EXHIBIT 2.1
SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT, made this 29th day of December, 2004, by and among
NETFRAN DEVELOPMENT CORP., a Florida corporation, ("NETFRAN"), ARIEL WAY, INC.,
a Delaware corporation ("Ariel Way") and the shareholders of Ariel Way common
stock who execute a counterpart of this agreement (referred to collectively as
the "Shareholders" and individually as a "Shareholder").
WHEREAS, NETFRAN desires to acquire all of the issued and outstanding shares of
common stock of Ariel Way in exchange for unissued shares of the common stock of
NETFRAN (the "NETFRAN Common Stock").
WHEREAS, the Shareholders executing this Agreement desire to exchange their
shares of Ariel Way common stock for the NETFRAN Common Stock on the terms set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
representations contained herein, the parties hereto agree as follows:
ARTICLE 1
EXCHANGE OF SECURITIES
1.1 Share Exchange. Subject to all of the terms and conditions of this
Agreement, NETFRAN agrees to exchange 1.6762 shares of NETFRAN Common Stock in
exchange for the outstanding share of Ariel Way common stock (the "Exchange
Ratio") with the Shareholders as set forth in Exhibit l.l hereto (the
"closing"). No fractional shares of NETFRAN common stock will be issued for
Ariel Way Common Stock. In lieu thereof, each recipient of NETFRAN Common Stock
who would otherwise be entitled to a fraction of a share of NETFRAN Common Stock
(after aggregating all fractional shares of NETFRAN Common Stock to be received
by such holder) shall be entitled to receive one whole share of NETFRAN Common
Stock. NETFRAN shall assume all Ariel Way option and warrants outstanding as of
the Closing Date as set forth on Schedule 2.2, by issuing, at the request of
such holder, an option or warrant to purchase shares of NETFRAN Common Stock on
the same terms and conditions as the option or warrant held by the holder
thereof except that (a) each such option or warrant shall be exercisable for a
number of shares of NETFRAN Common Stock equal to the number of shares of Ariel
Way Common Stock subject to such option or warrant multiplied by the Exchange
Ratio, (b) the option or warrant price per share shall be an amount equal to the
quotient of the option or warrant exercise price subject to such Ariel Way
options or warrant in effect immediately prior to the Closing Date divided by
the Exchange Ratio, and (c) fractional shares shall be handled as set forth
above.
1.2 Exemption from Registration. The parties hereto intend that the NETFRAN
Common Stock to be issued by NETFRAN to the Shareholders shall be exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and pursuant to applicable state statutes. NETFRAN makes no
representation concerning compliance with the securities laws of any
jurisdiction other that the United States. Ariel Way and the Shareholders shall
be responsible for compliance with the securities laws of all other
jurisdictions.
1.3 Shareholders' Representative. The Shareholders hereby irrevocably designate
and appoint Xxxx Xxxxxx as their agent and attorney in fact ("Shareholders'
Representative") with full power and authority until the Closing, as such term
is defined in Section 9.1 hereof, to execute, deliver and receive on their
behalf all notices, requests, certificates and other communications under this
Agreement; to fix and alter on their behalf the date, time and place of the
Closing; to waive, amend or modify any provisions of this Agreement and to take
such other action on their behalf in connection with the Agreement, the Closing
and the transactions contemplated thereby as the Shareholders Representative
deems appropriate; provided, however, that no such waiver, amendment or
modification may be made if it would decrease the number of shares to be issued
to the Shareholders as set forth in Exhibit 1.1 of the Agreement or increase the
extent of their obligation to indemnify NETFRAN under Sections 2.17 of this
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS AND ARIEL WAY
The Shareholders and Ariel Way hereby represent and warrant to NETFRAN that:
2.1 Organization. Ariel Way is a corporation duly organized, validly existing,
and in good standing under the laws of Delaware, has all necessary corporate
powers to own its properties and to carry on its business as now owned and
operated by it, and is duly qualified to do business and is in good standing in
each of the provinces and other jurisdictions where its business requires
qualification.
2.2 Capital. The authorized capital stock of Ariel Way consists of 145,000,000
of shares of Common Stock and 5,000,000 shares of preferred stock, of which
19,860,000 shares of Common Stock and no shares of preferred stock are issued
and outstanding. The Shareholders own issued and outstanding shares of Ariel Way
Common Stock as set forth in Exhibit 1.1 hereto. All of the issued and
outstanding shares of Ariel Way are duly and validly issued, fully paid, and
nonassessable and have been issued in compliance with all applicable securities
laws. Except as set forth in Schedule 2.2, there are no outstanding
subscriptions, options, rights, warrants, debentures, instruments, convertible
securities, or other agreements or commitments obligating Ariel Way to issue or
transfer from treasury any additional shares of its capital stock of any class
or repurchase any such shares.
2.3 Business and Subsidiary. Ariel Way is a technology company for highly secure
global communications services. Enfotec, Inc. , a Delaware corporation
(hereinafter referred to as the "Subsidiary"), is a wholly-owned subsidiary of
Ariel Way. Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, and has all
corporate powers required to carry on its business as now being conducted.
