Exhibit 2.1
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement") is entered into and effective as
of April 16, 2001 by and between Xxxxx Xxxxxxx as the authorized representative
of the shareholders of Xxxxxxx Media Inc. a Florida corporation (H.M.I.) who are
parties to this Agreement (collectively the "SHAREHOLDERS"), and whose name is
set forth in the attached Schedule "A", Xxxxxxx and Innovative Software
Technologies, a California corporation
("the Company").
1. RECITALS
This Agreement is entered into with reference to and in contemplation of
the following facts, circumstances and representations:
1.1. The SHAREHOLDERS are the owners of all of the ownership or membership
interests in (the "H.M.I. Shares").
1.2. The company desires to issue a total of 13,077,954 shares of its common
stock (the "Company Shares") to the SHAREHOLDERS in exchange for the
H.M.I. Shares.
1.3. The SHAREHOLDERS desire to exchange the H.M.I. Shares for the Shares in
accordance with the terms and conditions of the Agreement.
1.4. H.M.I. desires that this transaction be consummated.
2. EXCHANGE AND ISSUANCE OF SHARES
2.1. Exchange of the Shares: The Company shall exchange and deliver to the
SHAREHOLDERS, a total of 13,077,954 restricted shares of the Company
common stock in accordance with the allocation set forth in the
attached Schedule "A".
2.2. Exchange of H.M.I. Shares: At the closing, the SHAREHOLDERS shall
exchange and deliver to the Company the 1,000 H.M.I. Shares which
represent all of the ownership interests in H.M.I.
2.3. Nature of the Shares: The SHAREHOLDERS shall be issued the Company
Shares, which unless otherwise contractually restricted, shall be
subject to a one (1) year holding period before the Company Shares are
eligible for sale in the U.S. public market. The sale of the Company
Shares will be further limited by the resale provisions of SEC Rule
144.
2.4. Restricted nature of the Company Shares: Notwithstanding the one (1)
year holding period for the Company Shares, a SHAREHOLDER who becomes
an "affiliate" or "control person" of the Company will be subject to
certain limitations with respect to the sale of it's the Company
shares. Accordingly, as a result of such a designation, the sale of the
Company Shares will be limited by SEC Rule 144.
2.5. Private Sale Acknowledgment: The parties acknowledge and agree that the
exchange and issuance of the Company Shares is being undertaken as a
private sale pursuant to Section 4 (2) of the Securities Act of 1933,
as amended and is not being transacted via a broker-dealer and/or in
the public market place.
2.6. Status of Present Share ownership and Contemplated Share Issuance by
the Company: The parties hereto acknowledge and agree that the Company
will issue the 13,077,954 Company Shares. Accordingly and upon the
Closing of the share exchange contemplation by this Agreement, that the
following will be resulting share ownership of the Company:
Name No Shares %Ownership
Original Company Shareholders 1,453,106 10%
H.M.I. Shareholders 13,077,954 90%
Totals 14,531,060 100%
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The COMPANY represents and warrants to the SHAREHOLDERS and H.M.I. as follows:
3.1. Organization: The Company is a corporation duly incorporated and
validly existing under the laws of the State of California and is in
good standing with respect to all of its regulatory filings.
3.2. Capitalization: The authorized capital of the Company consists of
20,000,000 common shares with a no par value with the exception of the
common shares described in Paragraph 2.6, no common shares will have
been validly authorized and issued by the COMPANY prior to the Closing
of the contemplated share exchange.
3.3. Financial Statements: The Company has furnished to the SHAREHOLDERS and
H.M.I. unaudited financial statements for the period ending 31 December
2000. That at the Closing the financial affairs of the Company will be
materially the same as represented in the financial statements for the
period ending 31 December 2000.
3.4. Books and Records: All material transactions of the Company have been
promptly and properly recorded or filed in or with its books and
records and the Minute Book of the Company contains records of all
meetings and proceedings of the shareholders and directors thereof.
3.5. Legal Compliance: To the best of its knowledge, the Company is not in
breach of any laws, ordinances, statutes, regulations, by-laws, orders
or decrees to which the Company is subject or which apply to it or any
of its assets.
