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AMENDED MERGER AND
STOCK EXCHANGE AGREEMENT
This AMENDED MERGER AND STOCK EXCHANGE AGREEMENT (this "Merger
Agreement," hereafter the "Agreement") dated as of November 19, 2004 between
REZCONNECT TECHNOLOGIES, INC., a New York corporation ("Buyer"),
XXXXXXXXXXXXX.XXX, INC., an Illinois corporation (the "Company"), and all of the
holders of the common stock of the Company identified on Exhibit A hereto (the
"Stockholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Stockholders own all of the issued and outstanding capital
stock of the Company; and
WHEREAS, the Stockholders desire to convey to Buyer and Buyer desires
to receive from the Stockholders, upon the terms and subject to the conditions
contained herein, all of such stock in a transaction intended to comply with
Section 368(a)(1)(B) of the Internal Revenue Code; and
WHEREAS, the Board of Directors of Buyer has approved this Agreement
and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration had and received, the parties
hereto, upon the terms and subject to the conditions contained herein, hereby
agree as follows:
ARTICLE I
EXCHANGE OF THE COMMON STOCK
Section 1.1. Exchange of the Common Stock. Upon the terms and subject
to the conditions contained herein, the Stockholders shall convey, set over,
deliver, assign and transfer (or cause to be exchanged, conveyed, set over,
delivered, assigned and transferred) to Buyer and Buyer shall acquire from the
Stockholders, at the Closing (as defined in Section 3.1), a total of 12,800,000
shares of the Company's common stock, no par value per share ("Common Stock"),
which represents one hundred percent (100%) of all the outstanding Common Stock
of the Company. The number of shares of Common Stock to be conveyed to Buyer by
each Stockholder is set forth in Exhibit A hereto.
Section 1.2. No Obligation to Exchange in Event of Default. The
obligations of the Stockholders under Section 1.1 hereof shall be several and
not joint. If one or more of the Stockholders shall default on his or her
obligation to convey, either at or before the Closing, any or all of the Common
Stock he or she has hereby agreed to convey, Buyer shall not be obligated to
consummate the acquisition of any of the Common Stock from the remaining
Stockholders, but if any one or more of the Stockholders shall so default, Buyer
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shall have the option to consummate the acquisition of the Common Stock from the
remaining Stockholders.
ARTICLE II
EXCHANGE CONSIDERATION
Section 2.1. Exchange Consideration. In full consideration for the
common stock to be conveyed, set over, delivered, assigned and transferred to
Buyer pursuant to Section 1.1 hereof, and upon the terms and subject to the
conditions contained herein, Buyer shall, in exchange for one hundred percent
(100%) of the outstanding Common Stock, issue and deliver to the Stockholders
for the following consideration: (i) 7,430,000 shares of Buyer's no par value
common stock ("Buyer's Common Stock"), and (ii) 4,092,376 shares of Buyer's
Series B Convertible Preferred Stock ("Preferred Stock"); all as set forth in
more detail in Exhibit C (all consideration collectively referred to herein as
the "Exchange Consideration"), such exchange will be at the time and in the
manner provided for in Section 2.2 hereof. The pro rata portion of the Exchange
Consideration that each Stockholder is entitled to receive is set forth in
Exhibit A hereto.
Section 2.2. Payment of Exchange Consideration. At the Closing, each of
the Stockholders shall, upon the surrender to Buyer or an exchange agent
selected by Buyer of the certificates for his or her Common Stock, receive
certificates representing a pro rata portion of shares of Buyer's Common Stock
and Preferred Stock.
ARTICLE III
CLOSING
Section 3.1. Time and Place of Closing. The closing ("Closing") means
the time at which the Stockholders consummate the exchange of the Common Stock
owned by them to Buyer by delivery of the stock certificates referred to in
Section 3.2(a) hereof and by delivery of the other documents referred to in
Section 3.2 hereof, against delivery by Buyer of the Exchange Consideration and
the documents referred to in Section 3.3 hereof, after the satisfaction (or a
duly executed waiver thereof) of the conditions set forth in Articles VII, VIII
and IX hereof. The Closing shall take place at the offices of Xxxx Xxxxx LLP,
Xxx Xxxxxxxxxx Xxxxx, Xxxxxx, Xxx Xxxxxx 00000, at 10:00 a.m., New Jersey time,
on December 2, 2004 or any other date mutually agreed upon in writing by the
parties hereto.
Section 3.2. The Stockholders' and the Company's Particular Closing
Deliveries. At the Closing, in addition to any other documents specifically
required to be delivered pursuant to this Agreement, the Stockholders or the
Company, as the case may be, shall deliver to Buyer, in form and substance
reasonably satisfactory to Buyer and its counsel:
(a) certificates representing all the shares of Common Stock registered
in the name of each Stockholder, fully endorsed by each Stockholder for
transfer;
(b) the certificate of the Company required by Section 8.8 hereof;
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(c) all consents required by Section 8.6 hereof; and
Section 3.3. Buyer's Particular Closing Deliveries. At the Closing, in
addition to any other documents specifically required to be delivered pursuant
to this Agreement, Buyer shall deliver to or for the Stockholders, in form and
substance satisfactory to the Stockholders and the Company's counsel:
(a) the shares of Buyer's Common Stock set forth in Section 2.2 hereof;
(b) the shares of Buyer's Preferred Stock set forth in Section 2.2
hereof;
(c) the certificate required by Section 9.3 hereof;
(d) certified copies of resolutions of the Board of Directors of Buyer
approving this Agreement and the transactions contemplated hereby; and
(e) the opinion of counsel for Buyer, Xxxx X. Xxxxxx, Esq., dated the
date of the Closing, as required by Section 9.4 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Buyer that:
Section 4.1. Organization and Capitalization of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Illinois, with an authorized capital consisting
solely of 20,000,000 shares of Common Stock, no par value per share, of which
12,800,000 shares of Common Stock are issued and outstanding; all of such
12,800,000 issued and outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and nonassessable; and there are no other equity
securities of any class of the Company authorized, issued, reserved for issuance
or outstanding. There are no outstanding options, warrants, agreements or rights
to subscribe for or to purchase, or commitments to issue, shares of Common
Stock. The Stockholders are the record owners of all of the issued and
outstanding shares of Common Stock as set forth on Exhibit A hereto. Except for
800,000 shares of common stock of the Buyer, the Company does not own, directly
or indirectly, any outstanding capital stock or securities convertible into
capital stock of any other corporation or any participating interest in any
partnership, joint venture or other business enterprise.
Section 4.2. Power and Authority; Authority for Agreement. The Company
has all requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as it has been and is now conducted and
to enter into this Agreement and to perform the obligations to be performed by
it hereunder and is duly qualified or licensed as a foreign corporation in good
standing in each jurisdiction in which the character of its properties or the
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nature of its business activities require such qualification. This Agreement
constitutes the valid binding obligation of the Company.
Section 4.3. Articles of Incorporation and By-Laws of the Company. The
copies of the Articles of Incorporation of the Company, certified by the
Secretary of State of Illinois, and the By-Laws of the Company, certified by its
Secretary, heretofore delivered by or on behalf of the Stockholders to Buyer,
are true, complete and correct.
Section 4.4 Subsidiaries. The Company, as currently constituted, has
no subsidiaries.
Section 4.5. No Violation to Result. Assuming fulfillment prior to the
Closing of the conditions set forth Section 9.7 hereof, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby:
(a) are not in violation or breach of, do not conflict with or
constitute a default under, and will not accelerate or permit the
acceleration of the performance required by, any of the terms of the
charter documents or by-laws of the Company or any note, debt
instrument, security agreement or mortgage, or any other material
contract or agreement to which the Company is a party or by which the
Company or any of its properties or assets are bound;
(b) will not be an event which, after notice or lapse of time or both,
will result in any such violation, breach, conflict, default or
acceleration;
(c) will not result in violation under any law, judgment, decree,
order, rule, regulation or other legal requirement of any governmental
authority, court or arbitration tribunal whether federal, state,
provincial, municipal or local (within the U.S. or otherwise), at law
or in equity, and applicable to the Company; and
(d) will not result in the creation or imposition of any lien,
possibility of lien, encumbrance, security agreement, equity, option,
claim, charge, pledge or restriction in favor of any third person upon
any of the properties or assets of the Company.
Section 4.6. No Existing Defaults. Except as set forth in Exhibit 4.6
hereto, the Company is not in default:
(a) under any of the terms of any material note, debt instrument,
security agreement or mortgage or under any other commitment, contract,
agreement, license, lease or other instrument, whether written or oral,
to which it is a party or by which it or any of its properties or
assets is bound;
(b) under any law, judgment, decree, order, rule regulation or other
legal requirement or any governmental authority, court or arbitration
tribunal whether federal, state, provincial, municipal or local (within
the U.S. or otherwise), at law or in equity, and applicable to it or to
any of this properties or assets, which default would have a material
adverse effect on the Company; or
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(c) in the payment of any of its material monetary obligations or
debts. There exists no condition or event which, after notice or lapse
of time or both, would constitute a material default in connection with
any of the foregoing.
Section 4.7. Financial Statements. The audited financial statements of
the Company as of the comparative two year period ended December 31, 2002 and
2003 and the unaudited financial statements of the Company as of the end of and
for the six month period ended June 30, 2004 (the "Financial Statements"), will,
when delivered to Buyer after the date hereof, be complete and correct in all
material respects, fairly present the financial position of the Company and the
results of its operations as of the respective dates and for the periods
indicated thereon and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except that they are
subject to year-end adjustments. The Company does not have any material
liability or obligation, fixed, contingent, known, unknown or otherwise, not
reflected in the balance sheet to be included in the Financial Statements,
except for liabilities or obligations incurred between July 1, 2004 and the date
of this Agreement in the ordinary and usual course of business consistent with
the representations and warranties set forth herein and that would not have been
in conflict with Section 7.3. hereof if they had been incurred between the date
hereof and the Closing.
Section 4.8. No Adverse Changes. As of the date of this Agreement,
except as disclosed in Exhibit 4.8 hereto and except as otherwise permitted
herein:
(a) the Company has not sustained any damage, destruction or loss, by
reason of fire, explosion, earthquake, casualty, labor trouble,
requisition or taking of property by any government or agency thereof,
windstorm, embargo, riot, act of God or public enemy, flood, volcanic
eruption, accident, other calamity or other similar or dissimilar event
(whether or not covered by insurance) adversely affecting the business,
properties, financial condition or operations of the Company;
(b) there have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, liabilities or
obligations (fixed, contingent, known, unknown or otherwise) of the
Company which in the aggregate would have a material adverse affect on
the business, properties, financial condition or operations of the
Company; and
(c) the Directors and Officers of the Company have taken all necessary
action to cause the Company to perform all of the acts specified in
Sections 7.3(a) and (c) hereof and have refrained from performing any
of the acts specified in Sections 7.3(b), (d) and (e) hereof.
Solely for purposes of this Section 4.8, economic conditions prevailing
generally in the United States of America shall not be deemed to be a "material
adverse affect."
Section 4.9. Full Disclosure; Absence of Material Changes. Since June
30, 2004, there has not been any material adverse change in the financial
condition, results of operations or business of the Company taken as a whole.
More specifically, the information furnished to Buyer by the Company or by any
of its directors, officers, employees, agents or accountants pursuant to this
Agreement (whether furnished prior to, at, or subsequent to the date hereof),
the information contained in the Exhibits referred to in this Agreement, and the
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other information furnished to Buyer by the Company or by any of its directors,
officers, employees, agents or accountants at any time prior to the Closing
(pursuant to the request of Buyer or otherwise), does not and will not contain
any untrue statement of a material fact and does not and will not omit to state
any material fact necessary to make all such information not misleading.
Section 4.10. Taxes. The Company has prepared (or caused to be
prepared) and timely and properly filed (or caused to be timely and properly
filed) with the appropriate federal, state, provincial, municipal or local
authorities (within the U.S. or otherwise) all tax returns, information returns
and other reports required to be filed including without limitation all tax
returns and reports with respect to federal, state, local and foreign income
taxes, estimated taxes, excise taxes, sales taxes, use taxes, fuel taxes, gross
receipts taxes, franchise taxes, employment and payroll taxes and import duties,
whether or not measured in whole or in part by net income ("Taxes"). Such tax
returns and reports are materially complete and correct as filed. The Company
has paid or accrued (or caused to be so paid or accrued) in full all Taxes,
interest, penalties, assessments or deficiencies, if any, due to, or claimed to
be due by, any taxing authority. The Company has not executed or filed with any
taxing authority any agreement extending the period for assessment or collection
of any Taxes. The Company is not a party to any pending action or proceeding nor
to the best knowledge of its officers and directors is any such action or
proceeding threatened by any governmental authority for the assessment or
collection of Taxes. There are no liens for federal, state, local or foreign
Taxes, and no claim for assessment or collection of Taxes has been asserted
against the Company. To the directors', officers', Stockholders' and the
Company's best knowledge, there are no tax audits currently in progress or
incomplete.
