Exhibit 4
EXECUTION COPY
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU") reflects the
binding mutual understandings and agreements pertaining to the
subject matter contained herein by and among The Shaar Fund
Ltd. ("Shaar"), Hestian Pty Limited ("Hestian") and VB Family
Trust ("VB" and, together with Hestian, "Hestian/VB").
RECITALS
WHEREAS, Shaar and Hestian/VB (each a "Party" and
together the "Parties") desire to enter into a joint venture
for the purpose of maximizing the value of certain assets to
be contributed to the venture;
WHEREAS, the Parties wish to enter into this binding
MOU to establish a limited liability company for this purpose;
NOW THEREFORE, in consideration of the mutual
covenants and promises set forth herein, and intending to be
bound, the Parties hereto agree as follows:
1. Essence of Cooperation. The Parties shall each participate in the joint
venture through a limited liability company to be established pursuant
to Section 3 ("Newco"), which shall be formed solely for the purpose of
maximizing the value of the assets contributed to it by the Parties,
and for such other purposes as may be mutually agreed by the Parties.
2. Loans to IFSH. Shaar shall make a loan of $25,000 to IFS International
Holdings, Inc. ("IFSH"), and Hestian/VB shall make a loan of $25,000 to
IFSH (each such loan, a "Loan") to fund certain costs incurred by IFSH
in connection with the venture, including severance payments. Each Loan
shall be evidenced by a demand note executed by IFSH and payable to
Shaar and Hestian/VB, respectively, at rates of interest and on other
terms (including any security interests) to be determined (each, a
"Loan Note").
3. The Limited Liability Company.
(a) Formation. The Parties shall, as soon as practicable after the
date of this MOU, form a limited liability company under the
name SHVB Holdings LLC ("Newco"), by filing all necessary
organizational documents and obtaining all necessary approvals
in the State of Delaware. Newco shall issue no more than 100
membership interests, and the Parties shall initially
subscribe for those membership interests for a nominal
consideration, such that (i) Shaar holds exactly 50% of the
total membership interests of Newco and (ii) Hestian/VB holds
exactly 50% of the total membership interests of Newco.
(b) Voting of Membership Interests. Each of the Parties shall vote
its membership interests and take all other actions necessary
to ensure that all organizational documents of Newco
(including the certificate of formation and the limited
liability company agreement) shall, subject to the law, give
effect to, and shall not conflict with, the provisions of this
MOU.
(c) Allocation of Costs. Subject to the terms of this MOU, each
Party shall bear its own costs of establishing and organizing
Newco.
(d) Share of Assets and Profits. Subject to Section 4(e), any
dividends paid or distributions made by Newco, including,
without limitation, in connection with the winding-up,
liquidation, termination or dissolution of Newco (in each
case, voluntary or otherwise), shall be made to the Parties in
proportion to their relative membership interests.
(e) Board of Managers. Subject to the terms of this MOU and the
laws of the State of Delaware, the conduct of the affairs of
Newco shall be controlled by and shall be the responsibility
of the board of managers of Newco ("Board"). All actions of
Newco shall require approval of all managers. The Board shall
comprise 2 managers or such other number agreed by the
Parties. Shaar shall be entitled to nominate 1 manager or such
other number agreed by the Parties and Hestian/VB shall be
entitled to nominate 1 manager or such other number agreed by
the Parties.
(f) Manager Conflict Resolution. In the event that managers
appointed by each of Shaar and Hestian/VB cannot agree on any
material business or management issue relating to the
formation, capitalization or operation of Newco (a
"Deadlock"), the managers shall refer the matter to Xxx
Xxxxxxxx and Xxxxxxxxxxx xxx Xxxxxx for resolution of the
conflict.
(g) Removal of Managers. Only the appointing Party may cause the
removal of any manager appointed by it. Any manager jointly
nominated by the Parties may be removed only by agreement
among the Parties.
(h) Issuance of Additional Membership Interests. Apart from the
membership interests issued to each of Shaar and Hestian/VB
pursuant to this MOU, no further membership interests in
Newco, options in respect of unissued membership interests or
other securities may be issued by Newco without the prior
written consent of each Party.
(i) Restriction on Transferring Membership Interests. No Party
shall, other than in favor of a Related Party (as defined
below): (a) transfer or otherwise deal with its membership
interests in or any beneficial interest in its membership
interests, or (b) create any security interest, mortgage or
encumbrance whatsoever over the membership interests held by
it, in each case without the prior written consent of each
other Party.
