Exhibit 10.1
SHARE EXCHANGE AGREEMENT
AND
PLAN OF REORGANIZATION
This SHARE EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION is made and entered
into as of June 21, 2006, by and among Cyberads, Inc., a Nevada corporation
("CYBERADS"); Rhino Offroad Industries, Inc., a Nevada corporation ("RHINO");
and those persons executing this Agreement as shareholders of Rhino, sometimes
collectively referred to as the "SHAREHOLDERS."
RECITALS
A. Cyberads desires to acquire all of the outstanding shares of
capital stock of Rhino in exchange for shares of capital stock of Cyberads
("Exchange").
B. The Shareholders own 100% of the issued and outstanding shares
of Rhino and desire to exchange those shares for shares of common and preferred
stock of Cyberads ("Cyberads Shares").
C. Rhino, Cyberads and the Shareholders desire to make certain
representations and warranties and other agreements in connection with the
Exchange.
D. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended ("Code"), and to cause the Exchange to qualify as a
reorganization under the provisions of Section 368 of the Code.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE EXCHANGE
1.1. EXCHANGE OF SHARES.
(a) Concurrently with the execution of this Agreement,
the Shareholders are assigning, transferring contributing and delivering to
Cyberads 100% of the issued and outstanding shares of capital stock of Rhino
("Rhino Shares"). Concurrently with the execution of this Agreement, Cyberads is
issuing to the Shareholders One Million Six Hundred Fifty Thousand (1,650,000)
shares of Cyberads Series C Preferred Stock (the "Series C Shares"), based on a
value of $1.00 per share. A copy of the Certificate of Designation describing
the rights and limitations of the Series C Shares is attached as Exhibit A.
Share Exchange Agreement and Plan of Reorganization - Page 1
(b) All Cyberads Shares described in this Section 1.1
will be issued to the Shareholders as allocated on the attached Schedule 1.1.
(c) The Shareholders will have the right to convert all
or any part of the Series C Shares into fully paid and nonassessable shares of
Cyberads Class A Common Stock in an aggregate amount equal to One Million Six
Hundred Fifty Thousand Dollars ($1,650,000) ("Share Value"), based on the 30 day
trailing average of the closing bid price of the Cyberads common stock as
reported on the OTC Bulletin Board (or such other principal exchange then
listing the Cyberads Shares) (the "Trailing Average") on the relevant date
specified below.
(d) If any Series C Shares are converted to Cyberads
common stock prior to the one-year anniversary date of this Agreement
("Anniversary Date"), the conversion will occur at the ratio necessary to issue
Cyberads common stock to the converting Shareholders equal to the Shareholder's
pro rata portion of the Share Value, based on the Trailing Average as of the
date of conversion. If on the Anniversary Date the per share value of the
Cyberads common stock is less than the per share value on the date of
conversion, based on the Trailing Average as of the Anniversary Date, additional
Cyberads common stock will be issued to each applicable Shareholder as necessary
to make that Shareholder's aggregate fair market value of the Cyberads Shares
equal to his pro rata portion of the Share Value as of the Anniversary Date, as
adjusted for stock splits, stock dividends and similar events.
(e) If any Series C Shares are converted to Cyberads
common stock on or after the Anniversary Date, the conversion will occur at the
ratio necessary to issue Cyberads common stock to the converting Shareholder
equal to the Shareholder's pro rata portion of the Share Value, based on the
Trailing Average as of the Anniversary Date.
1.2 ADDITIONAL SHARES. Following the exchange of shares described
in Section 1.1 of this Agreement, shares of Cyberads Class A Common Stock
("Additional Cyberads Shares") shall be issued to the Shareholders according to
the following schedule, to be allocated to the Shareholders as set forth on
Schedule 1.1.
(a) For the fiscal year ended in 2007, Additional
Cyberads Shares shall be issued in an amount equal to twenty percent (20%) of
the Gross Revenues of Rhino, provided that such gross revenues are at least $2
million for said fiscal year. "Gross Revenues" shall mean Rhino's revenues
resulting from sales of products and services, royalties and license fees, all
of which must relate to the design, manufacture, marketing, promotion, sales,
rental and licensing activities of Rhino itself; and not through companies that
may be acquired by Rhino or Cyberads. For purposes of example and not as a
limitation, the following Rhino activities would all be included as Gross
Revenues: sales and resales of off-road vehicles and other products, sales of
parts, repair and maintenance fees, extended warranty fees, royalties on
trademarks and other Rhino intellectual property, interest and loan fees
received from customers on the finance of
Share Exchange Agreement and Plan of Reorganization - Page 2
purchases, and license fees relating to the distribution of off-road vehicles
and other Rhino products; but such revenues added to the Rhino business due to
an acquisition of a company by Rhino or Cyberads are not included within the
definition of Rhino's Gross Revenues.
(b) For the fiscal years ended 2008 through and including
2011, Additional Cyberads Shares shall be issued in an amount equal to:
(i) ten percent (10%) of gross revenues of Rhino
for 2008 provided that gross sales are no less than $5 million;
(ii) five percent (5%) of gross revenues of Rhino
for 2009 provided that gross sales are no less than $10 million;
(iii) three percent (3%) of gross revenues of
Rhino for 2010 provided that gross sales are no less than $20 million;
(iv) three percent (3%) of gross revenues of
Rhino for 2011 provided that gross sales are no less than $40 million.
(c) The total Additional Cyberads Shares to be issued
under this Section 1.2 shall not exceed Three Million Two Hundred Thousand
Dollars ($3,200,000) in fair market value of Cyberads Shares, even if Rhino's
gross revenues achieve or exceed $77 million for the fiscal years ended 2007
through and including 2011. Further, the respective Additional Cyberads Shares
will be issued in subsequent qualifying years as provided in this Section 1.2,
regardless whether gross revenues in any fiscal year do not meet the minimums
set forth in the schedule set forth in (b) above. Cyberads shall use its
reasonable best efforts to fund Rhino to attain the above goals, subject to the
agreed annual Rhino budget/business plan adopted by the Rhino executive team and
the Cyberads Board of Directors.
(d) The Additional Cyberads Shares to be issued as
provided in this Section 1.2 will have a fair market value based on the Trailing
Average for the period ending at the respective fiscal year end.
(e) Cyberads will issue the respective Additional
Cyberads Shares within 30 days after the issuance of its audited annual
financial statements, or as soon as practical thereafter, for each year in which
the annual goal has been met.
1.3 ARTICLES OF EXCHANGE/TAX CONSEQUENCES. Upon the consummation
of the exchange of shares described in Section 1.1, the Rhino and Cyberads shall
execute and file Articles of Exchange with Nevada Secretary of State. It is
intended by the parties hereto that the Exchange shall constitute a
reorganization within the meaning of Section 368 of the Code.
Share Exchange Agreement and Plan of Reorganization - Page 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF RHINO
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any person means any material event,
change, condition or effect related to the condition, financial or otherwise,
properties, assets, including intangible assets, liabilities, business,
operations or results of operations of such person and its subsidiaries, taken
as a whole. In this Agreement, any reference to a "Material Adverse Effect" with
respect to any person means any event, change or effect that is materially
adverse to the condition, financial or otherwise, properties, assets,
liabilities, business, operations or results of operations of such person.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after reasonable inquiry of executive officers and
directors.
Except as disclosed in the Disclosure Schedule delivered by Rhino to
Cyberads prior to the execution and delivery of this Agreement ("Rhino
Disclosure Schedule") corresponding to the Section of this Agreement to which
any of the following representations and warranties specifically relate or as
disclosed in another section of the Rhino Disclosure Schedule if it is
reasonably apparent from the nature of the disclosure that it is applicable to
another Section of this Agreement, Rhino represents and warrants to Cyberads as
follows:
2.1 ORGANIZATION, STANDING AND POWER. Rhino is a corporation duly
organized, validly existing and in good standing under the laws of Nevada. Rhino
has the power to own its properties and to carry on its business as now being
conducted and as presently proposed to be conducted and is duly authorized and
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Material
Adverse Effect on Rhino. Rhino has delivered or made available to Cyberads a
true and correct copy of the Articles of Incorporation ("Articles of
Incorporation"), and the Bylaws, or other charter documents, as applicable, of
Rhino as amended to date. Rhino is not in violation of any of the provisions of
its bylaws or equivalent organization documents.
2.2 CAPITAL STRUCTURE. The authorized capital stock of Rhino
consists of 5,000,000 shares of common stock and 1,000,000 shares of preferred
stock convertible to common stock on a 1:1 basis, of which 187,500 shares of
common stock and 51,750 shares of preferred stock are issued and outstanding as
of the date hereof. Additionally, there are three Convertible Promissory Notes
issued to the founders of Rhino that will be converted at the signing of this
Agreement for an additional 1,312,500 shares of common stock. All of the
foregoing, as converted to common stock, constitute the Rhino Shares. There are
no other outstanding shares of capital stock or voting securities and no
outstanding commitments to issue any shares of capital stock or voting
securities after the date hereof. All outstanding shares of Rhino Common Stock
are duly authorized, validly
Share Exchange Agreement and Plan of Reorganization - Page 4
issued, fully paid and non-assessable and are free of any liens or encumbrances
other than any liens or encumbrances created by or imposed upon the holders
thereof, and are not subject to preemptive rights or rights of first refusal
created by statute, the Articles of Incorporation or Bylaws of Rhino or any
agreement to which Rhino is a party or by which it is bound. Except as described
above, there are no other options, warrants, calls, rights, commitments or
agreements of any character to which Rhino is a party or by which it is bound
obligating Rhino to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of capital stock of
Rhino or obligating Rhino to grant, extend, accelerate the vesting and/or
repurchase rights of, change the price of, or otherwise amend or enter into any
such option, warrant, call, right, commitment or agreement. There are no
contracts, commitments or agreements relating to voting, purchase or sale of
Rhino capital stock (i) between or among Rhino and any of Shareholders and (ii)
to the best of Rhino's knowledge, between or among any of the Shareholders.
There are no dividends or other amounts due or payable with respect to any of
the shares of capital stock of Rhino.
