Exhibit 1
Execution Copy
SHARE AND WARRANT ISSUANCE AGREEMENT
Share and Warrant Issuance Agreement (this "Agreement") dated as of May 27,
2005 by and between BUDGETHOTELS NETWORK INC., a Nevada corporation, which shall
be renamed Edentify, Inc. ("Issuer"), and FACE2FACE ANIMATION, INC., a Delaware
corporation ("Licensor").
W I T N E S S E T H :
WHEREAS, Issuer is the sole shareholder of Edentify, Inc. (a Delaware
corporation), which is the sole shareholder of InMotion Biometrics,
Inc.("InMotion");
WHEREAS, Edentify, InMotion, and Licensor, are parties to that certain
Patent and Technology License Agreement dated as of the date hereof (the
"License Agreement"), pursuant to which, among other things, Licensor is
providing to Issuer an exclusive license (the "License") to the Technology and
Patents (as defined therein) and that certain Development Agreement dated as of
the date hereof (the "Development Agreement"), pursuant to which, among other
things, Licensor is developing for Issuer certain Deliverables (as defined
therein), each on the terms set forth therein;
WHEREAS, it is a condition precedent to each of the License Agreement and
Development Agreement that Licensor and Issuer enter into this Agreement;
WHEREAS, Issuer desires to issue to the Licensor (i) seven million five
hundred thousand (7,500,000) shares (the "Shares") of the common stock, par
value $.0001 per share, of Issuer (the "Common Stock") and (ii) warrants
exercisable for one million (1,000,000) shares of Common Stock of Issuer in
substantially the form attached hereto as Exhibit A (the "Warrants," and
together with the Shares, the "Securities"), and the Licensor agrees to accept
the Securities from Issuer in consideration for the grant of the License and the
entering into of the Development Agreement, upon the terms and conditions
hereinafter set forth; and
WHEREAS, Issuer shall not have sufficient shares to issue to Licensor until
such time as Issuer has completed a 1-for-10 reverse split of its Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. ISSUANCE OF THE SECURITIES. In consideration of Licensor's execution and
delivery of the License Agreement and Development Agreement, and the grant to
Issuer of the rights provided thereunder, Issuer hereby issues and grants the
Securities to Licensor, with the delivery of the Securities to Licensor as
follows:
a. At Closing (as hereinafter defined), Issuer shall deliver to
Licensor one or more stock certificates representing two million five
hundred thousand (2,500,000) shares of Common Stock (the "Closing Shares");
b. At Closing, Issuer shall deliver to Licensor the Warrants;
c. Upon acceptance of the Product by Issuer pursuant to the
Development Agreement (which acceptance shall not be unreasonably
withheld), Issuer shall promptly deliver or cause to be delivered to
Licensor one or more stock certificates representing two million five
hundred thousand (2,500,000) shares of Common Stock; and
d. Upon the closing of a sublicense or other agreement between Issuer
and a customer relating to the Product, Issuer shall promptly deliver or
cause to be delivered to Licensor one or more stock certificates
representing two million five hundred thousand (2,500,000) shares of Common
Stock.
2. ESCROW OF SHARES; NONDELIVERY. The balance of the shares not delivered
to Licensor at Closing pursuant to subparagraphs 1(c) and (d) hereof shall be
held in escrow by Issuer for the benefit of Licensor until the conditions of
subparagraph 1(c) and 1(d) have been fulfilled or waived; it being understood
that Licensor shall have the exclusive rights during such escrow period to vote
such shares and own any dividends issued with respect thereto. In the event that
the conditions to delivery set forth in subparagraph 1(c) hereof are not met
prior to June 30, 2007 or the conditions to delivery set forth in subparagraph
1(d) hereof are not met prior to June 30, 2007, the portion of such shares to
the extent such conditions have not been satisfied shall be forfeited by
Licensor. In the event Issuer does not timely deliver to Licensor any portion of
the Securities as provided under Section 1 hereof, Issuer shall immediately pay
to Licensor (in addition to its obligations to deliver said Securities) the sum
of $100,000 in cash. In addition, in the event Issuer does not timely register
any of the Securities as provided in Section 6 hereof, at the option of Licensor
Issuer shall immediately issue and deliver to Licensor 1,920,000 shares of
Common Stock (subject to adjustment for stock dividends and the like) provided
Licensor returns to Issuer all unexercised Warrants delivered to Licensor (it
being understood that to the extent any unexercised Warrants were transferred by
Licensor and can no longer be returned to Issuer, said 1,920,000 shares of
Common Stock shall be reduced by the amount of shares of Common Stock
exercisable upon exercise of the unexercised Warrants which were transferred by
Licensor, if any).
3. CLOSING. The closing on this Share and Warrant Issuance agreement (the
"Closing") shall take place at the offices of Issuer on such date as the Closing
Shares are available for issuance by Issuer but, in any event no later than July
31, 2005.
4. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to the Licensor as of the date hereof and as of the Closing as follows:
a. Issuer has the corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement and the issuance of the Securities contemplated hereby have been
duly authorized by all necessary corporate action on the part of Issuer.