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A "Related Party" of any Party shall be (i) the spouse, the
parents, any immediate family member or lineal descendants of
such Party; (ii) a trust under which the distribution of the
membership interests may be made only to beneficiaries who are
such Party or persons described in (i); (iii) a corporation,
the stockholders of which are only such Party or persons
described in (i) or (ii); (iv) a partnership or limited
liability company, the partners or members of which are only
such Party or persons described in (i), (ii) or (iii); (v) in
the case of Hestian, VB; (vi) in the case of VB, Hestian or
(vii) any direct or indirect beneficial owner of interests in
Shaar or the spouse, the parents, any immediate family member
or lineal descendants of such beneficial owner, provided that
in the case of any transfer to a person described in this
Section 3(i), the transferring Party shall retain all voting
rights associated with the transferred membership interest.
(j) Limitation on Liability. Each Party agrees that it shall not,
directly or indirectly, bring any suit or claim against any
manager appointed by the other Party (whether in contract, by
statute, common law or otherwise) arising out of or in
connection with the venture, except for claims arising from
such manager's fraud or willful misconduct.
(k) Indemnification of Managers. Newco shall agree to exculpate
and indemnify each manager to the fullest extent permitted by
law and to hold such manager harmless from and against any
losses, claims, damages or liabilities incurred or sustained
in connection with this venture (other than as a result of
such manager's fraud or willful misconduct).
4. Ownership and Capitalization of Newco.
(a) Newco Capitalization. Shaar shall initially make a capital
contribution to Newco in an amount equal to $50,000 (the
"Shaar Initial Contribution") and Hestian/VB shall make a
capital contribution to Newco in an amount equal to $50,000
(the "Hestian/VB Initial Contribution" and, together with the
Shaar Initial Contribution, the "Initial Contributions").
Shaar and Hestian/VB shall each contribute to Newco its Loan
Note, and such contribution shall be deemed, to the extent of
the face amount of each such Loan Note, to be in partial
satisfaction of the obligation of each Party to make capital
contributions pursuant to this Section 4. After the Initial
Contributions, no Party shall be permitted to effect an
additional capitalization of Newco in a manner that will have
a dilutive effect on holdings of each non-contributing Party,
without the consent of all non-contributing Parties.
(b) Shaar Contribution Commitment. Shaar shall contribute to Newco
all of its interests in IFSH, including without limitation (i)
all of its shares of Series 2002 Voting Preferred Stock (the
"Shaar Voting Preferred Stock") to be issued by IFSH to Shaar
pursuant to an amendment agreement substantially in the form
of Exhibit A (the "Amendment Agreement"), (ii) all of its
shares
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of IFSH common stock, including all shares of common stock
received by Shaar upon conversion (the "Conversion") of
Shaar's shares of IFSH Series B 5% Convertible Preferred Stock
(the "IFSH Preferred Stock") or Shaar Voting Preferred Stock
into shares of common stock of IFSH; (iii) all of Shaar's
interests in the Amendment Agreement; (iv) all of its Common
Stock Purchase Warrants (the "IFSH Warrants"); (v) to the
extent not relinquished by Shaar pursuant to the Amendment
Agreement, any and all interests in accrued dividends on IFSH
Preferred Stock; (vi) to the extent not relinquished by Shaar
pursuant to the Amendment Agreement, any and all interests in
late penalties (if any) accruing on IFSH Preferred Stock and
(vii) all of its other interests, legal or beneficial, in IFSH
((i) through (vii), together, the "Shaar Contribution
Commitment").
(c) Hestian/VB Contribution Commitment. Each of Hestian/VB and
Xxxxxxxxxxx xxx Xxxxxx shall contribute, or cause to be
contributed, to Newco all of their interests in IFSH,
including without limitation (i) all of their shares of IFSH
common stock; (ii) all of their common stock purchase warrants
and (iii) all right, title and interest held by Hestian/VB and
Sonic Communications Pty Limited ("Sonic") in that certain
letter agreement dated as of May 23, 2001, among Sonic, IFSH
and IFS International, Inc. ("IFSI") (the "Sonic Letter
Agreement") ((i) through (iii), together, the "Hestian/VB
Contribution Commitment").
