Exhibit 2
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COMMON STOCK EXCHANGE AGREEMENT
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This Exchange Agreement (this "Agreement") is entered into as of this 8th day of
April, 1997, among Affiliated Services, Inc., a Nevada corporation,
("Affiliated"); Amber Capital, Inc., a Delaware Corporation, ("Amber") and
LottoWorld, Inc., a Florida Corporation("LWI").
WHEREAS, it is the desire of Affiliated and Amber to exchange common shares of
Sound Money Investors, Inc. ("SMI"), a Nevada corporation registered in its name
for common shares of LWI, and
WHEREAS, it is the desire of LWI to exchange common shares of LWI for common
shares of SMI.
NOW THEREFORE, in consideration of the mutual representations, warranties,
convents and agreements contained herein, the parties agree as follows:
ARTICLE I
1.1 THE SHARE EXCHANGE. Subject to the terms and conditions of this Agreement,
at the Effective Date (as defined below), the parties agree that LWI shall
transfer to Amber and Affiliated the common stock of LottoWorld equal in value
to $500,000 and that Affiliated and Amber shall transfer to LWI the common stock
of SMI, Inc. equal in value to $500,000. The value of the common stock so
exchanged will be set as of the Effective Date.
1.2 THE CLOSING AND EFFECTIVE DATE. Subject to the terms and conditions of
this Agreement, the consummation of the transaction contemplated hereunder (the
"Closing") shall take place as promptly as practicable. The Effective Date or
Effective Time as provided in the agreement will be April 9, 1997.
1.3 EXCHANGE OF SECURITIES. As soon as practical after the effective date, the
number of shares of common stock to be exchanged shall be calculated based upon
closing "ask" price of the common stock of the relevant corporation divided into
$500,000. For example if the "ask price" for SMI stock on the Effective date is
$.125 then the number of shares to be exchanged will be 4,000,000 shares. If the
"ask price" for LottoWorld is $.97 then the number of shares to be exchanged
will be 515,464.
1.4 FILING OF DOCUMENTS. At the time of the closing (the "Effective Date" or
"Effective Time"), the parties shall cause to be filed any documents that LWI
determines to be required to lawfully effect the purposes of this Agreement.
1.5 ISSUANCE OF SHARES; DELIVERY OF CERTIFICATES AND ASSIGNMENTS. At the
Effective Time, LWI shall issue and deliver to Affiliated and Amber the LWI
shares issuable pursuant to Section 1.3, registered in the name of Affiliated or
Amber. Affiliated and Amber shall deliver to LWI the certificate(s) representing
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the SMI shares with duly executed assignments and stock powers. Each of LWI,
Amber and Affiliated agree that, for a period of three hundred and sixty five
(365) days from the Effective Date, they will not, directly or indirectly,
offer, sell, contract to sell or otherwise dispose of , any of the LWI or SMI
shares without the other parties prior written consent (the "Holding Period"),
and subsequent to the Holding Period each of LWI, Amber and Affiliated agree
that the other party has a first right of refusal and repurchase right as
provided in Article V.
1.6 TAX TREATMENT. The parties hereto acknowledge and agree that the
transactions contemplated hereby are intended to be a tax-free transaction under
Section 351 of the Internal Revenue Code of 1986, as amended.
1.7 COMMON STOCK EFFECTED. Notwithstanding anything to the contrary contained
in this agreement, the stock restrictions and agreements contained herein shall
only apply to the stock exchanged hereunder and shall not effect any other
shares of stock owned presently or acquired subsequently by the parties.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LWI
As a material inducement to Affiliated and Amber to enter into this
Agreement and to consummate the transaction contemplated hereby, LWI makes the
following representations and warranties to Affiliated.
2.1 CORPORATE STATUS. LWI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and has the
requisite power and authority to carry on its business.
