EXHIBIT 2.2
NOTE EXCHANGE AGREEMENT
BETWEEN
DREAMLIFE, INC.
AND
CYL DEVELOPMENT HOLDINGS, L.L.C.
DREAMLIFE, INC.
000 XXXX 00XX XXXXXX
XXXXX 0X
XXX XXXX, XX 00000
CYL Development Holdings, L.L.C.
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
NOTE EXCHANGE AGREEMENT
Dear Ladies and Gentlemen:
The undersigned, DREAMLIFE, INC., a Delaware corporation (the
"Corporation"), presently intends to issue common stock, $0.01 par value, of the
Corporation (the "Common Stock") to CYL Development Holdings, L.L.C. (the
"Investor") in accordance with this Agreement.
ACCORDINGLY, the Corporation hereby agrees with you as follows:
SECTION 1. ISSUANCE OF COMMON STOCK; CLOSING. Simultaneously with the
execution and delivery of this Agreement, the Corporation is issuing to the
Investor, and the Investor is acquiring from the Corporation, upon the terms and
subject to the conditions hereinafter set forth, 2,400,000 shares of Common
Stock, of the Corporation (collectively, the "Common Shares") at a price per
share of $1.00, in exchange for the transfer and delivery to the Corporation,
for cancellation, of the Corporation's note or notes issued in the aggregate
amount of $2,400,000 to The Chase Manhattan Bank (the "Note") and now having an
outstanding principal amount of $2,400,000 and now owned by the Investor.
Simultaneously herewith (the "Closing"), the Corporation is issuing and
delivering to the Investor a certificate representing the Common Shares being
acquired by the Investor hereunder, registered in the name of the Investor,
against delivery by the Investor of the Note, duly endorsed for transfer to the
Corporation. It is a condition of the Closing that simultaneously with the
Closing, the Corporation shall have completed the acquisition of 100% of
Discovery Toys, Inc.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation hereby represents and warrants to the Investor as follows:
2.1. ORGANIZATION. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. The Corporation has all requisite corporate power and authority
to own and operate its properties and to enter into this Agreement and
perform its obligations hereunder.
2.2. CAPITAL STOCK. The Corporation's Form 10-Q filed with the SEC
with respect to the fiscal quarter ended March 31, 2001 (the "Form 10-Q")
sets forth a true and complete description of the authorized and
outstanding shares of capital stock of the
Corporation as of such date. All outstanding shares of Common Stock are
and, when issued, all Common Shares to be issued hereunder will be,
validly issued, fully paid and non-assessable and not subject to
preemptive rights.
2.3. AUTHORITY. The execution, delivery and performance by the Corporation
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the
Corporation. This Agreement is a valid and binding obligation of the
Corporation, enforceable against the Corporation in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by principles of
equity regardless of whether such enforceability is considered a proceeding in
law or equity.
2.4. NO CONFLICTS. Neither the execution, delivery and performance by the
Corporation of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) conflict with, (B) result in any violations of,
(C) cause a default under (with or without due notice, lapse of time or both),
(D) give rise to any right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any benefit under, or
(E) result in the creation of any Encumbrance (as defined below) on or against
any assets, rights or property of the Corporation under any term, condition or
provision of (x) any instrument or agreement to which the Corporation is a
party, or by which the Corporation or any of its properties, assets or rights
may be bound, (y) any law, statute, rule, regulation, order, writ, injunction,
decree, permit, concession, license or franchise of any Governmental Authority
(as defined below) applicable to the Corporation or any of its properties,
assets or rights or (z) the Corporation's Certificate of Incorporation or
by-laws, as amended through the date hereof, respectively, which conflict,
breach, default or violation or other event will have a material adverse effect
on the Company's business, operations, properties, financial position or
operating result or on its ability to consummate the transactions contemplated
by this Agreement. "Encumbrances" shall mean and include security interests,
mortgages, liens, pledges, guarantees, charges, easements, reservations,
restrictions, clouds, equities, rights of way, options, rights of first refusal
and all other encumbrances, whether or not relating to the extension of credit
or the borrowing of money. "Governmental Authority" shall mean any Federal,
state, municipal, foreign or other governmental court, department, commission,
board, bureau, agency or instrumentality.
2.5. CONSENTS. Subject to the representations and warranties of the
Investor contained herein, no permit, authorization, consent or approval of or
by, or any notification of or filing with, any Governmental Authority or other
person is required in connection with the execution, delivery and performance by
the Corporation of this Agreement or the consummation of the transactions
contemplated hereby, other than (i) the filing with the SEC of such reports and
information under the Securities Act of 1933, as amended, (the "Securities Act")
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations promulgated by the Securities and Exchange Commission
("SEC") thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby, or (ii) the filing of such documents with, and
the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby.