2.3 AUTHORITY. Rhino has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject to the execution and delivery of this Agreement by
each of the Shareholders. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Rhino. This Agreement has been
duly executed and delivered by Rhino and constitutes the valid and binding
obligation of Rhino enforceable against Rhino in accordance with its terms,
except as enforceability may be limited by bankruptcy and other laws affecting
the rights and remedies of creditors generally and general principles of equity.
The execution and delivery of this Agreement by Rhino does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under, with or without notice or lapse of
time, or both, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i) any provision of
the Articles of Incorporation or Bylaws of Rhino, as amended, or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Rhino or any of its properties or
assets, except where such conflict, violation, default, termination,
cancellation or acceleration with respect to the foregoing provisions of (ii)
could not have had and could not reasonably be expected to have a Material
Adverse Effect on Rhino. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Rhino in connection with the
execution and delivery of this Agreement, or the consummation of the
transactions contemplated hereby and thereby, except for (i) the filing of the
Articles of Exchange as provided in Section 1.1 of this Agreement; (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country; and (iii) such other consents,
authorizations,
Share Exchange Agreement and Plan of Reorganization - Page 5
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on Rhino and would not prevent, or materially
alter or delay any of the transactions contemplated by this Agreement.
2.4 FINANCIAL STATEMENTS. Rhino has provided to Cyberads a correct
and complete copy of the unaudited financial statements, including any related
notes thereto, of Rhino as at and for the period ended March 31, 2006 ("Rhino
Financial Statements"). The Rhino Financial Statements were prepared and applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto), and each fairly presents in all material
respects the financial position of Rhino at the respective dates thereof and the
results of its operations and cash flows for the periods indicated.
2.5 ABSENCE OF CERTAIN CHANGES. Since March 31, 2006 ("Rhino
Balance Sheet Date"), Rhino has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition, whether or not covered by insurance, that has resulted in, or is
reasonably likely to result in, or to the best of Rhino's knowledge any event
beyond Rhino's control that is reasonably likely to result in, a Material
Adverse Effect to Rhino; (ii) any acquisition, sale or transfer of any material
asset of Rhino other than in the ordinary course of business and consistent with
past practice; (iii) any change in accounting methods or practices, including
any change in depreciation or amortization policies or rates, by Rhino or any
revaluation by Rhino of any of its assets; (iv) any declaration, setting aside,
or payment of a dividend or other distribution with respect to the shares of
Rhino, or any direct or indirect redemption, purchase or other acquisition by
Rhino of any of its shares of capital stock; (v) any material contract entered
into by Rhino, other than in the ordinary course of business and as provided to
Cyberads, or any amendment or termination of, or default under, any material
contract to which Rhino is a party or by which it is bound; (vi) any amendment
or change to the Articles of Incorporation or Bylaws; or (vii) any increase in
or modification of the compensation or benefits payable, or to become payable,
by Rhino to any of its directors or employees, other than pursuant to scheduled
annual performance reviews, provided that any resulting modifications are in the
ordinary course of business and consistent with Rhino's past practices. Rhino
has not agreed since October 31, 2005 to take any of the actions described in
the preceding clauses (I) through (vii) and is not currently involved in any
negotiations to do any of the things described in the preceding clauses (I)
through (vii), other than negotiations with Cyberads and its representatives
regarding the transactions contemplated by this Agreement.
2.6 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration, audit or investigation pending before any
agency, court or tribunal, foreign or domestic, or, to the knowledge of Rhino,
threatened against Rhino or any of its properties or any of its officers or
directors, in their capacities as such, that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Rhino. There
is no injunction, judgment, decree, order or regulatory restriction imposed
Share Exchange Agreement and Plan of Reorganization - Page 6
upon Rhino or any of its assets or business, or, to the knowledge of Rhino, any
of its directors or officers, in their capacities as such, that would prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Rhino.
2.7 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon Rhino which has or reasonably
could be expected to have the effect of prohibiting or materially impairing any
business practice of Rhino, any acquisition of property by Rhino or the conduct
of business by Rhino.
2.8 GOVERNMENTAL AUTHORIZATION. To the knowledge of Rhino, Rhino
has obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which Rhino currently operates or holds any interest in any of its
properties or (ii) that is required for the operation of Rhino's business or the
holding of any such interest ((I) and (ii) herein collectively called "Rhino
Authorizations"), and all of such Rhino Authorizations are in full force and
effect, except where the failure to obtain or have any of such Rhino
Authorizations or where the failure of such Rhino Authorizations to be in full
force and effect could not reasonably be expected to have a Material Adverse
Effect on Rhino.
2.9 TITLE TO PROPERTY. Except as provided in Schedule 2.9, Rhino
has good and valid title to all of its properties, interests in properties and
assets, real and personal, reflected in the Rhino Balance Sheet or acquired
after the Rhino Balance Sheet Date, except properties, interests in properties
and assets sold or otherwise disposed of since the Rhino Balance Sheet Date in
the ordinary course of business, or in the case of leased properties and assets,
valid leasehold interests in, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, (iii) liens
securing debt which is reflected on the Rhino Balance Sheet, and (iv) liens that
in the aggregate would not have a Material Adverse Effect on Rhino. To Rhino's
knowledge, the plants, property and equipment of Rhino that are used in the
operations of its business are in good operating condition and repair, except
where the failure to be in good operating condition or repair would not have a
Material Adverse Effect.
2.10 TAXES. Rhino has filed or is in the process of filing all tax
returns required to be filed by it from inception to the date hereof. All such
returns and reports are accurate and correct in all material respects. Rhino has
no material liabilities with respect to the payment of any federal, state,
county, local or other taxes, including any deficiencies, interest, or
penalties, accrued for or applicable to the period ended on the Rhino Balance
Sheet Date.
Share Exchange Agreement and Plan of Reorganization - Page 7
2.11 COMPLIANCE WITH LAWS. To its knowledge, Rhino has complied
with, is not in violation of, and Rhino has not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on Rhino.
2.12 MINUTE BOOKS. The minute books of Rhino made available to
Cyberads contain in all material respects a complete and accurate summary of all
meetings of directors and stockholders or actions by written consent of Rhino
during the past three years and through the date of this Agreement, and reflect
all transactions referred to in such minutes accurately in all material
respects.
2.13 BROKERS' AND FINDERS' FEES. Rhino has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.14 INSURANCE. Schedule 2.14 is an accurate and complete list of
each policy of insurance in force with respect to the properties and operation
of the business of Rhino.
2.15 EMPLOYMENT CONTRACTS AND BENEFITS. Schedule 2.15 is a list of
all of Rhino's material employment contracts, pension, bonus, profit sharing,
stock option, and other agreements providing for employee remuneration or
benefits. Rhino is not in default under any of these agreements, subject to the
accrued but unpaid remuneration reflected in the Rhino Financial Statements.
Rhino has not entered into any severance, golden parachute, or similar
arrangement with any present or former employee that will result in any absolute
or contingent obligation of Rhino to make any payment to any present or former
employee following termination of employment.
2.16 INFORMATION. The information concerning Rhino set forth in
Section 2 of this Agreement is complete and accurate in all material respects
and does not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CYBERADS
Except as disclosed in the Disclosure Schedule delivered by Cyberads to
Rhino and the Rhino Shareholders prior to the execution and delivery of this
Agreement ("Cyberads Disclosure Schedule") corresponding to the Section of this
Agreement to which any of the following representations and warranties
specifically relate or as disclosed in another section of the Cyberads
Disclosure Schedule if it is reasonably
Share Exchange Agreement and Plan of Reorganization - Page 8
apparent on the face of the disclosure that it is applicable to another Section
of this Agreement, Cyberads represents and warrants to Rhino as follows:
3.1 ORGANIZATION, STANDING AND POWER. Cyberads is a corporation
duly organized, validly existing and in good standing under the laws of Nevada.
Cyberads has the corporate power to own its properties and to carry on its
business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Material
Adverse Effect on Cyberads. Cyberads has delivered or made available to Rhino a
true and correct copy of the Certificate of Incorporation, and the Bylaws, or
other charter documents, as applicable, of Cyberads, each as amended to date.
Cyberads is not in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent organizational documents. Cyberads does
not directly or indirectly own any equity or similar interest in, or any
interest convertible or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity. Cyberads has no committees of its Board of Directors,
charters, codes of conduct or ethics, or similar policies.
3.2 CAPITAL STRUCTURE. The authorized capital stock of Cyberads
consists of 500,000,000 shares of Cyberads Common Stock, and 5,000,000 shares of
preferred stock, $0.001 par value ("Cyberads Preferred"). There are issued and
outstanding, as of the date hereof, 147,500,000 shares of Cyberads Series A
Common Stock, zero shares of Cyberads Series B Common Stock, 835,660 shares of
Series A Cyberads Preferred, and 1,000,000 shares of Series B Cyberads
Preferred. The shares of Cyberads Stock to be issued pursuant to the provisions
of this Agreement will be duly authorized, validly issued, fully paid, and
non-assessable, free of any liens or encumbrances, and will be issued in full
compliance with all applicable federal and state securities laws. There are no
other outstanding shares of capital stock or voting securities and no
outstanding commitments to issue any shares of capital stock or voting
securities after the date hereof. All outstanding shares of Cyberads Common
Stock and Cyberads Preferred Stock are duly authorized, validly issued, fully
paid and non-assessable and are free of any liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof, and are
not subject to preemptive rights or rights of first refusal created by statute,
the Articles of Incorporation or Bylaws of Cyberads or any agreement to which
Cyberads is a party or by which it is bound. Further, all outstanding shares of
Cyberads Common Stock and Cyberads Preferred Stock have been issued in full
compliance with all applicable federal and state securities laws. There are no
options, warrants, calls, rights, commitments or agreements of any character to
which Cyberads is a party or by which it is bound obligating Cyberads to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of Cyberads or obligating
Cyberads to grant, extend, accelerate the vesting and/or repurchase rights of,
change the price of, or otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. There are no contracts,
Share Exchange Agreement and Plan of Reorganization - Page 9
commitments or agreements relating to voting, purchase or sale of Cyberads'
capital stock (i) between or among Cyberads and any of its shareholders and (ii)
to the best of Cyberads' knowledge, between or among any of Cyberads'
shareholders. There are no dividends or other amounts due or payable with
respect to any of the shares of capital stock of Cyberads.