2.2 CORPORATE POWER AND AUTHORITY. LWI has the corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. LWI has taken all action
necessary to authorize its execution and delivery of this Agreement, the
performance of its respective obligations hereunder and the consummation f the
transactions contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by LWI
and constitutes a legal, valid and enforceable obligation of LWI, enforceable
against LWI in accordance with its terms, except as the same may by limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditor's rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
2.4 LWI COMMON STOCK. Upon consummation of the transactions contemplated
hereunder and the issuance and delivery of certificates representing the LWI
shares, the LWI shares will be validly issued, fully paid and non-assessable
shares of LWI.
2.5 NO COMMISSIONS. LWI has not incurred any obligation for any finder's or
broker's or agent's fees or commissions or similar compensation in connection
with the transactions contemplated hereby.
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2.6 ACCURACY OF INFORMATION. No representation, statement or information made
or furnished by LWI to Affiliated or Amber or any of Affiliated and Amber's
representatives, including those contained in this Agreement contain any untrue
statement of a material fact or omits or shall omit any material fact necessary
to make the information contained therein not misleading.
2.7 INVESTMENT INTENT; ACCREDITED INVESTOR STATUS. LWI is acquiring the SMI
shares hereunder for its own account for investment and not with a view to, or
for the sale in connection with, any distribution of any of the SMI shares,
except in compliance with applicable state and federal securities laws. LWI has
had the opportunity to discuss the transaction contemplated hereby with
Affiliated and Amber and has had the opportunity to obtain such information
pertaining to Affiliated and Amber as has been requested, including but not
limited to fillings made by Affiliated and Amber with the SEC under the Exchange
Act, as amended. LWI is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act, as amended, and has such
knowledge and experience in business or financial matters that it is capable of
evaluating the merits and risks of an investment in Affiliated and Amber.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AFFILIATED
As a material inducement to LWI to enter into this Agreement and to
consummate the transaction contemplated hereby, Affiliated makes the following
representations and warranties to LWI.
3.1 CORPORATE STATUS. Affiliated is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has the
requisite power and authority to carry on its business.
3.2 CORPORATE POWER AND AUTHORITY. Affiliated has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Affiliated has
taken all action necessary to authorize its execution and delivery of this
Agreement, the performance of its respective obligations hereunder and the
consummation f the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by
Affiliated and constitutes a legal, valid and enforceable obligation of
Affiliated, enforceable against Affiliated in accordance with its terms, except
as the same may by limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditor's rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
3.4 SMI COMMON STOCK. Upon consummation of the transactions contemplated
hereunder and the issuance and delivery of certificates representing the SMI
shares, the SMI shares will be validly issued, fully paid and non-assessable
shares of SMI common stock.
3.5 NO COMMISSIONS. Affiliated has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
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3.6 ACCURACY OF INFORMATION. No representation, statement or information made
or furnished by Affiliated to LWI or any of LWI's representatives, including
those contained in this Agreement contain any untrue statement of a material
fact or omits or shall omit any material fact necessary to make the information
contained therein not misleading.
3.7 INVESTMENT INTENT; ACCREDITED INVESTOR STATUS. Affiliated is acquiring the
LWI shares hereunder for its own account for investment and not with a view to,
or for the sale in connection with, any distribution of any of the LWI shares,
except in compliance with applicable state and federal securities laws.
Affiliated has had the opportunity to discuss the transaction contemplated
hereby with LWI and has had the opportunity to obtain such information
pertaining to LWI as has been requested, including but not limited to fillings
made by LWI with the SEC under the Exchange Act, as amended. Affiliated is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act, as amended, and has such knowledge and experience in business or
financial matters that it is capable of evaluating the merits and risks of an
investment in LWI.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AMBER
As a material inducement to LWI to enter into this Agreement and to
consummate the transaction contemplated hereby, Amber makes the following
representations and warranties to LWI.
4.1 CORPORATE STATUS. Amber is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite power and authority to carry on its business.
4.2 CORPORATE POWER AND AUTHORITY. Amber has the corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. Amber has taken all action
necessary to authorize its execution and delivery of this Agreement, the
performance of its respective obligations hereunder and the consummation f the
transactions contemplated hereby.