Section 4.11. Title to Assets. The Company has good and marketable
title to all of its material properties and assets, free and clear of any
material liens, encumbrances, security agreements, equities, options, claims,
charges, pledges, restrictions, encroachments, defects in title and easements
except for the matters set forth on Exhibit 4.11. At the Closing, the Company
will have good and marketable title to such material properties and assets, free
and clear of any material liens, encumbrances, security agreements, equities,
options, claims, charges, pledges, restrictions, encroachments, defects in title
and easements except for those shown in the Company's Financial Statements.
Section 4.12. Machinery and Equipment. The Company owns or has adequate
rights to all machinery and equipment currently used by the Company in the
conduct of its business and, to the best knowledge of the Company, all such
machinery and equipment is in good operating condition and free from any
material defect, ordinary wear and tear excepted.
Section 4.13. Litigation. Except as set forth in Exhibit 4.13 hereto,
there is no litigation, suit, proceeding, action or claim, at law or in equity,
pending or to the best knowledge of the Company threatened against or affecting
the Company or involving any of its property or assets, before any court,
agency, authority or arbitration tribunal, including, without limitation, any
product liability, workers' compensation or wrongful dismissal claim(s),
actions, suits or proceedings relating to toxic materials, hazardous substances,
pollution or the environment. Except as set forth in such Exhibit 4.13 hereto,
the Company is not subject to or in default with respect to any notice, order,
writ, injunction or decree of any court, agency, authority or arbitration
tribunal.
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Section 4.14. Compliance with Laws. To the best knowledge of the
Company, the Company has complied with all laws, municipal by-laws, regulations,
rules, orders, judgments, decrees and other requirements and policies imposed by
governmental authority applicable to it, its properties or the operation of its
business, except where failure of comply will not have a material adverse effect
on the business, properties or financial condition of the Company as otherwise
disclosed in Exhibit 4.14 hereto. Without limiting the generality of the
foregoing, to the best knowledge of the Company, the Company is in material
compliance with:
(a) all material and applicable laws relating to the protection of
human health and safety, including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, and all
material and applicable regulations and standards issued thereunder by
the Secretary of Labor or the Occupational Safety and Health
Administrator or other governmental agency or authority acting at any
time thereunder;
(b) all material and applicable laws relating to protection of the
environment, including, without limitation, the Resource Conservation
and Recovery Act ("RCRA") and the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA")
(c) all material and applicable laws administered by the Food and Drug
Administration; and
(d) all material and applicable laws relating to equal employment
opportunity.
The Company has not received any notice or citation for noncompliance
with any of the foregoing and, to the best knowledge of the Company, there
exists no condition, situation or circumstance, nor has there existed such a
condition, situation or circumstance which, after notice or lapse of time, or
both, would constitute noncompliance with regard to any of the foregoing.
Section 4.15. Environmental Matters. The Company has not stored and is
not storing any hazardous wastes, as defined by RCRA, for 90 days or more.
Except as set forth in Exhibit 4.15:
(a) the Company has not generated, stored, transported, recycled,
disposed of or otherwise handled in any way any waste material or
hazardous substance for itself or for any other person or entity, nor
has any other person or entity stored, transported, recycled, disposed
of or otherwise handled in any way any waste material or hazardous
substances for the Company;
(b) to the best knowledge of the Company, there are no locations where
any waste material or hazardous substances from the operation of the
Company has been stored, treated, recycled or disposed of;
(c) the Company has not been required by any governmental authority to
make any expenditure to achieve or maintain compliance with any
environmental standard; and
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(d) the Company has no knowledge of any information indicating that any
person, including any employee, may have impaired health or that the
environment may have been damaged as the result of the operation of the
business of either the Company or as the result of the release of
Contaminants from the Premises. For these purposes, the term
"Contaminants" includes any pollutant, waste materials, petroleum and
petroleum products and hazardous substances, as defined by CERCLA.
Section 4.16. Licenses, Permits and Approvals. Exhibit 4.16 hereto
constitutes a true and complete list of all material licenses, permits,
approvals, qualifications or the like, issued to the Company by any government
or any governmental unit, agency, body or instrumentality, whether federal,
state, provincial, municipal or local (within the U.S. or otherwise), and all
such items are in full force and effect. No registration with, approval by,
consent or clearance from or prenotification to any governmental agency is
required in connection with the execution and performance of this Agreement by
the Stockholders except as set forth on Exhibit 4.16.
Section 4.17. True Copies. All documents furnished, or caused to be
furnished to Buyer by the Company, are true and correct copies, and there are no
amendments or modifications thereto except as set forth in such documents.
Section 4.18. Pre-Signing Conduct of Business. Except as disclosed in
Exhibit 4.18 hereto and as contemplated by this Agreement, since June 30, 2004
the Company has operated only in the ordinary course of business except that the
Company is in the process of locating a suitable space to relocate its offices.
Solely for purposes of this Section 4.18, any aspect of the Company's operations
that would have been in conflict with Section 7.3 hereof if it had occurred
between the date hereof and the Closing shall be deemed by way of non-exclusive
illustration not to be in the ordinary course of business.
Section 4.19. Survival of Representations and Warranties of the Company
and the Stockholders. The representations and warranties of the Company and the
Stockholders made in Articles IV and V of this Agreement are correct, true and
complete as of the date hereof and will be correct, true and complete as at the
Closing with the same force and effect as though such representations and
warranties had been made at the Closing, and shall not survive the Closing.
Section 4.20. Intellectual Property.
(a) The Company (which, as presently constituted, has no subsidiaries)
owns, or is licensed or otherwise possesses legally enforceable rights to use
all patents, trademarks, trade names, service marks, copyrights and any
applications therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or materials
that are used in the business of Company as currently conducted, except for any
such failures to own, be licensed or possess that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect as
defined in subsection (b) below.
(b) Material Adverse Effect means, with respect to any party to this
Agreement, such state of facts, event(s), change(s) or effect(s) that had, has
or would reasonably be expected to have a material adverse effect on the assets,
business, condition (financial or otherwise), results of operations, prospects
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or, customer, supplier or employee relations of such party taken as a whole.
(c) Except as disclosed in the Company's Reports, or as is not
reasonably likely to have a Material Adverse Effect:
(i) the Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of the Company's
obligations hereunder, in violation of any licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to
which it is authorized to use any third-party patents, trademarks,
service marks and copyrights ("Company Third-Party Intellectual
Property Rights");
(ii) no claims with respect to the patents, registered and material
unregistered trademarks as well as service marks, registered
copyrights, trade names, any applications therefor owned by the Company
("Company Intellectual Property Rights"), any trade secret material to
the Company, or Company Third-Party Intellectual Property Rights to the
extent arising out of any use, reproduction or distribution of such
Company Third Party Intellectual Property Rights by or through the
Company, are currently pending or, to the knowledge of the Company, are
overtly threatened by any person;
(iii) the Company does not know of any valid grounds for any bona fide
claims (A) to the effect that the manufacture, sale, licensing or use
of any product as now used, sold or licensed or proposed for use, sale
or license by the Company, infringes on any copyright, patent,
trademark, service xxxx or trade secret of any third party other than
the Company; (B) against the use by the Company, of any trademarks,
trade names, trade secrets, copyrights, patents, technology, know-how
or computer software programs and applications of any third party used
in the business of the Company as currently conducted or as proposed to
be conducted; (C) challenging the ownership, validity or effectiveness
of any Company Intellectual Property Rights or other trade secret
material to the Company; or (D) challenging the license or legally
enforceable right to the use of the Company Third-Party Intellectual
Rights by the Company; and
(iv) to the knowledge of the Company, all patents, registered
trademarks and service marks as well as copyrights held by the Company
are valid, enforceable and subsisting.
Section 4.21. Company Due Diligence Investigation. The Company has
conducted its own independent review and analysis of the business, operations,
assets, liabilities, results of operations, financial condition, technology and
prospects of Buyer and acknowledges that the Company has been provided access to
the personnel, properties, premises and records of Buyer for such purpose. In
entering into this Agreement, the Company has relied solely upon its own
investigation and analysis and the representations and warranties contained
herein, and the Company:
(a) acknowledges that neither the Buyer nor any of its respective
directors, officers, shareholders, employees, affiliates, controlling
persons, agents, advisors or representatives makes or has made any
representation or warranty, either express or implied, as to the
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accuracy of completeness of any of the information provided or made
available to the Company or its directors, officers, employees,
affiliates, controlling persons, agents or representatives; and
(b) agrees, to the fullest extent permitted by law, that neither Buyer
nor any of its directors, officers, employees, shareholders,
affiliates, controlling persons, agents, advisors or representatives
shall have any liability or responsibility whatsoever to the Buyer or
its directors, officers, employees, affiliates, controlling persons,
agents or representatives on any basis (including, without limitation,
in contract or tort, under federal or state securities laws or
otherwise) based upon any information provided or made available, or
statements made, to the Company or its directors, officers, employees,
affiliates, controlling persons, advisors, agents or representatives
(or any omissions therefrom), except that the foregoing limitations
shall not apply (i) to the extent the Buyer makes the specific
representations and warranties set forth in this Agreement and (ii) in
the case of fraud, willful misrepresentation or willful nondisclosure,
but always subject to the limitations and restrictions contained
herein.
Section 4.22. Material Contracts and Agreements. Other than as
disclosed on Exhibit 4.22, the Company is not a party to any material contracts
or agreements.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS GENERALLY
Section 5.1. Authority for Agreement. Each of the Stockholders
severally represents and warrants to Buyer that he/she has all requisite power
and authority to enter into this Agreement and to perform the obligations to be
performed by him/her hereunder and that this Agreement constitutes the valid and
binding obligation of such Stockholder. By means of a Power of Attorney in the
form attached hereto as Exhibit B ("Power of Attorney"), each of the
Stockholders has duly and effectively appointed J. Xxxxx Xxxxx, J. Xxxxx Xxxxx
and/or J. Xxx Xxxxxxxx, and each of them (the "Representatives"), as his/her
attorneys-in-fact with full power and authority to act in his or her place and
stead with respect to all matters relating to this Agreement, both before and
after the Closing. Buyer is entitled to rely conclusively upon the validity and
binding effect of actions taken by either Representative under the foregoing
Power of Attorney.
Section 5.2. Title of Common Stock. Each Stockholder severally
represents and warrants to Buyer that he/she is the owner, beneficially and of
record, of all of the Common Stock set forth opposite such Stockholder's name in
Exhibit A hereto, free and clear of all liens, encumbrances, security
agreements, equities, options, claims, charges, pledges and restrictions and
that he/she has the full power and unrestricted right to transfer the Common
Stock to Buyer and, assuming the conditions set forth in Article VIII have been
satisfied, has obtained all the consents and approvals of all persons
(including, without limitation, courts and governmental authorities) necessary
to effect such transfer. Upon delivery of the Common Stock to Buyer at the
Closing as herein contemplated, Buyer shall have good and marketable title to
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all of the shares of Common Stock delivered by such Stockholder free and clear
of all liens, encumbrances, security agreements, equities, options, claims,
charges, pledges and restrictions.
Section 5.3. Investment Representations. Each Stockholder understands
that the shares of Buyer's Common Stock comprising the Exchange Consideration
are being offered and sold pursuant to the exemption from registration contained
in Section 4(2) the Securities Exchange Act of 1933, as amended (the "Act"),
based in part upon their respective representations contained in this Agreement.
(a) Economic Risk. Each Stockholder is in a position to bear the
economic risk of this investment indefinitely unless the shares of the
Buyer's Common Stock purchased are registered pursuant to the Act, or
an exemption from registration is available, and the Buyer has no
present intention of registering such shares. Each Stockholder also
understands that, even if available, such exemption may not allow
him/her to transfer all or any portion of said shares, if any, under
the circumstances, in the amount or at the times he/she might propose.
Each Stockholder understands that he/she has no registration rights
with respect to the shares.
(b) Acquisition for Own Account. Each Stockholder is acquiring the
shares of Buyer's Common Stock for his/her own account for investment
and not with a view toward distribution.
(c) Ability to Protect His/Her Own Interests. Each Stockholder
represents that by reason of his/her business or financial experience,
or the business and financial experience of his/her management, he/she
has the capacity to protect his/her own interests in connection with
the transactions contemplated in this Agreement. No Stockholder is a
corporation formed for the specific purpose of consummating this
transaction.
(d) Accredited Investor. Each Stockholder represents that he or she is
an "accredited investor" as that term is defined in Regulation D
promulgated under the Act.
(e) Access to Information. Each Stockholder has been given access to
all of both the Company's and Buyer's documents, records and other
information, has received physical delivery of all those documents
which he/she has requested, and has had adequate opportunity to ask
questions of, and receive answers from, both the Company's and Buyer's
officers, employees, agents, accountants and representatives concerning
the Company's and Buyer's business, operations, financial condition,
assets, liabilities and all other matters relevant to their investment
in the shares of Buyer's Common Stock.