3.3 AUTHORITY. Cyberads has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Cyberads. This Agreement has
been duly executed and delivered by Cyberads and constitutes the valid and
binding obligations of Cyberads enforceable against Cyberads in accordance with
its terms, except as enforceability may be limited by bankruptcy and other laws
affecting the rights and remedies of creditors generally and general principles
of equity. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under, with or without notice or lapse of
time, or both, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i) any provision of
the Articles of Incorporation or Bylaws of Cyberads, as amended, or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Cyberads or any of its subsidiaries
or their properties or assets, except where such conflict, violation, default,
termination, cancellation or acceleration with respect to the foregoing
provisions of (ii) could not have had and could not reasonably be expected to
have a Material Adverse Effect on Cyberads. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, is required by or with respect to Cyberads or any of its subsidiaries in
connection with the execution and delivery of this Agreement by Cyberads or the
consummation by Cyberads of the transactions contemplated hereby, except for (i)
the filing with the SEC of Form D; (ii) any filings as may be required under
applicable state securities laws and the securities laws of any foreign country;
(iii) any filings required with the National Quotation Bureau Incorporated with
respect to the shares of Cyberads Common Stock issuable upon exchange of Rhino
Common Stock in the Merger; and (iv) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on Cyberads and would not prevent or materially
alter or delay any of the transactions contemplated by this Agreement.
3.4 ABSENCE OF CERTAIN CHANGES. Since December 31, 2005 ("Cyberads
Balance Sheet Date"), Cyberads has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or is
reasonably likely to result in, or to the best of Cyberads' knowledge any event
beyond Cyberads' control that is reasonably likely to result in, a Material
Adverse Effect to Cyberads; (ii)
Share Exchange Agreement and Plan of Reorganization - Page 10
any acquisition, sale or transfer of any material asset of Cyberads or any of
its subsidiaries other than in the ordinary course of business and consistent
with past practice; (iii) any change in accounting methods or practices,
including any change in depreciation or amortization policies or rates, by
Cyberads or any revaluation by Cyberads of any of its or any of its
subsidiaries' assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of Cyberads, or any
direct or indirect redemption, purchase or other acquisition by Cyberads of any
of its shares of capital stock; (v) any material contract entered into by
Cyberads or any of its subsidiaries, other than in the ordinary course of
business and as provided to Rhino, or any amendment or termination of, or
default under, any material contract to which Cyberads or any of its
subsidiaries is a party or by which it is bound; (vi) any amendment or change to
Cyberads' Articles of Incorporation or Bylaws; or (vii) any increase in or
modification of the compensation or benefits payable, or to become payable, by
Cyberads to any of its directors or employees, other than pursuant to scheduled
annual performance reviews, provided that any resulting modifications are in the
ordinary course of business and consistent with Cyberads' past practices.
Cyberads has not agreed since December 31, 2005 to do any of the things
described in the preceding clauses (i) through (vii) and is not currently
involved in any negotiations to take any of the actions described in the
preceding clauses (I) through (vii) (other than negotiations with Rhino and its
representatives regarding the transactions contemplated by this Agreement).
3.5 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration, audit or investigation pending before any
agency, court or tribunal, foreign or domestic, or, to the knowledge of
Cyberads, threatened against Cyberads or any of its properties or any of its
officers or directors, in their capacities as such, that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Cyberads. There is no injunction, judgment, decree, order or regulatory
restriction imposed upon Cyberads or any of its assets or business, or, to the
knowledge of Cyberads, any of its directors or officers, in their capacities as
such, that would prevent, enjoin, alter or materially delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Material Adverse Effect on Cyberads.
3.6 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon Cyberads or any of its
subsidiaries which has or reasonably could be expected to have the effect of
prohibiting or materially impairing any business practice of Cyberads, any
acquisition of property by Cyberads or the conduct of business by Cyberads.
3.7 GOVERNMENTAL AUTHORIZATION. Cyberads has obtained each
federal, state, county, local or foreign governmental consent, license, permit,
grant, or other authorization of a Governmental Entity (i) pursuant to which
Cyberads currently operates or holds any interest in any of its properties or
(ii) that is required for the operation of Cyberads' business or the holding of
any such interest ((i) and (ii) herein collectively
Share Exchange Agreement and Plan of Reorganization - Page 11
referred to as "Cyberads Authorizations"), and all of such Cyberads
Authorizations are in full force and effect, except where the failure to obtain
or have any of such Cyberads Authorizations or where the failure of such
Cyberads Authorizations to be in full force and effect could not reasonably be
expected to have a Material Adverse Effect on Cyberads.
3.8 TITLE TO PROPERTY. Cyberads has good and valid title to all of
its properties, interests in properties and assets, real and personal, reflected
in the Cyberads Balance Sheet or acquired after the Cyberads Balance Sheet Date,
except properties, interests in properties and assets sold or otherwise disposed
of since the Cyberads Balance Sheet Date in the ordinary course of business, or
in the case of leased properties and assets, valid leasehold interests in, free
and clear of all mortgages, liens, pledges, charges or encumbrances of any kind
or character, except (i) the lien of current taxes not yet due and payable, (ii)
such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties, (iii) liens securing debt which is reflected on the
Cyberads Balance Sheet, and (iv) liens that in the aggregate would not have a
Material Adverse Effect on Cyberads. The plants, property and equipment of
Cyberads that are used in the operations of its business are in good operating
condition and repair, except where the failure to be in good operating condition
or repair would not have a Material Adverse Effect. All properties used in the
operations of Cyberads are reflected in the Cyberads Balance Sheet to the extent
generally accepted accounting principles require the same to be reflected.
3.9 TAXES. Cyberads has filed and provided to Rhino copies of all
tax returns required to be filed by it from inception to the date hereof. All
such returns and reports are accurate and correct in all material respects.
Cyberads has no material liabilities with respect to the payment of any federal,
state, county, local or other taxes, including any deficiencies, interest, or
penalties, accrued for or applicable to the period ended on the Cyberads Balance
Sheet Date. To the best knowledge of Cyberads, none of its tax returns has been
examined or is currently being examined by the Internal Revenue Service and no
deficiency assessment or proposed adjustment of any such return is pending,
proposed or contemplated. Cyberads has not made any election pursuant to the
provisions of any applicable tax laws, other than elections that relate solely
to methods of accounting, depreciation, or amortization, that would have a
material adverse affect on Cyberads, its financial condition, its business as
presently conducted or proposed to be conducted, or any of its respective
properties or material assets. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any tax return of
Cyberads.
Share Exchange Agreement and Plan of Reorganization - Page 12
3.10 COMPLIANCE WITH LAWS. Cyberads has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as would not be reasonably expected to
have a Material Adverse Effect on Cyberads.
3.11 FINANCIAL STATEMENTS. The Cyberads Financial Statements filed
with the Securities & Exchange Commission each fairly presents in all material
respects the financial position of Cyberads at the respective dates thereof and
the results of its operations and cash flows for the periods indicated.
3.12 BROKERS' AND FINDERS' FEES. Cyberads has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
3.13 INSURANCE. Schedule 3.13 is an accurate and complete list of
each policy of insurance in force with respect to the properties and operation
of the business of Cyberads.
3.14 EMPLOYMENT CONTRACTS AND BENEFITS. Schedule 3.14 is a list of
all of Cyberad's material employment contracts, pension, bonus, profit sharing,
stock option, and other agreements providing for employee remuneration or
benefits. Cyberads is not in default under any of these agreements. Cyberads has
not entered into any severance, golden parachute, or similar arrangement with
any present or former employee that will result in any absolute or contingent
obligation of Cyberads to make any payment to any present or former employee
following termination of employment.
3.15 LACK OF RHINO PROFITABILITY. Cyberads acknowledges that Rhino
has not been profitable since its inception and that Rhino will, for the
foreseeable future, continue to need funding to operate and to reach the revenue
goals specified in Section 1.2(a) and (b).
3.16 INFORMATION. The information concerning Cyberads set forth in
Section 3 of this Agreement is complete and accurate in all material respects
and does not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
Share Exchange Agreement and Plan of Reorganization - Page 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each Shareholder individually represents and warrants to Cyberads that:
4.1 TITLE AND AUTHORITY. Such Shareholder has the full right,
power and authority to enter into this Agreement and to transfer, convey and
deliver to Cyberads the Shares being transferred to Cyberads by such Shareholder
hereunder and upon consummation of the Exchange Cyberads will acquire from such
Shareholder good and marketable title to the Shares being transferred to
Cyberads by such Shareholder, free and clear of all covenants, conditions,
restrictions, voting trust arrangements, liens, charges, encumbrances, option
and adverse claims or rights whatsoever.
4.2 NO LEGAL BAR. Such Shareholder is not a party to, subject to
or bound by any agreement or judgment, order, writ, prohibition, injunction or
decree of any court or other governmental body which would prevent the execution
or delivery of this Agreement by such Shareholder to Cyberads or the transfer,
conveyance and delivery of the Shares being transferred by such Shareholder to
Cyberads pursuant to the terms hereof.
4.3 RESTRICTIONS ON CYBERADS SHARES. Such Shareholder acknowledges
that, except as otherwise provided in this Agreement the Cyberads Shares will be
not be registered under the Securities Act of 1933 or any state securities law
and are characterized as "restricted securities" under the Securities Act of
1933. Therefore, the transferability of the Cyberads Shares will be restricted
("Trading Restriction"). Certificates evidencing the Cyberads Shares will
include a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 ("ACT") OR ANY STATE SECURITIES LAW.
THE SHARES HAVE BEEN ACQUIRED WITHOUT A VIEW TO DISTRIBUTION AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SUCH SALE, OFFER, TRANSFER,
PLEDGE OR HYPOTHECATION.