4.3 ENFORCEABILITY. This Agreement has been duly executed and delivered by
Amber and constitutes a legal, valid and enforceable obligation of Amber,
enforceable against Amber in accordance with its terms, except as the same may
by limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditor's rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
4.4 SMI COMMON STOCK. Upon consummation of the transactions contemplated
hereunder and the issuance and delivery of certificates representing the SMI
shares, the SMI shares will be validly issued, fully paid and non-assessable
shares of SMI common stock.
4.5 NO COMMISSIONS. Amber has not incurred any obligation for any finder's or
broker's or agent's fees or commissions or similar compensation in connection
with the transactions contemplated hereby.
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4.6 ACCURACY OF INFORMATION. No representation, statement or information made
or furnished by Amber to LWI or any of LWI's representatives, including those
contained in this Agreement contain any untrue statement of a material fact or
omits or shall omit any material fact necessary to make the information
contained therein not misleading.
4.7 INVESTMENT INTENT; ACCREDITED INVESTOR STATUS. Amber is acquiring the LWI
shares hereunder for its own account for investment and not with a view to, or
for the sale in connection with, any distribution of any of the LWI shares,
except in compliance with applicable state and federal securities laws.
Affiliated has had the opportunity to discuss the transaction contemplated
hereby with LWI and has had the opportunity to obtain such information
pertaining to LWI as has been requested, including but not limited to fillings
made by LWI with the SEC under the Exchange Act, as amended. Affiliated is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act, as amended, and has such knowledge and experience in business or
financial matters that it is capable of evaluating the merits and risks of an
investment in LWI.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such additional
instruments and other documents and shall take such further actions as may be
necessary or appropriate to effectuate, carry out and comply with all of the
terms of this Agreement and the transactions contemplated hereby.
5.2 COOPERATION. Each of the parties agrees to cooperate with the other
parties in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation or the rules of any exchange on which the LWI Common
Stock is listed or the NASDAQ Stock Market in connection with the transactions
contemplated by this Agreement and to use its respective best efforts to agree
jointly on a method to overcome any objections by any Governmental Authority to
any such transactions.
5.3 TAX TREATMENT. LWI, Amber and Affiliated will use their respective best
efforts to cause the transactions contemplated hereunder to qualify as tax-free
transactions under the provisions of Section 351 of the Code and do not
presently intend to take any action after the transactions contemplated
hereunder are effected to cause the transactions contemplated hereunder to lose
their tax-free status. All parties hereto agree to comply with the reporting
requirements of Section 351 of the Code and applicable Treasury Regulations
promulgated thereunder.
5.4 VOTING RIGHTS. For the term of this agreement so long as any stock is held
by the parties, the parties hereby agree to assign to each other the Voting
Rights represented by the stock so exchanged, so that Amber and Affiliated will
continue to exercise their voting rights in SMI and that LWI will continue to
exercise its voting rights in LottoWorld.
ARTICLE VI
FIRST RIGHT OF REFUSAL AND REPURCHASE RIGHTS
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6.1 FIRST RIGHT OF REFUSAL. Subsequent to termination of the Holding Period,
in the event LWI, Amber or Affiliated intends or attempts to sell, give, assign,
pledge, encumber or otherwise dispose of any interest or right in the LWI shares
or SMI shares owned by it as a result of this Agreement, then such shareholder
shall immediately offer to sell such number of shares it intends to sell, give,
assign, transfer, pledge, encumber or otherwise dispose of. Such offer shall be
in the form of a written notice (the "First Right of Refusal Notice") addressed
and delivered to the other party containing a statement as to (i) the name and
address of the proposed purchaser, assignee or transferee, if applicable, (ii)
the terms of such intended sale, gift, assignment, transfer or encumbrance,
including with respect to a transfer for value, the price per share and (iii)
the number of shares offered.
