EXCHANGE AGREEMENT
This
Exchange Agreement (the “Agreement”), dated as of December 29, 2009, is between
Accountabilities, Inc., a Delaware corporation (the “Company”) and Tri-State
Employment Services, Inc., a Nevada corporation (the “Holder”).
Recitals
A. The
Holder is the owner of that certain (i) Convertible Secured Promissory Note,
dated March 31, 2006, issued by the Company and attached hereto as Exhibit A (the
“Convertible Note”) and (ii) Promissory Note, dated March 31, 2006, issued by
the Company and attached hereto as Exhibit B (the
“Promissory Note,” and with the Convertible Note, each a “Note” and
collectively, the “Notes”) as well as the obligations and liabilities of the
Company and any pertinent affiliate thereof which were sold and transferred
(along with the Notes) to the Holder pursuant to that certain Debt Purchase
Agreement, dated December 29, 2009, between the Holder and the Xxxxxxx Xxxxxxxx
and Xxxxx Xxxxxxxx Living Trust under Agreement dated April 28, 1992 (the “Debt
Purchase Agreement”) and referred to therein as the “Transferred
Rights.” The Debt Purchase Agreement is attached hereto as Exhibit
C. The Notes and the Transferred Rights are collectively
referred to herein as the “Company Obligations” and the Company has previously
consented to the sale and transfer of the Company Obligations to the
Holder.
B. The
Company has experienced and continues to experience liquidity issues, including
debt service obligations and insufficient operating cash flow, and as a result
the Board of Directors of the Company has determined that it would be in the
best interests of the Company to restructure the debt obligations of the Company
to strengthen the Company’s balance sheet.
C. The
Company has previously been advised by Messrs. Xxxxxx Xxxxxxx, Xxxx Xxxxxxx
and Xxx Xxxxxxxx, directors of the Company and, in the case of Messrs.
Xxxxxxx and Schecter, the President and Chief Executive Offer, respectively of
the Company, and by the Holder, an affiliate of the Company and an affiliate of
Messrs. Xxxxxxx, Xxxxxxx and Schecter, that the Holder was contemplating
entering into an agreement for the purchase of the Company
Obligations.
D. The
Holder had previously disclosed to the Company the terms of the Debt Purchase
Agreement and offered to the Company (i) to assign to the Company its agreement
for the purchase of the Company Obligations, thereby giving the Company the
opportunity to purchase the Company Obligations on the same terms as negotiated
by the Holder, or (ii) to exchange the Company Obligations, after they were
acquired by the Holder, for shares of the Company’s common stock.
E. The
Board of Directors of the Company appointed Xxxxxx Xxxxxxxx, the sole director
of the Company who is not affiliated with the Holder and who has no financial or
other interest in connection with the Company Obligations, to act as a special
committee of independent directors (the “Special Committee”) to review and, if
he determined to be appropriate, approve either the acquisition of the Company
Obligations on the terms set forth in the Debt Purchase Agreement or the
exchange of the Company Obligations, after they were acquired by the Holder, for
shares of the Company’s common stock.
F. The
Special Committee consulted with members of management (other than Messrs.
Xxxxxxx and Schecter) and other advisors with regard to the proposal and
determined that the Company did not have, and could not on reasonable terms
obtain, sufficient cash to purchase the Company Obligations on the terms offered
to the Holder, and therefore the Special Committee on behalf of the Company
determined that it was not in the best interests of the Company to exercise the
opportunity to acquire the Company Obligations on such terms.
G. The
Special Committee did determine that it would be in the best interests of the
Company to exchange the Company Obligations, after they were acquired by the
Holder, for shares of the Company’s common stock.
H. The
Special Committee, following negotiations with the Holder and execution of the
Debt Purchase Agreement, approved the terms of the exchange of the Company
Obligations for 2,333,333 shares of the Company’s common stock, par value
$0.0001 per share (the “Exchange Common Stock”) at a per share exchange price of
$0.30 per share.
Agreement
NOW,
THEREFORE, in consideration of the foregoing recitals and for good and valuable
consideration, the parties hereto agree as follows:
Section
1.