(f) Acknowledgment of Financial Condition of Buyer. Each Stockholder
acknowledges that he/she has been informed and is aware of the
financial condition of the Buyer as reflected in the audited Form10-KSB
financial statements for the periods ended December 31, 2002 and
December 31, 2003, respectively, as well as the unaudited financials
for the six month period ended June 30, 2004, receipt of which
financials are hereby acknowledged.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and its Stockholders that:
Section 6.1. Organization and Capitalization of Buyer. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York with an authorized capital consisting solely of five
million (5,000,000) shares of Preferred Stock; of which no shares are issued and
outstanding as of the date hereof; and twenty million (20,000,000) shares of
Common Stock, of which Eleven Million Forty Eight Thousand Eight Hundred
Forty-five (11,048,845) shares of Common Stock are issued and outstanding as of
the date hereof; all of such issued and outstanding shares of Buyer's Common
Stock are duly authorized, validly issued, fully paid and nonassessable. Except
as described on Exhibit 6.1 or as disclosed in the Buyer's Reports (as defined
in Section 6.6), there are no other securities of any class of Buyer authorized,
issued, reserved for issuance or outstanding. Except as described on Exhibit 6.1
or as disclosed in the Buyer's Reports (as defined in Section 6.6), there are no
outstanding options, warrants, agreements or rights to subscribe for or to
purchase, or commitments to issue, shares of Buyer's Common Stock or any other
security of Buyer or any plan for any of the foregoing. Buyer has no
subsidiaries and does not own, directly or indirectly, any outstanding capital
stock or securities convertible into capital stock of any other corporation or
any participating interest in any partnership, joint venture or other business
enterprise. Buyer is not obligated to register the resale of any Buyer capital
stock on behalf of any stockholder of Buyer under the Act.
Section 6.2. Power and Authority. Buyer has all requisite corporate
power and authority to own, lease and operate its properties and to conduct its
business as presently conducted and as proposed to be conducted and is duly
qualified or licensed as a foreign corporation in good standing in each
jurisdiction in which the character of its properties or the nature of its
business activities require such qualification.
Section 6.3. Certificate of Incorporation and By-Laws of Buyer. The
copies of the Certificate of Incorporation of Buyer, certified by the Secretary
of State of New York, and the By-laws of Buyer, certified by its Secretary,
heretofore delivered by Buyer to the Stockholders, are true, complete and
correct.
Section 6.4. Authority for Agreement; Buyer's Common Stock, Preferred
Stock and Options. The Board of Directors of Buyer has approved this Agreement
and has authorized the execution and delivery hereof. Buyer has full power,
authority and legal right to enter into this Agreement; and no approval of
Buyer's stockholders is necessary for the consummation of the transactions
contemplated hereby. The shares of Buyer's Common Stock and Preferred Stock and
the Options constituting the Exchange Consideration, when issued in accordance
with the terms of this Agreement will be duly authorized, validly issued, fully
paid and non-assessable and the Preferred Stock shall have the rights and
preferences expressed in Exhibit D.
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Section 6.5. No Violations to Result. Assuming fulfillment prior to
the closing of the conditions set forth in Section 8.7 hereof and except as set
forth in Exhibit 6.5, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby:
(a) are not in violation or breach of, do not conflict with or
constitute a default under, and will not accelerate or permit the
acceleration of the performance required by, any of the terms of the
charter documents or by-laws of Buyer or any note, debt instrument,
security agreement or mortgage, or any other contract or agreement,
written or oral, to which Buyer is a party or by which Buyer or any of
its properties or assets are bound;
(b) will not be an event which, after notice or lapse of time or both,
will result in any such violation, breach, conflict, default or
acceleration;
(c) will not result in violation under any law, judgment, decree,
order, rule, regulation or other legal requirement of any governmental
authority, court or arbitration tribunal, whether federal, state,
provincial, municipal or local (within the U.S. or otherwise), at law
or in equity, and applicable to Buyer; and
(d) will not result in the creation or imposition of any lien,
possibility of lien, encumbrance, security agreement, equity, option,
claim, charge, pledge or restriction in favor of any third person upon
any of the properties or assets of Buyer.
Section 6.6. Exchange Act Reports and Financial Statements. The Buyer
has delivered to the Company (i) Buyer's Annual Report on Form 10-KSB for the
fiscal years ended December 31, 2003, containing Buyer's balance sheet at
December 31, 2002 and December 31, 2003 and statements of income, changes in
shareholders' equity and cash flows of Buyer for the three fiscal years ended
December 31, 2002 certified by Xxxxxxxx & Associates, P.C., Fairfield, New
Jersey, independent auditors and December 31, 2003 certified by Israeloff
Trattner & Co., independent auditors, respectively; (ii) quarterly reports in
Form 10-QSB for the three quarters ended March 31, June 30, and September 30,
2004, respectively; and (iii) all Current Reports on Form 8-K filed by Buyer
since December 31, 2002 (collectively, the "Buyer's Reports"). All Buyer's
Reports as of their respective dates (i) comply in all material respects with
the requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, (ii) do not contain any untrue statement of a material fact and
(iii) do not omit 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. All such financial statements, including
the related notes have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as indicated
therein) and fairly present the financial condition, assets and liabilities of
Buyer at the dates thereof and the results of operations and changes in
shareholders' equity and cash flows of Buyer for the periods stated therein,
subject, in the case of the interim financial statements, to normal and
recurring year-end audit adjustments and except that the interim financial
statements do not contain all of the notes required by generally accepted
accounting principles. In addition, Buyer does not have any material liability
or obligation, fixed, contingent, known, unknown or otherwise, not reflected in
the balance sheet included in the Buyer's Reports, and all provisions, reserves
and allowances provided for therein are adequate, except for liabilities or
obligations incurred between July 1, 2004 and the date of this Agreement in the
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ordinary and usual course of business consistent with the representations and
warranties set forth herein and that would not have been in conflict with
Section 7.3 hereof if they had been incurred between the date hereof and the
Closing.
Section 6.7. Full Disclosures; Absence of Material Changes. From the
date hereof through the Closing, except as disclosed in Exhibit 6.7 hereto and
except as otherwise permitted herein, Buyer has not sustained any damage,
destruction or loss, by reason of fire, explosion, earthquake, casualty, labor
trouble, requisition or taking of property by any government or agency thereof,
windstorm, embargo, riot, act of God or the public enemy, flood, volcanic
eruption, accident, other calamity or other similar or dissimilar event (whether
or not covered by insurance) adversely affecting the business, properties,
financial condition or operations of Buyer taken as a whole. The information
furnished by Buyer, or by any of the directors, officers, employees, agents,
accountants or representatives of Buyer to the Company and the Stockholders
pursuant to this Agreement (whether furnished prior to, at or subsequent to the
date hereof), the information contained in the Exhibits referred to in this
Agreement and the other information furnished to the Company and the
Stockholders by Buyer, or by any of the directors, officers, employees, agents,
accountants or representatives of Buyer at any time prior to the Closing
(pursuant to the request of the Stockholders or otherwise), does not and will
not contain any untrue statement of a material fact and does not and will not
omit to state any material fact necessary to make all such information not
misleading.
Section 6.8. Taxes. Buyer has prepared (or caused to be prepared) and
timely and properly filed (or caused to be timely and properly filed) with the
appropriate federal, state, provincial, municipal or local authorities (within
the U.S. or otherwise) all tax returns, information returns and other reports
required to be filed. Such tax returns are substantially complete and correct as
filed. Buyer has paid or accrued (or caused to be so paid or accrued) in full
all Taxes, interest, penalties, assessments or deficiencies, if any, due to, or
claimed to be due by, any taxing authority. The balance sheet included in the
Buyer's Reports include appropriate provisions for all such Taxes, interest,
penalties, assessments or deficiencies, if any, for the period indicated thereon
to the extent not theretofore paid. The Buyer has not executed or filed with any
taxing authority any agreement extending the period for assessment or collection
of any Taxes. The Buyer is not a party to any pending action or proceeding, nor
is any such action or proceeding threatened, by any governmental authority for
the assessment or collection of Taxes. There are no liens for federal, state,
local or foreign Taxes, and no claim for assessment or collection of Taxes has
been asserted against Buyer. To Buyer's best knowledge, there are no tax audits
currently in progress or not complete; the Buyer is not currently subject to an
election under Section 341(f) of the Internal Revenue Code; the transaction
contemplated by this Agreement will not obligate Buyer to make payments that are
not deductible pursuant to Section 280(G) of the Internal Revenue Code; the
Buyer has disclosed on its tax returns any positions that could give rise to a
"substantial understatement" of Federal income tax pursuant to Section 6662 of
the Internal Revenue Code; and the Buyer has never been a member of a group
filing a consolidated federal income tax return.
Section 6.9. Title to Assets. Buyer has good and marketable title to
all of its material properties and assets, free and clear of any material liens,
encumbrances, security agreements, equities, options, claims, charges, pledges,
restrictions, encroachments, defects in title and easements except for the
matters set forth on Exhibit 6.9 hereto. At the Closing, Buyer will have good
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and marketable title to such material properties and assets, free and clear of
any material liens, encumbrances, security agreements, equities, options,
claims, charges, pledges, restrictions, encroachments, defects in title and
easements except for those shown on Exhibit 6.9 hereto.
Section 6.10. Real Property. Buyer owns no real property. Buyer is a
party to the leases listed on Exhibit 6.10.
Section 6.11. Machinery and Equipment. Except as set forth on Exhibit
6.11, Buyer owns or has adequate rights to all machinery and equipment currently
used by Buyer in the conduct of its business and to the best knowledge of Buyer,
all such machinery and equipment is in good operating condition and free from
any material defect, ordinary wear and tear excepted.
Section 6.12. Brokers. Except for G-V Capital Corp., a registered NASD
Member firm (the "Finder"), which will receive shares of Buyer's Common Stock as
compensation for advice to the Buyer in this transaction, Buyer has not
expressly or impliedly engaged any broker, finder or agent with respect to this
Agreement or any transaction contemplated hereby. It is understood that the
calculation of the Exchange Consideration will give effect to the issuance of
Buyer Common Stock to the Finder.
Section 6.13. Litigation. Except as set forth in Exhibit 6.13 hereto,
there is no litigation, suit, proceeding, action or claim at law or in equity,
pending or to Buyer's best knowledge threatened against or affecting Buyer or
involving any of its property or assets, before any court, agency, authority or
arbitration tribunal, including, without limitation, any product liability,
workers' compensation or wrongful dismissal claims, or claims, actions, suits or
proceedings relating to toxic materials, hazardous substances, pollution or the
environment. Except as set forth in such Exhibit 6.13 hereto, Buyer is not
subject to or in default with respect to any notice, order, writ, injunction or
decree of any court, agency, authority or arbitration tribunal.
Section 6.14. Compliance with Laws. To the best knowledge of Buyer, it
has complied with all laws, municipal by-laws, regulations, rules, orders,
judgments, decrees and other requirements and policies imposed by any
governmental authority applicable to it, its properties or the operation of its
business, except where the failure to comply will not have a material adverse
effect on the business, properties, financial condition or earnings of Buyer and
except as otherwise disclosed in Exhibit 6.14 hereto. Without limiting the
generality of the foregoing, to the best knowledge of Buyer, it is in material
compliance with:
(a) all laws relating to the protection of human health and safety,
including, without limitation, the Occupational Safety and Health Act
of 1970, as amended, and all material and applicable regulations and
standards issued thereunder by the Secretary of Labor or the
Occupational Safety and Health Administrator or other governmental
agency or authority acting at any time thereunder;
(b) all material and applicable laws relating to protection of the
environment, including, without limitation, RCRA and CERCLA;
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(c) all material and applicable laws administered by the Food and Drug
Administration; and
(d) all material and applicable laws relating to equal employment
opportunity.
Buyer has not received any notice or citation for noncompliance with
any of the foregoing, and to the best knowledge of Buyer there exists no
condition, situation or circumstance, nor has there existed such a condition,
situation or circumstance which, after notice or lapse of time, or both, would
constitute noncompliance with regard to any of the foregoing.
Section 6.15. Environmental Matters. Buyer has not stored and is not
storing any hazardous wastes, as defined by RCRA, for 90 days or more and except
as set forth in Exhibit 6.15:
(a) Buyer has not generated, stored, transported, recycled, disposed of
or otherwise handled in any way any waste material or hazardous
substance for itself or for any other person or entity, nor has any
other person or entity stored, transported, recycled, disposed of or
otherwise handled in any way any waste material or hazardous substances
for Buyer;
(b) to the best knowledge of Buyer, there are no locations where any
waste material or hazardous substances from the operation of Buyer has
been stored, treated, recycled or disposed of;
(c) Buyer has not been required by any governmental authority to make
any expenditure to achieve or maintain compliance with any
environmental standard; and
(d) Buyer has no knowledge of any information indicating that any
person, including any employee, may have impaired health or that the
environment may have been damaged as the result of the operation of the
business of Buyer or as the result of the release of Contaminants from
the Buyer Premises. For these purposes, the term "Contaminants"
includes any pollutant, waste materials, petroleum and petroleum
products and hazardous substances, as defined by CERCLA.
Section 6.16. Licenses, Permits and Approvals. Exhibit 6.16 constitutes
a true and complete list of all material licenses, permits, approvals,
qualifications or the like, issued or to be issued to Buyer by any government or
any governmental unit, agency, body or instrumentality, whether federal, state,
provincial, municipal or local (within the U.S. or otherwise) necessary for the
conduct of its trade or business, and all such items are in full force and
effect. No registration with, approval by, consent or clearance from or
prenotification to any governmental agency is required in connection with the
execution and performance of this Agreement by Buyer except as set forth on
Exhibit 6.16.
Section 6.17. True Copies. All documents furnished or caused to be
furnished to the Company and the Stockholders by Buyer are true and correct
copies, and there are no amendments or modifications thereto except as set forth
in such documents.
