AGREEMENT
and
PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION, effective the 28th day of
July 1997 (the "Effective Date"), by and between Mr. Roger Royce ("Mr. Royce")
and FORTUNE FINANCIAL SYSTEMS, INC., a Nevada corporation ("FFS"),
WITNESSETH:
WHEREAS Mr. Royce owns 10,000 shares of common stock of Gateway
Management International, Inc. (the "Company"), which constitute 100 % of the
issued and outstanding shares of the Company (collectively, the "Company
Shares"); and
WHEREAS FFS wishes to acquire, and the Shareholder wishes to transfer
to FFS, all of his issued and outstanding Company Shares in exchange for one
million (1,000,000) shares of common voting stock of FFS (the "FFS Shares") in a
transaction intended to qualify as a reorganization within the meaning of
Internal Revenue Code Section 368(a)(1)(B), as amended;
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Closing" means the consummation of the transactions contemplated
herein, as described herein. The Closing shall be deemed to have occurred July
28, 1997.
"Material Adverse Effect" means a material adverse effect on the
business (including the continued conduct or the operation thereof in
substantially the manner currently conducted), assets, liabilities, financial
condition or results of operations.
"Party" means each of FFS and the Shareholder.
ARTICLE 2
TRANSFER AND ASSIGNMENT OF SHARES
2.1 Ownership of the Shares. He is the true and lawful owner of his
Company Shares, has good title to and is the beneficial and record owner of his
Company Shares, and has the absolute right to sell, assign and transfer his
Company Shares to FFS. His Company Shares will be conveyed to FFS free and clear
of all liens, claims, restrictions, covenants, conditions, pledges, options,
encumbrances and rights of any Persons, other than pursuant to restrictions
under applicable federal and state securities laws. He has not entered into any
other agreement to sell or otherwise transfer his Company Shares, or entered
into any agreement limiting the ability to vote or transfer his Company Shares.
All of the Company Shares are duly authorized, validly issued, fully paid and
non-assessable. There are no outstanding options, warrants, agreements, rights,
conversion privileges or other agreements of any kind to acquire any share of
capital stock in the Company, nor any outstanding rights or privileges to
acquire any such interest. No share of capital stock of the Company has been
registered under the Securities Act of 1933, as amended, nor under the
securities laws of any state in which they were or may be offered for sale. The
Company Shares constitute 100% of the issued and outstanding capital stock of
the Company.
2.2 Organization of the Company. The Company (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State in
which it was incorporated, (ii) has all requisite corporate power and authority
to own all of its properties and assets and to carry on its business as it is
now being conducted, (iii) is duly qualified to do business and is in good
standing, and is duly licensed, authorized or qualified to transact business in
each jurisdiction in which the ownership or lease of real property or the
conduct of its business requires it to be so qualified, except where the failure
to be so qualified or to be in good standing or to be duly licensed, authorized
or qualified to transact business, would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, and (iv) has all federal, state
and local government licenses, permits, approvals and other authorizations
necessary to own its properties and assets and carry on its business as it is
now being conducted, except where the failure to have such governmental
licenses, permits, approvals or other authorizations would not, individually or
in the aggregate, have a Material Adverse Effect on the Company.
2.3 Authority and Approval. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate action on
the part of Shareholder. This Agreement is a legal, valid and binding obligation
of the Shareholder, enforceable against the Shareholder in accordance with its
terms, except to the extent limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws or decisions relating to or
affecting creditors' rights generally, by equitable limitations on its enforce
ability, and by other laws or decisions of general application relating to
general principles of equity.
2.4 No Conflict. The execution, delivery and performance of this
Agreement by the Shareholder do not, and the consummation by the Shareholder of
the transactions contemplated hereby and thereby will not, violate any provision
of the Company's Articles of Incorporation or By-laws.
2.5 Brokers. The Shareholder has not employed any investment banker,
broker or finder in connection with the transactions contemplated hereby who
might be entitled to a fee or other remuneration from the Shareholder, the
Company or FFS.
2.6 Litigation. To the Shareholder's best knowledge, except as set
forth in Exhibit 3.6, there is no litigation, investigation or proceeding of or
before any arbitrator, court, agency or governmental authority pending or
threatened by or against the Company or affecting the Company Shares.
2.7 Compliance with Laws. To the best knowledge of the Shareholder, the
Company is in compliance with all laws, rules, regulations, orders, writs,
injunctions and decrees to which it or any of its assets are subject, except
where the failure would not have a Material Adverse Effect on the Company.