Subsidiary is duly qualified to do business in each jurisdiction which such
qualification is necessary. Ariel Way and the Subsidiary operates the business
described in the Business Plan delivered to NETFRAN. Except as set forth on
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Schedule 2.3, neither Ariel Way nor the Subsidiary have any subsidiaries or own
any interest in any other enterprise (whether or not such enterprise is a
corporation).
2.4 Directors and Officers. Schedule 2.4 to this Agreement, the text of which is
hereby incorporated herein by reference, contains the names and titles of all
directors and officers of Ariel Way as of the date of this Agreement.
2.5 Financial Statements. Marked as Exhibit 2.5 hereto and delivered to NETFRAN
are the audited consolidated financial statements of Ariel Way as at September
30, 2004 together with the notes thereto and income statement of Subsidiary,
respectively, for the fiscal periods then ended. These financial statements have
been prepared from the books and records of Ariel Way and Subsidiary, present
fairly the financial position of the respective company as at the date of such
balance sheets and the results of their respective operations for the fiscal
year then ended, and have been prepared in accordance with generally accepted
accounting principles consistently applied with those used in preparing
financial statements of the respective companies during prior fiscal periods.
2.6 Absence of Changes. Since the date of the most recent financial statements
included in Exhibit 2.5, there has not been any change in the financial
condition or operations of Ariel Way or Subsidiary, except for changes in the
ordinary course of business, which changes have not in the aggregate been
materially adverse.
2.7 Absence of Undisclosed Liabilities. As of the date of its most recent
balance sheets included in Exhibit 2.5, Ariel Way and Subsidiary did not have
any material debt, liability, or obligation of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that is not
reflected in such balance sheet or incurred in the ordinary course of business
following the date of the last balance sheets included in Exhibit 2.5.
2.8 Tax Returns. Within the times and in the manner prescribed by law, Ariel Way
and Subsidiary have filed all federal, state, provincial and local tax returns
required by law, the failure to file which would have a materially adverse
effect on the business or financial condition of Ariel Way and Subsidiary, and
have paid all taxes, assessments and penalties due and payable in accordance
with such returns. The provisions for taxes, if any, reflected in the balance
sheets included in Exhibit 2.5 are adequate for any and all federal, state,
provincial and local taxes for the periods ending on the date of the balance
sheets and for all prior periods, whether or not disputed. There are no present
disputes as to taxes of any nature payable by Ariel Way or Subsidiary.
2.9 Investigation of Financial Condition. Without in any manner reducing or
otherwise mitigating the representations contained herein, NETFRAN and/or its
attorneys shall have the opportunity to meet with accountants and attorneys to
discuss the financial condition of Ariel Way and Subsidiary. Ariel Way shall
make available to NETFRAN and/or its attorneys all books and records of Ariel
Way and Subsidiary. If the transaction contemplated hereby is not completed, all
documents received by NETFRAN and/or its attorneys shall be returned to Ariel
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Way and all information so received shall be treated as confidential by NETFRAN
and shall not be disclosed to any third party or used by NETFRAN without the
written consent of Ariel Way.
2.10 Compliance with Laws. Ariel Way and Subsidiary have substantially complied
with, and are not in violation of, all applicable federal, state, provincial or
local statutes, laws and regulations, including, without limitation, any
applicable building, zoning, environmental, employment or other law, ordinance
or regulation affecting their respective properties, products or the operation
of their respective business except where such non-compliance would not have a
materially adverse effect on their respective business or financial condition.
Ariel Way and Subsidiary have all licenses and permits required to conduct their
respective business as now being conducted and as contemplated in the Business
Plan heretofore delivered to NETFRAN except where such non-compliance would not
have a materially adverse effect on their respective business or financial
condition.
2.11 Litigation. Neither Ariel Way nor Subsidiary is a party to any suit,
action, arbitration or legal, administrative or other proceeding, or
governmental investigation pending or, to the best knowledge of Ariel Way or
Subsidiary, threatened against or affecting Ariel Way or Subsidiary or their
business, assets or financial condition, except for matters which would not have
a material affect on Ariel Way or Subsidiary or their respective properties.
Neither Ariel Way nor Subsidiary is in default with respect to any order, writ,
injunction or decree of any federal, state, local or foreign court, department,
agency or instrumentality applicable to it. Neither Ariel Way nor Subsidiary is
engaged in any lawsuits to recover any material amount of monies due to it.
2.12 Ownership of Shares. The delivery of Ariel Way Common Stock as contemplated
herein will result in NETFRAN's immediate acquisition of record and beneficial
ownership of 100% of Ariel Way `s capital stock, free and clear of all liens and
encumbrances. Such shares were duly and validly issued, fully paid and
non-assessable.
2.13 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by the Shareholders and Ariel Way and the performance by the
Shareholders of their obligations hereunder in the time and manner contemplated
will not cause, constitute or conflict with or result in (a) any material breach
or violation of any of the provisions of or constitute a material default under
any license, indenture, mortgage, charter, instrument, articles of
incorporation, by-laws, or other agreement or instrument to which Ariel Way or
Subsidiary is a party, or by which they may be bound, nor will any consents or
authorizations of any party other than those hereto be required, (b) an event
that would permit any party to any material agreement or instrument to terminate
it or to accelerate the maturity of any indebtedness or other obligation of
Ariel Way or Subsidiary, or (c) an event that would result in the creation or
imposition of any material lien, charge, or encumbrance on any asset of Ariel
Way or Subsidiary.