(d) Contribution Timing. The Initial Contributions, the Shaar
Contribution Commitment and the Hestian/VB Contribution
Commitment shall be contributed to Newco simultaneously and as
promptly as reasonably possible after the formation of Newco.
(e) Certain Distributions. In the event that Sonic and/or Pulse
International Pty Ltd. ("Pulse") initiates a suit or similar
proceeding, whether in a court of law or binding arbitration,
against IFSH, any subsidiary of IFSH or Newco, then (i) Newco
shall be dissolved, (ii) the Shaar Initial Contribution shall
be returned to Shaar; (iii) the Hestian/VB Initial
Contribution shall be returned to Hestian/VB; (iv) the Shaar
Commitment Contribution shall be returned to Shaar; (v) the
Hestian/VB Commitment Contribution shall be returned to
Hestian/VB and (vi) any remaining assets of Newco shall be
distributed to the Parties in proportion to their relative
membership interests. As of the date hereof, other than the
contractual relationships between Sonic and IFS International,
Inc. and Pulse and IFS International, Inc., no affiliate of
Sonic or Pulse has a contractual relationship with IFSH or any
of its affiliates.
(f) Restriction on Interests in IFSH Each of Shaar and Hestian/VB
agrees that, prior to the contribution to Newco of the Shaar
Contribution Commitment and the Hestian/VB Contribution
Commitment, respectively, it will not (a) transfer, vote or
otherwise deal with its equity interests in IFSH, or (b)
create any security interest, mortgage or encumbrance
whatsoever over its equity interests in IFSH, in each case
without the prior written consent of each
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other Party; provided nothing in this Section 4(f) shall
restrict the ability of Shaar to consummate the Conversion
and/or an exchange of the IFSH Preferred Stock for other
shares of IFSH preferred stock and/or shares of IFSH common
stock pursuant to the Amendment Agreement.
(g) Certain Assurances. The managers and Newco shall use their
best efforts to cause IFSH to comply with its contractual
obligations, including, without limitation, those in favor of
Pulse.
(h) Certain Consulting Arrangements. Newco shall use its best
efforts to enter in to an agreement with Xxxx Post to provide
consulting services to Newco with respect to IFSH.
5. Confidentiality.
(a) The Parties shall, as soon as practicable after the date of
this MOU, cooperate in the preparation and filing of any
filings required by the securities laws of the United States.
(b) Except (i) for filings made pursuant to Section 5(a) hereunder
or (ii) as required by any applicable law or regulation or the
rules of any recognized national stock exchange, neither party
shall cause any public announcement to be made regarding the
formation, capitalization and operation of Newco or this MOU
without the prior written consent of each other Party. In the
event that any Party shall be required to cause such a public
announcement to be made pursuant to any applicable law or
regulation or the rules of any recognized national securities
exchange, such Party shall provide each other Party prior
written notice of such announcement as far in advance of such
announcement as may be reasonably practical.
6. Representations and Warranties.
(a) Each Party warrants to each other Party that it is duly
organized and validly existing under the laws of the
jurisdiction and/or state of its organization and has full
corporate and/or organizational power and authority to do all
things required by it under this MOU.
(b) Each Party warrants to each other Party that:
(i) it has the legal right and power to enter into this
MOU and to carry out its obligations in accordance
with the terms of this MOU;
(ii) the execution, delivery and performance of this MOU
has been duly and validly authorized by all necessary
action on its part;
(iii) this MOU is a valid and binding agreement on it,
enforceable in accordance with its terms; and
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(iv) the execution and performance of this MOU by it and
the other transactions contemplated by this MOU does
not violate or conflict with or result in a breach of
or constitute a default under its organizational
documents.
(c) Each Party warrants that it has not entered into any agreement
or arrangement with a third party that would restrain it from
acting in accordance with this MOU.
7. Mutual Understandings.
(a) If any Party (the "First Party") commits a material breach of
this MOU, each other Party shall serve a written notice on the
First Party requiring it to remedy the breach within 14
calendar days. If such breach is not remedied the
non-breaching Parties shall have the right (but not the
obligation) to terminate this MOU.
(b) The Parties acknowledge that supplemental documentation,
filings and registrations shall be required to effectively
complete the contemplated transaction. The Parties agree,
represent and warrant that they shall make best efforts to
comply with any and all reasonable requests and requirements
of each other and any and all government and industry
regulatory agencies in the execution and submission of all
such required and requested documentation.