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EXCHANGE OF SECURITIES AND RELEASE OF COMPANY
OBLIGATIONS
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1.1 Exchange. Subject
to the terms and conditions set forth herein, the Company agrees to issue and
deliver the Exchange Common Stock to the Holder in exchange for the Company
Obligations.
1.2 The Closing of the
Exchange. On the date hereof, the Company will deliver to the
Holder, and the Holder hereby agrees to accept, the Exchange Common Stock,
against the Holder’s delivery of each of the Notes to the Company for
cancellation and the release contained herein as to the Company Obligations. The
Company will deliver to the Holder on the date hereof a certificate or
certificates representing the Exchange Common Stock, registered in the name of
the Holder or, if requested by the Holder, in the name of an affiliate of the
Holder or nominee for the Holder or such affiliate’s benefit. In
exchange for the Exchange Common Stock, the Holder will deliver to the Company,
and the Company hereby agrees to accept, each of the Notes and the release
contained herein as to the Company Obligations. The closing of the
transactions contemplated hereby shall be held at the offices of Xxxxx Xxxx LLP,
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the date hereof, or at
such other place or time as all parties hereto may agree. Upon
execution hereof, and effective only upon the consummation of the transactions
contemplated hereby, the Holder hereby assigns to the Company the benefit of the
representations and warranties set forth in Section 4 of the Debt Purchase
Agreement.
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1.3 Release. The
Holder hereby releases and discharges the Company and its respective officers,
directors, employees, agents, subsidiaries and members, and the heirs,
executors, legal representatives, successors and assigns of each of the
foregoing, from and against any and all actions, causes of action, lawsuits,
accounts, sums of money, indebtedness, agreements, damages, losses, claims,
demands, expenses, covenants, agreements, liabilities and obligations whatsoever
against any of them which have arisen or may arise solely by reason or in
respect of the Company Obligations which the Holder, its legal representatives,
successors or assigns ever had, now have or hereafter can, shall or may have,
for, upon, or by reason of any matter, cause or thing whatsoever, from the
beginning of the world to the date hereof. The Company shall be
authorized to file all UCC termination statements and discharges naming the
Company as debtor in connection with the Company Obligations. This
provision shall not be effective unless and until the Holder actually receives
the Exchange Common Stock and the Company actually cancels the
Notes.
1.4 Further
Assurances. If at any time any further action is necessary to
effect the transactions contemplated hereby, each party hereto will take such
further reasonable action (including executing and delivering any further
instruments and documents, obtaining any permits and consents and providing any
reasonably requested information) as any other party may reasonably request, all
at the requesting party’s sole costs and expense.
Section
2.
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REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY
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The
Company hereby represents, warrants and covenants to the Holder as
follows:
2.1 Existence and
Power. The Company (i) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization and (ii)
has all requisite power and authority to execute and deliver this Agreement and
to consummate the transactions described herein.
2.2 Authorization; Binding
Effect. The execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations under this
Agreement and the consummation of the transactions described herein by the
Company have been duly authorized by all requisite action on the part of the
Company. This Agreement is the legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
that such enforcement (i) may be limited by bankruptcy, insolvency, moratorium
or similar laws affecting creditors’ rights generally and (ii) is subject to the
availability of equitable remedies, as determined in the discretion of the court
before which such a proceeding may be brought.
2.3 No
Conflicts. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby (including the issue and sale of the Exchange Common Stock) will not (i)
conflict with or violate any provision of the Company’s certificate or articles
of incorporation, bylaws or other organizational or charter documents, (ii)
violate any provision of any existing law, statute, rule, regulation or
ordinance applicable to the Company, (iii) any order, writ, judgment, award or
decree of any court, governmental authority, bureau or agency to which the
Company is a party or by which it may be bound or (iv) any contract or
other agreement or undertaking to which the Company is a party or by which the
Company may be bound.
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2.4 Authorization and Issuance
of Exchange Common Stock. The Company has a sufficient number
of authorized and unissued and unreserved shares of common stock available in
order to issue the Exchange Common Stock in accordance with the terms of this
Agreement. Upon issuance, the Exchange Common Stock will have been
duly and validly authorized and issued and will be fully paid and non-assessable
free and clear of any lien, charge, encumbrance, security interest, right of
first refusal or other restrictions of any kind.