2.14 Assets. Ariel Way and Subsidiary have good and marketable title to all of
the properties and assets reflected on its latest balance sheet included in
Exhibit 2.5 (except for property and assets disposed of in the ordinary course
of business after the date thereof), free and clear of all liens and
encumbrances, except as noted therein, and except for liens of taxes not
delinquent.
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2.15 Contracts and Commitments; No Default.
(a) Except as set forth in the Schedule 2.15, neither Ariel Way nor the
Subsidiary is a party to, nor are any of their respective assets bound by, any
written or oral:
(i) employment, non-competition, consulting or severance agreement,
collective bargaining agreement, or pension, profit-sharing, incentive
compensation, equity compensation, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay, employee
benefit or retirement plan or agreement;
(ii) indenture, mortgage, note, installment obligation, agreement or
other instrument relating to the borrowing of money by Ariel Way or Subsidiary
or the sale or purchase of any security;
(iii) contract, agreement, lease (real or personal property) or
arrangement that (A) is not terminable on less than 30 days' notice without
penalty, (B) is not over one year in length of obligation of Ariel Way or
Subsidiary, or (C) involves an obligation of more than $5,000 over its term;
(iv) contract, agreement, commitment or license relating to
Intellectual Property Rights or contract, agreement or commitment of any other
type, whether or not fully performed, not otherwise disclosed pursuant to this
Section 2.15;
(v) obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution, stock purchase or
otherwise) in any person or entity; or
(vi) outstanding sales or purchase contracts, commitments or proposals
that will result in any material loss upon completion or performance thereof
after allowance for direct distribution expenses, or bound by any outstanding
contracts, bids, sales or service proposals quoting prices that are not
reasonably expected to result in a normal profit.
(b) True and complete copies (or summaries, in the case of oral items) of all
agreements disclosed pursuant to this Section 2.15 (the "Ariel Way Contracts")
have been provided to NETFRAN for review. Except as set forth in Schedule 2.15,
all of the Ariel Way Contracts items are valid and enforceable in accordance
with their terms, and are in full force and effect. Ariel Way and Subsidiary is
not in breach, violation or default, however defined, in the performance of any
of its obligations under any of the Ariel Way Contracts, and no facts and
circumstances exist which, whether with the giving of due notice, lapse of time,
or both, would constitute such breach, violation or default thereunder or
thereof, and, to the knowledge of Ariel Way or Subsidiary, no other parties
thereto are in a breach, violation or default, however defined, thereunder or
thereof, and no facts or circumstances exist which, whether with the giving of
due notice, lapse of time, or both, would constitute such a breach, violation or
default thereunder or thereof.
2.16 Intellectual Property Rights. Each of Ariel Way and Subsidiary owns or has
the unrestricted right to use all patents, patent applications, patent rights,
registered and unregistered trademarks, trademark applications, tradenames,
service marks, service xxxx applications, copyrights, internet domain names,
computer programs and other computer software, inventions, know-how, trade
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secrets, technology, proprietary processes, trade dress, software and formulae
(collectively, "Intellectual Property Rights") used in, or necessary for, the
operation of its Business as currently conducted or proposed to be conducted.
Except as set forth in Schedule 2.16, to the Ariel Way's knowledge, the use of
all Intellectual Property Rights necessary or required for the conduct of the
Business of the Company as presently conducted and as proposed to be conducted
does not infringe or violate the Intellectual Property Rights of any person or
entity. Except in the ordinary course of business or except as described on
Schedule 2.16, to the Company's knowledge: (a) the Company does not own or use
any Intellectual Property Rights pursuant to any written license agreement; (b)
the Company has not granted any person or entity any rights, pursuant to a
written license agreement or otherwise, to use the Intellectual Property Rights;
and (c) the Company owns, has unrestricted right to use and has sole and
exclusive possession of and has good and valid title to, all of the Intellectual
Property Rights, free and clear of all Liens and Encumbrances. All license
agreements relating to Intellectual Property Rights are binding and there is
not, under any of such licenses, any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute a default,
or would constitute a basis for a claim on non-performance) on the part of Ariel
Way or the Subsidiary or, to the knowledge of Ariel Way or Subsidiary, any other
party thereto. Schedule 2.16 contains a list of all patents, trademarks and
domain names owned or licensed by Ariel Way and the Subsidiary.
2.17 Indemnification. The Shareholders (severally in proportion to their shares
in Ariel Way as set forth in Exhibit 1.1) and Ariel Way agree to indemnify,
defend and hold NETFRAN harmless against and in respect of any and all claims,
demands, losses, costs, expenses, obligations, liabilities, damages, recoveries
and deficiencies, including interest, penalties, and reasonable attorney fees,
that it shall incur or suffer, which arise out of, result from or relate to any
breach of, or failure by Ariel Way or the Shareholders to perform any of their
respective representations, warranties, covenants and agreements in this
Agreement.