(c) Newco shall reimburse Shaar the amount of $50,000 for legal
fees and disbursements of Xxxxxxxxx & Xxxxxxx in connection
with the Amendment Agreement and related transactions
associated therewith.
8. Assignment. This MOU shall be binding upon and inure to the benefit of
the respective representatives, successors and assigns of the Parties.
No assignment or transfer hereunder shall be made by any Party without
the prior written consent of the other Party (the "Non-Assigning
Party").
9. Termination. This MOU may be terminated:
(a) in accordance with Section 7(a);
(b) by mutual agreement of the Parties; or
(c) by Hestian/VB, on delivery of written notice to Shaar, if
Shaar's contribution to Newco pursuant to Section 4(b) hereof
has not occurred within 30 days of the date hereof.
10. Governing Law; Jurisdiction. This MOU, and any amendments hereto, shall
be governed by and construed in accordance with the laws of the State
of New York without giving effect to the choice of law provisions
thereof.
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11. Amendments. This MOU may not be amended, supplemented or otherwise
modified, and no provision of this MOU may be waived, except by a
written instrument signed by each of the Parties hereto.
12. Severability. If any provision of this MOU or application thereof to
anyone under any circumstances should be determined to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions or applications of this MOU which can be given effect
without the invalid or unenforceable provision or application.
13. No Waiver. No failure on the part of any Party to exercise any right
hereunder, and no delay in exercising any right, privilege, or power
under this MOU, shall operate as waiver or relinquishment; nor shall
any single or partial exercise by any Party preclude any other or
further exercise, or the exercise of any other right, privilege, or
power.
14. Entire Agreement. This MOU constitutes the entire agreement and
understanding among the Parties with respect to the subject matter
hereof and supersedes all previous agreements and understandings.
15. Counterparts. This MOU may be executed in multiple counterparts which,
when taken together, shall constitute one and the same instrument.
Delivery of an executed counterpart of this MOU by facsimile shall be
effective as a manual signature.
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In witness whereof, the undersigned Parties have caused this MOU to be
executed and delivered by its duly authorized officer as of the 30th day of
September, 2002.
THE SHAAR FUND LTD.
By: Shaar Advisory Services, N.V.
(the Advisor to The Shaar Fund)
/s/ Hugo Van Neutegem
------------------------------
Name: Hugo Van Neutegem
Title: Managing Director of Shaar Advisory Services, N.V.
HESTIAN PTY LIMITED
By:
/s/ Xxxxx Xxxxxxx Xxxxxxx
---------------------------
Name: Xxxxx Xxxxxxx Xxxxxxx
Title: Director
VB FAMILY TRUST
By:
/s/ Xxxxx Sechos
-------------------------------------------------------
Name: Xxxxx Sechos, as Attorney-in-fact for
Xxxxxxxxxxx xxx Xxxxxx
Title: Director
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EXHIBIT A
[Amendment Agreement attached]
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EXECUTION COPY
AGREEMENT TO AMEND TERMS OF SERIES B PREFERRED STOCK
Agreement to Amend Terms of Series B Preferred Stock (this
"Agreement"), dated as of September 30, 2002, between The Shaar Fund, Ltd.
("Shaar") and IFS International Holdings, Inc. ("IFSH").
RECITALS
WHEREAS, Shaar and IFSH (each a "Party" and together the "Parties") are
each party to that certain Securities Purchase Agreement (the "Purchase
Agreement"), dated as of March 23, 2000, pursuant to which Shaar purchased (1)
200,000 shares of Series B 5% Convertible Preferred Stock of IFSH and (2) a
common stock warrant (the "Warrant") to purchase 200,000 shares of the common
stock of IFSH;
WHEREAS, under its certificate of incorporation, as amended, IFSH has
authorized 50,000,000 shares of common stock, par value $0.001 per share (the
"Common Stock") and 25,000,000 shares of Preferred Stock $0.001 par value (the
"Preferred Stock") and has 8,809,122 shares of Common Stock outstanding and has
695,244 shares of Preferred Stock outstanding, consisting of 161,250 shares of
Series B 5% Convertible Preferred Stock ("Series B Preferred Stock") and 533,994
shares of Series 2000 Preferred Stock ("Series 2000 Preferred Stock");
WHEREAS, Shaar is, as of the date hereof, the holder of all the
outstanding shares of Series B Preferred Stock (the "Shaar Preferred Stock");
WHEREAS, pursuant to the certificate of designation, as amended (the
"Certificate of Designation"), relating to the Series B Preferred Stock, Shaar
believes it has the right to convert the Shaar Preferred Stock into no fewer
than 70,000,000 shares of Common Stock;
WHEREAS, the Parties believe it is in the best interests of IFSH and
Shaar to restructure the capital of IFSH, including certain amendments to the
Certificate of Designation, and to enter into certain agreements to accomplish
this restructuring;
WHEREAS, the Parties acknowledge that the aforesaid amendments to the
Certificate of Designation require shareholder approval; and
WHEREAS, pending such shareholder approval, the Parties wish to take
certain actions in furtherance of the aforesaid capital restructuring.