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Section 6.18. Buyer's Common Stock. As and when required by the
provisions of this Agreement and subject to the terms and conditions hereof,
Buyer will reserve for issuance and issue shares of Buyer's Common Stock. The
shares of Buyer's Common Stock to be issued in accordance with this Agreement
will have been duly authorized and, upon such issuance, will be validly issued,
fully paid and nonassessable.
Section 6.19. Interest in the Company. Buyer does not own, directly or
indirectly (within the meaning of ss.318 of the Internal Revenue Code of 1986,
as amended), nor has it owned during the past 5 years, directly or indirectly
(within the meaning of ss.318 of the Internal Revenue Code of 1986, as amended)
any stock of the Company.
Section 6.20. Disposition of the Company's Shares. Buyer has no plan
or intention to sell or otherwise dispose of any of the assets of the Company
acquired in the transactions contemplated by this Agreement, except for
dispositions made in the normal and usual course of business. Buyer has no plan
or intention to reacquire any of Buyer's Common Stock and Buyer has no plan or
intention to sell or otherwise dispose of any of the Common Stock, or to
liquidate or dissolve the Company.
Section 6.21. Issuance of Stock.Buyer has no plan or present intention
to cause or permit the Company to issue additional shares of its stock that
would result in Buyer losing control of the Company within the meaning of
section 368(c) of the Internal Revenue Code of 1986, as amended (the "Code").
Section 6.22. Company's Historic Business. The Buyer intends to
continue the Company's historic business.
Section 6.23. Employee Benefit Plans. Buyer does not currently have in
effect nor has Buyer had in effect since the filing of its original certificate
of incorporation any employee retirement benefit plan including but not limited
to any ERISA type plan.
Section 6.24. Reporting Company Status. Buyer is registered under
Section 12(g) of the Securities Exchange Act of 1934, is required to file
reports under Sections 13 and 15 under such Exchange Act with the Securities and
Exchange Commission and has complied with all filing requirements required
thereto.
Section 6.25. Claims. Buyer has no knowledge of any pending or
threatened claims against the Buyer.
Section 6.26. Intellectual Property.
(a) Buyer (which, as presently constituted, has no subsidiaries) owns,
or is licensed or otherwise possesses legally enforceable rights to use all
patents, trademarks, trade names, service marks, copyrights and any applications
therefor, technology, know-how, computer software programs or applications, and
tangible or intangible proprietary information or materials that are used in the
business of Buyer as currently conducted, except for any such failures to own,
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be licensed or possess that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect.
(b) Except as disclosed in Buyer's Reports, or as is not reasonably
likely to have a Material Adverse Effect (as that term is defined in Section
4.20(b):
(i) Buyer is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of Buyer's obligations
hereunder, in violation of any licenses, sublicenses and other
agreements as to which Buyer is a party and pursuant to it is
authorized to use any third-party patents, trademarks, service marks
and copyrights ("Buyer Third-Party Intellectual Property Rights");
(ii) no claims with respect to the patents, registered and material
unregistered trademarks as well as service marks, registered
copyrights, trade names, any applications therefor owned by Buyer (the
"Buyer Intellectual Property Rights"), any trade secret material to
Buyer, or Buyer Third-Party Intellectual Property Rights to the extent
arising out of any use, reproduction or distribution of such Buyer
Third Party Intellectual Property Rights by or through Buyer, are
currently pending or, to the knowledge of Buyer, are overtly threatened
by any person;
(iii) Buyer does not know of any valid grounds for any bona fide claims
(A) to the effect that the manufacture, sale, licensing or use of any
product as now used, sold or licensed or proposed for use, sale or
license by Buyer, infringes on any copyright, patent, trademark,
service xxxx or trade secret of any third party other than Buyer; (B)
against the use by Buyer, of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software
programs and applications of any third party used in the business of
Buyer as currently conducted or as proposed to be conducted; (C)
challenging the ownership, validity or effectiveness of any Buyer
Intellectual Property Rights or other trade secret material to Buyer;
or (D) challenging the license or legally enforceable right to the use
of the Buyer Third-Party Intellectual Rights by Buyer; and
(iv) to the knowledge of Buyer, all patents, registered trademarks and
service marks as well as copyrights held by Buyer are valid,
enforceable and subsisting.
Section 6.27. Buyer Due Diligence. Buyer has conducted its own
independent review and analysis of the business, operations, assets,
liabilities, results of operations, financial condition, technology and
prospects of the Company and its affiliates and acknowledges that Buyer has been
provided access to the personnel, properties, premises and records of the
Company and its affiliates for such purpose. In entering into this Agreement,
Buyer has relied solely upon its own investigation and analysis and the
representations and warranties contained herein, and Buyer:
(a) acknowledges that neither the Company nor any of its respective
directors, officers, shareholders, employees, affiliates, controlling
persons, agents, advisors or representatives makes or has made any
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representation or warranty, either express or implied, as to the
accuracy of completeness of any of the information provided or made
available to the Company or its directors, officers, employees,
affiliates, controlling persons, agents or representatives; and
(b) agrees, to the fullest extent permitted by law, that neither the
Company nor any of its directors, officers, employees, shareholders,
affiliates, controlling persons, agents, advisors or representatives
shall have any liability or responsibility whatsoever to the Buyer or
its directors, officers, employees, affiliates, controlling persons,
agents or representatives on any basis (including, without limitation,
in contract or tort, under federal or state securities laws or
otherwise) based upon any information provided or made available, or
statements made, to the Buyer or its directors, officers, employees,
affiliates, controlling persons, advisors, agents or representatives
(or any omissions therefrom), except that the foregoing limitations
shall not apply (i) to the extent the Company makes the specific
representations and warranties set forth in this Agreement and (ii) in
the case of fraud, willful misrepresentation or willful nondisclosure,
but always subject to the limitations and restrictions contained
herein.
Section 6.28. Current Report on Form 8-K; Section 14(f) Information.
Except for information relating to the Company, the current report on Form 8-K
to be prepared by Buyer and filed after the Closing with regard to this
acquisition transaction and the information required by Section 14(f) of the
Exchange Act will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading. All documents which Buyer is responsible for filing with the SEC or
any regulatory agency in connection with the acquisition will comply as to form
in all material respects with the requirements of applicable law, and all of the
information relating to Buyer in any document filed with the SEC or any other
regulatory agency in connection with this Agreement or the transactions
otherwise contemplated hereby shall be true and correct in all material
respects.
Section 6.29. No Existing Defaults.Except as set forth in Exhibit 6.29
hereto, the Buyer is not in default:
(a) under any of the terms of any material note, debt instrument,
security agreement or mortgage or under any other commitment, contract,
agreement, license, lease or other instrument, whether written or oral,
to which it is a party or by which it or any of its properties or
assets is bound;
(b) under any law, judgment, decree, order, rule regulation or other
legal requirement or any governmental authority, court or arbitration
tribunal whether federal, state, provincial, municipal or local (within
the U.S. or otherwise), at law or in equity, and applicable to it or to
any of this properties or assets, which default would have a material
adverse effect on Buyer; or
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(c) in the payment of any of its material monetary obligations or
debts. There exists no condition or event which, after notice or lapse
of time or both, would constitute a material default in connection with
any of the foregoing
Section 6.30. Material Contracts and Agreements. Other than as
disclosed on Exhibit 6.30, Buyer is not a party to any material contracts or
agreements.
Section 6.31. Survival of Representations and Warranties of Buyer. The
representations and warranties of Buyer made in this Agreement are correct, true
and complete as of the date hereof and will be correct, true and complete as at
the Closing with the same force and effect as though such representations and
warranties had been made at the Closing, and shall survive the Closing for a
period of 12 months.
ARTICLE VII
CONDUCT AND TRANSACTIONS
PRIOR TO AND AFTER CLOSING
Section 7.1. Access to Property and Records of Buyer. Buyer shall
afford to the Company and the Stockholders and their authorized representatives
free and full access to all of its assets, property, books and records, in order
to afford the Company and the Stockholders as full an opportunity of review,
examination and investigation as they shall desire to make, and the Company and
the Stockholders shall be permitted to make extracts from, or take copies of,
such books, records (including the stock record and minute books) or other
documentation or to obtain temporary possession of any thereof as may be
reasonably necessary; and the Buyer shall furnish or cause to be furnished such
reasonable financial and operating data and other information about its
business, properties and assets which the Company and the Stockholders or their
authorized representatives may request.
Section 7.2. Interim Covenants of the Buyer. From the date of this
Agreement until the Closing, except to the extent expressly permitted by or
disclosed in this Agreement or otherwise consented to by an instrument in
writing signed by the Company and the Stockholders, Buyer shall take all
necessary action so that:
(a) Buyer shall keep its business and organization intact;
(b) Buyer shall not make any change in its constituent documents, i.e.,
Certificate of Incorporation or by-laws except to increase the number
of authorized common shares and as otherwise contemplated by this
Agreement;
(c) Buyer shall not form any subsidiary nor shall it issue, grant,
sell, redeemed combined, change or purchase any shares, notes or other
securities or make any commitments to do so;
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(d) Buyer shall not effect any subdivision of its outstanding capital
stock purchase or redeem any capital stock, or declare, make or pay any
dividend, distribution or payment in respect of its capital stock other
than as contemplated by this Agreement;
(e) Buyer shall not issue any Buyer's Common Stock or Preferred Stock
except for Buyer's Common Stock to be issued upon exercise of currently
outstanding options and warrants.
(f) Buyer shall not grant or issue any options, warrants or other
rights to acquire any of its securities, whether by conversion or
otherwise, or make any commitment to do so other than as contemplated
in this Agreement;
(g) Buyer shall keep the Company appraised of its operations and any
developments thereto;
(h) Buyer agrees not to solicit or negotiate any offers with respect to
the purchase of substantially all its assets or a merger or similar
transaction prior to the termination of this Agreement;
(i) Buyer will not voluntarily go into bankruptcy and will object to
and resist any involuntary petition brought against the Buyer; and
(i) Buyer will timely and diligently perform any and all acts necessary
to convene a meeting for the shareholders' approval necessary for this
transaction.
Section 7.3. Interim Covenants of the Company. From the date of this
Agreement until the Closing, except to the extent expressly permitted by or
disclosed in this Agreement or otherwise consented to by an instrument in
writing signed by Buyer, the Company shall take all necessary action so that:
(a) the Company shall keep its business and organization intact and
shall not take or permit to be taken or do or suffer to be done
anything other than in the ordinary course of its business as the same
is presently being conducted, and shall use its best efforts to keep
available the services of its directors, officers, employees and agents
and to maintain the good will and reputation associated with its
business;
(b) the Company shall not make any change in its constituent documents,
i.e., Certificate of Incorporation or by-laws, without the prior
written consent of the Buyer;
(c) the Company shall exercise its best efforts to maintain all of its
properties and assets, tangible or intangible, in good operating
condition and repair, and take all steps necessary to keep its
operations functioning properly it being understood that the Company is
presently relocating its headquarters facility;
(d) the Company shall not purchase, sell, lease or dispose of or make
any contract for the purchase, sale, lease or disposition of or subject
to lien or security interest any properties or assets other than in the
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ordinary and usual course of its business consistent with the
representations and warranties of the Company and the Stockholders
contained herein and not in breach of any of the provisions of this
Article VII, in each case for a consideration at least equal to the
fair value of such property or asset; and
(e) the Company shall not enter into any contract, agreement or
commitment, including, without limiting the generality of the
foregoing, any contracts, agreement or commitment other than in the
ordinary course of its business.
Section 7.4. Public Announcements. Neither Buyer, the Company nor any
Stockholder shall make any press release or other public announcements with
respect to this Agreement or the transactions contemplated hereby without the
prior approval of the contraparty, which approval shall not be unreasonably
withheld; provided, however, that if failure to make such announcement would be
a violation of federal or state securities laws and the consents are not
practicably available on a timely basis, such a press release or public
announcement can be made without the consent of the other parties. For purposes
of the preceding sentence, each Stockholder hereby designates the Company as its
representative to give consent to a proposed press release.
Section 7.5. Compliance with Code Section 368(a)(1)(B). Each
Stockholder, the Company and Buyer hereby acknowledge that the parties hereto
intend that the transactions contemplated by this Agreement will qualify as a
"reorganization" as described in section 368(a)(1)(B) of the Code. Each
Stockholder, the Company and Buyer hereby agree to use their reasonable efforts
to take all actions necessary or appropriate to ensure that the transactions
undertaken pursuant to this Agreement will qualify as a "reorganization" as
described in section 368(a)(1)(B) of the Code. In addition, each Stockholder,
the Company and Buyer hereby agree to refrain from taking any actions that are
known by such party to be, or that clearly are, inconsistent with such
qualification. The obligations of the parties under the preceding sentence shall
include, without limitation, the obligation to refrain from (i) taking any
position on any federal, state, or local income tax return that is inconsistent
with the transactions undertaken pursuant to this Agreement qualifying as a
"reorganization" as described in section 368(a)(1)(B) of the Code; (ii) taking,
for a period of two (2) years from the Closing Date, any of the actions
described in Sections 6.21 through 6.23 hereof; (iii) in the case of the Buyer,
providing any consideration with respect to the Shares other than as expressly
provided for herein; and (iv) in the case of each Stockholder, within two (2)
years of Closing, without the consent of each of the other Stockholders,
disposing of more than forty percent (40%) of the Buyer's Common Stock received
by such Stockholder pursuant to this Agreement. Each Stockholder hereby agrees
to provide to each other Stockholder written notice of any disposition, within
two (2) years of Closing, of any Buyer's Common Stock.