2.18 Authorization. All corporate action on the part of Ariel Way, its directors
and shareholders necessary for the authorization, execution, delivery and
performance of this Agreement by Ariel Way and the Shareholders, the
consummation by Ariel Way and the Shareholders of the other transactions
contemplated hereunder, and the performance of all of the obligations of Ariel
Way and the Shareholders under this Agreement, have been taken or will be taken
prior to the Closing. This Agreement, when executed and delivered by Ariel Way
and the Shareholders, shall constitute the valid and binding obligation of Ariel
Way and the Shareholders enforceable against Ariel Way and the Shareholders in
accordance with its terms, subject to: (a) laws of general application relating
to bankruptcy, insolvency, and the relief of debtors or (b) general equitable
principles.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NETFRAN
NETFRAN represents and warrants to Ariel Way and the Shareholders that:
3.1 Organization. NETFRAN is a corporation duly organized, validly existing, and
in good standing under the laws of Florida, has all necessary corporate powers
to own properties and to carry on business as now owned and operated, and is
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duly qualified to do business in each of such states and other jurisdictions
where its business requires such qualification.
3.2 Capital. The authorized capital stock of NETFRAN consists of 50,000,000
shares of $.001 par value Common Stock of which 3,698,826 shares of Common Stock
are issued and outstanding as of the date hereof. All such shares has been
issued in compliance with all applicable U.S. securities laws. All of the issued
and outstanding shares are duly and validly issued, fully paid and
nonassessable. Except as set forth in Schedule 3.2, there are no outstanding
subscriptions, options, rights (including preemptive rights and rights to demand
registration under the Securities Act) warrants, convertible securities, or
other agreements or commitments obligating NETFRAN to issue or to transfer from
treasury any additional shares of its capital stock of any class or repurchase
any such shares, except as otherwise provided herein.
3.3 Business and Subsidiaries. The business of NETFRAN is as set forth in its
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003. Except
as set forth in Schedule 3.3, NETFRAN does not have any subsidiaries or own any
interest in any other enterprise.
3.4 SEC Documents. NETFRAN is an issuer required to file reports under Section
13(a) of the Securities Exchange Act of 1934 (the "Exchange Act") since January
1, 2003. NETFRAN has filed with the SEC all reports (collectively, the "SEC
Documents") required to be filed by reporting companies pursuant to the Exchange
Act. As of their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act, each as in effect
on the date so filed, and at the time filed with the SEC none of the SEC
Documents 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. The financial statements of NETFRAN included in the SEC
Documents comply as of their respective dates as to form in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except in the case of
the unaudited statements, as permitted by Form 10-QSB under the Exchange Act)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly present in all material
respects the financial position of NETFRAN as at the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments and to any
other adjustments described therein).
3.5 Absence of Changes. Since the date of the last Balance Sheet filed with the
SEC, there has not been any change in the financial condition or operations of
NETFRAN except for changes in the ordinary course of business, which changes
have not in the aggregate been materially adverse, and transactions referred to
in this Agreement.
3.6 Absence of Undisclosed Liabilities. As of the date of this Agreement,
NETFRAN does not have any material debt, liability, or obligation of any nature,
whether accrued, absolute, contingent, or otherwise, and whether due or to
become due, that is not reflected in the last Balance Sheet filed with the SEC
or incurred in the ordinary course of business following the date of the Balance
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Sheet. NETFRAN has no knowledge of any past or existing circumstance, condition,
event or arrangement that may hereafter give rise to any liabilities of NETFRAN,
except as disclosed herein.
3.7 Tax Returns. Within the times and the manner prescribed by law, NETFRAN has
filed all federal, state and local tax returns required by law and has paid all
taxes, assessments and penalties due and payable. There are no present audits or
disputes or extensions as to taxes of any nature payable by NETFRAN. Adequate
provision has been made on the Balance Sheet for all taxes of NETFRAN as of the
date thereof.
3.8 Investigation of Financial Condition. Without in any manner reducing or
otherwise mitigating the representations contained herein, Ariel Way and the
Shareholders shall have the opportunity to meet with NETFRAN's accountants to
discuss the financial condition of NETFRAN. NETFRAN shall make available to
Ariel Way and the Shareholders all books and records of NETFRAN, all of which
books and records are true and complete in all material respects to the best
knowledge of NETFRAN.
3.9 Compliance with Laws. NETFRAN has complied with, and is not in violation of,
all applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning, environmental
or other law, ordinance, or regulation) affecting its properties or the
operation of its business, except where non-compliance would not have a
materially adverse effect on the business or operations of NETFRAN.
3.10 Litigation. NETFRAN is not a party to any suit, action, arbitration, or
legal, administrative, or other proceeding, or governmental investigation
pending or, to the best knowledge of NETFRAN, threatened against or affecting
NETFRAN or its business, assets, or financial condition.
3.11 Authority. The Board of Directors of NETFRAN has authorized the execution
of this Agreement and the transactions contemplated herein, and NETFRAN has full
power and authority to execute, deliver and perform this Agreement and this
Agreement is the legal, valid and binding obligation of NETFRAN, is enforceable
in accordance with its terms and conditions, except as may be limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally.