3.6. Tax Returns: All tax returns and reports of the Company required by law
to be filled prior to the date hereof have been filed and are
substantially true, complete and correct and all taxes and governmental
charges have been paid.
3.7. Adverse Financial Events: The Company has not experienced nor is it
aware of any occurrence or event, which has had or might reasonably be
expected to have a material adverse effect on its financial condition.
3.8. Disputes, Claims and Investigations: there are no disputes, claims,
actions, suits, judgements, investigations or proceedings outstanding
or pending or to the knowledge of the Company threatened against or
affecting the Company at law or in equity or before or by any federal,
state, municipal or other governmental department, commission, board,
bureau or agency.
3.9. Employee Liabilities: The Company has no known liability to former
employees or any liability to any governmental authorities with respect
to current or former employees.
3.10. Conflicts or Agreement Violations: the execution, delivery and
performance of this Agreement will not conflict with or be in violation
of the articles or by-laws of the Company or of any agreement to which
the Company is party and will not give any person or company a right to
terminate or cancel any agreement or right enjoyed by the Company and
will not result in the creation or imposition of any lien, encumbrance
or restriction of any nature whatsoever in favor of a third party upon
or against the assets of he Company.
3.11. Validly Issued and Authorized the Company Shares: That the Shares will
be validly authorized and issued by the Company, they will be fully
paid and non-assessable and they will be issued in full compliance with
all federal and state securities laws.
3.12. Restrictive Legend: That the Company Shares will have a restrictive
legend imposed thereon identifying them as "Restricted Shares" which
are subject to the conditions and limitations of SEC Rule 144 with
respect to their sale in the U.S. public market place.
3.13. Validly Issued and Authorized Outstanding Shares of The Company: That
all of the issued and outstanding common shares of the Company are
validly issued, authorized and issued, fully paid, and non-assessable,
and that the outstanding shares have been so issued in full compliance
with all federal and state securities laws.
3.14. Corporate Authority: The officers or representatives of the Company
executing this Agreement represent that they have been authorized to
execute this Agreement pursuant to a resolution of the Board of
Directors of the Company.
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4. REPRESENTATIONS OF SHAREHOLDERS AND H.M.I.
The Shareholders and H.M.I. collectively and individually hereby represent and
warrant to the Company as follows:
4.1. Share Ownership: That the SHAREHOLDERS are the owners, beneficially and
of record, of 1,000 H.M.I. Shares and said shares are free and clear of
all liens, encumbrances, claims, charges and restrictions.
4.2. Transferability of H.M.I. Shares: That the SHAREHOLDERS have full power
to transfer the H.M.I. Shares to the Company without obtaining the
consent or approval of any other person or governmental authority.
4.3. Validly Issued and Authorized Shares: That the H.M.I. Shares are
validly authorized and issued, fully paid, and nonassessable, and the
H.M.I. Shares have been so issued in full compliance with all
securities laws of the State of Florida.
4.4. Organization: H.M.I. is a corporation duly incorporated and validly
existing under the laws of the State of Florida and is in good standing
with respect to all of its regulatory filings.
4.5. Capitalization: That the H.M.I. Shares represent one hundred percent
(100%) of the ownership or membership interest in H.M.I. and that such
interest were validly issued and are fully paid on non-assessable
interest.
4.6. Financial Statements: H.M.I. will furnished to H.M.I. the company
audited financial statements for the three 3 year period ending
December 31, 2000. That at the closing the financial affairs of H.M.I.
will be materially the same as represented in these same financial
statements.
4.7. Books and Records: All material transactions of H.M.I. have been
promptly and properly recorded or filed in or with its books and
records and the Minute Book of H.M.I. contains records of all meetings
and proceedings of the members and directors thereof.
4.8. Legal Compliance: H.M.I. is not in breach of any laws, ordinances,
statutes, regulations, by-laws, orders or decrees to which H.M.I. is
subject or which apply to it or any of its assets.
4.9. Tax Returns: All tax returns and reports of H.M.I. required by law to
be filed prior to the date hereof have been filed and are true,
complete and correct and all taxes and governmental charges have been
paid.
