Exchange Agreement
This Exchange Agreement (the "Agreement") is made and entered into by and
among Explorations Group, Inc., a Delaware corporation ("Explorations"), and The
Xxxxx Family Spendthrift Trust, a Florida trust (the "CFST"), Explorations and
CFST being sometimes hereinafter collectively referred to as the "Parties" or
generically as a "Party").
Preamble:
WHEREAS, the CFST desires to enter into arrangements making it clear to
Explorations that it is not and will not become a "control person" of
Explorations, as such term is used for purposes of Item 401(d) of Regulation SB
promulgated by the Commission; and
WHEREAS, Explorations desires to assure that such representation is and
remains accurate;
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the Parties, intending to be legally bound, hereby agree as follows:
Witnesseth:
Article I
Definitions
The following terms or phrases, as used in this Agreement, shall have the
following meanings:
(A) Commission:
The United States Securities and Exchange Commission.
(B) Exchange Act:
The Securities Exchange Act of 1934, as amended.
(C) Exchange Act Reports:
Prior to registration of a class of Explorations securities with the
Commission under the Securities Act or the Exchange Act, Exchange Act
Reports will refer to the disclosure statement prepared by Explorations in
compliance with the requirements of Rule 15c2-11 promulgated by the
Commission under authority of the Exchange Act; after Explorations
registers a class of its securities with the Commission under the
Securities Act or the Exchange Act, Exchange Act Reports will refer to the
reports on Commission Forms 10-SB, 10-KSB, 10-QSB and 8-K and Commission
Schedules 14A and 14C, that Explorations would be required to file pursuant
to Sections 13, 14, 15(d) and 12(g) of the Exchange Act.
(D) Exchange Exemption:
Securities Act Section 3(a)(9), Securities Exempted by Act, Subsubsection
(9), Securities Exchanged with Security Holders. "Except as hereinafter
expressly provided the provisions of this title shall not apply to any of
the following classes of securities: ....(9) Except with respect to a
security exchanged in a case under title 11 of the United States Code, any
security exchanged by the issuer with its existing security holders
exclusively where no commission or other remuneration is paid or given
directly or indirectly for soliciting such exchange ....
(D) Florida Act:
The Florida Securities and Investor Protection Act.
(E) Florida Exemption:
Sec. 517.061, Florida Statutes, Exempt transactions. .... (6) Any
transaction involving the distribution of the securities of an issuer
exclusively among its own security holders, including any person who at the
time of the transaction is a holder of any convertible security, any
nontransferable warrant, or any transferable warrant which is exercisable
within not more than 90 days of issuance, when no commission or other
remuneration is paid or given directly or indirectly in connection with the
sale or distribution of such additional securities.
(F) Securities Act:
The Securities Act of 1933, as amended.
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Article II
Exchange
(A) The CFST hereby exchanges all of the shares of Explorations' common stock,
$0.01 par value (the "Common Stock") which it holds in excess of one share
less than 5% of all of Explorations' outstanding Common Stock (the
"Exchanged Common Stock") for shares of Explorations' Class A Non-Voting,
Convertible Preferred Stock, as more particularly described in the
certificate of designation annexed hereto and made a part hereof as exhibit
II-A-1 (the "Preferred Stock" and the "Certificate," respectively) in an
amount equal to 1/20th the number of shares of Preferred Stock as the
number of shares of Common Stock exchanged, as calculated in exhibit
annexed II-A-2 hereto and made a part hereof (the "Exchange Calculation").
(B) The exchange is being effected without registration under the Securities
Act or the Florida Act, based on the exemption from registration provided
by Section 3(a)(9) of the Securities Act and Section 517.061(6) of the
Florida Act.