3.12 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by NETFRAN and the performance by NETFRAN will not conflict with or
result in (a) any material breach or violation of any of the provisions of or
constitute a default under any license, indenture, mortgage, charter,
instrument, certificate of incorporation, bylaw, or other agreement or
instrument to which NETFRAN is a party, or by which it may be bound, nor will
any consents or authorizations of any party other than those hereto be required,
(b) an event that would permit any party to any material agreement or instrument
to terminate it or to accelerate the maturity of any indebtedness or other
obligation of NETFRAN, or (c) an event that would result in the creation or
imposition of any material lien, charge, or encumbrance on any asset of NETFRAN.
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3.13 Validity of NETFRAN Shares. The shares of NETFRAN Common Stock to be
delivered pursuant to this Agreement, when issued in accordance with the
provisions of this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable.
3.14. Assets. NETFRAN has good and marketable title to all of the properties and
assets reflected on the last Balance Sheet filed with the SEC (except for
property and assets disposed of in the ordinary course of business after the
date thereof or as otherwise contemplated herein), free and clear of all liens
and encumbrances, except as noted therein, and except for liens of taxes not
delinquent, and subject to the transactions referred to herein.
3.15. Indemnification. NETFRAN agrees to indemnify, defend and hold Ariel Way
and the Shareholders harmless against and in respect of any and all claims,
demands, losses, costs, expenses, obligations, liabilities, damages, recoveries
and deficiencies, including interest, penalties, and reasonable attorney fees,
that they shall incur or suffer, which arise out of, result from or relate to
any breach of, or failure by NETFRAN to perform any of its representations,
warranties, covenants or agreements in this Agreement.
ARTICLE 4
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each Shareholder hereby represents and warrants to NETFRAN that:
4.1 Share Ownership. The Shareholder holds shares of Ariel Way Common Stock as
set forth in Exhibit 1.1 hereto. Such shares are owned of record and
beneficially by the Shareholder and such shares are not subject to any lien,
encumbrance, pledge, right of first refusal, voting trust or voting agreement.
The Shareholder holds authority to exchange such shares pursuant to this
Agreement and the person executing this Agreement on behalf of the Shareholder
is duly authorized to bind and obligate Shareholder to the terms of this
Agreement.
4.2 Investment Intent. The Shareholder understands and acknowledges that the
shares of NETFRAN Common Stock are being offered for exchange in reliance upon
the exemption provided in Section 4(2) of the Securities Act for nonpublic
offerings and the NETFRAN Common Stock being received are "restricted
securities" as such term in defined in Rule 144 under the Securities Act. The
Shareholder makes the following representations and warranties with the intent
that the same may be relied upon in determining the suitability of the
Shareholder as a purchaser of securities.
(a) The shares of NETFRAN Common Stock are being acquired solely
for the account of the Shareholder, for investment purposes only, and not with a
view to, or for sale in connection with, any distribution thereof and with no
present intention of distributing or reselling any part of the NETFRAN Common
Stock.
(b) The Shareholder agrees not to dispose of the NETFRAN Common
Stock or any portion thereof unless and until counsel for NETFRAN shall have
determined that the intended disposition is permissible under Rule 144 of the
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Securities Act or other exemption from applicable securities laws or pursuant to
a registration under the Securities Act.
(c) The Shareholder acknowledges that NETFRAN has made all
documentation pertaining to all aspects of the offer to exchange shares of
NETFRAN Common Stock for Shareholder's shares of Ariel Way Common Stock
available to the Shareholder and to the Shareholder's qualified representatives,
if any, and has offered such person or persons an opportunity to discuss the
offer with the officers of NETFRAN.
4.3 Legend. The Shareholder agrees that the certificates evidencing the NETFRAN
Common Stock acquired pursuant to this Agreement will have a legend placed
thereon referring to the restrictions on sale herein and such other legends as
required by applicable law or agreement with Ariel Way.
ARTICLE 5
PRE-CLOSING COVENANTS
5.1 Investigative Rights. From the date of this Agreement each party shall
provide to the other party, and such other party's counsel, accountants,
auditors, and other authorized representatives, full access during normal
business hours to all of Ariel Way's and NETFRAN's and Subsidiary's properties,
books, contracts, commitments, and records for the purpose of examining the
same. Each party shall furnish the other party with all information concerning
Ariel Way's and NETFRAN's affairs, litigation and material changes as the other
party may reasonably request. In the event the share exchange is not completed
as contemplated herein, each party will maintain the confidentiality of any
confidential information received from any other party.