NOW THEREFORE, in consideration of the mutual covenants and promises
set forth herein, and intending to be bound, the Parties hereto agree as
follows:
1. Amendment of the Certificate of Designation. The Certificate of
Designation shall be amended to provide that each share of Series B
Preferred Stock shall (i) have no dividend rights, provided that the
Series B Preferred Stock shall have dividend rights equivalent to
holders of the Common Stock on an as-converted basis, (ii) have voting
rights equivalent to 403 shares of Common Stock; (iii) be convertible
into 403 shares of Common Stock; and (iv) in all other respects retain
the rights and preferences set forth in the Certificate of Designation,
except for those set forth in Sections 6.4, 6.5, 6.6, 6.7, 6.8 and 6.9
therein, or those inconsistent with the foregoing (i), (ii) and (iii)
hereof, prior to amendment. This amendment shall be accomplished in the
manner and in accordance with the terms set forth in this Agreement.
2. Exchange to Facilitate Amendment of the Certificate of Designation. In
order to effectuate the aforesaid amendment of the Certificate of
Designation, the Parties agree to take the following actions:
(a) Shaar shall exchange (i) the Shaar Preferred Stock and (ii)
all Monetary Rights (defined below), to IFSH in exchange for
650,000 shares of Series 2002 Voting Preferred Stock (the
"Securities"), which shall be issued by IFSH pursuant to a
certificate of designation (the "2002 Certificate of
Designation") containing provisions described in the following
paragraph (this exchange being referred to hereinafter as the
"Initial Exchange").
(b) Each share of the Securities shall (i) have no dividend
rights, provided that the Securities shall have dividend
rights equivalent to holders of the Common Stock on an
as-converted basis, (ii) have voting rights equivalent to 100
shares of Common Stock; (iii) shall be convertible into 100
shares of Common Stock, and (iv) other than as set forth in
this paragraph and to the maximum extent permissible, have
rights and preferences no less favorable than the Series 2000
Preferred Stock.
(c) As used herein "Monetary Rights" shall mean all rights and/or
claims to money from IFSH that Shaar possesses pursuant to the
Purchase Agreement, including any and all rights to dividends,
interest, and/or penalties accrued through the date hereof by
reason or pursuant to Shaar's ownership of the Shaar Preferred
Stock, provided that Monetary Rights shall not include (x) the
Warrant, (y) any rights granted by the Registration Rights
Agreement dated as of March 23, 2000 between IFSH and Shaar
(the "Registration Rights Agreement"), or (z) any rights or
claims that Shaar possesses against IFSH in connection with
the Purchase Agreement (or any document executed in connection
with the Purchase Agreement) that as of the date hereof are
unliquidated or cannot be fully satisfied by the payment of
legal tender of the United States.
3. Timing of the Initial Exchange. On September 30, 2002 (the "Closing
Date"), or such other date as the Parties shall agree, Shaar shall
surrender certificates representing the Shaar Preferred Stock to IFSH,
and IFSH shall issue and deliver to Shaar (or its designee)
certificates representing the Securities, registered in the name of
Shaar (or its designee).
4. Closing of the Initial Exchange. The closing (the "Closing") of the
transactions contemplated hereby shall be held at the offices of Xxxx
Xxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. on
the Closing Date, or at such other time, date or location as may be
agreed by the Parties.
5. Escrow of Shaar Preferred Stock. IFSH agrees to hold the certificates
representing the Shaar Preferred Stock in escrow, to be held on behalf
of Shaar and to be released to Shaar upon the occurrence of (i) receipt
by IFSH of a written request from Shaar following a Shaar Release Event
pursuant to Section 7 hereof or (ii) the Final Exchange (as defined in
Section 8 hereof).