Upon the expiration of the Trading Restriction, such
Shareholder agrees to limit the amount of Cyberads Shares to be sold to a
maximum of five percent (5%) of the daily trading volume as quoted on the OTC
Bulletin Board, provided such amount is not is excess of the amount permitted by
Rule 144 under the Securities Act of 1933.
Share Exchange Agreement and Plan of Reorganization - Page 14
ARTICLE V
SHAREHOLDER REGISTRATION RIGHTS
5.1 "PIGGYBACK"REGISTRATION RIGHTS. In the event that Cyberads
files one or more registration statements under the Securities Act of 1933 on
Form SB-2, or any other available form other than Form S-4 or Form S-8, in
connection with the proposed offer and sale for money of any of its securities,
either for its own account or on behalf of any other security holder, in excess
of $5 million (cumulative), the Shareholders shall have the right to register
all or any part of their Cyberads common stock and other securities issued or
issuable with respect to the common stock pursuant to said registration
statement, subject to the terms and conditions of a Registration Rights
Agreement in the form attached hereto as Exhibit B.
ARTICLE VI
BUY-SELL RESTRICTIONS
6.1 RIGHTS OF FIRST OFFER.
(a) In the event Cyberads wishes to accept a bona fide
offer from a third party ("Third Party Offer") to purchase any of the Rhino
Shares, to purchase all or substantially all of the Rhino assets, or to merge
Rhino with a company other than Cyberads, it shall deliver a notice ("Sale
Notice") to the Shareholders stating the terms and conditions of the Third Party
Offer, which Sale Notice shall include a copy of the Third Party Offer. The
Shareholders shall have the first right, on a pro rata basis, to purchase the
Rhino Shares or assets covered by the Sale Notice on the same terms and
conditions as set forth in the Sale Notice. The Shareholders shall have twenty
(20) days from the date of receipt of the Sale Notice to elect, by written
notice to Cyberads to purchase the Rhino Shares or assets covered by the Sale
Notice. In the event that none of the Shareholders elect to purchase the Rhino
Shares or assets covered by the Sale Notice, Cyberads may sell the Rhino Shares
or assets to the bona-fide purchaser on the original terms and conditions set
forth in the Sale Notice. If less than all of the Rhino Shareholders elect to
purchase and if the electing Shareholders cannot otherwise agree, they shall
purchase the interests in the ratio that each purchasing Shareholder's Rhino
Shares (as shown in Schedule 1.2) bears to the aggregate Rhino Shares of all
purchasing Shareholders.
(b) In the event of a transfer of Rhino to the
Shareholders or to the third party, as provided in the preceding paragraph (the
"Section 6.1 Sale"), and provided that the price in the Section 6.1 Sale for
Cyberads' interest in Rhino is not less than a multiple of two times the sum of
(i) the Share Value described in Section 1.1(c), plus (ii) the cash investment
made in Rhino by Cyberads pursuant to the funding requirements in the last
sentence of Section 1.2(c), then the schedule for the vesting of the Additional
Cyberads Shares described in Section 1.2(a) and 1.2(b) shall accelerate and
immediately vest in full as if all the then remaining gross revenue goals have
been fully satisfied in
Share Exchange Agreement and Plan of Reorganization - Page 15
time to participate in the Section 6.1 Sale. The accelerated vesting will occur
with respect to the Additional Cyberads Shares that may have become issuable
during and after the fiscal year in which the Section 6.1 Sale closes. The fair
market value of such Additional Cyberads Shares shall be based on the closing
price of the Cyberads stock in the Section 6.1 Sale, and shall be issued pro
rata to the Shareholders as provided in Schedule 1.2.
6.2 OWNERSHIP CHANGE EVENT. An "Ownership Change Event" with
respect to Cyberads means that any of the following occurs, after the closing
deliveries described in Section 9 below: (i) the direct or indirect sale or
exchange in a single or series of related transactions by the shareholders of
Cyberads of more than fifty percent (50%) of the voting stock of Cyberads; (ii)
a merger or consolidation in which Cyberads is not the surviving entity; (iii)
the sale, exchange, or transfer of all or substantially all of the assets of
Cyberads; or (iv) a liquidation or dissolution of Cyberads. In the event of an
Ownership Change Event, the terms of Section 1.2 shall continue in full force
and effect without acceleration. However, if the acquiring party desires to
negotiate an acceleration of the Section 1.2 goals and the Cyberads Board of
Directors accepts the offer in that manner, then Cyberads will work with the
Rhino Shareholders to reach a fair and equitable acceleration.
ARTICLE VII
OTHER CONTRACTUAL COMMITMENTS
7.1 EMPLOYMENT WITH RHINO. Concurrently with the execution of this
Agreement, Cyberads and Rhino will enter into Rhino employment agreements with
the executive officers of Rhino, Xxxxxx X. Pearl as Chief Executive Officer and
Xxxxxx Xxxxx as Vice President Business Development, on such terms and
conditions as will be negotiated and agreed to by the parties, including
mutually agreeable provisions regarding term, base and incentive compensation,
confidentiality, assignment to Cyberads of intellectual property rights in past
and future work product and restrictions on competition. Cyberads shall offer
employment agreements to substantially all of Rhino's employees and will expect
the executive officers of Rhino to use its best efforts to assist Cyberads in
employing the Rhino employees. All employment agreements referred to herein
shall contain appropriate and legally enforceable covenants not to compete for a
period equal to the term of employment plus one year.
7.2 RETENTION SHARES. In order to induce Xxxxxx X. Pearl and
Xxxxxx Xxxxx to renew their employment relationship with Rhino, concurrently
with the execution of this Agreement Cyberads will issue to each of them Three
Hundred Thousand (300,000) shares of Cyberads Series C Preferred Stock, based on
a value of $1.00 per share, for a total of Six Hundred Thousand (600,000) shares
of Series C Shares. Xxxxxx and Xxxxxx will each have the right to convert all or
part of his Series C Shares into Cyberads Class A Common Stock in an amount
equal to Three Hundred Thousand Dollars ($300,000) (the "Retention Share
Value"), based on the Trailing Average. As described in Sections 1.1
Share Exchange Agreement and Plan of Reorganization - Page 16
(d) and 1.1(e) above, and depending on the date of conversion relative to the
Anniversary Date, additional shares of Cyberads Class A Common Stock will be
issued to Xxxxxx and Stuart if the fair market value of the Cyberads common
stock is less than the Retention Share Value, based on the Trailing Average on
the conversion date and/or the Anniversary Date.
7.3 EMPLOYMENT WITH CYBERADS. Concurrently with the execution of
this Agreement, Cyberads will issue and Xxxxxx X. Pearl will sign an offer
letter of employment with Cyberads, in the form attached hereto as Exhibit C.
Negotiations will be handled in good faith after the closing of this Exchange,
in order to complete and sign a definitive employment agreement by September 1,
2006. The terms of the employment agreement will be consistent with the
provisions of Exhibit C and will contain such other provisions as may be
standard with Chief Executive Officers in companies similarly situated with
Cyberads.
7.4 PERSONAL GUARANTEES.
(a) After the closing, Cyberads will act diligently and
in good faith to cause the release of each of the personal guarantees (the
"Guarantees") of Xxxxxx X. Pearl and Xxxxxxx X. Xxxxx with respect to the three
loans from Nevada First Bank (the "Bank") to Rhino, the first being a fixed rate
equipment loan in the original principal amount of $108,588.55 (as of the date
of this Agreement) identified as Loan No. 2723, the second being a revolving
line of credit in the original principal amount of $100,000 identified as Loan
No. 1923, and the third being a Note payable in the approximate principal amount
of $199,950 (collectively the "Loans"). If necessary to cause the release of the
Guarantees, Cyberads will substitute its own guarantee (but not the guarantee of
any individual) in the place of the Guarantees. Pending the release of the
Guarantees, Cyberads hereby agrees to indemnify, defend and hold harmless Xxxxxx
X. Pearl and Xxxxxxx X. Xxxxx from and against any and all claims, damages,
obligations, expenses (including reasonable attorneys fees and costs) and other
liabilities of any character in any way arising from or relating to the
Guarantees.
(b) The provisions of this paragraph are not intended to
limit the provisions of Section 7.4(a). In consideration for Xxxxxx X. Pearl's
guarantee of the Loans and indemnification of Xxxxxxx X. Xxxxx on his guaranty,
Cyberads will, concurrently with the execution of this Agreement, issue to
Xxxxxx Four Hundred Thousand (400,000) shares of Cyberads Series C Preferred
Stock, based on a value of $1.00 per share. Xxxxxx will have the right to
convert all or part of his Series C Shares into Cyberads Common Stock in an
amount equal to Four Hundred Thousand Dollars ($400,000) (the "Guaranty Share
Value"), based on the Trailing Average. As described in Sections 1.1(d) and
1.1(e) above, and depending on the date of conversion relative to the
Anniversary Date, additional shares of Cyberads Class A Common Stock will be
issued to Xxxxxx if the fair market value of the Cyberads common stock is less
than the Guaranty Share Value, based on the Trailing Average on the conversion
date and/or the
Share Exchange Agreement and Plan of Reorganization - Page 17
Anniversary Date
7.5 BOARD SEATS AND OTHER VOTING RIGHTS. As a condition to the
execution and closing of this Exchange, the Voting Agreement attached hereto as
Exhibit D will be signed concurrently with the execution of this Agreement. The
Voting Agreement will be signed by the Shareholders and the controlling
shareholder(s) of Cyberads and, among other things, will require them to vote in
whatever manner will be necessary, by no later than 60 days after the signing
and delivery of this Agreement (a) to set and retain the size of the Company
Board of Directors (the "Cyberads Board") at five directors, and (b) to elect
and retain Xxxxxx X. Pearl and one other person designated by majority vote of
the Shareholders to the Cyberads Board.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 CONFIDENTIALITY. The parties acknowledge that each of Cyberads
and Rhino have previously executed a Confidentiality Agreement dated February
17, 2006, which agreement shall continue in full force and effect in accordance
with its terms.