5.2 Conduct of Business. Prior to the Closing, NETFRAN, Ariel Way and Subsidiary
shall each conduct its business in the normal course, and shall not sell,
pledge, or assign any assets, without the prior written approval of the other
party, except in the regular course of business. Except as provided herein,
neither NETFRAN, Ariel Way nor Subsidiary shall amend its Articles of
Incorporation or Bylaws, declare dividends, redeem or sell stock or other
securities, incur additional or newly-funded liabilities, acquire or dispose of
fixed assets, change employment terms, enter into any material or long-term
contract, guarantee obligations of any third party, settle or discharge any
balance sheet receivable for less than its stated amount, pay more on any
liability than its stated amount, or enter into any other transaction other than
in the regular course of business. Each party will keep the other parties
informed of any litigation, material changes in business or financial condition
occurring after the execution hereof until the Closing or termination of this
Agreement. Notwithstanding the foregoing, the completion of the acquisitions,
financings, and employment contracts as set forth in Schedule 5.2 shall not be
prohibited my this Section 5.2.
ARTICLE 6
POST-CLOSING COVENANTS
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6.1 Change of Shares. NETFRAN will not decrease its outstanding common stock to
less than 20,000,000 shares by reverse stock split, combination,
reclassification, reorganization or other similar event for one year following
the Closing herein.
6.2 (a) Continued trading of Shares. The Shareholders shall cause NETFRAN to
take all reasonable actions necessary to continue trading of its common stock on
the OTC Bulletin Board, NASDAQ Stock Market or a national stock exchange.
(b) SEC Reports. The Shareholders shall cause NETFRAN to file all reports and
take all actions to timely comply with the reporting requirements of the
Exchange Act.
(c) Prompt Registration of Transfer. NETFRAN shall register transfer of the
common stock of NETFRAN as required by the Uniform Commercial Code within three
(3) business days after receipt of proper documentation for such transfer
request. Restricted securities shall be transferred without restrictive legend
if supported by an opinion of counsel to the shareholder to which NETFRAN's
counsel has no reasonable objection.
(d) Issue of Additional Shares. Issuance and sales of NETFRAN's securities to
affiliated investors will be on the same terms as non-affiliated investors and
shall be for fair value, except pursuant to employee benefit plans authorizing
issuance of not more than 10% of NETFRAN's total outstanding shares.
6.3 Benefit for all NETFRAN Shareholders. The foregoing provisions of this
Article 6 are expressly set forth for the benefit of all shareholders of NETFRAN
and may not be amended or waived. Any shareholder damaged by a violation of
these provisions shall have the right to seek an injunction and/or damages for
such violation.
6.4 Change of Directors. NETFRAN will distribute an Information Statement
pursuant to Exchange Act Rule 14f-1 as soon as possible after execution of this
Agreement and the current NETFRAN directors will appoint the nominees of Ariel
Way as directors of NETFRAN and thereupon resign in accordance with such
Information Statement upon closing of this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO NETFRAN'S PERFORMANCE
7.1 Conditions. NETFRAN's obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of all the conditions set forth in this
Article 7. NETFRAN may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by NETFRAN of any other condition of or any of
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NETFRAN's other rights or remedies, at law or in equity, if the Shareholders
shall be in default of any of their representations, warranties, or covenants
under this Agreement.
7.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by the Shareholders in this
Agreement or in any written statement that shall be delivered to NETFRAN by the
Shareholders under this Agreement shall be true and accurate on and as of the
date of the Closing as though made at that time.
7.3 Performance. The Shareholders shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by them, on or before the Closing.
7.4 Absence of Litigation. No action, suit, or proceeding before any court or
any governmental body or authority, pertaining to the transaction contemplated
by this Agreement or to its consummation, shall have been instituted or
threatened against Ariel Way or Subsidiary on or before the Closing.
7.5 Acceptance by Ariel Way Shareholders. The holders of all of the issued and
outstanding shares of Ariel Way Common Stock shall have agreed to exchange their
shares for shares of NETFRAN Common Stock at the initial closing.
7.6 Certificate. The Shareholders shall have delivered to NETFRAN a certificate,
dated as of the Closing, certifying that each of the conditions specified in
Sections 7.2 through 7.5 hereof have been fulfilled.
7.7 Stock Purchase. Ariel Way's purchase of 300,000 shares of issued and
outstanding Netfran common stock has been funded.
ARTICLE 8
CONDITIONS PRECEDENT TO SHAREHOLDERS' PERFORMANCE
8.1 Conditions. The Shareholders' obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of all the conditions set forth in this
Article 8. The Shareholders may waive any or all of these conditions in whole or
in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by the Shareholders of any other condition
of or any of the Shareholders' rights or remedies, at law or in equity, if
NETFRAN shall be in default of any of its representations, warranties, or
covenants under this Agreement.
8.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by NETFRAN in this Agreement or in
any written statement that shall be delivered to Shareholders by NETFRAN under
this Agreement shall be true and accurate on and as of the Closing as though
made at that time.
12
8.3 Performance. NETFRAN shall have performed, satisfied, and complied with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by it, on or before the Closing.
8.4 Absence of Litigation. No action, suit or proceeding before any court or any
governmental body or authority, pertaining to the transaction contemplated by
this Agreement or to its consummation, shall have been instituted or threatened
against NETFRAN on or before the Closing.
8.5 Officers' Certificate. NETFRAN shall have delivered to Shareholders a
certificate, dated the date of the Closing and signed by the President of
NETFRAN certifying that each of the conditions specified in Sections 8.2 through
8.4 have been fulfilled.