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2.6. SEC DOCUMENTS.
(i) The Corporation has furnished or made available to the Investor
a correct and complete copy of the Corporation's Annual Report on Form
10-K filed with the SEC with respect to the fiscal year ended December 31,
2000 (the "Form 10-K") and the Form 10-Q and each other report, schedule,
and information statement filed by the Corporation with the SEC on or
after the date of filing with the SEC the Form 10-Q, which are all the
documents (other than preliminary material) that the Corporation was
required to file (or otherwise did file) with the SEC in accordance with
Sections 13, 14 and 15(d) of the Exchange Act on or after the date of
filing with the SEC of the Form 10-Q (collectively, the "SEC Documents").
As of their respective filing dates, none of the SEC Documents (including
all exhibits and schedules thereto and documents incorporated by reference
therein) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading, and the SEC Documents complied when filed
as of their respective effective dates, in all material respects, with the
then applicable requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations promulgated by the SEC
thereunder.
(ii) The financial statements (including the notes thereto) of the
Corporation included in the Form 10-K for the fiscal year ended December
31, 2000 and in the Forms 10-Q for the applicable fiscal quarter complied
as to form in all material respects with the then applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP during the periods
involved (except as may have been indicated in the notes thereto) and
fairly present the financial position of the Corporation as at the dates
thereof and the results of its operations, stockholders' equity and cash
flows for the periods then ended.
2.7. BROKERS. Neither the Corporation nor any of its officers,
directors or employees have employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
2.8. NO MATERIAL ADVERSE CHANGE. Since the date of the Form 10-Q, no
event which had or is likely to have a material adverse effect on the
business, operations, properties, financial condition or operating results
of the Corporation (a "Material Adverse Effect") has occurred or exists
with respect to the Corporation, except as otherwise disclosed or reflect
in press releases or other SEC Documents prepared through or as of a date
subsequent to the date of the Form 10-Q. The Corporation has continued to
incur losses from the date of the Form 10-Q through the date hereof.
2.9. NO GENERAL SOLICITATION. Neither the Corporation nor, to the
Corporation's knowledge, any person acting on its behalf has engaged in
any form of general solicitation or general advertising (within the
meaning of Regulation D promulgated under the Securities Act) in
connection with the offer or sale of the Common Shares.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
hereby severally represents and warrants to the Corporation as follows:
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3.1. AUTHORITY. The Investor has full power and authority to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby; and this Agreement constitutes the valid
and binding obligations of the Investor, enforceable in accordance with
its terms, except (i) as limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws relating
to or affecting the rights and remedies of creditors and debtors and (B)
equitable principles generally, regardless of whether such principles are
considered in a proceeding at equity or at law.
3.2. ACCREDITED INVESTOR. The Investor is either an "accredited
investor" (as such term is defined in Rule 501 of Regulation D promulgated
under the Securities Act) or has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of acquiring Common Shares under this Agreement.
3.3. INVESTOR INTENT. The Investor is acquiring the Common Shares
for its own account, for investment and not with a view to, or for resale
in connection with, any distribution thereof, nor with any present
intention of distributing or reselling the same or any part thereof in any
transactions that would be in violation of the Securities Act or any state
securities or "blue-sky" laws. It is expressly understood that the
Investor may grant the options contemplated by Section 4.2(a) hereof and
perform its obligations under such options.
3.4. RESTRICTED SECURITIES. The Investor understands (i) that the
Common Shares will not be registered under the Securities Act or any state
securities or "blue-sky" laws by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act or any
state securities or "blue-sky" laws, (ii) that the Common Shares must be
held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or any state securities or "blue-sky" laws or is
exempt from such registration, (iii) that the Corporation is under no
obligation to so register any shares of Common Stock and (iv) that the
certificate(s) evidencing the shares of the Common Stock will be imprinted
with a legend substantially as set forth in Section 4.2(b) hereof.
3.5. RULE 144. The Investor understands that the exemption from
registration afforded by Rule 144 promulgated under the Securities Act
("Rule 144") depends on the satisfaction of various conditions and that,
if applicable, Rule 144 may only afford the basis for sales under certain
circumstances only in limited amounts.