This Agreement constitutes the valid and legally binding obligation of
Issuer, enforceable against Issuer in accordance with its terms, except as
may be limited by principles of equity or by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally.
b. The Securities are duly and validly issued, fully paid and
non-assessable and free and clear of all liens, encumbrances, security
interests, restrictions, options or other restrictions other than those
imposed upon the Securities pursuant to applicable federal and state
securities laws.
c. Issuer (formerly xxxxxxxxxxxx.xxx, Inc.) was incorporated under the
laws of the State of Nevada on November 5, 1997, as Info Center
International, Inc., and, to our knowledge, is in good standing under the
laws of the jurisdiction in which it was formed.
d. The authorized capital of Issuer consists of 50,000,000 shares of
Common Stock authorized with 50,000,000 shares of Common Stock outstanding.
e. Prior to July 31, 2005, Issuer intends to complete a reverse
1-for-10 reverse split of its common stock in order to have sufficient
shares of its common stock available for issuance to Licensor under this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE LICENSOR. The Licensor hereby
represents and warrants to Issuer as of the Closing as follows:
a. The Licensor has the requisite power, capacity and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All action on the part of the Licensor necessary for
the authorization, execution, delivery and performance of this Agreement
has been taken.
b. This Agreement constitutes the valid and binding obligation of the
Licensor, enforceable against the Licensor in accordance with its terms,
except as may be limited by principles of equity or by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
c. Licensor is acquiring the shares of Issuer to be received by it,
for investment, for its own account, and not with a view to the
distribution of the Issuer shares. In such connection, Licensor further
represents and warrants that it understands that Issuer is issuing the
Issuer shares that it is designated to receive, to it in reliance upon an
exemption from the registration requirements pursuant to Section 5 of the
Securities Act (as hereinafter defined) and the rules and regulations
thereunder. Licensor agrees that the Issuer Shares (other than those shares
to be registered pursuant to this paragraph following such registration)
may not be sold, transferred, pledged, hypothecated, assigned or otherwise
disposed of by it unless Issuer shall have been supplied with evidence
reasonably satisfactory to it and its counsel that such transfer is not in
violation of the Securities Act. Furthermore, Licensor understands that the
certificates for the Issuer shares shall bear an appropriate restrictive
legend to reflect the foregoing restrictions and that stop transfer
instructions will be placed against
the Issuer shares with respect thereto. Licensor consents to the placing of
such legend on the certificates for the Issuer shares.
d. Licensor is capable of fulfilling the requirements of the
Development Agreement.
6. REGISTRATION RIGHTS.
a. DEMAND RIGHT. For a period of one (1) year commencing no later than
ninety (90) days after the Closing, Licensor shall have the right to make
one demand for Issuer to file a registration statement under the Securities
Act of 1933 (the "Securities Act") on Form SB-2 (or such other form as is
available to Issuer) (a "Registration Statement"), as amended covering the
resale of no more than five hundred thousand (500,000) (the "Registrable
Shares") of the Shares in the open market and shall maintain such
Registration Statement as effective for a continuous period lasting until
the earlier of (i) twelve (12) months from the date of effectiveness of
such registration or (ii) such time as all the Registrable Shares desired
to be registered by Licensor have been sold (the "Effectiveness Period").
b. PIGGYBACK RIGHTS. In addition to the foregoing, if at any time
during the Effectiveness Period there is not one or more Registration
Statements covering the resale of all Shares and Issuer shall determine to
prepare and file with the SEC a registration statement relating to an
offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than of Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then Issuer
shall send to Licensor written notice of such determination at least 20
calendar days prior to the filing of such registration statement and if,
within 15 calendar days after receipt of such notice Licensor shall so
request in writing, Issuer shall include in such registration statement the
Closing Shares requested by Licensor to be so included.
c. RIGHTS WITH REGARD TO SHARES UNDERLYING WARRANTS. Licensor shall
have such registration rights with respect to the shares of Common Stock
underlying the Warrants as are set forth in a registration rights agreement
provided to investors of Issuer in any offering of securities commenced
within ninety (90) days after the Closing of this Agreement. To the extent
such agreement is not entered into, Licensor shall be entitled to similar
registration rights afforded to the Closing Shares.
d. VOLUME RESTRICTIONS ON SALE OF REGISTERED SHARES. Licensor shall
sell no more than 25% of the Registrable Shares per quarter (the "Volume
Restriction") during the Effectiveness Period, provided however, that in
the event Licensor sells less than the Volume Restriction in any given
quarter, the
percentage remaining unsold may be accumulated towards and sold in
successive quarters. Notwithstanding the foregoing, Licensor may not sell
more than 50% of the Registrable Shares during any given quarter unless
such sale is during the fourth quarter of the Effectiveness Period.
7. SURVIVAL. All covenants, agreements, representations and warranties made
herein shall survive the execution and delivery of this Agreement.
8. FURTHER ASSURANCES. Licensor and Issuer shall execute and deliver all
such other documents and instruments and take any other action as may be
reasonably required by the other party to effectuate the purposes of this
Agreement.
9. ASSIGNMENT. Issuer may not assign this Agreement or its rights hereunder
without the prior written consent of Licensor.
10. ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with the License
Agreement and the Development Agreement, contain the entire agreement and
understanding between the parties with respect to the subject matter hereof, and
supersede any and all prior or contemporaneous agreements between them. No
modification, amendment, alteration or change in the terms of this Agreement
shall be effective unless same shall be in writing and signed by both of the
parties hereto.
11. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without giving effect to principles of conflict of laws.
12. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original but both of which when taken together shall
constitute one and the same instrument.
13. SEVERABILITY. In the event that any provision of this Agreement becomes
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without said
provision, and the parties agree to negotiate, in good faith, a legal and
enforceable substitute provision which most nearly effects the parties' intent
in entering into this Agreement.
IN WITNESS WHEREOF, the parties have executed this Share and Warrant
Issuance Agreement as of the day and year first above written.
ISSUER:
BUDGETHOTELS NETWORK, INC.
By: /s/ X. XxXxxxxx
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Name: X. XxXxxxxx
Title: CEO
LICENSOR:
FACE2FACE ANIMATION, INC.
By: /s/ Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
Title: Executive Chairman