The other party shall have the first right and option, exercisable
within thirty (30) days of the date of the First Right of Refusal Notice, to
purchase all or any part of such offered shares at the price per share stated in
the First Right of Refusal Notice. If the other party fails to purchase any or
all of such shares offered for sale, then the holder thereof shall be free to
offer and sell any remaining shares to any other party.
6.2 REPURCHASE RIGHTS OF AFFILIATED, AMBER AND LWI. Any time after the Holding
Period, and upon thirty (30) days prior notice by the repurchasing party, either
party to this Agreement may repurchase some or all of the shares acquired of the
other party as a result of this Agreement. The price payable for the repurchased
shares shall equal the price paid pursuant to Section 1.3 of this Agreement. The
per share amount shall be subject to equitable adjustment whenever there shall
occur a combination, stock split, reclassification or other similar event with
respect to the LWI shares or the SMI shares.
ARTICLE VII
INDEMNIFICATION
7.1 AGREEMENT BY THE SHAREHOLDERS TO INDEMNIFY. Subject to the terms set forth
herein below, the parties agree to indemnify and hold each other harmless from
and against the aggregate of all expenses, losses, costs, deficiencies,
liabilities, and damages (including, without limitation, related counsel and
paralegal fees and expenses) incurred or suffered by a party arising out of or
resulting from (i) any material breach of a representation or warranty made by
the other party in or pursuant to this Agreement, or (ii) any material breach of
the covenants or agreements made by the other party in or pursuant to this
Agreement.
7.2 SURVIVAL OR REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties made by Affiliated and LWI in this Agreement or pursuant hereto
shall survive for a period of three (3) years after the Effective Time. No claim
for the recovery of Indemnifiable Damages may be asserted by one of the parties
against another after such representations and warranties shall thus expire,
provided, however, that claims for Indemnifiable Damages first asserted within
the applicable period shall not thereafter be varied. Notwithstanding any
knowledge of facts determined or determinable by any party by investigation,
each party shall have the right to fully rely on the representations,
warranties, covenants and agreements of the other parties contained in this
Agreement or in any other documents or parties contained in this Agreement is
independent of each other representation, warranty, covenant and agreement.
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ARTICLE VIII
SECURITIES LAW MATTERS
8.1 DISPOSITION OF SHARES. Affiliated, Amber and LWI each represents and
warrants that the shares being acquired hereunder are being acquired and will be
acquired for its own accounts and will not be sold or otherwise disposed of,
except pursuant to (a) an exemption from the registration requirements under the
Securities Act, which does not require the filing by LWI, Amber or Affiliated
with the SEC of any registration statement, offering circular or other document,
in which case, the selling entity shall first supply to other an opinion of
counsel (which counsel and opinions shall be satisfactory to the recipient) that
such exception is available, or (b) an effective registration statement filed by
LWI, Amber or Affiliated with the SEC under the Securities Act. The parties
understand that the shares being transferred may be shares restricted by other
agreements and not freely trading shares at the time of their transfer, but may
or will become freely trading shares prior to the expiration of one year from
the effective date.
8.2 LEGEND. The certificates representing the SMI shares and LWI shares shall
bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO OR
IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND ALSO MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT IN
COMPLIANCE WITH ANY APPLICABLE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.
LWI may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
ARTICLE IX
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual written consent of all of the parties hereto at any time prior to
the Closing; or
(b) by LWI, in the event of a material breach by Amber or Affiliated of any
provision of this Agreement; or
(c) by Affiliated or Amber in the event of a material breach by LWI of any
provision of this Agreement; or
(d) by LWI, Amber or Affiliated if the Closing shall not have occurred by April
15, 1997.