3.6. ACCESS TO INFORMATION; EXPERIENCE. The Investor has had access
during the course of this transaction and prior to sale of the Common
Shares to all information necessary to enable the Investor to evaluate the
merits and risks of a prospective investment in the Corporation and the
Investor has had an opportunity to discuss with representatives of the
Corporation the business and financial affairs of the Corporation and the
terms and conditions of the offering and to obtain such additional
information, to the extent that the Corporation possesses such information
or could acquire it without unreasonable effort or expense, necessary to
verify the accuracy of the information to which the Investor has had
access and all questions raised by the Investor have been answered to the
full satisfaction of the Investor. The Investor has conducted its own
investigation and analysis of the business and its investment in the
Common Shares and is not relying on the Corporation's business plan or
executive summary (if any) or any other written material or any
information or
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opinions that may be contained therein in making its decision to purchase
the Common Shares. The Investor has substantial experience in evaluating
and investing in private placement transactions of securities in companies
similar to the Corporation so that it is capable of evaluating the merits
and the risks of its investment in the Corporation and has the capacity to
protect its own interests in making its investment in the Corporation. The
Investor can afford to suffer a complete loss of its investment in the
Common Shares.
3.7. SPECULATIVE INVESTMENT. The Investor understands that the
Corporation has a limited financial and operating history, that the Common
Shares are a speculative investment which involve a high degree of
financial risk, and that there is no assurance of any economic, income or
tax benefit from such investment. The Investor is aware of the ongoing
losses incurred by the Company since March 31, 2001.
3.8. REVIEW OF AGREEMENT. The Investor has carefully read and
reviewed this Agreement and, to the extent it believed necessary, the
Investor has discussed with its legal, accounting and other professional
advisors the representations, warranties and agreements which the Investor
is making herein and the terms and conditions of the investment
contemplated hereby.
SECTION 4. AFFIRMATIVE COVENANTS.
4.1. CONFIDENTIALITY. The Investor hereby agrees to and shall keep
strictly confidential and will not disclose or divulge any confidential,
proprietary or secret information which the Investor may obtain from the
Corporation, including, by way of example and not in limitation thereof,
financial statements, reports and other materials submitted by the
Corporation as required hereunder, unless required to be disclosed by law
or pursuant to any judgment, order, subpoena or decree of any court having
competent jurisdiction, or unless such information is or becomes publicly
known (other than as a result of this Section 4.1), or unless the
Corporation gives its written consent to the Investor's release of such
information, except that no such written consent shall be required (and
the Investor shall be free to release such information) if such
information is to be provided to the Investor's lawyer or accountant who
are instructed to comply with this provision. The Investor shall be
responsible for making sure its lawyer and accountant comply.
4.2. TRANSFER OF SECURITIES.
(a) RESTRICTIONS ON TRANSFER. The Investor acknowledges that
the Common Shares purchased hereunder have not been registered under the
Securities Act, that such shares are being or will be issued pursuant to
an exemption from registration under the Securities Act and that such
shares constitute "restricted securities" under Rule 144. Accordingly, the
Common Shares held by the Investor shall not be sold, transferred,
assigned, pledged, encumbered or otherwise disposed of (each, a
"Transfer") except upon the conditions specified in this Section 4.2,
Section 4.4 or section 4.5 (which provides for certain additional
restrictions on transfer), which conditions are intended to ensure
compliance with the provisions of the Securities Act and this Agreement.
Notwithstanding the foregoing, the Investor shall be permitted to grant an
option to purchase all or any part of the Common Shares to any of Xxxxx
Xxxx or Xxxxxxxx Xxxxxxxx, upon such terms and conditions as shall be
agreed among the parties thereto and to perform its obligations under
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such options.
(b) RESTRICTIVE LEGEND. Each certificate for Common Shares
held by the Investor and each certificate for any such securities issued
to subsequent transferees of any such certificate shall (unless otherwise
permitted by the provisions of Sections 4.2(c) and 4.2(d)) be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
OR ANY RELEVANT STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS. COPIES OF THE RELEVANT TRANSFER RESTRICTIONS CONTAINED IN A
NOTE EXCHANGE AGREEMENT BETWEEN DREAMLIFE, INC. AND THE OTHER PARTY
THERETO MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF DREAMLIFE,
INC."