6. Amendment of Certificate of Designation. As soon as practicable after
Closing, IFSH shall use its best efforts (including obtaining
shareholder approval) to amend the Certificate of Designation in
accordance with the provisions of Section 1 of this Agreement.
7. Release Conditions. If:
(a) an event as described in Article 5 of the Certificate of
Designation is threatened or occurs prior to the filing in the
State of Delaware of the Certificate of Designation as amended
in accordance with the terms of Section 1 of this Agreement;
(b) IFSH shareholders fail to approve the amendment to the
Certificate of Designation as set forth in Section 1 of this
Agreement on or before March 31, 2003; or
(c) any legal proceeding, in law or in equity, is brought
challenging in any way this Agreement or any actions taken
pursuant to this Agreement;
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(each, a "Shaar Release Event") then, upon receipt of a written request
from Shaar, IFSH shall (i) promptly return to Shaar (or its designee)
the certificates representing the Shaar Preferred Stock and the
documentation pursuant to which Shaar relinquished the Monetary Rights,
(ii) Shaar shall return the Securities to IFSH, and (iii) IFSH shall be
authorized to retire the Securities. In such event, Shaar's rights and
privileges in the Series B Preferred Stock and the Monetary Rights
shall continue unaltered as if the Initial Exchange did not occur.
8. Final Exchange. Upon the amendment and filing in the State of Delaware
of the Certificate of Designation, amended as provided in this
Agreement (the exchange described below being referred to hereinafter
as the "Final Exchange"):
(a) IFSH shall promptly return the certificates representing the
Shaar Preferred Stock to Shaar (or its designee) (with any
alterations or notations on such certificates necessary to
indicate that they are issued pursuant to the Certificate of
Designation as amended in accordance with the terms of this
Agreement),
(b) Shaar shall return the Securities to IFSH, and
(c) IFSH shall be authorized to retire the Securities.
Shaar's rights and privileges in the Series B Preferred Stock shall be
as set forth in the Certificate of Designation as amended in accordance
with the terms of this Agreement, effective as of the date of the
filing of the amended Certificate of Designation in the State of
Delaware.
9. Representations and Warranties.
(a) Each Party warrants to each other Party that:
(i) it is duly organized and validly existing under the
laws of the jurisdiction and/or state of its
organization;
(ii) it has full corporate and/or organizational power and
authority to enter into this Agreement and to carry
out its obligations in accordance with the terms of
this Agreement;
(iii) the execution, delivery and performance of this
Agreement has been duly and validly authorized by all
necessary action on its part;
(iv) this Agreement is a valid and binding agreement on
it, enforceable in accordance with its terms; and
(v) the execution and performance of this Agreement by it
and the other transactions contemplated by this
Agreement does not violate or conflict with or result
in a breach of or constitute a default under any
agreement, contract or instrument to which it is
bound.
(b) Shaar represents and warrants to IFSH that:
(i) Shaar is amending, transferring and exchanging the
Shaar Preferred Stock in exchange for the Securities
for its own account, for investment purposes only and
not with a view towards or in connection with the
public sale or distribution thereof in violation of
the Securities Act.
(ii) By virtue of a transaction between Shaar and third
parties, Shaar is deemed to be the beneficial owner
of at least ten (10%) percent of IFSH's Common Stock
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within the meaning of the Securities Exchange Act of
1934 and the regulations promulgated thereunder.
(iii) Shaar is (i) an "accredited investor" within the
meaning of Rule 501 of Regulation D under the
Securities Act, (ii) experienced in making
investments of the kind contemplated by this
Agreement, (iii) capable, by reason of its business
and financial experience, of evaluating the relative
merits and risks of an investment in the Securities,
and (iv) able to afford the loss of its investment in
the Securities.
(iv) Shaar understands that the Securities are being
offered and sold by IFSH in reliance on an exemption
from the registration requirements of the Securities
Act and equivalent state securities and "blue sky"
laws, and that IFSH is relying upon the accuracy of,
and Shaar's compliance with, Shaar's representations,
warranties and covenants set forth in this Agreement
to determine the availability of such exemption and
the eligibility of Shaar to purchase the Securities;
(v) Shaar understands that the Securities have not been
approved or disapproved by the Securities and
Exchange Commission (the "Commission") or any state
securities commission and is not relying on any
representation of IFSH and has conducted its own
investigation of the affairs of IFSH.