8.2 PUBLIC DISCLOSURE. Unless otherwise permitted by this
Agreement, Cyberads and Rhino shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public, or non-confidential, disclosure, whether or not in response to an
inquiry, regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other, which approval
shall not be unreasonably withheld, except as may be required by law or by
obligations pursuant to the Securities Act of 1933 and rules and regulations
promulgated by the Securities and Exchange Commission thereunder, any listing
agreement with any national securities exchange or with the NASD, in which case
the party proposing to issue such press release or make such public statement or
disclosure shall use its commercially reasonable efforts to consult with the
other party before issuing such press release or making such public statement or
disclosure.
8.3 BLUE SKY LAWS. Cyberads shall use its reasonable efforts to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Cyberads Common Stock in connection with the
Exchange. The Shareholders shall use their reasonable best efforts to assist
Cyberads as may be necessary to comply with the securities and blue sky laws of
all jurisdictions which are applicable in connection with the issuance of
Cyberads Common Stock in connection with the Exchange.
8.4 TAX TREATMENT. For U.S. federal income tax purposes, it is
intended that the Exchange qualify as a reorganization within the meaning of the
Code, and the parties hereto intend that this Agreement shall constitute a "plan
of reorganization" within the meaning of Section 368 of the Code and Treasury
Regulations Sections 1.368-2(g) and
Share Exchange Agreement and Plan of Reorganization - Page 18
1.368-3(a). Cyberads will report the Exchange on its income tax returns in a
manner consistent with treatment of the Exchange as a Code Section 368(b)
reorganization. Neither Cyberads, Rhino nor any of their respective affiliates
has taken any action, nor will they take any action, that could reasonably be
expected to prevent or impede the Exchange from qualifying as a reorganization
under Section 368 of the Code.
ARTICLE IX
CLOSING DELIVERIES
9.1 BY CYBERADS. Concurrently with the execution of this
Agreement, Cyberads is delivering to the Shareholders and the Rhino:
(a) Stock certificates representing duly authorized,
validly issued fully paid and non-assessable shares of Cyberads Series C
Preferred Stock in the names of the Shareholders and in the proportions set
forth in Schedule 1.1.
(b) Certified copy of the Certificate of Designation in
the form attached hereto as Exhibit A.
(c) Registration Rights Agreement in the form attached
hereto as Exhibit B.
(d) Copies of resolutions of the board of directors of
Cyberads authorizing the execution and performance of this Agreement, certified
by the secretary or an assistant secretary of Cyberads as of the date hereof.
(e) Employment offer letter to Xxxxxx X. Pearl in the
form attached hereto as Exhibit C.
(f) Voting Agreement in the form attached hereto as
Exhibit D.
9.2 BY RHINO AND SHAREHOLDERS. Concurrently with the execution of
this Agreement, Rhino and the Shareholders are delivering to Cyberads:
(a) Stock certificates, duly endorsed in blank,
representing all of the Rhino Shares.
(b) A certificate of good standing from the secretary of
state of Nevada, issued as of a date within 60 days prior to the date hereof
certifying that is in good standing as a corporation in the state of Nevada.
(c) Copies of resolutions of the board of directors
authorizing the execution and performance of this Agreement and the contemplated
transactions, certified by the secretary or an assistant secretary of Rhino as
of the date hereof.
Share Exchange Agreement and Plan of Reorganization - Page 19
(d) Registration Rights Agreement in the form attached
hereto as Exhibit B.
(e) Employment offer letter to Xxxxxx X. Pearl in the
form attached hereto as Exhibit C.
(f) Voting Agreement in the form attached hereto as
Exhibit D.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail, return receipt
requested, or sent via facsimile, with confirmation of receipt, to the parties
at the following address, or at such other address for a party as shall be
specified by like notice:
(a) if to Cyberads to:
Xxxx Xxxxxxxx, President
Cyberads, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy, which shall not constitute notice to
Cyberads, to:
Xxxxxx X. Xxxxxxxxx
Attorney at Law
000 XX Xxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
(b) if to Rhino or the Shareholders, to:
Xxxxxx X. Pearl, President
Rhino OffRoad Industries, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
10.2 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall
Share Exchange Agreement and Plan of Reorganization - Page 20
become effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all parties
need not sign the same counterpart.
10.3 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Rhino Disclosure Schedule and the Cyberads Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements, understandings,
representations and warranties, both written and oral, among the parties with
respect to the subject matter hereof, except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
10.4 SEVERABILITY. If any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
10.5 REMEDIES CUMULATIVE. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
10.6 ARBITRATION REQUIRED/MEDIATION FIRST OPTION. Any dispute or
claim that arises out of or that relates to this Agreement, or to the
interpretation or breach thereof, or to the existence, scope, or validity of
this Agreement or the arbitration agreement, shall be resolved by arbitration in
accordance with the then effective arbitration rules of American Arbitration
Association. Judgment upon the award rendered pursuant to such arbitration may
be entered in any court having jurisdiction thereof. The parties acknowledge
that mediation usually helps parties to settle their dispute. Therefore, any
party may propose mediation whenever appropriate through the organization named
above or any other mediation process or mediator as the parties may agree upon.
10.7 GOVERNING LAW. This Agreement shall be governed by and
construed in
Share Exchange Agreement and Plan of Reorganization - Page 21
accordance with the laws of the State of Nevada, without regard to the laws that
might otherwise govern under applicable principles of conflicts of law. Each of
the parties hereto irrevocably consents to the exclusive jurisdiction of any
court located within the State of Nevada in connection with any matter based
upon or arising out of this Agreement or the matters contemplated herein, agrees
that process may be served upon them in any manner authorized by the laws of the
State of Nevada for such persons and waives and covenants not to assert or plead
any objection which they might otherwise have to such jurisdiction and such
process.
10.8 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
10.9 ATTORNEYS FEES. In the event any legal action is filed by any
party or parties to this Agreement relating in any way to this Agreement, the
losing party or parties in such action shall reimburse the prevailing party or
parties for all attorneys fees and costs of litigation.
10.10 WAIVER. The failure of any party to enforce, in one or more
instances, any of the terms or conditions of this Agreement shall not be
construed as a waiver of the future performance of any such term or condition
unless the waiver is made in writing.
10.11 AMENDMENTS. No amendment, modification or supplement to this
Agreement shall be binding on any of the parties unless it is in writing and
duly signed by the parties in interest at the time of the modification.
10.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall not
be effective until the execution and delivery between each of the parties of at
least one set of counterparts. The parties authorize each other to detach and
combine original signature pages and consolidate them into a single identical
original.
Share Exchange Agreement and Plan of Reorganization - Page 22
IN WITNESS WHEREOF, Cyberads, Rhino and the Shareholders have caused
this Share Exchange and Reorganization Agreement to be executed and delivered by
their respective officers thereunto duly authorized, all as of the date first
written above.
CYBERADS, INC.
By: /s/ XXXX XXXXXXXX
------------------------------------------
Xxxx Xxxxxxxx, President
RHINO OFFROAD INDUSTRIES, INC.
By: /s/ XXXXXX X. PEARL
------------------------------------------
Xxxxxx X. Pearl, President
SHAREHOLDERS
Clubhouse Communications, Inc.
/s/ XXXXXX X. PEARL
--------------------------
By: Xxxxxx X. Pearl, President
3686469 Canada, Inc.
/s/ XXXXXX XXXXX
--------------------------
By: Xxxxxx Xxxxx, President
Rumax, Inc.
/s/ XXXXXXX X. XXXXX
--------------------------
By: Xxxxxxx X. Xxxxx, President
[Signatures continue on next page]
Share Exchange Agreement and Plan of Reorganization - Page 23
[Signatures continued from Share Exchange Agreement and Plan of Reorganization]
Xxxxxxxxxxx El Cajon Investment, LLC
/s/ XXXXXX (XXXXX) XXX
--------------------------
By: Xxxxxx (Xxxxx) Xxx, Manager
/s/ XXXXXX X. XXXXX
--------------------------
Xxxxxx X. Xxxxx
/s/ T. XXXXXX XXXXXX
--------------------------
T. Xxxxxx Xxxxxx
Perbar Investments, Inc.
/s/ XXX XXXXXXX
--------------------------
By: Xxx Xxxxxxx, President
HSK Industries, Inc.
/s/ XXXXXXX XXXXXXX
--------------------------
By: Xxxxxxx Xxxxxxx, President
Share Exchange Agreement and Plan of Reorganization - Page 24
SCHEDULE 1.1 TO
SHARE EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
--------------------------------------------- -------------------------------------- ---------------------------------
ALLOCATION OF
RHINO SHAREHOLDERS RHINO SHARES FULLY DILUTED CYBERADS SHARES
--------------------------------------------- -------------------------------------- ---------------------------------
Clubhouse Communications, Inc. 93,750 common 48.333%
656,250 convertible to common
--------------------------------------------- -------------------------------------- ---------------------------------
3686469 Canada, Inc. 31,250 common 16.111%
218,750 convertible to common
--------------------------------------------- -------------------------------------- ---------------------------------
Rumax, Inc. 34,370 common 30.409%
437,500 convertible to common
--------------------------------------------- -------------------------------------- ---------------------------------
Xxxxxxxxxxx El Cajon Investment, LLC 28,130 common 1.813%
--------------------------------------------- -------------------------------------- ---------------------------------
Xxxxxx X. Xxxxx 11,500 preferred convertible to 0.741%
common
--------------------------------------------- -------------------------------------- ---------------------------------
T. Xxxxxx Xxxxxx 11,500 preferred convertible to 0.741%
common
--------------------------------------------- -------------------------------------- ---------------------------------
Perbar Investments, Inc. 11,500 preferred convertible to 0.741%
common
--------------------------------------------- -------------------------------------- ---------------------------------
HSK Industries, Inc. 17,250 preferred convertible to 1.112%
common
--------------------------------------------- -------------------------------------- ---------------------------------
FULLY DILUTED: 1,551,750 SHARES 100%
--------------------------------------------- -------------------------------------- ---------------------------------
SCHEDULE 2.9 TO
SHARE EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
Rhino Offroad Industries, Inc., uses the following trucks as part of its regular
business operations and pays the monthly bank debt on the trucks. The registered
owners stand ready to transfer title to Rhino or Cyads at any time upon payoff
or assignment and assumption of the debt.