Section 7.6. Special Stockholder Meeting. No later than 30 days after
the Closing, Buyer shall file with the Securities and Exchange Commission
("SEC") an Information Statement for a meeting of Buyer's stockholders. The
Information Statement shall propose:
(i) increasing the Buyer's authorized capital stock to 50 million
shares;
(ii) reincorporating the Buyer into Delaware; and
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(iii) changing the name of the Buyer to YTB International, Inc.
("YTBI").
Buyer and the Company shall use their best efforts to ensure that the
Information Statement is cleared for mailing and that the special meeting is
held at the earliest practicable date.
Section 7.7. Series B Convertible Preferred Stock. Buyer shall promptly
file with the New York Department of State an Amendment to its Certificate of
Incorporation in proper form, to designate the rights and preferences of the
Series B Preferred Stock, in accordance with the provisions specified in Exhibit
D.
Section 7.8 Second Schedule 14F Statement. As contemplated by the
Stockholders' Agreement (as defined in Section 9.11), there will be a second
Schedule 14F Statement filed with the SEC and mailed to the shareholders of the
Buyer within sixty (60) days of the Closing unless such date is extended by
mutual agreement of the parties.
ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each of the agreements of Buyer to be performed by it at the Closing
pursuant to this Agreement shall be subject to the fulfillment of each of the
following conditions, any one or more of which may be waived, in whole or in
part, in writing, by Buyer.
Section 8.1. Stockholders' Approval.Stockholders owning at least 100%
of Company's Common Stock shall have executed this Agreement.
Section 8.2. Authority. All action required to be taken by, or on the
part of, the Company and the Stockholders to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
Section 8.3. Representations and Warranties of the Stockholders to Be
True. Each of the representations and warranties of the Company and the
Stockholders set forth in Article IV hereof shall be true and correct in all
material respects both on the date hereof and on the date of the Closing as if
made at that time, except insofar as changes shall have occurred after the date
hereof which are permitted by Section 7.3 of this Agreement.
Section 8.4. No Material Adverse Change. Since the date hereof, there
shall have been no material adverse change in the business of the Company or any
material loss to the business by fire or other casualty whether or not covered
by insurance.
Section 8.5. No Litigation. No material suit, action or other
proceeding against the Buyer, the Company or their officers or directors or
stockholders shall be pending or threatened before any court or governmental
agency seeking to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby and in
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which in the judgment of Buyer makes the consummation of the transactions
contemplated by this Agreement inadvisable.
Section 8.6. Consents Obtained. All necessary governmental and third
party consents or approvals to the transactions contemplated hereby shall have
been obtained.
Section 8.7. Legal Review. All legal matters in connection with this
Agreement and the transactions contemplated hereby, and the form and substance
of all legal proceedings and of all papers, instruments and documents used or
delivered hereunder or incidental hereto, shall be reasonably satisfactory to
Buyer, and at its request, to Xxxx X. Xxxxxx, Esq., counsel for Buyer.
Section 8.8. Certificate of the Company. At the Closing, the Company
shall have delivered to Buyer a certificate signed by an authorized officer,
dated the date of the Closing, to the effect that to the best of its knowledge
and belief, after due inquiry, the conditions specified in Section 8.6 have been
fulfilled.
Section 8.9. Xxxxx Xxxxx. Buyer shall issue to Xxxxx Xxxxx 900,000
shares of Buyer's Common Stock.
ARTICLE IX
CONDITIONS PRECEDENT TO THE STOCKHOLDERS' OBLIGATIONS
Each of the agreements of the Company and the Stockholders to be
performed by it or each of them at the Closing pursuant to this Agreement shall
be subject to the fulfillment of each of the following conditions, any one or
more of which may be waived, in whole or in part, in writing, by the
Stockholders as appropriate:
Section 9.1. Representations and Warranties of Buyer to Be True. The
representations and warranties of Buyer set forth in Article VI hereof shall be
true and correct both on the date hereof and on the date of the Closing as if
made at that time, except insofar as changes shall have occurred after the date
hereof which are permitted by Section 7.2 of this Agreement.
Section 9.2. Authority. All action required to be taken by, or on the
part of, Buyer to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Board of Directors and Shareholders of
Buyer.
Section 9.3. Officers' Certificate of Buyer. At the Closing, Buyer
shall have delivered to the Company and the Stockholders a certificate signed by
the Buyer's Chairman of the Board dated the date of the Closing, to the effect
that to the best of the knowledge and belief of such officers, after due
inquiry, the conditions specified in Sections 9.1 and 9.2 with respect to Buyer
have been fulfilled.
Section 9.4. Opinion of Buyer's Counsel. The Company and the
Stockholders shall have received from Xxxx X. Xxxxxx, Esq., counsel for Buyer,
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his opinion, dated the date of Closing, in form and substance satisfactory to
them and their counsel, to the effect set forth in Exhibit 9.4 hereto.
Section 9.5. The Buyer Has Complied with Covenants. The Buyer shall
have performed and complied in all material respects with all agreements,
undertakings and obligations which are required to be performed or complied with
by it at or prior to the Closing.
Section 9.6. No Litigation. No material suit, action or other
proceeding against the Buyer, the Company or their officers or directors or
stockholders shall be pending or threatened before any court or governmental
agency seeking to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby and in
which in the judgment of Buyer makes the consummation of the transactions
contemplated by this Agreement inadvisable.
Section 9.7. Consents Obtained. All necessary governmental and
third-party consents or approvals to the transaction contemplated hereby shall
have been obtained.
Section 9.8. Legal Review. All legal matters in connection with this
Agreement and the transactions contemplated hereby, and the form and substance
of all legal proceedings and of all papers, instruments and documents used or
delivered hereunder or incidental hereto, shall be reasonably satisfactory to
the Stockholders and, at their request, to counsel for the Company.
Section 9.9. D&O Policy. Directors and Officers' insurance coverage
shall be obtained at both the parent and the subsidiary levels, effective on the
date of Closing unless both Buyer and the Company agree as to a different date.
Section 9.10. Employment Agreements; Option Agreements. Xxxxxxx Xxxxx'x
employment agreement with Buyer shall be replaced, effective on Closing, by a
substitute employment agreement that will be put in place with Xx. Xxxxx, Xxxxx
Xxxxx, J. Xxxxx Xxxxx and J. Xxx Xxxxxxxx. The terms and conditions of each
employment agreement, including the compensation provisions, shall be mutually
agreed to by the respective individual and the Buyer. All employment agreements
will be with the Buyer. The Buyer at closing will issue options to purchase the
respective amounts of Buyer's Common Stock (the "Matching Options") to Messrs.
J. Xxxxx Xxxxx (100,000), J. Xxxxx Xxxxx (135,000), J. Xxx Xxxxxxxx (135,000)
and Xxxxxx Xxxxxxx (100,000). These Matching Options will be issued under the
Buyer's 1999 Stock Option Plan, be fully vested on the date of issuance and have
the same exercise prices and expiration dates as the options held by Xx. Xxxxx
and certain other employees.
Section 9.11.Stockholders' Agreement; Resultant Corporate Structure.
Effective at Closing, a stockholders' agreement with respect to the Buyer's
outstanding stock (the "Stockholder Agreement") shall have been executed by and
between the Tomer Group (as such term is defined therein) and the Xxxxx Group
(as such term is defined therein). Effective at Closing, the Company
(XxxxXxxxxxXxx.xxx, Inc.) will become a 100% owned subsidiary of Buyer; and
Buyer will have created two new 100% owned subsidiaries REZconnect Technology,
Inc. and YTB Travel Network, Inc. The respective certificates of incorporation
of the subsidiaries shall contain provisions which (limit the Board of Directors
to five (5) members and permit the Tomer Group (in the case of the Company) and
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the Xxxxx Group (in the case of the RezConnect Technology, Inc. subsidiary) to
elect three (3) members to the applicable board of directors and also provide
that the applicable certificate of incorporation of such subsidiary cannot be
amended without the consent of the Tomer Group (in the case of the Company) and
the Xxxxx Group (in the case of the RezConnect Technology, Inc. subsidiary).
Section 9.12. Buyer's Board of Directors; Schedule 14F Statement. The
Buyer's board of directors shall have been initially expanded to six (6) members
in accordance with the provisions of the Stockholders' Agreement and the three
(3) board members designated by the Tomer Group shall have been appointed by the
incumbent board. At least ten (10) days before the Closing, the disclosure
required by Section 14(f) of the Exchange Act shall have been filed with the SEC
and mailed to Buyer's stockholders. The parties acknowledge that following the
Closing there will be a second Schedule 14F Statement filed with the SEC and
mailed to the Buyer's stockholders in connection with the expansion of the
Buyer's Board of Directors to nine (9) members.
Section 9.13. Tax Opinion. Xxxx, Xxxxx LLP shall prepare a tax opinion,
the tax status of this exchange of stock pursuant to Section 368 of the Internal
Revenue Code.
Section 9.14. Lockup Agreements. Effective not later than Closing,
Finder shall enter into a twelve (12) month period Lockup Agreement with regard
to Buyer's shares paid to the Finder as compensation.
Section 9.15.Assignment Agreement between YTB Travel & Cruises, Inc.
and YTB Travel Network Subsidiary. Effective at Closing, YTB Travel & Cruises,
Inc. ("Assignor") will have entered into an Assignment and Assumption Agreement
with the newly created YTB Travel Network, Inc. subsidiary assigning to such
subsidiary (i) all of Assignor's rights and obligations under Assignor's
contracts with all of its Referring Travel Agents; and (ii) all right, title and
interest in and to Assignor's ARC Number.
Section 9.16. Series B Convertible Preferred Stock. The Certificate of
Amendment for designating the rights and preferences of the Preferred Stock
shall have been filed with, and accepted by, the New York Department of State.
ARTICLE X
FURTHER ASSURANCES OF THE STOCKHOLDERS
Section 10.1. Satisfaction of Conditions of the Stockholders. The
Stockholders shall not voluntarily undertake any course of action inconsistent
with the satisfaction of the requirements or conditions applicable to them set
forth in this Agreement, and the Stockholders shall promptly do all such acts
and take all such measures as may be appropriate to enable them to perform as
early as is reasonably practicable the obligations herein provided to be
performed by them. The Stockholders shall use their reasonable efforts to cause
the Closing to occur as contemplated herein at the earliest practicable date.
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ARTICLE XI
AMENDMENT, WAIVER AND TERMINATION
Section 11.1. Amendment. This Agreement may be amended at any time in a
writing which refers to and incorporates by reference this Agreement and is
executed by all the parties hereto.
Section 11.2. Waiver. Either the Stockholders or Buyer may waive or
modify in writing compliance by the other with any of the covenants and
conditions contained in this Agreement (except such as may be imposed by law) to
the extent such party believes such action not to be materially adverse to its
interest.
Section 11.3. Termination. This Agreement may be terminated at any time
on or prior to the Closing Date:
(a) By the mutual consent of Buyer, the Company and the Stockholders;
(b) By Buyer, if any of the Company's representations or warranties
contained in or made pursuant to this Agreement was not true and
complete in all material respects when made or if Seller or the
Stockholders fails to perform or comply in all material respects with
all agreements and covenants required by this Agreement to be performed
or complied with by Seller or the Stockholders or if any of the
conditions set forth in Article VIII have not been satisfied as of the
Closing Date; and
(c) By the Company or the Stockholders, if any of Buyer's
representations or warranties contained in or made pursuant to this
Agreement was not true and complete in all material respects when made
or if Buyer fails to perform or comply in all material respects with
all agreements and covenants required by this Agreement to be performed
or complied with by Buyer or if any of the conditions set forth in
Article IX have not been satisfied as of the Closing Date. In the event
of termination of this Agreement pursuant to Article IX hereof, notice
shall promptly be given by the terminating party to the other party to
this Agreement.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Arbitration. Any controversy, claim, or dispute between
the parties, directly or indirectly, concerning this Agreement or the breach
hereof, or the subject matter hereof, including questions concerning the scope
and applicability of this arbitration clause, shall be finally settled by
arbitration in New York City, New York pursuant to the rules then applying of
the American Arbitration Association. The arbitrators shall consist of one
representative selected by Buyer, one representative selected by the Company and
one representative selected by the first two arbitrators. The parties agree to
expedite the arbitration proceeding in every way, so that the arbitration
proceeding shall be commenced within thirty (30) days after request therefore is
made, and shall continue thereafter, without interruption, and that the decision
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of the arbitrators shall be handed down within thirty (30) days after the
hearings in the arbitration proceedings are closed. The arbitrators shall have
the right and authority to assess the cost of the arbitration proceedings and to
determine how their decision or determination as to each issue or matter in
dispute may be implemented or enforced. The decision in writing of any two of
the arbitrators shall be binding and conclusive on all of the parties to this
Agreement. Should either Buyer or the Company fail to appoint an arbitrator as
required by this Section 12.1 within thirty (30) days after receiving written
notice from the other party to do so, the arbitrator appointed by the other
party shall act for all of the parties and his decision in writing shall be
binding and conclusive on all of the parties to this Agreement. Any decision or
award of the arbitrators shall be final and conclusive on the parties to this
Agreement; judgment upon such decision or award may be entered in any competent
Federal or state court located in the United States of America; and the
application may be made to such court for confirmation of such decision or award
for any order of enforcement and for any other legal remedies that may be
necessary to effectuate such decision or award.