8.6 Disposal of Netfran Business. Netfran shall have made arrangements for the
disposition of its franchise business and indemnification of Netfran from the
liabilities of the operation of said business on terms it deems satisfactory.
ARTICLE 9
CLOSING
9.1 Closing. The Closing (the "Closing") of this transaction shall be held at
the offices of NETFRAN, or such other place as shall be mutually agreed upon, on
such date as shall be mutually agreed upon by the parties. In event the Closing
herein has not been completed by January 20, 2002 any party hereto may terminate
this Agreement and in such event this Agreement shall be null and void. At the
Closing:
(a) Each Shareholder shall present the certificates representing his
shares of Ariel Way Common Stock being exchanged to NETFRAN, and such
certificates will be duly endorsed for transfer to Netfran.
(b) Each Shareholder shall receive a certificate or certificates
representing the number of shares of NETFRAN Common Stock for which the shares
of Ariel Way Common Stock shall have been exchanged.
(c) NETFRAN shall deliver an officer's certificate, as described in
Section 8.5 hereof, dated the date of the Closing, that all representations,
warranties, covenants and conditions set forth in this Agreement on behalf of
NETFRAN are true and correct as of, or have been fully performed and complied
with by, the Closing.
(d) NETFRAN shall deliver a signed consent and/or Minutes of the
Directors of NETFRAN approving this Agreement and each action to be taken by
NETFRAN under this Agreement.
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(e) The Shareholders shall deliver a certificate, as described in
Section 7.6 hereof, dated the Closing Date, that all representations,
warranties, covenants and conditions set forth in this Agreement on behalf of
Shareholders are true and correct as of, or have been fully performed and
complied with by, the Closing Date.
(f) Ariel Way shall deliver to NETFRAN:
(i) Certificates of Good Standing of Ariel Way and Subsidiary
as corporations in their jurisdiction of incorporation;
(ii) Any consents of third parties required to consummate the
share exchange; and
(iii) Certified copy of the charter documents and by-laws of
Ariel Way and Subsidiary.
(g) NETFRAN shall deliver to Ariel Way:
(i) Certificates of Good Standing of NETFRAN as a corporation
in the State of Florida;
(ii) Any consents of third parties required to consummate the
share exchange;
(iii) Certified copy of its charter documents and by-laws; and
(iv) Certified shareholders list of NETFRAN dated as of the
Closing.
ARTICLE 10
MISCELLANEOUS
10.1 Captions. The Article and paragraph headings throughout this Agreement are
for convenience and reference only, and shall in no way be deemed to define,
limit, or add to the meaning of any provision of this Agreement.
10.2 No Oral Change. This Agreement and any provision hereof, may not be waived,
changed, modified, or discharged orally, but it can be changed by an agreement
in writing signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought. Except as otherwise set forth herein,
after the Closing, this Agreement may be amended only with the approval of 2/3
of the shareholders of NETFRAN's common stock in attendance at a meeting of the
shareholders (in person or by proxy) specifically called to approve such
amendment provided that the shares voted at the meeting were issued without
violation of this Agreement.
10.3 Non-Waiver. Except as otherwise expressly provided herein, no waiver of any
covenant, condition, or provision of this Agreement shall be deemed to have been
made unless expressly in writing and signed by the party against whom such
14
waiver is charged; and (i) the failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants, or conditions of
this Agreement or to exercise any option herein contained shall not be construed
as a waiver or relinquishment for the future of any such provisions, covenants,
or conditions, (ii) the acceptance of performance of anything required by this
Agreement to be performed with knowledge of the breach or failure of a covenant,
condition, or provision hereof shall not be deemed a waiver of such breach or
failure, and (iii) no waiver by any party of one breach by another party shall
be construed as a waiver with respect to any other or subsequent breach.
10.4 Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, supersedes all prior agreements and
understandings, and constitutes a complete and exclusive statement of the
agreements, responsibilities, representations and warranties of the parties.
10.5 Counterparts and Facsimile Signatures. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Any signature page delivered by a fax machine, telecopy machine or
electronic mail shall be binding to the same extent as an original signature
page, with regard to any agreement subject to the terms hereof or any amendment
thereto. Any party who delivers such a signature page agrees to later deliver an
original counterpart to any party which requests it.
10.6 Notices. All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given or delivered by a national courier service, or on the third day after
mailing if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid, and properly addressed as
follows:
To NETFRAN: Xxxxxx Xxxxxxx, President
Netfran Development Corp.
0000 XX 000xx Xxxxxxx
0xx xxxxx
Xxxxxxxx, XX 00000
With copy to: Xxxx Xxxxxxxxx, Esq.
0000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx, XX 00000
To Ariel Way and Xxxx Xxxxxx, President
the Shareholders Ariel Way, Inc.
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, XX 00000
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With copy to: Xxx X. Xxxxxxxxxx, Esq.
Xxxxx Xxxx & Xxxxxx
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, XX 00000
10.7 Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.
10.8 Mutual Cooperation. The parties hereto shall cooperate with each other to
achieve the purpose of this Agreement, and shall execute such other and further
documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.