(c) IFSH represents and warrants to Shaar that:
(i) Under its certificate of incorporation, as amended,
IFSH has authorized an capitalization of 50,000,000
shares of common stock, par value $0.001 per share
(the "Common Stock"), 25,000,000 shares of Preferred
Stock $.001 par value ("Preferred Stock") and has
8,809,122 shares of Common Stock outstanding and has
695,244 shares of Preferred Stock outstanding,
consisting of 161,250 shares of Series B Preferred
Stock and 533,994 shares of Series 2000 Preferred
Stock.
(ii) The Securities have been duly and validly authorized
by IFSH, and when issued by IFSH will be duly and
validly issued, fully paid and nonassessable and will
not subject the holder thereof to personal liability
by reason of being such holder.
(iii) Except as disclosed on Schedule B hereto, there are
no preemptive, subscription, "call," right of first
refusal or other similar rights to acquire any
capital stock of IFSH or any of its subsidiaries or
other voting securities of IFSH that have been issued
or granted to any person and no other obligations of
IFSH or any of its subsidiaries to issue, grant,
extend or enter into any security, option, warrant,
"call," right, commitment, agreement, arrangement or
undertaking with respect to any of their respective
capital stock. If any shares of Common Stock are
issued and not reflected in Schedule B or if more
than 350,000 shares of Common Stock are issued in
connection with the Contingent Claim listed in
Schedule B (each, an "Additional Issuance"), then
IFSH shall issue to Shaar 850 shares of Common Stock
for every 100 shares of Common Stock IFSH issues
pursuant to any Additional Issuance (the aggregate of
such shares of Common Stock issued to Shaar being
referred to hereinafter collectively as "Dilution
Shares").
(iv) IFSH shall reserve 35,000,000 shares of Common Stock
for the sole purpose of complying with its
obligations in the event that Shaar exercises a
portion of its conversion rights pursuant to the
Securities or the Shaar Preferred Stock. All shares
of Common Stock outstanding and not otherwise
reserved as of the date
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hereof shall be reserved on and after the date hereof
only for grants to directors and management of IFSH
pursuant to stock option or other compensation awards
or other business purposes approved by Shaar.
(v) As soon as practicable after the Closing, IFSH shall
use its best efforts to amend its certificate of
incorporation in a manner to permit IFSH to comply
fully with its conversion obligations under the
Securities or the Shaar Preferred Stock by either (x)
increasing the authorized number of shares of Common
Stock, or (y) effecting a reverse stock split.
(vi) IFSH has not incurred any liability for any fees or
compensation for services rendered in connection with
the transactions contemplated hereby (except for
legal fees and customary filing fees).
(vii) IFSH acknowledges and understands that Shaar intends
to assign its rights under this Agreement pursuant to
its rights under Section 14 hereof.
10. Press Release/Confidentiality. As soon as practicable following the
execution and delivery of this Agreement, the Parties shall cooperate
and shall prepare and issue a press release describing the terms of
this transaction. Except for the press release described in the
preceding sentence and except as may be required (in the reasonable
judgment of counsel) by any applicable law or regulation or the rules
of any recognized national stock exchange, neither Party shall cause
any public announcement to be made regarding this Agreement or the
transactions contemplated by this Agreement without the prior written
consent of each other Party. In the event that any Party shall be
required to cause such a public announcement to be made pursuant to any
applicable law or regulation or the rules of any recognized national
securities exchange, such Party shall provide the other Party prior
written notice of such announcement as far in advance of such
announcement as may be reasonably practical.
11. Restrictive Legend. The certificates evidencing the Securities to the
extent applicable will bear legends reading substantially as follows
(unless and until such legend is no longer required):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THAT
ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR IN A TRANSACTION WHICH QUALIFIES AS AN EXEMPT
TRANSACTION UNDER SUCH ACT AND THE RULES AND REGULATIONS
THEREUNDER."