Section 12.2. Indemnification of Company Directors and Officers.
(a) From and after the Closing, Buyer shall indemnify, defend and hold
any person any person who is now, or has been at any time prior to the
date hereof, or who becomes prior to the Closing, an officer or
director (the "Indemnified Party") of the Company against all losses,
claims, damages, liabilities, costs and expenses (including reasonable
attorney's fees and expenses), judgments, fines, losses, and amounts
paid in settlement in connection with any actual or threatened action,
suit, claim, proceeding or investigation (each a "Claim") to the extent
that any such Claim is based on, or arises out of, (i) the fact that
such person is or was a director or officer of the Company or is or was
serving at the request of the Company as a director or officer of
another corporation, partnership, joint venture, trust or other
enterprise, or (ii) this Agreement, or any of the transactions
contemplated hereby, in each case to the extent that any such Claim
pertains to any matter or fact arising, existing, or occurring prior to
or at the Closing, regardless of whether such Claim is asserted or
claimed prior to, at or after the Closing, to the full extent permitted
under the Illinois Business Corporation Act of 1983 ("BCA"), or the
Company's Articles of Incorporation, By-laws or indemnification
agreements in effect at the date hereof, including provisions relating
to advancement of expenses incurred in the defense of any action or
suit. Without limiting the foregoing, in the event any Indemnified
Party becomes involved in any capacity in any Claim, then from and
after the Closing, Buyer and/or its consolidated successor, shall
periodically advance to such Indemnified Party its legal and other
expenses (including the cost of any investigation and preparation
incurred in connection therewith), subject to the provision by such
Indemnified Party of a written affirmation in accordance with Illinois
BCA.
(b) The parties agree that all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Party as
provided in the Company's Articles of Incorporation and By-laws as in
effect as of the date hereof shall survive the Closing and shall
continue in full force and effect, without any amendment thereto, for a
period of two years from the Closing of the reorganization to the
extent such rights are consistent with Illinois BCA; provided that, in
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the event any Claim or Claims are asserted or made within such two year
period, all rights to indemnification in respect of any such Claim or
Claims shall continue until disposition of any and all such Claims;
provided further, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the
standards set forth under Illinois BCA, the Company's Articles of
Incorporation or By-laws, as the case may be, shall be made by
independent legal counsel in accordance with Illinois BCA and the
indemnification agreements and; provided further, that nothing in this
Section 12.2 shall impair any rights or obligations of any present or
former directors or officers of the Company.
(c) In the event Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to
the extent necessary to effectuate the purposes of this Section 12.2,
proper provision shall be made so that the successors and assigns of
Buyer assume the obligations set forth in this Section 12.2, and none
of the actions described in clauses (i) or (ii) shall be taken until
such provision is made.
(d) Buyer shall maintain the Company's existing officers' and
directors' liability insurance policy ("D&O Insurance") for a period of
not less than six years after the Closing of the reorganization;
provided, that Buyer may substitute therefor policies of substantially
similar coverage and amounts containing terms no less advantageous to
such former directors and officers; provided, further, if the existing
D&O Insurance expires or is cancelled during such period, Buyer will
use its best efforts to obtain substantially similar D&O Insurance.
Section 12.3. Successors, Assigns and Third Parties. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns; provided, however, that, except as otherwise
expressly provided herein, none of the parties hereto may make any assignment of
this Agreement or any interest herein without the prior written consent of the
other parties hereto. Nothing herein expressed or implied is intended or shall
be construed to confer upon or give to any person, firm or corporation, other
than the parties hereto and their respective successors and assigns, any rights
or remedies under or by reason of this Agreement.
Section 12.4. Governing Law. This Agreement shall in all respects be
interpreted, construed and governed by and in accordance with the internal
substantive laws of the State of New Jersey, disregarding principles of conflict
of laws and the like.
Section 12.5. Severability. Each Section, subsection and lesser section
of this Agreement constitutes a separate and distinct undertaking, covenant
and/or provision hereof. In the event that any provision of this Agreement shall
finally be determined to be unlawful, such provision shall be deemed severed
from this Agreement, but every other provision of this Agreement shall remain in
full force and effect.
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Section 12.6. Certain Words. Words such as "herein," "hereof,"
"hereby," "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular Section or subsection of this Agreement.
Section 12.7. Notices. Except as otherwise expressly provided herein,
any notice, consent or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given when
received, and shall be addressed as follows:
(a) If to Buyer:
REZconnect Technologies, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx Xxxxx , President
with a copy to:
Xxxx X. Xxxxxx, Esq.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
(b) If to the Company or the Stockholders:
Xxxxxxxxxxxxx.xxx, Inc.
000 Xxxx Xxxxx Xxxxxx -Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxx or Xxxxx Xxxxx or Xxx Xxxxxxxx
With a copy to:
Xxxxxx X. XxXxxxx, Esq.
Xxxx Xxxxx LLP
Xxx Xxxxxxxxxx Xxxxx -- 0xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
or at such other address or addresses as the party addressed may from time to
time designate in writing. Any communication dispatched by telegram or telex
shall be confirmed by letter.
Section 12.8. Expenses. Each party hereto shall pay its own legal,
accounting and other costs and expenses incurred in connection herewith and the
transactions contemplated hereby.
Section 12.9. Confidentiality. All information disclosed heretofore or
hereafter by Buyer or the Company and the Stockholders to the other in
connection with this Agreement shall be kept confidential by such other, and
shall not be used otherwise than by such other in connection with this
Agreement, except to the extent it was known when received or as it is or
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hereafter becomes lawfully obtainable from other sources, or to the extent such
duty as to confidentiality and non-use is waived, in writing or except as may be
required by court order or any governmental agency. Such obligation as to
confidentiality and non-use shall survive any termination of this Agreement. In
the event of termination of this Agreement, Buyer and the Stockholders shall use
all reasonable efforts to return upon request to the other (or destroy) all
documents (and reproductions thereof) received from the other (and, in the case
of reproductions, all such reproductions made by the receiving party) that
include information not within the exception contained in the first sentence of
this Section 12.9.
Section 12.10. Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
Section 12.11. Amendments to Structure of Transaction. If the
transaction as contemplated by this Agreement poses undue tax burdens, creates a
materially and adverse affect on the financial statements of the Buyer or
Company or is necessitated in order to comply with federal or state securities
laws, the parties hereto will diligently and timely use their best efforts to
restructure the transaction in a mutually agreeable manner, provided however any
party requiring any change must state the terms of the proposed restructuring
and give notice to the other parties to this Agreement in writing prior to
November 30, 2004 and provided further if the parties do not agree on the
proposed restructuring of this Agreement, any party to this Agreement following
a thirty day right to cure period may terminate this Agreement by notice to the
other parties on or before December 15, 2004 and no party shall have any
liability to any other party for such termination.
Section 12.12. Counterparts or Facsimiles. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which shall constitute the same agreement and this Agreement may be
executed by facsimile signatures which shall be valid and binding.
[* * * * * *]
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IN WITNESS WHEREOF, the parties hereto have caused their signatures to
be affixed to this Agreement as of the date first above written.
REZCONNECT TECHNOLOGIES, INC.
By: ____________________________________
Name: Xxxxxxx X. Xxxxx
Title: Chairman and Chief Executive Officer
XXXXXXXXXXXXX.XXX, INC.
By: ____________________________________
Name: J. Xxxxx Xxxxx
Title: Chairman and Chief Executive Officer
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Stockholders' Signature Pages to the Amended Merger and Stock Exchange Agreement
dated November 19, 2004 between REZconnect Technologies, Inc.,
XxxxXxxxxxXxx.xxx, Inc. and the Stockholders of XxxxXxxxxxXxx.xxx, Inc.
STOCKHOLDERS
---------------------------------------- --------------------------------------
J. Xxx Xxxxxxxx, Individually J. Xxxxx Xxxxx, Individually
GREAT RIVER ENTERPRISES LP
By:
---------------------------------------- --------------------------------------
J. Xxxxx Xxxxx, its General Partner
Xxxxxx X. Xxxxxxx, Individually
(By J.Xxxxx Xxxxx, as Attorney-in-Fact)
SERENITY ENTERPRISES LP
By:
---------------------------------------- --------------------------------------
Xxxxx Stillwelt, its General Partner Xxxx Xxxxxxx, Individually
(By J. Xxxxx Xxxxx, as Attorney-in-Fact) (By J. Xxxxx Xxxxx, as Attorney-in-Fact)
---------------------------------------- --------------------------------------
Xxxxx Xxxxxxx, Individually Xxxxx Xxxxx, Individually
(By J. Xxxxx Xxxxx, as Attorney-in-Fact) (By J. Xxxxx Xxxxx, as Attorney-in-Fact)
---------------------------------------- --------------------------------------
Xxxxxx Xxxxxxxx, Individually Xxxxxx Head, Individually
(By J. Xxxxx Xxxxx, as Attorney-in-Fact) (By J. Xxxxx Xxxxx, as Attorney-in-Fact)
---------------------------------------- --------------------------------------
Xxxxxx Xxxxxxx, Individually Xxxxxx X. Xxxxxxx, Individually
(By J. Xxxxx Xxxxx, as Attorney-in-Fact) (By J. Xxxxx Xxxxx, as Attorney-in-Fact)
---------------------------------------- --------------------------------------
Xxxxxxx Xxxx, Individually Xxxxxxxx Xxxxxxxxxxx, Individually
(By J. Xxxxx Xxxxx, as Attorney-in-Fact) (By J. Xxxxx Xxxxx, as Attorney-in-Fact)
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Exhibit 4.18
Pre-Signing Conduct
Company has advised the Buyer that its office location at 000 Xxxx
Xxxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000 has been sold, and it is seeking
a replacement lease for its operations.
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Exhibit 9.7
Consents
ARC Number Transfer
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AMENDED MERGER AND
STOCK EXCHANGE AGREEMENT
TABLE OF CONTENTS
(This Table of Contents is not a part of this Agreement and is attached
only for convenience of reference.)