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9.2 EFFECT OF TERMINATION. Except for the provisions of Article VII hereof,
which shall survive any termination of this Agreement, breach of any of its
representations, warranties, covenants or agreements set forth in this Agreement
in the event of termination of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith become void and of no further force and effect and the
parties shall be released from any and all obligations hereunder; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
9.3 ARBITRATION. If a dispute arises out of or relates to this contract, or
the breach thereof, and if said dispute cannot be settled through direct
discussions, the parties agree to first endeavor to settle the dispute in an
amicable manner by mediation under the Commercial Mediation Rules of the
American Arbitration Association, before resorting to arbitration. Thereafter,
any unresolved controversy or claim arising out of or relating to this contract
or breach thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the Award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. The situs for the mediation and arbitration
shall be Orange County, Florida.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices, requests, demands, claims, and other communications
hereunder shall be in writing and shall be delivered by certified or registered
mail (first class postage pre-paid), guaranteed overnight delivery, or facsimile
transmission if such transmission is confirmed by delivery by certified or
registered mail (first class postage pre-paid) or guaranteed overnight delivery,
to the following addresses and telecopy numbers (or to such other addresses or
telecopy numbers which such party shall designate in writing to the other
party):
(a) if to LottoWorld, Inc. (b) if to Affiliated
LottoWorld, Inc. Affiliated Services, Inc.
Attn.: Xxxxxx X. Xxxxxxxxx Attn: Xxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxxx Xx. 0 Xxx 000
Xxxxx 000 000 Xxxxxx Xxxx
Xxxxxx, XX 00000 Xxxxxxx, XX 00000
(000)-000-0000 (000)-000-0000
fax: (000)-000-0000
(c) if to Amber,
Amber Capital, Inc.
Attn: Xxxxxxxxx X. Xxxxxx
President
0 Xxxx Xxxx
Xxxxxxx Xxxxx, XX 00000
(000)-000-0000
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Notice shall be deemed given on the date sent if sent by overnight delivery or
facsimile transmission and on the date delivered (or the date of refusal of
delivery) if sent by certified or registered mail.
10.2 ENTIRE AGREEMENT. This Agreement (including any Exhibits and Schedules
attached hereto) and other documents delivered at the Closing pursuant hereto,
contains the entire understanding of the parties in respect of its subject
matter and supersedes all prior agreements and understandings (oral or written)
between or among the parties with respect to such subject matter. Any Exhibits
and Schedules constitute a part hereof as though set forth in full above.
10.3 EXPENSES. Except as otherwise provided herein, the parties shall pay their
own fees and expenses, including their own counsel fees, incurred in connection
with this Agreement or any transaction contemplated hereby.
10.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
10.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this Agreement
shall bind and inure to the benefit of the parties and their respective
successors and assigns. Nothing expressed or implied herein shall be construed
to give any other person any legal or equitable rights hereunder. Except as
expressly provided herein, the rights and obligations of this Agreement may not
be assigned by any of the Shareholders or any of the Partners without the prior
written consent of Affiliated.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
10.7 INTERPRETATION. When a reference is made in this Agreement to an article,
section, paragraph, clause, schedule or exhibit, such reference shall be deemed
to be to this Agreement unless otherwise indicated. The headings contained
herein and on the schedules are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement or the schedules.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". Time shall be of the essence in this Agreement.
10.8 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Florida applicable to contracts executed and to be wholly performed within such
State.
10.9 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly represents and
warrants to all other parties hereto that (a) before executing this Agreement,
said party has fully informed itself of the
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terms, contents, conditions and effects of this Agreement; (b) said party has
relied solely and completely upon its own judgment in executing this Agreement;
(c) said party has had the opportunity to seek and has obtained the advise of
counsel before executing this Agreement; (d) said party has acted voluntarily
and of its own free will in executing this Agreement; (e) said party is not
acting under duress, whether economic or physical, in executing this Agreement;
and (f) this Agreement is the result of arm's length negotiations conducted by
and among the parties and their respective counsel.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
LOTTOWORLD, INC. AFFILIATED, INC.
By: s/ Xxxxxx X. Xxxxxxxxx By: s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxxxxx Xxxxxx X. Xxxxxx
Chief Executive Officer President
AMBER CAPITAL, INC.
By: s/ Xxxxxxxxx X. Xxxxxx
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Xxxxxxxxx X. Xxxxxx
President
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