(C) As a material inducement to Explorations' consideration of the CFST's offer
to effect the exchange, the CFST represents, warrants and covenants to
Explorations, as follows:
(1) The CFST acknowledges that it has, based on its own substantial
experience, the ability to evaluate the transactions contemplated
hereby and the merits and risks thereof in general and the suitability
of the transaction for it in particular;
(2) The CFST understands that the offer and issuance of Preferred Stock is
being made in reliance on the CFST's representation that it has
reviewed Explorations' materials submitted to the NASD pursuant to
Exchange Act Rule 15c2-11 and Explorations' Audit, and has become
familiar with the information disclosed therein, including that
contained in exhibits filed with such reports;
(3) The CFST is fully aware of the material risks associated with becoming
an investor in Explorations and confirms that it was previously
informed that all documents, records and books pertaining to this
investment have been available from Explorations and that all
documents, records and books pertaining to this transaction requested
by it have been made available to it;
(4) The CFST has had an opportunity to ask questions of and receive
answers from the officers of Explorations concerning the terms and
conditions of this Agreement and the transactions contemplated hereby,
as well as the affairs of Explorations and related matters;
(5) The CFST has had an opportunity to obtain additional information
necessary to verify the accuracy of the information referred to in
subparagraphs (1), (2), (3) and (4) hereof;
(6) The CFST has represented to Explorations that it has the general
ability to bear the risks of the subject transaction and that it is a
suitable investor for a private offering and the CFST hereby affirms
the correctness of such information to Explorations;
(7) The CFST acknowledges and is aware that:
(a) The Preferred Stock is a speculative investment with no assurance
that Explorations will be successful, or if successful, that such
success will result in payments to the CFST or to realization of
capital gains by the CFST on disposition of the Preferred Stock;
and
Exchange Agreement - 2
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(b) The Preferred Stock to be issued to it has not been registered
under the Securities Act or under any state securities laws;
accordingly the CFST may have to hold such common stock and may
not be able to liquidate, pledge, hypothecate, assign or transfer
it;
(8) The CFST has obtained its own opinion from its legal counsel to the
effect that after an examination of the transactions associated
herewith and the applicable law, no action needs to be taken by either
the CFST or Explorations in conjunction with this Agreement and the
issuance of the Preferred Stock in conjunction therewith, other than
such actions as have already been taken in order to comply with the
securities law requirements of the CFST's state of domicile, including
the safe harbor provided in conjunction with compliance with the
Florida Exemption; and
(9) (a) The certificates for the Preferred Stock will bear restrictive
legends and Explorations' transfer agent will be instructed not
to transfer the subject securities unless they have been
registered pursuant to Section 6 of the Securities Act or an
opinion of counsel to the CFST satisfactory to legal counsel to
Explorations and Explorations' president has been provided, to
the effect that the proposed transaction is exempt from
registration requirements imposed by the Securities Act, the
Exchange Act and any applicable state or foreign laws.
(b) The legend shall read as follows: "The securities represented by
this certificate were issued without registration under the
Securities Act of 1933, as amended, or comparable state laws in
reliance on the provisions of Section 3(a)(9) of such act, and
comparable state law provisions. These securities may not be
transferred, pledged or hypothecated unless they are first
registered under applicable federal, state or foreign laws, or
the transaction is demonstrated to be exempt from such
requirements to Explorations' satisfaction."
Article III
General Provisions
3.1 Interpretation.
(A) When a reference is made in this Agreement to Schedules or Exhibits, such
reference shall be to a Schedule or Exhibit to this Agreement unless
otherwise indicated.
(B) The words "include," "includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without limitation."
(C) The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(D) The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
(E) All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the
Party or Parties, or their personal representatives, successors and assigns
may require.
(F) The Parties agree that they have been represented by counsel during the
negotiation 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.
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3.2 Notice.
(A) All notices, demands or other communications given hereunder shall be in
writing and shall be deemed to have been duly given on the first business
day after mailing by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
(1) To Explorations:
Explorations Group, Inc.
Crystal Corporate Center;
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000-X;
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxx, President
Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail xxxxxxxx@xxxxxxxx.xxx;
(2) the CFST:
The Xxxxx Family Spendthrift Trust
0000 Xxxxxxxxx 00xx Xxxxxxx;
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Trustee
Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail, xxxxxxxxxx@xxxxxxx.xxx;
or such other address or to such other person as any Party shall designate
to the other for such purpose in the manner hereinafter set forth.
(B) At the request of any Party, notice will also be provided by overnight
delivery, facsimile transmission or e-mail, provided that a transmission
receipt is retained.
3.3 Merger of All Prior Agreements Herein.
(A) This instrument, together with the instruments referred to herein, contains
all of the understandings and agreements of the Parties with respect to the
subject matter discussed herein.
(B) All prior agreements whether written or oral are merged herein and shall be
of no force or effect.
3.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and the Reorganization and
shall be effective regardless of any investigation that may have been made or
may be made by or on behalf of any Party.
3.5 Severability.
If any provision or any portion of any provision of this Agreement, other
than one of the conditions precedent or subsequent, or the application of such
provision or any portion thereof to any person or circumstance shall be held
invalid or unenforceable, the remaining portions of such provision and the
remaining provisions of this Agreement or the application of such provision or
portion of such provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby.