o 2004 Ford F350 Truck, secured by Ford Credit with an approximate
outstanding balance owed of $22,000; registered in Nevada in the name
of Xxxxxx X. Pearl
o 2004 Nissan Titan Truck, secured by Nissan Motor Credit with an
approximate outstanding balance owed of $20,000; registered in the name
of Shun-Chun Xxxx Xx
SCHEDULE 2.14 TO
SHARE EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
RHINO INSURANCE
Rhino Offroad Industries, Inc., currently has the following insurance regarding
its properties and operation of business:
o Workers Compensation and Employers Liability Policy; Hartford
Underwriters Insurance Company; Policy No. 34 WE OB2882; expires
10/26/06
o Commercial Property Coverage Policy; Scottsdale Insurance Company;
Policy No. CPSO651997; expires 4/11/07
o Commercial General Liability Insurance Policy; Essex Insurance Company,
Policy No. [to be assigned], expires 6/14/2007
SCHEDULE 2.15 TO
SHARE EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
List of all Rhino Offroad Industries, Inc., material employment contracts,
pension, bonus, profit sharing, stock option, and other agreements providing for
employee remuneration or benefits.
o Medical and dental insurance benefits fully paid for Xxxxxx X. Pearl
and family, and for Xxx Xxxxxxx
SCHEDULE 3.13 TO
SHARE EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
THERE ARE NO POLICIES ON INSURANCE IN FORCE WITH RESPECT TO THE PROPERTIES AND
OPERATION OF THE BUSINESS OF CYBERADS, INC.
SCHEDULE 3.14 TO
SHARE EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
(1) Employment Agreement dated January 1, 2004 with Xxxx Xxxxx
(2) Employment Agreement dated April 15, 2005 with Xxxx Xxxxxxxx
Employee Benefit Plan
2001 Incentive Stock and Non-Qualified Stock Option Plan adopted November 1,
2001 covering awards of up to 500,000 shares of common stock. As of may 31,
2006, all stock options issued under this Plan which have not been
exercised have expired.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
June 21, 2006 by and between Cyberads, Inc., a Nevada corporation ("Cyberads");
and those persons executing this Agreement ("collectively referred to as
Shareholders").
Therefore, the parties hereto hereby agree as follows:
1. Definitions. Unless the context otherwise requires, the terms
defined in this Section 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined.
"Agreement" means this Registration Rights Agreement.
"Board" means the Board of Directors of the Cyberads.
"Common Stock" means the common stock of the Cyberads.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Person" includes any natural person, corporation, trust,
association, company, partnership, joint venture and other entity and any
government, governmental agency, instrumentality or political subdivision.
"Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities" means (1) all Common Stock owned now
or in the future by Shareholders, and (2) any securities issued or issuable with
respect to the Common Stock referred to in clause (1) above by way of a stock
dividend or stock split or in connection with a combination of shares,
reclassification, recapitalization, merger or consolidation or reorganization;
provided, however, that such shares of Common Stock shall only be treated as
Registrable Securities if and so long as they have not been (i) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (ii) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof so that all transfer restrictions and restrictive legends
with respect to such Common Stock are removed upon the consummation of such sale
and the seller and purchaser of such Common Stock receive an opinion of counsel
for Cyberads, which shall be in form and content reasonably satisfactory to the
seller and buyer and their respective counsel, to the effect that such Common
Stock in the hands of the purchaser is freely transferable without restriction
or registration under the Securities Act in any public or private transaction.
"Securities Act" means the Securities Act of 1933, as amended.
Registration Rights Agreement
2. Cyberads Registration.
(a) Each time Cyberads shall determine to file a
registration statement under the Securities Act, other than on Form X-0, X-0 or
a registration statement covering solely an employee benefit plan, in connection
with the proposed offer and sale for money of any of its securities either for
its own account or on behalf of any other security holder, Cyberads agrees to
give promptly written notice of its determination to Shareholders. Upon the
written request of Shareholders given within thirty (30) days after the receipt
of such written notice from Cyberads, Cyberads agrees to cause all such
Registrable Securities, which Shareholders has so requested registration
thereof, to be included in such registration statement and registered under the
Securities Act, all to the extent requisite to permit the sale or other
disposition by Shareholders of the Registrable Securities to be so registered.
(b) If the registration of which Cyberads gives written
notice pursuant to Section 2(a) is for a public offering involving an
underwriting, Cyberads agrees to so advise Shareholders. Shareholders'
participation in such underwriting and the inclusion of Shareholders'
Registrable Securities in the underwriting shall be conditioned upon the
provisions of Section 2(b) and Section 2(c). Shareholders agree to enter into,
together with Cyberads, an underwriting agreement with the underwriter or
underwriters selected for such underwriting by Cyberads provided that such
underwriting agreement is in customary form.
(c) Notwithstanding any other provision of this Section
3, if the managing underwriter of an underwritten distribution advises Cyberads
and Shareholders in writing that in its good faith judgment the number of shares
of Registrable Securities and the other securities requested to be registered
exceeds the number of shares of Registrable Securities and other securities
which can be sold in such offering, then (i) the number of shares of Registrable
Securities and other securities so requested to be included in the offering
shall be reduced to that number of shares which in the good faith judgment of
the managing underwriter can be sold in such offering, except for shares to be
issued by Cyberads in an offering initiated by Cyberads, which shall have
priority over the shares of Registrable Securities, and (ii) such reduced number
of shares shall be allocated among Shareholders and the holders of other
securities in proportion, as nearly as practicable, to the respective number of
shares of Registrable Securities and other securities held by Shareholders and
other holders at the time of filing the registration statement. All Registrable
Securities and other securities which are excluded from the underwriting by
reason of the underwriter's marketing limitation and all other Registrable
Securities not originally requested to be so included shall not be included in
such registration and shall be withheld from the market by Shareholders for a
period which the managing underwriter reasonably determines is necessary to
effect the underwritten public offering.
Registration Rights Agreement 2
3. Registration Procedures. If and whenever Cyberads is required
by the provisions of Section 2 hereof to effect the registration of Registrable
Securities under the Securities Act, Cyberads, at its expense and as
expeditiously as possible, agrees to:
(a) In accordance with the Securities Act and all
applicable rules and regulations, prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective until the
securities covered by such registration statement have been sold, and prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus contained therein as may be necessary
to keep such registration statement effective and such registration statement
and prospectus accurate and complete until the securities covered by such
registration statement have been sold;
(b) If the offering is to be underwritten in whole or in
part, enter into a written underwriting agreement in form and substance
reasonably satisfactory to the managing underwriter of the public offering and
Shareholders;
(c) Furnish to Shareholders and the underwriters of the
securities being registered such number of copies of the registration statement
and each amendment and supplement thereto, preliminary prospectus, final
prospectus and such other documents as such underwriters and Shareholders may
reasonably request in order to facilitate the public offering of such
securities;
(d) Use its best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as Shareholders and underwriters may
reasonably request within ten (10) days prior to the original filing of such
registration statement, except that Cyberads shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction where it is not so
qualified;
(e) Notify Shareholders, promptly after it shall receive
notice thereof, of the date and time when such registration statement and each
post-effective amendment thereto has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) Notify Shareholders promptly of any request by the
Commission for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) Prepare and file with the Commission, promptly upon
the request of Shareholders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for Shareholders, is
required under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Registrable Securities by Shareholders;
Registration Rights Agreement 3
(h) Prepare and file promptly with the Commission, and
promptly notify Shareholders of the filing of, such amendments or supplements to
such registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event has
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(i) In case Shareholders or any underwriter for
Shareholders is required to deliver a prospectus at a time when the prospectus
then in circulation is not in compliance with the Securities Act or the rules
and regulations of the Commission, prepare promptly upon request such amendments
or supplements to such registration statement and such prospectus as may be
necessary in order for such prospectus to comply with the requirements of the
Securities Act and such rules and regulations;
(j) Advise Shareholders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(k) Not file any registration statement or prospectus or
any amendment or supplement to such registration statement or prospectus to
which Shareholders has reasonably objected on the grounds that such registration
statement or prospectus or amendment or supplement thereto does not comply in
all material respects with the requirements of the Securities Act or the rules
and regulations thereunder, after having been furnished with a copy thereof at
least five (5) business days prior to the filing thereof; provided, however,
that the failure of Shareholders or its counsel to review or object to any
registration statement or prospectus or any amendment or supplement to such
registration statement or prospectus shall not affect the rights of Shareholders
or its respective officers, directors, legal counsel, accountants or controlling
Persons or any underwriter or any controlling Person of such underwriter under
Section 5 hereof;
(l) Make available for inspection upon request by
Shareholders, by any managing underwriter of any distribution to be effected
pursuant to such registration statement and by any attorney, accountant or other
agent retained by any Shareholders or any such underwriter, all financial and
other records, pertinent corporate documents and properties of Cyberads, and
cause all of Cyberads' officers, directors and employees to supply all
information reasonably requested by Shareholders, underwriter, attorney,
accountant or agent in connection with such registration statement; and
(m) At the request of Shareholders, furnish to
Shareholders on the effective date of the registration statement or, if such
registration includes an underwritten public offering,
Registration Rights Agreement 4
at the closing provided for in the underwriting agreement, (i) an opinion dated
such date of the counsel representing Cyberads for the purposes of such
registration, addressed to the underwriters, if any, and to Shareholders,
covering such matters with respect to the registration statement, the prospectus
and each amendment or supplement thereto, proceedings under state and federal
securities laws, other matters relating to Cyberads, the securities being
registered and the offer and sale of such securities as are customarily the
subject of opinions of issuer's counsel provided to underwriters in underwritten
public offerings, and such opinion of counsel shall additionally cover such
legal and factual matters with respect to the registration as Shareholders may
reasonably request, and (ii) letters dated each of such effective date and such
closing date, from the independent certified public accountants of Cyberads,
addressed to the underwriters, if any, and to Shareholders, stating that they
are independent certified public accountants within the meaning of the
Securities Act and dealing with such matters as the underwriters may request, or
if the offering is not underwritten that in the opinion of such accountants the
financial statements and other financial data of Cyberads included in the
registration statement or the prospectus or any amendment or supplement thereto
comply in all material respects with the applicable accounting requirements of
the Securities Act, and additionally covering such other accounting and
financial matters, including information as to the period ending not more than
five (5) business days prior to the date of such letter with respect to the
registration statement and prospectus, as Shareholders may reasonably request.