ARTICLE I
EXCHANGE OF THE COMMON STOCK
Page
----
Section 1.1 Exchange of the Common Stock 1
Section 1.2 No Obligation to Exchange in Event of Default 1
ARTICLE II
EXCHANGE CONSIDERATIONS
Section 2.1 Exchange Consideration 2
Section 2.2 Payment of Exchange Consideration 2
ARTICLE III
CLOSING
Section 3.1 Time and Place of Closing 2
Section 3.2 The Stockholders' and the Company's Particular Closing Deliveries 2
Section 3.3 Buyer's Particular Closing Deliveries 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
Section 4.1 Organization and Capitalization of the Company 3
Section 4.2 Power and Authority; Authority for Agreement 3
Section 4.3 Articles of Incorporation and By-Laws of the Company 4
Section 4.4 Subsidiaries 4
Section 4.5 No Violation to Result 4
Section 4.6 No Existing Defaults 4
Section 4.7 Financial Statements 5
Section 4.8 No Adverse Changes 5
Section 4.9 Full Disclosure; Absence of Material Changes 5
Section 4.10 Taxes 6
Section 4.11 Title to Assets 6
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Section 4.12 Machinery and Equipment 6
Section 4.13 Litigation 6
Section 4.14 Compliance with Laws 7
Section 4.15 Environmental Matters 7
Section 4.16 Licenses, Permits and Approvals 8
Section 4.17 True Copies 8
Section 4.18 Pre-Signing Conduct of Business 8
Section 4.19 Survival of Representations and Warranties of the Company and the Stockholders 8
Section 4.20. Intellectual Property 8
Section 4.21. Company Due Diligence Investigation 9
Section 4.22 Material Contracts and Agreements 10
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
STOCKHOLDERS GENERALLY
Section 5.1 Authority for Agreement 10
Section 5.2 Title of Common Stock 10
Section 5.3 Investment Representations 11
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 6.1 Organization and Capitalization of Buyer 12
Section 6.2 Power and Authority 12
Section 6.3 Certificate of Incorporation and By-Laws of Buyer 12
Section 6.4 Authority for Agreement; Buyer's Common Stock, Preferred Stock and Options 12
Section 6.5 No Violation to Result 13
Section 6.6 Exchange Act Reports and Financial Statements 13
Section 6.7 Full Disclosure; Absence of Material Changes 14
Section 6.8 Taxes 14
Section 6.9 Title to Assets 14
Section 6.10 Real Property 15
Section 6.11 Machinery and Equipment 15
Section 6.12 Brokers 15
Section 6.13 Litigation 15
Section 6.14 Compliance with Laws 15
Section 6.15 Environmental Matters 16
Section 6.16 Licenses, Permits and Approvals 16
Section 6.17 True Copies 16
Section 6.18 Buyer's Common Stock 17
Section 6.19 Interest in the Company 17
Section 6.20 Disposition of the Company's Shares 17
Section 6.21 Issuance of Stock 17
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Section 6.22 Company's Historic Business 17
Section 6.23 Employee Benefit Plans 17
Section 6.24 Reporting Company Status 17
Section 6.25 Claims 17
Section 6.26 Intellectual Property 17
Section 6.27 Buyer Due Diligence 18
Section 6.28 Current Report on Form 8-K; Section 14(f) Information 19
Section 6.29 No Existing Defaults 19
Section 6.30 Material Contracts and Agreements 20
Section 6.31 Survival of Representations and Warranties of Buyer 20
ARTICLE VII
CONDUCT AND TRANSACTIONS
PRIOR TO AND AFTER CLOSING
Section 7.1 Access to Properties and Records of Buyer 20
Section 7.2 Interim Covenants of the Buyer 20
Section 7.3 Interim Covenants of the Company 21
Section 7.4 Public Announcements 22
Section 7.5 Compliance with Code Section 368(a)(1)(B) 22
Section 7.6 Special Stockholder Meeting 22
Section 7.7 Series B Convertible Preferred Stock 23
Section 7.8 Second Schedule 14F Statement 23
ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Section 8.1 Stockholders' Approval 23
Section 8.2 Authority 23
Section 8.3 Representations and Warranties of the Stockholders to be True 23
Section 8.4 No Material Adverse Change 23
Section 8.5 No Litigation 23
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Section 8.6 Consents Obtained 24
Section 8.7 Legal Review 24
Section 8.8 Certificate of the Company 24
Section 8.9 Xxxxx Xxxxx 24
ARTICLE IX
CONDITIONS PRECEDENT TO THE STOCKHOLDERS' OBLIGATIONS
Section 9.1 Representations and Warranties of Buyer to be True 24
Section 9.2 Authority 24
Section 9.3 Officers' Certificate of Buyer 24
Section 9.4 Opinion of Buyer's Counsel 24
Section 9.5 The Buyer Has Complied with Covenants 25
Section 9.6 No Litigation 25
Section 9.7 Consents Obtained 25
Section 9.8 Legal Review 25
Section 9.9 D & O Policy 25
Section 9.10 Employment Agreements; Option Agreements 25
Section 9.11 Stockholders' Agreements; Resultant Corporate Structure 25
Section 9.12 Buyer's Board of Directors; Schedule 14F Disclosures 26
Section 9.13 Tax Opinion 26
Section 9.14 Lockup Agreements 26
Section 9.15 Assignment Agreement between YTB Travel & Cruises, Inc. and YTB Travel Network 26
Subsidiary
Section 9.16 Series B Convertible Preferred Stock 26
ARTICLE X
FURTHER ASSURANCES OF THE STOCKHOLDERS
Section 10.1 Satisfaction of Conditions of the Stockholders 26
ARTICLE XI
AMENDMENT, WAIVER AND TERMINATION
Section 11.1 Amendment 27
Section 11.2 Waiver 27
Section 11.3 Termination 27
ARTICLE XII
MISCELLANEOUS
Section 12.1 Arbitration 27
Section 12.2 Indemnification of Company Directors and Officers 28
Section 12.3 Successors, Assigns and Third Parties 29
Section 12.4 Governing Law 29
Section 12.5 Severability 29
Section 12.6 Certain Words 30
Section 12.7 Notices 30
Section 12.8 Expenses 30
Section 12.9 Confidentiality 30
Section 12.10 Headings 31
Section 12.11 Amendments to Structure of Transaction 31
Section 12.12 Counterparts or Facsimiles 31
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LIST OF EXHIBITS
Exhibit A List of Stockholders
Exhibit B Power of Attorney
Exhibit C Estimate of Exchange Consideration
Exhibit D Rights and Preferences of Preferred Stock
Exhibit 4.6 No Existing Defaults
Exhibit 4.8 No Adverse Changes
Exhibit 4.11 Title to Assets
Exhibit 4.13 Litigation
Exhibit 4.14 Compliance with Laws
Exhibit 4.15 Environmental Matters
Exhibit 4.16 Licenses, Permits and Approvals
Exhibit 4.18 Pre-signing Conduct of Business
Exhibit 4.22 Material Contracts and Agreements
Exhibit 6.1 Organization and Capitalization of Buyer
Exhibit 6.5 No Violations to Result
Exhibit 6.7 Full Disclosures; Absence of Material Changes
Exhibit 6.9 Title to Assets
Exhibit 6.10 Real Property
Exhibit 6.11 Machinery and Equipment
Exhibit 6.13 Litigation
Exhibit 6.14 Compliance with Laws
Exhibit 6.15 Environmental Matters
Exhibit 6.16 Licenses, Permits and Approvals
Exhibit 6.29 No Existing Defaults
Exhibit 6.30 Material Contracts and Agreements
Exhibit 9.4 Opinion of Buyer's Counsel
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AMENDED MERGER AND
STOCK EXCHANGE AGREEMENT
dated as of
November 19, 2004
among
REZCONNECT TECHNOLOGIES, INC.
and
XXXXXXXXXXXXX.XXX, INC.
and
THE STOCKHOLDERS OF
XXXXXXXXXXXXX.XXX, INC.
------------------------------------------------------------------------------
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EXHIBIT A
SHARES OF COMPANY COMMO PERCENTAGE OF
BUYER
COMMON STOCK
STOCKHOLDERS COMMON STOCK TO BE RECEIVED
------------ ------------ ---------------
J. Xxx Xxxxxxxx 2,400,000 18.75%
J. Xxxxx Xxxxx 2,400,000 18.75%
Great River Enterprises, LP#1 6,800,000 53.13%
Xxxxxx X. Xxxxxxx 120,000 .94%
Serenity Enterprises LP#1 120,000 .94%
Xxxx and Xxxxx Xxxxxxx 125,000 .98%
Xxxxx Xxxxx 200,000 1.56%
Xxxxxx X. Xxxxxxxx 200,000 1.56%
Xxxxxx Head 200,000 1.56%
Xxxxxx Xxxxxxx 100,000 .78%
Xxxxxx X. Xxxxxxx 50,000 .39%
Xxxxxxx Xxxx 50,000 .39%
Xxxxxxxxx Xxxxxxxxxxx 35,000 .27%
TOTAL 12,800,000 100%
Prior to the Closing, the Company shall supply the Buyer with detailed
instruction as to how the Exchange Consideration is to be issued and distributed
amongst the Stockholders.
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EXHIBIT C
Details of Exchange Consideration
11,351,845 Shares outstanding as of November 1, 2004
Less Adjustments
----------------
(1,000,000) Less Shares Being Cancelled Held by YTB
Shares Issued Contingently for Services Returned to
( 303,000) Treasury
-----------
10,048,845 Plus Adjustments
---------- ----------------
900,000 Shares to Xxxxx Xxxxx
500,000 Shares to G-V Capital Corp
73,530 Shares to Xxxx Xxxxx
------
1,473,530
11,522,375 Total Adjusted Shares outstanding before Merger
==========
Number of New Shares
to be Issued to the Stockholders: 11,522,376
----------
Consisting of: 7,430,000
Common Shares of Buyer; and
4,092,376
Preferred Shares (Series B)
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EXHIBIT D
Series B Convertible Preferred Stock
Rights and Preferences
[EXHIBIT D TO AMENDED AND RESTATED MERGER AGREEMENT]
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
REZCONNECT TECHNOLOGIES, INC.
(a New York corporation)
(Under Section 805 of New York Business Corporation Law ("BCL"))
Pursuant to the provisions of Section 805 of the BCL, the undersigned,
Xxxxxxx Xxxxx, being the President and Secretary of Rezconnect Technologies,
Inc., a corporation organized and existing under the BCL of the State of New
York (the "Corporation"), DOES HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is Rezconnect Technologies, Inc. The
name under which the Corporation was formed was Playorena Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed
with the Department of the State of the State of New York on December 4, 1981,
and Certificates of Amendment were filed with such Department on the following
dates: May 4, 1984; December 21, 1984; March 20, 1987; January 8, 1990; January
10, 1990; January 25, 1999; and September 28, 1999; August 18, 2000; and
September 10, 2001.
THIRD: The Certificate of Incorporation is hereby amended by the
addition of the following provisions setting forth the number, designation,
preferences and the relative, participating, optional or other rights and the
qualifications, limitations or restrictions thereof relating to the Series B
Convertible Preferred Stock (as defined below) as fixed by the Board of
Directors of the Corporation, and in accordance with the provisions of Sections
501 and 502 of the BCL of the State of New York.
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FOURTH: Pursuant to authority expressly granted and vested in the Board
of Directors of the Corporation by the provisions of its Certificate of
Incorporation, as amended, said Board of Directors duly adopted upon unanimous
written consent the following resolution:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by Section 502 of the BCL and in accordance with
the provisions of its Certificate of Incorporation, a class of preferred stock
of the Corporation to be known as Series B Convertible Preferred Stock is hereby
created and provided for and the Board of Directors hereby fixes, states and
expresses the terms, designations, relative rights, preferences and limitations
of such class in addition to those set forth in said Certificate of
Incorporation, as amended, to be in their entirety as follows:
1. Designation of Series of Preferred Stock. Of the 5,000,000
undesignated shares of the Corporation's authorized Preferred Stock, 4,092,376
shares shall be designated and known as "Series B Convertible Preferred Stock,"
par value $.001 per share (the "Series B Preferred Stock").
2. Issuance; Rank. The issuance price of the Series B Preferred Stock
shall be $1.45 per share (the "Original Purchase Price"). The Series B Preferred
Stock shall rank senior to the Common Stock and any other capital stock of the
Corporation ranking junior to the Series B Preferred Stock as to dividends and
upon liquidation, dissolution or winding up. The date on which a share of Series
B Preferred Stock was issued shall hereinafter be referred to as the "Original
Issue Date" for such share.
3. Dividends.
3.1 No dividends shall be declared or paid upon the Common
Stock or other securities ranking junior to the Series B Preferred Stock unless
equivalent dividends, on an as converted basis, are declared and paid
concurrently on the Series B Preferred Stock.
4. Liquidation, Dissolution or Winding Up.
4.1 In the event of any liquidation, dissolution or winding up of
the Corporation (a "Liquidation Event"), the assets of the Corporation available
for distribution to its stockholders, whether from capital, surplus or earnings
(the "Corporate Assets") shall be distributed as follows:
4.1.1 First, before any distribution of assets shall be made to
the holders of, Common Stock, the holder of each share of Series B Preferred
Stock then outstanding shall be entitled to be paid out of the Corporate Assets
an amount per share equal to the Original Purchase Price (subject to an
Adjustment) plus all dividends, accrued but unpaid, on such share up to the date
of distribution of the assets of the Corporation (the "Liquidation Preference").
If upon the occurrence of a Liquidation Event, the Corporate Assets shall be
insufficient to pay the holders of shares of Series B Preferred Stock the
Liquidation Preference, the holders of shares of Series B Preferred Stock and
any class or series of stock, ranking on liquidation on a parity with the shares
of Series B Preferred Stock, shall share ratably in the distribution of the
entire remaining Corporate Assets in proportion to the respective amounts which
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would otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.
4.1.2 Second, after distribution of the Liquidation Preference,
the remaining Corporate Assets shall be distributed among the holders of Common
Stock and the Series B Preferred Stock on a pro rata basis.
4.2 For purposes of this Section 4, the term Liquidation Event shall
be deemed to include (i) a statutory merger or consolidation of the Corporation
into or with any other corporation, or a statutory merger or consolidation of
any other corporation into or with the Corporation; (ii) a sale, transfer,
exchange or lease of all or any part of the assets of the Corporation; and (iii)
a purchase or redemption of all or a substantial part of the outstanding shares
of any class or classes of capital stock of the Corporation.
4.3 Written notice of such Liquidation Event, stating a payment
date, the liquidation amount and the place where said liquidation amount shall
be payable, shall be delivered in person, mailed by certified or registered
mail, return receipt requested, or sent by telecopier or telex, not less than
twenty (20) days prior to the payment date stated therein, to the holders of
record of the Series B Preferred Stock, such notice to be addressed to each such
holder at its address as shown by the records of the Corporation.
5. Voting.
5.1 Each holder of outstanding shares of Series B Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which the shares of Series B Preferred Stock held of record by
such holder are convertible (as adjusted from time to time pursuant to Section 6
hereof) at each meeting of stockholders of the Corporation (and written actions
of stockholders in lieu of meetings) with respect to any and all matters
presented to the stockholders of the Corporation for their action or
consideration. Except as provided by law and by the provisions of Section 5.2
below, the holders of shares of Series B Preferred Stock shall vote together
with the holders of Common Stock as a single class.