4.10. Adverse Financial Events: H.M.I. has not experienced nor is it aware of
any occurrence or event which had or might reasonably be expected to
have a material adverse effect on its financial condition.
4.11. Disputes, Claims and Investigations: There are no disputes, claims,
actions, suits judgements, investigations or proceedings outstanding or
pending or to the knowledge of H.M.I. threatened against or affecting
H.M.I. at law or in equity or before or by any federal, municipal or
other governmental department, commission, board, bureau or agency.
4.12. Employee Liabilities: H.M.I. has no liability to former employees or
any liability to any government authorities with respect to current or
former employees.
4.13. No Conflicts or Agreement Violations: The execution, delivery and
performance of this Agreement will not conflict with or be in violation
of the Articles of Incorporation of H.M.I. or of any agreement to which
H.M.I. is a party and will not give any person or company a right to
terminate or cancel any agreement or right enjoyed by H.M.I. and will
not result in the creation or imposition of any lien, encumbrance or
restriction of any nature whatsoever in favor of a third party upon or
against the assets of H.M.I.
4.15. No Liens: That H.M.I. has not received a notice of any assignment,
lien, encumbrance, claim or charge against the H.M.I. shares.
4.16. Corporate Authority: The officers or representatives of H.M.I.
executing this agreement represent that they have been authorized to
execute this Agreement pursuant to a resolution of the Board of
Directors of H.M.I.
5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS ALONE
The SHAREHOLDERS alone further represent and warrant to the Company as
follows with respect to the Company Shares:
5.1 Financially Responsible: That they are financially responsible, able to
meet their obligations and acknowledge that this investment will be
speculative.
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5.1. Investment Experience: That they have had experience in the business of
investments in one or more of the following: (i) investment experience
with securities such as stocks and bonds; (ii) ownership of interest in
partnerships, new ventures and start-up companies; (iii) experience in
business and financial dealings; and that they can protect their own
interest in an investment of this nature and they do not have an
"Investor Representative", as that term is defined in Regulation D of
the Securities Act of 1933 and do not need such and Investor
Representative.
5.2. Investment Risk: That they are capable of bearing the high degree of
economic risks and burdens of this investment, including but not
limited to the possibility of complete loss of all their investment
capital and the lack of a liquid market, such that they may not be able
to liquidate readily the investment whenever desired or at the then
current asking price.
5.3. Access to Information: That they have had access to the information
regarding the financial condition of the Company and they were able to
request copies of such information, ask questions of and receive
answers from the Company regarding such information and any other
information he desires concerning the Company shares, and all such
questions have been answered to his full satisfaction.
5.4. Private Transaction: That at no time was he presented with or solicited
by any leaflet, public promotional meeting, circular, newspaper or
magazine article, radio or television advertisement or any other form
of general advertising
5.5. Investment Intent: The Company Shares are not being purchased with a
view to or for the resale or distribution thereof and they have no
present plans to enter into any contract, undertaking, agreement or
arrangement for such resale or distribution.
5.6. Due Diligence: That the SHAREHOLDERS shall have completed a due
diligence review of the affairs of the Company and are satisfied with
the results.
6. CLOSING, ESCROW HOLDER AND CONDITIONS TO CLOSING
6.1. Exchange Closing: The closing of the share exchange as contemplated by
this Agreement (the "Closing") shall take place in Los Angeles,
California, at such time and place as may be agreed among by the
parties, but in no event later than April 15, 2001, unless otherwise
extended in writing by the parties. The parties appoint X.X. Xxxxxx as
the Escrow holder.
6.2. Closing: Prior to the Closing the following will be required:
1. Delivery of H.M.I. Shares: The SHAREHOLDERS shall deliver to
the Escrow Holder the certificate or certificates representing
the H.M.I. Shares registered in the name of the SHAREHOLDERS
duly endorsed for transfer accompanied by duly executed
assignments of the H.M.I. Shares to the Company.
2. Delivery of the Company Shares: The Company shall deliver to
the Escrow Holder a total of 13,077,954 of the Company Shares
registered in the names of the SHAREHOLDERS as set forth in
Schedule "A."