(c) NOTICE OF TRANSFER. The Investor agrees, prior to any
Transfer of Common Shares to give written notice to the Corporation of the
Investor's intention to effect such Transfer and to comply in all other
respects with the provisions of this Section 4.2. Each such notice shall
describe the manner and circumstances of the proposed Transfer and, except
in the case of a Transfer upon exercise of an option referred to in
Section 4.2(a), shall be accompanied by the written opinion, addressed to
the Corporation, of counsel for the holder of such shares, stating that in
the opinion of such counsel (which opinion and counsel shall be reasonably
satisfactory to the Corporation), such proposed Transfer does not involve
any transaction requiring registration or qualification of such shares
under the Securities Act or the securities blue sky laws of any relevant
state of the United States. Upon giving of such notice and, if required,
opinion, the Investor shall thereupon be entitled to Transfer such shares
in accordance with the terms of the notice delivered by it to the
Corporation; provided, that unless the restrictions imposed by this
Section 4.2 have terminated, the transferee agrees in writing to be
subject to the provisions of this Section 4.2. Each certificate or other
instrument evidencing the securities issued upon the Transfer of any such
shares (and each certificate or other instrument evidencing any
untransferred balance of such shares) shall bear the legend set forth in
Section 4.2(b) unless (a) registration of any future Transfer is not
required by the applicable provisions of the Securities Act and applicable
state securities laws or (b) the Corporation shall have waived the
requirement of such legends. The Investor shall not Transfer any Common
Shares until such opinion of counsel has been given (unless waived by the
Corporation or unless such opinion is not required in accordance with the
provisions of this Section 4.2).
(d) REMOVAL OF LEGENDS, ETC. Notwithstanding the foregoing
provisions of this Section 4.2, the restrictions imposed by this Section
4.2 upon the
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transferability of any shares of the capital stock of the Corporation held
by the Investor shall cease and terminate when (a) any such shares are
sold or otherwise disposed of pursuant to an effective registration
statement under the Securities Act or as otherwise contemplated by Section
4.2(c) and, pursuant to Section 4.2(c), the securities so transferred are
not required to bear the legend set forth in Section 4.2(b) or (b) the
holder of such shares has received an opinion of counsel stating that such
holder has met the requirements for Transfer of such shares pursuant to
subparagraph (k) of Rule 144. Whenever the restrictions imposed by this
Section 4.2 shall terminate, as herein provided, the Investor holding
shares as to which such restrictions have terminated shall be entitled to
receive from the Corporation, without expense, a new certificate not
bearing the restrictive legend set forth in Section 4.2(b) and not
containing any other reference to the restrictions imposed by this Section
4.2.
SECTION 5. MISCELLANEOUS.
5.1 NOTICES. All notices, advices and communications to be given or
otherwise made to any party to this Agreement shall be deemed to be sufficient
if contained in a written instrument delivered in person or by telecopier or
duly sent by first class registered or certified mail, return receipt requested,
postage prepaid, or by overnight courier, addressed to such party at the address
set forth below or at such other address as may hereafter be designated in
writing by the addressee to the addressor listing all parties:
(i) if to the Corporation, to:
000 Xxxx 00xx Xxxxxx
Xxxxx 0X
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxxx
(ii) if to the Investor, to the Investor's address set forth on the
first page hereto.
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. Any
such notice or communication shall be deemed to have been delivered and received
(i) in the case of personal delivery or delivery by telecopier, on the date of
such delivery, (ii) in the case of nationally-recognized overnight courier, on
the next business day after the date when sent and (iii) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted. As used in this Section 5, "business day" shall
mean any day other than a day on which banking institutions in the State of New
York are legally closed for business.
5.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, this Agreement shall bind and inure to the benefit of the parties hereto
and the respective successors and assigns of the parties hereto, PROVIDED,
HOWEVER, that the rights and obligations of the Corporation shall not be
assignable without the prior written consent of the Investor.
5.3 SURVIVAL. All representations and warranties contained in this
Agreement shall survive the Closing.
5.4 AMENDMENTS. The terms and provisions of this Agreement may only be
amended
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with the written consent of the Corporation and the Investor.
5.5 ENTIRE AGREEMENT. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
5.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
5.7 HEADINGS. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
5.8 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAWS PROVISION OR RULE (WHETHER OF THE STATE OF NEW
YORK, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK TO BE APPLIED, EXCEPT TO THE EXTENT THAT THIS
AGREEMENT RELATES TO THE INTERNAL AFFAIRS OF THE CORPORATION, WHICH SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS PROVISION OR RULE
(WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED TO
SUCH MATTERS. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
NEW YORK OR THE STATE OF DELAWARE, AS THE CASE MAY BE, WILL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH
JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF
SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
IN WITNESS WHEREOF, the undersigned have caused this Note Exchange
Agreement to be executed as of the date written below.
DREAMLIFE, INC.
Dated: July 18, 2001 By: /s/ Xxxxx X. Xxxx
------------- ------------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer
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CYL DEVELOPMENT HOLDINGS, L.L.C.
Dated: July 18, 2001 By: /s/ Xxxxx X. Xxx
------------- ----------------------------
Name: Xxxxx X. Xxx
Title: Member
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