5.2 So long as any of the shares of Series B Preferred Stock are
outstanding, the Corporation or, as applicable, any subsidiary shall not,
without first obtaining the written consent or affirmative vote of the holders
of a majority of the then outstanding shares of Series B Preferred Stock, given
in writing or by vote at a meeting, consenting or voting, as the case may be,
separately as a class:
5.2.1 merge with or into or consolidate with any other
corporation or enter into any other similar transaction or series of related
transactions after which the holders of the Corporation's voting securities
immediately prior to such transaction or transactions own less than fifty (50%)
percent of the voting power of the surviving entity in the transaction, or all
or substantially all of the assets of the Corporation or any of its subsidiaries
are sold;
5.2.2 effectuate a liquidation, dissolution or winding up of the
Corporation or any of its subsidiaries;
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5.2.3 amend, alter or repeal any provision of the Certificate of
Incorporation, the By-laws of the Corporation, in a manner that changes or
modifies the rights, preferences, or privileges of the Series B Preferred Stock;
5.2.4 authorize any other class or series of stock having parity
with, or senior to, the Series B Preferred Stock;
5.2.5 increase the authorized number of shares of the Series B
Preferred Stock;
5.2.6 redeem or repurchase shares of the Corporation's capital
stock;
5.2.7 effectuate a reclassification or recapitalization of' the
outstanding capital stock of the Corporation;
5.2.8 effect any sale, transfer, assignment, license or
sublicense of any patent, copyright, trademark, trade name, software or other
intellectual property that is used or developed by the Corporation or any
subsidiary and is material to the conduct of its business;
5.2.9 permit any subsidiary to issue or sell, or obligate itself
to issue or sell, except to the Corporation or any wholly-owned subsidiary, any
stock or other equity securities of such subsidiary;
5.2.10 take any action which would result in taxation of the
holders of Series B Preferred Stock under Section 305 of the Internal Revenue
Code of 1986 (or any comparable provision of the Internal Revenue Code as
hereafter from time to time as amended);
5.2.11 create, form, incorporate or organize a subsidiary of the
Corporation;
5.2.12 make any change in the size or composition of the Board
of Directors of the Corporation except in accordance with the provisions of that
certain Amended Merger and Stock Exchange Agreement dated as of November 19,
2004 by and among the Corporation, XxxxXxxxxxXxx.xxx, Inc. ("YTB") and the
stockholders of YTB (the "Merger Agreement"); and the Stockholders' Agreement
referenced in the Merger Agreement; or
5.2.13 effect any offering of the securities of the Corporation
or any of its subsidiaries.
6. Optional Conversion. The holders of shares of Series B Preferred
Stock shall have conversion rights as follows (the "Conversion Rights"):
6.1 Right to Convert. Each share of Series B Preferred Stock shall
be convertible, at the option of the holder thereof, at any time and from time
to time, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing the Original Purchase Price plus the amount of any
unpaid dividends on such Series B Preferred Stock by the Conversion Price (as
defined below) in effect at the time of conversion. The conversion price at
which shares of Common Stock shall be deliverable upon conversion of Series B
Preferred Stock without payment of additional consideration by the holder
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thereof (the "Conversion Price") shall initially be the Original Purchase Price.
Such initial Conversion Price, and the rate at which shares of Series B
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below.
Upon a Liquidation Event of the Corporation, the Conversion Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of shares of Series B Preferred Stock.
6.2 Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of the shares of Series B Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price. Whether or not a holder would otherwise be entitled
to a fractional share shall be determined on the basis of the total number of
shares of Series B Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
6.3 Mechanics of Conversion.
6.3.1 In order for a holder to convert shares of Series B
Preferred Stock into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Series B Preferred Stock at the
office of the transfer agent for such shares (or at the principal office of the
Corporation if the Corporation serves as its own transfer agent), together with
written notice that such holder elects to convert all or any number of the
shares of the Series B Preferred Stock represented by such certificate or
certificates. Such notice shall state such holder's name or the names of the
nominees in which such holder wishes the certificate or certificates for shares
of Common Stock to be issued. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his or her or its attorney-in-fact
duly authorized in writing. The date of receipt of such certificates and notice
by the transfer agent (or by the Corporation if the Corporation serves as its
own transfer agent) shall be the conversion date (the "Conversion Date"). The
Corporation shall, as soon as practicable after the Conversion Date, issue and
deliver at such office to such holder of shares of Series B Preferred Stock, or
to his or her or its nominees, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled, together with
cash in lieu of any fraction of a share. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Series B Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. Other than as set forth
in Section 7 below, if the conversion is in connection with an underwritten
offer of securities registered pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), the conversion may, at the option of any holder
tendering shares of Series B Preferred Stock for conversion, be conditioned upon
the closing of the sale of securities pursuant to such offering in which event
the person entitled to receive the Common Stock issuable upon such conversion of
the shares of Series B Preferred Stock shall not be deemed to have converted
such shares of Series B Preferred Stock until immediately prior to the closing
of such sale of securities.
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6.3.2 The Corporation shall, at all times when the Series B
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the shares of Series B Preferred Stock, such number of its duly authorized
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series B Preferred Stock. Before taking
any action that would cause an adjustment reducing the Conversion Price below
the then par value of the shares of Common Stock issuable upon conversion of the
shares of Series B Preferred Stock, the Corporation will take any corporate
action that may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Conversion Price. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series B Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
shares of Series B Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes.
6.3.3 All shares of Series B Preferred Stock that shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and dividends or to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders thereof
to receive shares of Common Stock in exchange therefor. Any shares of Series B
Preferred Stock so converted shall be retired and canceled and shall not be
reissued, and the Corporation may from time to time take such appropriate action
as may be necessary to eliminate the authorized Series B Preferred Stock or
reduce the authorized number thereof as may be appropriate accordingly.
6.4 Adjustments to Conversion Price for Diluting Issues:
6.4.1. Special Definitions. For purposes of this Section 6.4,
the following definitions shall apply:
(A) "Option" shall mean any rights, options or warrants
to subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities (as defined below) or restricted stock, excluding rights, options or
warrants to subscribe for, purchase or otherwise acquire up to 470,000 shares of
Common Stock (appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes effected after the Original
Issue Date) pursuant to any equity incentive plan or benefit plan approved by a
majority of the Directors of the Corporation and any shares of Common Stock
issued on exercise of such rights, options or warrants (such excluded
securities, the "Reserved Option Shares").
(B) "Original Issue Date" shall have the definition set
forth in Section 2.
(C) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Series B Preferred Stock) or other securities
directly or indirectly convertible into or exchangeable for Common Stock or
Preferred Stock.
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(D) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 6.4.3 below, deemed to be
issued) by the Corporation after the Original Issue Date, other than:
(1) any securities issued as a stock dividend, stock
split or other similar event in respect of Common Stock
outstanding on the date hereof or Series B Preferred Stock;
(2) the Reserved Option Shares; and
(3) any conversion of the Series B Preferred Stock.
6.4.2 No Adjustment of Conversion Price. Notwithstanding any
provision herein to the contrary, no adjustment in the number of shares of
Common Stock into which the shares of Series B Preferred Stock are convertible
shall be made, by adjustment in the applicable Conversion Price thereof, unless
the consideration per share (determined pursuant to Section 6.4.5) for all
Additional Shares of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Conversion Price in effect on the date
of, and immediately prior to, the issue of such Additional Shares of Common
Stock.
6.4.3 Issue of Options and Convertible Securities Deemed
Issuance of Additional Shares of Common Stock. If the Corporation at any time or
from time to time after the Original Issue Date shall issue any Options or
Convertible Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common Stock (as
set forth in the instrument relating thereto without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, issuable upon the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price shall
be made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities; and
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities, provided that no adjustment pursuant to this clause (B)
shall have the effect of increasing the Conversion Price to an amount that
exceeds the lower of (i) the Conversion Price on the original adjustment date,
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or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date.
6.4.4 Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Corporation shall, after the Original
Issue Date, issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Section 6.4.3, without
consideration or for a consideration per share less than the Conversion Price in
effect on the date of, and immediately prior to such issue, then and in such
event, the Conversion Price shall be reduced, concurrently with such issue, to a
price (calculated to the nearest tenth of a cent) determined by multiplying the
Conversion Price by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue (including
all shares issuable upon the conversion of shares of Series B Preferred Stock)
plus the number of shares of Common Stock that the Aggregate Consideration (as
defined in Section 6.4.5 below) received by the Corporation for the total number
of Additional Shares of Common Stock so issued would purchase at the Conversion
Price in effect prior to such issue; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
(including all shares issuable upon the conversion of shares of Series B
Preferred Stock) plus the number of such Additional Shares of Common Stock so
issued.
6.4.5 Determination of Consideration. For purposes of this
Section 6.4, the "Aggregate Consideration" shall mean the net consideration
received by the Corporation for the issue of all Additional Shares of Common
Stock and shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(1) insofar as it consists of cash, be computed at the
aggregate of cash received by the Corporation, after deducting
therefrom any commissions, compensations or other expenses paid
or incurred by the Corporation for any underwriting or placement
of, or otherwise in connection with the issuance or sale of
shares;
(2) insofar as it consists of property other than cash,
be computed at the fair market value thereof at the time of such
issue, as determined in good faith by the Board; and
(3) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets
of the Corporation for consideration that covers both, be the
proportion of such consideration so received, computed as
provided in clauses (1) and (2) above, as determined in good
faith by the Board.
(B) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 6.4.3, relating to
Options and Convertible Securities, shall be determined by dividing:
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(x) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities or, in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
6.4.6 Adjustment for Combinations or Consolidation of Common
Stock. If, at any time after the Original Issue Date, the number of shares of
Common Stock outstanding are decreased by a combination of the outstanding
shares of Common Stock, then following the record date fixed for such
combination (or the date of such combination, if no record date is fixed), the
applicable Conversion Price shall be increased so that the number of shares of
Common Stock issuable on conversion of each share of Series B Preferred Stock
shall be decreased in proportion to such decrease in outstanding shares of
Common Stock.
6.4.7 Adjustment for Stock Dividends, Splits, Etc. If the
Corporation shall at any time after the applicable Original Issue Date fix a
record date for the subdivision, split-up or stock dividend of shares of Common
Stock, then, following the record date fixed for the determination of holders of
shares of Common Stock entitled to receive such subdivision, split-up or
dividend (or the date of such subdivision, split-up or dividend, if no record
date is fixed), the Conversion Price shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
Series B Preferred Stock shall be increased in proportion to such increase in
outstanding shares, provided, however, that the Conversion Price shall not be
decreased at such time if the amount of such reduction would be an amount less
than $0.10, but all such amount shall be carried forward and reduction with
respect thereto made at the time of, and together with all, subsequent reduction
that, together with such amount and any other amount or amounts so carried
forward, shall aggregate $0.10 or more.
6.4.8 Adjustment for Merger or Reorganization, Etc. In case of
any consolidation, recapitalization or merger of the Corporation with or into
another corporation or the sale of all or substantially all of the assets of the
Corporation to another corporation (other than a subdivision or combination
provided for elsewhere in this Section 6 and other than a consolidation, merger
or sale that is treated as a Liquidation Event pursuant to Section 4), each
share of Series B Preferred Stock shall thereafter be convertible into the kind
and amount of shares of stock or other Securities or property to which a holder
of the number of shares of Common Stock of the Corporation deliverable upon
conversion of such shares of Series B Preferred Stock would have been entitled
upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors ) shall be
made in the application of the provisions in this Section 6 set forth with
respect to the rights and interest thereafter of the holders of the shares of
Series B Preferred Stock, to the end that the provisions set forth in this
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Section 6 (including provisions with respect to changes in and other adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the shares of Series B Preferred Stock.
6.5 No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
shares of Series B Preferred Stock against impairment.
6.6 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
shares of Series B Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series B Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property that then would
be received upon the conversion of the shares of Series B Preferred Stock.
6.7 Notice of Record Date. In the event:
6.7.1 that the Corporation takes a record of the holders of' any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or any other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right;
6.7.2 that the Corporation subdivides or combines its
outstanding shares of Common Stock;
6.7.3 of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or with another corporation, or
of the sale of all or substantially all of the assets of the Corporation; or
6.7.4 of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation; then the Corporation shall cause to be filed
at its principal office or at the office of the transfer agent of the Series B
Preferred Stock, and shall cause to be mailed to the holders of the Series B
Preferred Stock at their last addresses as shown on the records of the
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Corporation or such transfer agent, at least ten (10) days prior to the record
date specified in (A) below or twenty (20) days before the date specified in (B)
below, a notice stating:
(A) the record date of such dividend,
distribution, subdivision or combination, or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, subdivision or combination are to be
determined, or
(B) the date on which such reclassification,
consolidation, merger, Sale, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, dissolution or winding up.
7. Automatic Conversion.
7.1 Triggering Event. All outstanding shares of Series B Preferred
Stock shall automatically convert to shares of Common Stock, at the then
effective Conversion Price pursuant to Section 6, on the date that is five (5)
business days following the last to occur of the following events: (i) the
holding of a stockholders meeting authorizing and approving the amendment of the
Corporation's Certificate of Incorporation to increase the Corporation's
authorized Common Stock to 50 million shares; and a change in the name of the
Corporation to YTB International, Inc., and (ii) the filing of a Certificate of
Amendment reflecting the changes referenced in clause (i).
7.2 No Further Action. In the case of an automatic conversion
pursuant to this Section 7, the outstanding shares of Series B Preferred Stock
shall be converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent.
7.3 Surrender of Certificates; Retirement and Cancellation of
Converted Shares. All certificates evidencing shares of Series B Preferred Stock
that are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been retired and canceled and the
shares of Series B Preferred Stock represented thereby converted into Common
Stock for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The Corporation
may thereafter take such appropriate action as may be necessary to reduce the
authorized Series B Preferred Stock accordingly.