3. Delivery of Certificates of Good Standing: Each party shall
deliver to the Escrow Holder a current Certificate of Good
Standing issued by the Florida Secretary of State and
California Secretary of State.
4. Requisite Corporate Resolutions: Each party shall deliver to
the Escrow Holder certified copies of resolutions for their
respective Boards of Directors authorizing the subject
transaction.
5. Satisfactory Completion of Due Diligence: Each party shall
deliver to the Escrow holder written notice that is has
completed its due diligence investigation and is satisfied
with the results of such investigation.
6. Documents: Both parties shall deliver to the Escrow Holder
such other documents as are required by the terms and
conditions of the Agreement.
7. Appointment of Directors: The Company shall deliver to the
Escrow Holder certified resolutions of the The Company Board
of Directors for the following actions (1) the appointment of
Xxxxx Xxxxxxx as the President of the Company; and (2) the
appointment of Xxxxx X. Xxxxxx as Secretary of the Company.
a. Close of Transaction: The subject transaction shall
`close' upon the satisfaction of the above conditions.
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b. Notices: All notices given pursuant to the Agreement must
be in writing and may be given by (1) personal delivery,
or (2) registered or certified mail, return receipt
requested, or (3) via facsimile transmission to the Escrow
Holder and the parties as set forth below. Any party
hereto may by notice so given change its address for any
future notices:
ESCROW HOLDER X.X. XXXXXX
Suite 151
0000 Xxxxx Xxxxxx
Xxxxxxxxxx Xxxxx XX 00000
SHAREHOLDERS XXXXX XXXXXXX
AND H.M.I. 0000 Xxxxxx Xxxxx
Xxxxxxxx, XX. 00000
The Company 0000 Xxxxxx Xxxxx
Xxxxxxxx, XX. 00000
7. COOPERATION,ARBITRATION, INTERPRETATION, MODIFICATION AND ATTORNEY FEES
7.1 Cooperation of parties: The parties further agree that they will do all
things necessary to accomplish and facilitate the purpose of this
Agreement and that they will sign and execute any and all documents
necessary to bring about and perfect the purposes of this Agreement.
7.2 Arbitration: The parties hereby submit all controversies, claims and
matters of difference arising out of this Agreement to arbitration in
Los Angeles, California according to the rules and practices of the
American Arbitration Association from time to time in force. The
submission and agreement to arbitrate shall be specifically
enforceable. The Agreement shall, further be governed by the laws of
the State of California.
7.3 Interpretation of Agreement: The Parties agree that should any
provision of this Agreement be found to be ambiguous in any way, such
ambiguity shall not be resolved by construing such provisions or any
part of or the entire Agreement in favour of or against any party
herein, but rather by construing the terms of the Agreement fairly and
reasonably in accordance with their generally accepted meaning.
7.4 Modification of Agreement: This Agreement may be amended or modified in
any way at any time by an instrument in writing stating the manner in
which it is amended or modified and signed by each of the parties
hereto. Any such writing amending or modifying this Agreement shall be
attached to and kept with this Agreement.
7.5 Attorney Fees: If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of the Agreement, the successful
or prevailing party shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding, in addition
to any other relief to which it may be entitled.
7.6 Entire Agreement: This Agreement constitutes the entire Agreement and
understanding of the parties hereto with respect to the matters herein
set forth, and all prior negotiations, writings and understandings
relating to the subject matter of this Agreement are merged herein and
are superseded and canceled by this Agreement.
7.7 Counterparts: This Agreement may be signed in one or more counterparts.
7.8 Facsimile Transmission Signatures: A signature received pursuant to a
facsimile transmission shall be sufficient to bind a party to this
Agreement.
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SHAREHOLDERS OF
THE COMPANY
Dated: __________________ BY: _______________________
-------------------------------
Their Authorized Representative
XXXXXXX MEDIA INC
Date: __________________ BY: _______________________
XXXXX XXXXXXX
PRESIDENT as Representative of the H.M.I.
Shareholders.
ESCROW AGENT
Date: ___________________ BY: _______________________
X.X. XXXXXX
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