10.9 Announcements. NETFRAN and Ariel Way will consult and cooperate with each
other as to the timing and content of any announcements of the transactions
contemplated hereby to their employees, customers, suppliers and franchises.
10.10 Expenses. Each party will pay its own legal, accounting and any other
out-of-pocket expenses reasonably incurred in connection with this transaction,
whether or not the transaction contemplated hereby is consummated.
10.11 Brokerage. Ariel Way, NETFRAN and the Shareholders each represent that no
finder, broker, investment banker or other similar person has been involved in
this transaction except for Xxxxxxx Xxxxxx and Xxxx Xxxxxxxxx. Each party agrees
to indemnify and hold the others harmless from payment of any brokerage fee,
finders fee or commission claimed by any other person or entity who claims to
have been involved in the transaction herein because of an association with such
party.
10.12 Public Announcements. NETFRAN and Ariel Way will consult with each other
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, fiduciary duties or
by obligations pursuant to any listing agreement with any national securities
exchange.
10.13 Survival of Representations and Warranties. The representations and
warranties of the parties set forth in this Agreement or in any instrument,
certificate, opinion, or other writing providing for in it, shall survive the
Closing irrespective of any investigation made by or on behalf of any party for
a period of one year.
10.14 Exhibits and Schedules. As of the execution hereof, the parties hereto
have provided each other with the Exhibits and Schedules provided for herein
above, including any items referenced therein or required to be attached
thereto. Any material changes to the Exhibits and Schedules shall be immediately
disclosed to the other party.
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10.15 Arbitration of Disputes Any dispute or controversy arising out of or
relating to this Agreement, any document or instrument delivered pursuant to, in
connection with, or simultaneously with this Agreement, or any breach of this
Agreement or any such document or instrument shall be settled by arbitration in
accordance with the rules of commercial arbitration then in effect of the
American Arbitration Association or any successor thereto. The arbitrator may
grant injunctions or other relief in such dispute or controversy. The decision
of the arbitration shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction. Each party in such arbitration shall pay their respective
costs and expenses of such arbitration and all the reasonable attorneys' fees
and expenses of their respective counsel. Such arbitration shall occur in
Miami-Dade County, Florida.
10.16 Choice of Law. This Agreement and its application shall be governed by the
laws of the State of Florida.
10.17 Termination. (a) This Agreement may be terminated at any time prior to the
Closing Date:
(i) by mutual written consent of NETFRAN and Ariel Way;
(ii) by NETFRAN, if Ariel Way or the Shareholders shall have breached
in any material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement and such breach has not been waived
by NETFRAN;
(iii) by Ariel Way, if NETFRAN shall have breached in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement and such breach has not been waived by Ariel Way; or
(iv) by NETFRAN or Ariel Way if the Closing shall not have been
consummated on or prior to January 20, 2005.
(b) If this Agreement is terminated and the transactions contemplated hereby are
not consummated as described above, this Agreement shall become void and if no
further force or effect except for the provisions of Sections 2.9 and 5.1
relating to confidentiality and Section 10.10 relating to expenses.
AGREED TO AND ACCEPTED as of the date first above written.
ARIEL WAY, INC. NETFRAN DEVELOPMENT CORP.
By: s/ Xxxx Xxxxxx, President By: s/Xxxxxx Xxxxxxx, President
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EXHIBIT 1.1
Ariel Way Shares
Ariel Way Shareholders Owned
---------------------- ----------------
The Dunhem Family Partnership 7,600,000
Xxxxx Xxxxx 2,800,000
Xxxxx Xxxxxxxx 1,100,000
Xxxxx Xxxxxx 400,000
Xxxxxxx X. Xxxxxx 300,000
Xxxxx Xxxxxxxxx 900,000
Xxxx Xxxxxxx 900,000
Xxxxxx Xxxx 200,000
Chivas Capital, Inc. 480,000
Market Central, Inc. 2,000,000
Cornell Capital Partners, LP 1,980,000
Xxxxxx, Xxx 114,685
Freke, Viv 123,506
Janko, Uros 141,150
O Riordain, Seosamh D. 104,922
Peulve, Xxxx-Xxxx 114,685
Xxxx, Xxx 101,245
Xxxxxxx Xxxx 255,848
Xxxx Xxxxxx 20,959
Xxxx, Xxx 7,667
Xxx, Xxxxx 15,334
Xxxx Xxxxx 91,820
Xxx Xxxx 34,249
Viv Freke 19,505
Xxx Xxxxxx 19,591
Xxxx Xxxx Peulve 12,119
Seo O'Riordain 11,210
Xxxxx Xxx 11,505
----------------------------------------------------------------------
Total 19,860,000
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SHAREHOLDER SIGNATURE PAGE
The undersigned shareholder of Ariel Way, Inc. hereby executes and becomes a
party to the Share Exchange Agreement dated as of December 29, 2004 between
Netfran Development Corp. and Ariel Way, Inc.
Print name of shareholder:
----------------------------
-----------------------------------------------------
Signature of shareholder or authorized representative
-------------------------------------------
Name and Title of authorized representative
--------------------------------------------
Address
Shareholder's Social Security or Tax I.D. No.
---------------------
19