4. Expenses.
(a) With respect to the inclusion of Registrable
Securities in a registration statement pursuant to Section 3 hereof, Cyberads
agrees to bear all fees, costs and expenses of and incidental to such
registration and the public offering in connection therewith; provided, however,
that Shareholders participating in any such registration agrees to bear its pro
rata share of the underwriting discount and commissions.
(b) The fees, costs and expenses of registration to be
borne as provided in paragraph (a) above, shall include, without limitation, all
registration, filing and NASD fees, printing expenses, fees and disbursements of
counsel and accountants for Cyberads, fees and disbursements of counsel for the
underwriter or underwriters of such securities, if Cyberads and/or selling
security holders are otherwise required to bear such fees and disbursements, all
legal fees and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the securities to be
offered are to be registered or qualified, reasonable fees and disbursements of
one firm of counsel for the selling security holders, selected by Shareholders,
and the premiums and other costs of policies of insurance against liability
arising out of such public offering.
5. Indemnification.
(a) Cyberads hereby agrees to indemnify and hold harmless
Shareholders pursuant to the provisions of this Agreement and each of its
officers, directors, legal counsel and accountants, and each Person who controls
Shareholders within the meaning of the Securities Act
Registration Rights Agreement 5
and any underwriter, as defined in the Securities Act, Shareholders, and any
Person who controls such underwriter within the meaning of the Securities Act,
from and against, and agrees to reimburse Shareholders, its officers, directors,
legal counsel, accountants and controlling Persons and each such underwriter and
controlling Person of such underwriter with respect to, any and all claims,
actions, actual or threatened, demands, losses, damages, liabilities, costs and
expenses to which Shareholders, its officers, directors, legal counsel,
accountants or controlling Persons, or any such underwriter or controlling
Person of such underwriter may become subject under the Securities Act or
otherwise, insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
to the extent that any such claim, action, demand, loss, damage, liability, cost
or expense is caused by an untrue statement or alleged untrue statement or
omission or alleged omission so made in strict conformity with written
information furnished by a respective Shareholder specifically for use in the
preparation thereof, Cyberads will not be liable to such Shareholder.
(b) Shareholders hereby agrees to severally and not
jointly indemnify and hold harmless Cyberads, its. officers, directors, legal
counsel and accountants and each Person who controls Cyberads within the meaning
of the Securities Act, from and against, and agrees to reimburse Cyberads, its
officers, directors, legal counsel, accountants and controlling Persons with
respect to, any and all claims, actions, demands, losses, damages, liabilities,
costs or expenses to which Cyberads, its officers, directors, legal counsel,
accountants or such controlling Persons may become subject under the Securities
Act or otherwise, insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses are caused by any untrue statement of any
material fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or are caused by the omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was so made in reliance upon and in strict
conformity with written information furnished by the respective Shareholder
specifically for use in the preparation thereof.
(c) Promptly after receipt by a party indemnified
pursuant to the provisions of subsection (a) or (b) of this Section 5 of notice
of the commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim therefor is to be
made against the indemnifying party pursuant to the provisions of subsection (a)
or (b), notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 6 and shall not relieve the indemnifying party from liability under this
Section 5 unless such indemnifying party is prejudiced by such omission. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein
Registration Rights Agreement 6
and, to the extent that it may wish, jointly with any other indemnifying parties
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel, in which case
the indemnifying party shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Upon the permitted
assumption by the indemnifying party of the defense of such action, and approval
by the indemnified party of counsel, the indemnifying party shall not be liable
to such indemnified party under subsection (a) or (b) for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof (other than reasonable costs of investigation) unless (i) the
indemnified party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence, (ii)the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time, (iii) the indemnifying party and its counsel do not actively
and vigorously pursue the defense of such action, or (iv) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. No indemnifying party shall be liable to an
indemnified party for any settlement of any action or claim without the consent
of the indemnifying party and no indemnifying party may unreasonably withhold
its consent to any such settlement. No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim or
litigation.
(d) If the indemnification provided for in subsection (a)
or (b) of this Section 5 is held by a court of competent jurisdiction to be
unavailable to a party to be indemnified with respect to any claims, actions,
demands, losses, damages, liabilities, costs or expenses referred to therein,
then each indemnifying party under any such subsection, in lieu of indemnifying
such indemnified party thereunder, hereby agrees to contribute to the amount
paid or payable by such indemnified party as a result of such claims, actions,
demands, losses, damages, liabilities, costs or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions which resulted in such claims, actions, demands, losses,
damages, liabilities, costs or expenses, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties,
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. Notwithstanding the foregoing, the amount
any Holder of Registrable Securities shall be obligated to contribute pursuant
to this subsection (d) shall be limited to an amount equal to the per share
public offering price, less any underwriting discount and
Registration Rights Agreement 7
commissions, multiplied by the number of shares of Registrable Securities sold
by Shareholders pursuant to the registration statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages which
Shareholders has otherwise been required to pay in respect of such claim,
action, demand, loss, damage, liability, cost or expense or any substantially
similar claim, action, demand, loss, damage, liability, cost or expense arising
from the sale of such Registrable Securities). No person guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution hereunder from any person who was not guilty
of such fraudulent misrepresentation.
6. Reporting Requirements Under the Exchange Act. Cyberads agrees
to file timely such information, documents and reports as the Commission may
require or prescribe under Section 13 or 15(d), whichever is applicable, of the
Exchange Act. Cyberads acknowledges and agrees that the purposes of the
requirements contained in this Section 6 are (a) to enable Shareholders to
comply with the current public information requirement contained in paragraph
(c) of Rule 144 under the Securities Act should Shareholders ever wish to
dispose of any of the securities of Cyberads acquired by it without registration
under the Securities Act in reliance upon Rule 144, or any other similar
exemptive provision, and (b) to qualify Cyberads for the use of registration
statements on Form S-3. In addition, Cyberads agrees to take such other measures
and file such other information, documents and reports, as shall be required of
it hereafter by the Commission as a condition to the availability of Rule 144
under the Securities Act, or any similar exemptive provision hereafter in
effect, and the use of Form S-3. Cyberads also covenants to use its best
efforts, to the extent that it is reasonably within its power to do so, to
qualify for the use of Form S-3. Additionally, Cyberads agrees to furnish to any
Shareholder, so long as the Shareholder owns any Registrable Securities,
forthwith upon written request such information as may be reasonably requested
in availing any Shareholder of any rule or regulation of the SEC which permits
the selling of any such securities without registration or pursuant to such
form.
7. Shareholder Information. Cyberads may request Shareholders to
furnish Cyberads with such information with respect to Shareholders and the
distribution of Registrable Securities as Cyberads may from time to time
reasonably request in writing and as shall be required by law or by the
Commission in connection therewith, and Shareholders agrees to furnish Cyberads
with such information.
8. Forms. All references in this Agreement to particular forms of
registration statements are intended to include, and shall be deemed to include,
references to all successor forms which are intended to replace, or to apply to
similar transactions as, the forms herein referenced.
9. Miscellaneous.
9.1 Waivers and Amendments. Neither this Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally or
by course of dealing, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. Specifically, but without limiting the generality of the
Registration Rights Agreement 8
foregoing, the failure of Shareholders at any time or times to require
performance of any provision hereof by Cyberads shall in no manner affect the
right of Shareholders at a later time to enforce the same. No waiver by any
party of the breach of any term or provision contained in this Agreement, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
9.2 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first class postage prepaid, registered or certified mail,
(a) If to Shareholders, addressed to
Shareholders, at any address as such Shareholder may specify by written notice
to Cyberads, or
(b) If to Cyberads, to Xxxx Xxxxxxxx, President,
Cyberads, Inc. 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000 or at such
other address as Cyberads may specify by written notice to Shareholders, and
each such notice, request, consent and other communication shall for all
purposes of the Agreement be treated as being effective or having been given
when delivered, if delivered personally, or, if sent by mail, at the earlier of
its actual receipt or three (3) days after the same has been deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and postage prepaid as aforesaid.
9.3 Severability. Should any one or more of the
provisions of this Agreement or of any agreement entered into pursuant to this
Agreement be determined to be illegal or unenforceable, all other provisions of
this Agreement and of each other agreement entered into pursuant to this
Agreement, shall be given effect separately from the provision or provisions
determined to be illegal or unenforceable and shall not be affected thereby.
9.4 Headings. The headings of the sections, subsections
and paragraphs of this Agreement have been inserted for convenience of reference
only and do not constitute a part of this Agreement.
9.5 Choice of Law. It is the intention of the parties
that the internal substantive laws, and not the laws of conflicts, of the State
of Nevada should govern the enforceability and validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.
9.6 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
[Signatures continue on next page]
Registration Rights Agreement 9
[Signatures continued from Registration Rights Agreement]
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed personally or by a duly authorized representative
thereof as of the day and year first above written.
CYBERADS, INC. SHAREHOLDERS
By: /s/ XXXX XXXXXXXX
---------------------------------- Clubhouse
Xxxx Xxxxxxxx, President Communications, Inc.
By: /s/ XXXXXX X. PEARL
----------------------------------
Xxxxxx X. Pearl, President
3686469 Canada, Inc.
By: /s/ XXXXXX XXXXX
----------------------------------
Xxxxxx Xxxxx, President
Rumax, Inc.