3.6 Governing Law.
This Agreement shall be construed in accordance with the substantive and
procedural laws of the State of Florida (other than those regulating taxation
and choice of law).
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3.7 Indemnification.
(A) Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including legal
or other expenses incidental thereto), contingent, current, or inchoate to
which they or any one of them may become subject as a direct, indirect or
incidental consequence of any action by the indemnifying Party or as a
consequence of the failure of the indemnifying Party to act, whether
pursuant to requirements of this Agreement or otherwise.
(B) In the event it becomes necessary to enforce this indemnity through an
attorney, with or without litigation, the successful Party shall be
entitled to recover from the indemnifying Party, all costs incurred
including reasonable attorneys' fees throughout any negotiations, trials or
appeals, whether or not any suit is instituted.
3.8 Dispute Resolution.
(A) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement any proceedings
pertaining directly or indirectly to the rights or obligations of the
Parties hereunder shall, to the extent legally permitted, be held in
Broward County, Florida, and the prevailing Party shall be entitled to
recover its costs and expenses, including reasonable attorneys' fees up to
and including all negotiations, trials and appeals, whether or not any
formal proceedings are initiated.
(B) In the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the dispute
shall, at the request of any Party, be exclusively resolved through the
following procedures:
(1) (a) First, the issue shall be submitted to mediation before a
mediation service in Broward County, Florida to be selected by
lot from four alternatives to be provided, two by the CFST and
two by Explorations.
(b) The mediation efforts shall be concluded within ten business days
after their initiation unless the Parties unanimously agree to an
extended mediation period;
(2) In the event that mediation does not lead to a resolution of the
dispute then at the request of any Party, the Parties shall submit the
dispute to binding arbitration before an arbitration service located
in Broward County, Florida to be selected by lot, from four
alternatives to be provided, two by the CFST and two by Explorations.
(3) (a) Expenses of mediation shall be borne equally by the Parties, if
successful.
(b) Expenses of mediation, if unsuccessful and of arbitration shall
be borne by the Party or Parties against whom the arbitration
decision is rendered.
(c) If the terms of the arbitral award do not establish a prevailing
Party, then the expenses of unsuccessful mediation and
arbitration shall be borne equally by the Parties involved.
3.9 Benefit of Agreement.
The terms and provisions of this Agreement shall be binding upon and inure
to the benefit of the Parties, their successors, assigns, personal
representatives, estate, heirs and legatees but are not intended to confer upon
any other person any rights or remedies hereunder.
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3.10 Further Assurances.
The Parties agree to do, execute, acknowledge and deliver or cause to be
done, executed, acknowledged or delivered and to perform all such acts and
deliver all such deeds, assignments, transfers, conveyances, powers of attorney,
assurances, stock certificates and other documents, as may, from time to time,
be required herein to effect the intent and purpose of this Agreement.
3.11 Counterparts.
(A) This Agreement may be executed in any number of counterparts.
(B) All executed counterparts shall constitute one Agreement notwithstanding
that all signatories are not signatories to the original or the same
counterpart.
(C) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for aesthetic
purposes, prepare a fully executed original version of this Agreement which
shall be the document filed with the Commission in conjunction with the
contemplated filing of Explorations' Form 10-SB under the Exchange Act.
In Witness Whereof, Explorations and the CFST have caused this Agreement to
be executed by themselves or their duly authorized respective officers, all as
of the last date set forth below:
Signed, sealed and delivered
In Our Presence:
Explorations Group, Inc.
/s/ Xxxxx Xxxxxxxx /s/ (A Delaware corporation)
/s/ Xxxxxxx X. Xxxxxxx /s/ By: /s/ Xxxxxxxx Xxxxxx /s/
Xxxxxxxx Xxxxxx, President
(Corporate Seal)
Attest: /s/ Xxxxxxx X. Xxxxxxx /s/
Xxxxxxx X. Xxxxxxx, Secretary
Dated: May 29, 2002
The Xxxxx Family Spendthrift Trust
/s/ Pearl Audit /s/ (a Florida trust)
/s/ Xxxxx Xxx Xxxxxxxx /s/ By: /s/ Xxxxx X. Xxxxx /s/
Xxxxx X. Xxxxx, Trustee
Dated: May 29, 2002
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Exhibit II-A-1
Certificate of Designation
Exchange Agreement - 7
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Exhibit II-A-2
Xxxxx Family Spendthrift Trust will exchange 251,313 shares of Explorations'
Common Stock currently held for 12,566 shares of Explorations' Class A-
Non-Voting, Convertible Preferred Stock.
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