12. Release; Agreement Not to Assert Claim; Registration Rights. (a)
Effective upon completion of the Initial Exchange Shaar hereby (i)
releases IFSH, its officers and directors (the "Releasees") from all
liabilities, claims and expenses that Shaar may have against the
Releasees by reason of its ownership of the Shaar Preferred Stock, or
pursuant to the Purchase Agreement (and any document executed in
connection with the Purchase Agreement other than the Registration
Rights Agreement) and (ii) agrees that it shall have no further right
to receive the Monetary Rights in connection therewith; provided such
release shall terminate if the transaction is unwound pursuant to
Section 7 hereof.
(b) Shaar agrees not to assert any claim existing on the Closing Date
and not covered by the release set forth in Section 12(a) of this
Agreement (including without limitation any claim under the
Registration Rights Agreement, the Warrant or any claims excluded from
the definition of Monetary Rights) unless and until one of the
following occurs: (i) the unwinding of the transaction pursuant to
Section 7 hereof, (ii) during any period or periods of time during
which enforcement proceeds are pending in connection with judgments
against IFSH aggregating no less than $100,000, (iii) any actual or
threatened liquidation of IFSH or (iv) any actual or threatened
bankruptcy proceeding in which IFSH is the debtor.
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(c) The Parties acknowledge that no registration statement filed by
IFSH with the Commission covers securities sufficient to enable the
public sale of the Securities or the shares of Common Stock into which
the Securities may be converted, and that additional filings with the
Commission will be required to permit the public sale or certain other
transfers of the Securities or the shares of Common Stock into which
the Securities may be converted. IFSH shall file a new registration
statement within 10 business days following the Final Exchange covering
(i) the Common Stock into which the Shaar Preferred Stock may be
converted and (ii) any Dilution Shares; provided that there shall be no
such obligation prior to December 15, 2002; and provided further that
such registration statement shall be filed in any event no later than
April 10, 2003. IFSH shall make all necessary filings, including
amendments to such registration statement as necessary, until such
registration statement is declared effective by the Securities and
Exchange Commission.
13. Certain Obligations Under Purchase Agreement. Notwithstanding anything
in this Agreement to the contrary, IFSH shall abide by its obligations
set forth in Article V of the Purchase Agreement.
14. Assignment. This Agreement shall be binding upon and inure to the
benefit of the respective representatives, successors and assigns of
the Parties. No assignment or transfer hereunder shall be made by any
Party without the prior written consent of the other Party, such
consent not to be unreasonably withheld; provided that Shaar may assign
its rights under this Agreement to SHVB Holdings LLC, the limited
liability company to be formed in the State of Delaware pursuant to
that certain Memorandum of Understanding, dated as of the date hereof,
among Shaar, Hestian Pty Limited and VB Family Trust and to any party
Shaar has designated pursuant to Sections 3, 7 or 8 hereof.
15. Governing Law; Jurisdiction. This Agreement, and any amendments hereto,
shall be governed by and construed in accordance with the laws of the
State of New York without giving effect to the choice of law provisions
thereof.
16. Amendments. This Agreement may not be amended, supplemented or
otherwise modified, and no provision of this Agreement may be waived,
except by a written instrument signed by each of the Parties hereto.
17. Severability. If any provision of this Agreement or application thereof
to anyone under any circumstances should be determined to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
18. No Waiver. No failure on the part of any Party to exercise any right
hereunder, and no delay in exercising any right, privilege, or power
under this Agreement, shall operate as waiver or relinquishment; nor
shall any single or partial exercise by any Party preclude any other or
further exercise, or the exercise of any other right, privilege, or
power.
19. Entire Agreement. This Agreement constitutes the entire agreement and
understanding among the Parties with respect to the subject matter
hereof and supersedes all previous agreements and understandings.
20. Counterparts. This Agreement may be executed in multiple counterparts
which, when taken together, shall constitute one and the same
instrument. Delivery of an executed counterpart of this Agreement by
facsimile shall be effective as a manual signature.
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In witness whereof, the undersigned Parties have caused this Agreement
to be executed and delivered by its duly authorized officer as of the 30th day
of September, 2002.
THE SHAAR FUND LTD.
By: Shaar Advisory Services, N.V.
(the Advisor to The Shaar Fund)
/s/ Hugo Van Neutegem
------------------------------
Name: Hugo Van Neutegem
Title: Managing Director of Shaar Advisory Services, N.V.
IFS INTERNATIONAL HOLDINGS, INC.
By:
/s/ Per Olof Ezelius
-----------------------------
Name: Per Olof Ezelius
Title: President
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