By: /s/ XXXXXXX X. XXXXX
---------------------------------
Xxxxxxx X. Xxxxx, President
Xxxxxxxxxxx El Cajon Investment, LLC
By: /s/ XXXXXX (XXXXX) XXX
---------------------------------
Xxxxxx (Xxxxx) Xxx, Manager
/s/ XXXXXX X. XXXXX
---------------------------------
Xxxxxx X. Xxxxx
/s/ T. XXXXXX XXXXXX
---------------------------------
T. Xxxxxx Xxxxxx
Perbar Investments, Inc.
By: /s/ XXX XXXXXXX
---------------------------------
Xxx Xxxxxxx, President
HSK Industries, Inc.
By: /s/ XXXXXXX XXXXXXX
---------------------------------
Xxxxxxx Xxxxxxx, President
Registration Rights Agreement 10
VOTING AGREEMENT
Date: June 21, 2006
Parties: Cyberads, Inc., a Nevada corporation ("Company")
Xxxxxx Xxxxx ("Xxxxx")
Clubhouse Communications, Inc; 3686469 Canada, Inc.
Rumax, Inc; Xxxxxxxxxxx El Cajon Investment, LLC;
Perbar Investments; Xxxxxx X. Xxxxx; T. Xxxxxx Xxxxxx; and HSK
Industries, Inc. (collectively "Rhino Shareholders")
RECITALS
X. Xxxxx is the holder of Series B Convertible Preferred
Stock of the Company.
B. The Rhino Shareholders are, as of the date of this
Agreement, holders of all of the Company's Series C Convertible Preferred Stock
and, upon any conversion of the same, shall become common shareholders of the
Company.
X. Xxxxx and the Rhino Shareholders desire to enter into
this Agreement to provide for the voting of their shares in connection with
certain corporate matters as described in this Agreement.
D. The Company desires to enter in this Agreement to
facilitate the implementation of its provisions.
AGREEMENT
The parties agree as follows:
1. ELECTION AND REMOVAL OF DIRECTORS.
(a) In the election of members of the Company's Board of
Directors, Xxxxx and the Rhino Shareholders shall vote their shares as necessary
to ensure that, at each annual or special meeting of the shareholders of the
Company at which an election of directors is held or pursuant to any written
consent of the shareholders as permitted under the Nevada Business Corporation
Act, the following persons shall be elected members of the Board of Directors:
Xxxxxx Xxxxx
One other individual designated by the majority of the Company voting securities
held by the Rhino Shareholders
Voting Agreement - Page 1
(b) Any removal and/or replacement of the above-named
members of the Board of Directors shall be subject to the approval of the Rhino
Shareholders, in their absolute discretion.
2. NUMBER OF DIRECTORS.
Xxxxx and the Rhino Shareholders shall vote their shares as
necessary to ensure that the size of the Board of Directors shall be set and
remain at five (5) directors.
3. IRREVOCABLE PROXIES.
Xxxxx and the Rhino Shareholders hereby grant one to the
other, and is each deemed to have executed in favor of the other, an irrevocable
proxy to vote, or to give written consent with respect to, all the voting
securities owned by the granter of the proxy for the election to the Board of
Directors of the individuals named in Section 1 of this Agreement.
4. SPECIFIC PERFORMANCE.
Xxxxx and the Rhino Shareholders intend and agree that the
provisions of this Agreement shall be specifically enforceable in any court
having jurisdiction to grant the remedy of specific performance.
5. OTHER VOTING AGREEMENT.
Xxxxx and the Rhino Shareholders represent and agree that they
are not and will not become parties to any voting trust, agreement for voting
control, or other like agreement involving any of the voting securities of the
Company owned by any of them during the term of this Agreement.
6. TRANSFER OF EQUITY SECURITIES.
Xxxxx and the Rhino Shareholders shall not sell, transfer,
assign or otherwise convey any of their respective voting securities, other than
in open market transactions, unless the person receiving such equity securities
shall become a party to this Agreement.
7. TERM.
This Agreement shall terminate upon the earlier of the following
events:
(a) The merger or consolidation of the Company into or
with another corporation after which Xxxxx and the Rhino Shareholders,
collectively, own less than 50% of the voting equity securities of the surviving
corporation or its parent;
Voting Agreement - Page 2
(b) The sale, transfer or other disposition of all or
substantially all of the assets of the Company;
(c) The agreement of Xxxxx and the Rhino Shareholders.
8. AMENDMENT.
Any amendment or modification of this Agreement may be made
only with the written consent of Xxxxx and the Rhino Shareholders.
9. MISCELLANEOUS.
9.1 SUCCESSORS AND ASSIGNS
The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as may be expressly provided in this Agreement.
9.2 GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada.
9.3 COUNTERPARTS
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
9.4 ATTORNEYS' FEES
If any suit or action arising out of or related to this
Agreement is brought by any party, the prevailing party shall be entitled to
recover its costs and fees, including reasonable attorneys' fees, incurred by
such party in such suit or action, including any appellate proceedings.
9.5 INJUNCTIVE RELIEF.
The parties agree that the remedy at law for a breach or
threatened breach by a party may, by its nature, be inadequate and that the
other parties shall be entitled, in addition to damages, to a restraining order,
temporary and permanent injunctive relief, specific performance, and other
appropriate equitable relief, without showing or proving any monetary damage has
been sustained.
Voting Agreement - Page 3
9.6 ENTIRE AGREEMENT
This Agreement and the other documents delivered at Closing
constitute the full and entire understanding and agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CYBERADS, INC. SHAREHOLDERS
By: /s/ XXXX XXXXXXXX
----------------------------------- Clubhouse
Xxxx Xxxxxxxx, President Communications, Inc.
By: /s/ XXXXXX X. PEARL
----------------------------------
Xxxxxx X. Pearl, President
3686469 Canada, Inc.
By: /s/ XXXXXX XXXXX By: /s/ XXXXXX XXXXX
----------------------------------- ----------------------------------
Xxxxxx Xxxxx Xxxxxx Xxxxx, President
Rumax, Inc.
By: /s/ XXXXXXX X. XXXXX
---------------------------------
Xxxxxxx X. Xxxxx, President
Xxxxxxxxxxx El Cajon Investment, LLC
By: /s/ XXXXXX (XXXXX) XXX
---------------------------------
Xxxxxx (Xxxxx) Xxx, Manager
/s/ XXXXXX X. XXXXX
---------------------------------
Xxxxxx X. Xxxxx
/s/ T. XXXXXX XXXXXX
---------------------------------
T. Xxxxxx Xxxxxx
[SIGNATURES CONTINUE ON NEXT PAGE]
Voting Agreement - Page 4
[SIGNATURES CONTINUED FROM VOTING AGREEMENT]
Perbar Investments, Inc.
By: /s/ XXX XXXXXXX
---------------------------------
Xxx Xxxxxxx, President
HSK Industries, Inc.
By: /s/ XXXXXXX XXXXXXX
---------------------------------
Xxxxxxx Xxxxxxx, President
Voting Agreement - Page 5
EXHIBIT C TO
SHARE EXCHANGE AGREEMENT
June 21, 2006
Xxxxxx X. Pearl
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxx 00000
Re: Offer of Employment
Dear Xxxxxx,
We are very pleased to offer you the position of Chief Executive Officer at
Cyberads, Inc., with a commencement date of September 1, 2006. We are confident
that your contributions will enhance Cyberads' standing as an industry leader
and an employer of choice. This offer is subject to the following terms,
conditions and benefits.
COMPENSATION
Your salary will be at the rate of $250,000 annually, subject to normal payroll
withholdings (with the understanding that, depending on the financial condition
of Cyberads, Cyberads may accrue prorata portions of the salary above $180,000
per year). Additionally, you will be eligible for cash bonuses and/or equity
incentives, upon meeting performance objectives determined by the Board in
reasonable consultation with you. At a minimum, you will receive annual
performance and compensation reviews.
BENEFITS
You will be eligible to participate in the following benefit plans:
o Medical and dental insurance for you and your family, at least consistent
with the plans offered by Rhino Offroad Industries, Inc. (effective on your
employment commencement date)
o All reasonable and ordinary business expenses will be paid or reimbursed by
Cyberads (effective on your employment commencement date)
o You will receive a car allowance of $700.00 per month will, or Cyberads
will lease an automobile reasonably acceptable to you (commencing January
1, 2007)
o You will be eligible to participate in additional benefit plans offered now
or later to executives of Cyberads
TERMINATION:
The term of employment will be for a period of three years, which will
automatically renew for an additional two-year term at the option of Executive.
If Cyberads terminates
employment without cause, or if Executive resigns due to breach by Cyberads, (a)
100% of any unvested equity shall immediately vest, (b) Executive will have the
option to repurchase Rhino Offroad at the same price (payable in cash and/or
Cyberads stock) and on the same payment terms, as Rhino Offroad was purchased by
Cyberads (this right to repurchase expires on December 31, 2008), and (c) if the
termination occurs after December 31, 2006, Cyberads will pay Executive one year
base salary.
OTHER
Prior to commencement of employment, Cyberads will provide Directors and
Officers Liability Insurance approved by Executive. Cyberads will provide all
resources, tools, executives, and professional services reasonably necessary to
permit compliance with all SEC and other regulatory and legal requirements
applicable to Cyberads.
In addition to Cyberads Board of Directors, Executive will be permitted to serve
on up to five public, private or non-profit Boards of Directors, subject to
Cyberads approval (which will not be unreasonably withheld).
Please note that this offer is also contingent upon a satisfactory completion of
an education, employment and criminal background check (excluding your disclosed
violation of certain U.S. laws more than 25 years ago). Additionally, this offer
is contingent upon your acceptance and signing of the Cyberads
Confidentiality/Non-Disclosure Agreement on your date of hire. This offer is
valid for 30 business days from receipt of this letter.
Xxxxxx, on behalf of Cyberads, I would like to express my pleasure in presenting
you with this offer of employment. Cyberads is truly an exciting organization
comprised of highly competent, enthusiastic and dedicated individuals and we
look forward to welcoming you to our team.
Yours sincerely,
/s/ XXXX XXXXX
Xxxx Xxxxx
Chairman of the Board
Accepted By: /s/ XXXXXX X. PEARL
------------------------------------
Xxxxxx X. Pearl