2.5 Governmental Consent.
Other than possible filings with the Securities and Exchange Commission, none of
the execution, delivery or performance of this Agreement (including the offer,
issue and sale of the Exchange Common Stock) require the consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority.
Section
3.
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REPRESENTATIONS AND WARRANTIES OF
HOLDER
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The
Holder hereby represents, warrants and covenants to the Company as
follows:
3.1 Ownership of Company
Obligations. The Holder is the sole owner of the Company Obligations and
is the sole legal record and beneficial owner of the Notes and is conveying the
Company Obligations to the Company free and clear of any liens, claims,
interests, charges or other encumbrances that it shall have
created. The Holder has neither previously sold, assigned, conveyed,
transferred or otherwise disposed of, in whole or in part, the Company
Obligations, nor is the Holder party to any agreement other than this Agreement
to sell, assign, convey, transfer or otherwise dispose of, in whole or in part,
such Company Obligations.
3.2 Due Authorization.
The Holder represents and warrants that (i) the execution and delivery of this
Agreement by it and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary action on its behalf and (ii)
this Agreement has been duly executed and delivered by the Holder and
constitutes the valid and binding obligation of the Holder, enforceable against
it in accordance with its terms, except that such enforcement (x) may be limited
by bankruptcy, insolvency, moratorium or similar laws affecting creditors’
rights generally and (y) is subject to the availability of equitable remedies,
as determined in the discretion of the court before which such a proceeding may
be brought.
Section
4.
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MISCELLANEOUS
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4.1 Notices. All
communications under this Agreement shall be in writing and shall be delivered
by first class mail, overnight mail through a national reputable delivery
service, by hand or confirmed facsimile transmission to the address or facsimile
number for such party on the signature page hereto. Notices under
this Agreement shall be deemed given and effective on the earliest of (i) the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified on the signature page hereto prior
to 5:30 p.m. (New York City time) on a business day, (ii) the business day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified on the signature page
hereto later than 5:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.
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4.2 Survival. All
representations and warranties made herein or in any certificate or other
instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the parties hereto and shall survive the
issuance of the Exchange Common Stock.
4.3 Successors and
Assigns. Except as otherwise expressly provided herein, this Agreement
shall inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties; provided however that no party may assign this
Agreement or the obligations and rights of such party hereunder without the
prior written consent of the other party hereto.
4.4 Amendment and
Waiver. This Agreement may not be amended, modified or waived
except by an instrument in writing signed on behalf of each of the parties
hereto.
4.5 Counterparts. This
Agreement may be executed in one or more counterparts each of which shall be an
original and all of which together shall constitute one and the same
instrument. Any signature delivered by facsimile shall have the legal
effect of the original thereof.
4.6 Severability. In the
event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
4.7 Governing Law. This
Agreement shall be construed in accordance with and governed by the laws of the
State of New York without regard to principles of conflicts of
laws.
4.8 Expenses. Each of the
parties to this Agreement shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement.
4.9 Entire Agreement.
This Agreement, together with all exhibits, including any schedules hereto
constitutes the entire agreement among the parties pertaining to the
transactions contemplated hereby and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties on such matter.
4.10 Waiver of Jury
Trial. EACH OF THE COMPANY AND THE HOLDER HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY LAWSUIT, PROCEEDING OR ACTION TO ENFORCE OR
DEFEND ANY RIGHT UNDER THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR TO BE DELIVERED IN CONNECTION WITH THIS AGREEMENT AND
AGREES THAT ANY LAWSUIT, PROCEEDING OR ACTION WILL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
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IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
By:
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/s/
Xxx X. Xxxxxxxx
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Name: Xxx
X. Xxxxxxxx
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Title:Chief
Executive Officer
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Address:
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000
Xxxxxxxx, 00xx
Xxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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TRI-STATE
EMPLOYMENT SERVICES, INC.
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By:
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/s/
Xxxxxx Xxxxxxx
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Name: Xxxxxx
Xxxxxxx
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Title: President
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Address:
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000
Xxxxxxxx, 00xx
Xxxxx
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Xxx
Xxxx, Xxx Xxxx
00000
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