2.8 No Undisclosed Liability. To the best knowledge of the Shareholder,
there is no liability or obligation of any kind, whether accrued, absolute,
fixed or contingent, of the Company that is not disclosed, reflected or reserved
against in the Company's financial statements.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF FFS
As a material inducement to the Shareholder to enter into this
Agreement and to consummate the transactions contemplated hereby, FFS represents
and warrants to the Shareholder as follows:
3.1 Ownership of the Shares. FFS is the true and lawful owner of the
FFS Shares, has good title to and is the beneficial and record owner of the FFS
Shares, and has the absolute right to sell, assign and transfer the FFS Shares
to the Shareholder. The FFS Shares are owned by FFS and will be conveyed to the
Shareholder free and clear of all liens, claims, restrictions (except as
required under Rule 144 of the Securities and Exchange Commission), covenants,
conditions, pledges, options, encumbrances and rights of any Persons, other than
pursuant to restrictions under applicable federal and state securities laws. The
FFS Shares are common voting stock of FFS, eligible to vote in the election of
corporate directors of FFS. The FFS Shares constitute approximately five and
one-half percent (51/2%) of the issued and outstanding capital stock of FFS. FFS
has not entered into any other agreement to sell or otherwise transfer the FFS
Shares, nor has FFS entered into any agreement limiting the ability to vote or
transfer the FFS Shares. All FFS Shares transferred pursuant to this Agreement
are duly authorized, validly issued, fully paid and non-assessable, and are not
subject to dilution except in the same proportion as all other shares of FFS, in
connection with new issues for public distribution or for the purpose of
facilitating an acquisition or merger.
3.2 Organization of the Company. FFS(i)is a corporation duly organized,
validly existing and in good standing under the laws of the State in which it
was has all requisite incorporated, (ii) has all requisite corporate power and
authority to own all of its properties and assets and to carry on its business
as it is now being conducted, (iii) is duly qualified to do business and is in
good standing, and is duly licensed, authorized or qualified to transact
business in each jurisdiction in which the ownership or lease of real property
or the conduct of its business requires it to be so qualified, except where the
failure to be so qualified or to be in good standing or to be duly licensed,
authorized or qualified to transact business, would not, individually or in the
aggregate, have a Material Adverse Effect on FFS, and (iv) has all federal,
state and local government licenses, permits, approvals and other authorizations
necessary to own its properties and assets and carry on its business as it is
now being conducted, except where the failure to have such governmental
licenses, permits, approvals or other authorizations would not, individually or
in the aggregate, have a Material Adverse Effect on FFS.
3.3 Authority and Approval. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate action on
the part of FFS. This Agreement is a legal, valid and binding obligation of FFS,
enforceable against FFS in accordance with its terms, except to the extent
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws or decisions relating to or affecting creditors' rights generally,
by equitable limitations on its enforce ability, and by other laws or decisions
of general application relating to general principles of equity.
3.4 No Conflict. The execution, delivery and performance of this
Agreement by FFS do not, and the consummation by FFS of the transactions
contemplated hereby and thereby will not, violate any provision of FFS's
Articles of Incorporation or By-laws.
3.5 Brokers. FFS has not employed any investment banker, broker or
finder in connection with the transactions contemplated hereby who might be
entitled to a fee or other remuneration from the Shareholder, the Company or The
Shareholder.
3.6 Disclosure. No representation or warranty of FFS contained in this
Agreement and no statement contained in any certificate, list, schedule, exhibit
or other instruments furnished or to be furnished to the Shareholder pursuant
hereto, or in any connection with the transaction contemplated hereby, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material fact which is necessary in order to make the statements
contained herein not misleading.
3.7 Litigation. To FFS's best knowledge there is no litigation,
investigation or proceeding of or before any arbitrator, court, agency or
governmental authority pending or threatened by or against FFS or affecting the
FFS Shares.
3.8 Compliance with Laws. To the best knowledge of FFS, FFS is in
compliance with all laws, rules, regulations, orders, writs, injunctions and
decrees to which it or any of its assets are subject, except where the failure
would not have a Material Adverse Effect on FFS.
3.9 No Undisclosed Liability. To the best knowledge of FFS, there is no
liability or obligation of any kind, whether accrued, absolute, fixed or
contingent, of FFS that is not disclosed, reflected or reserved against in the
FFS financial statements.
ARTICLE 4
COVENANTS OF FFS AND SHAREHOLDER
4.1 Mutual Cooperation. Following the execution of this Agreement, FFS
and the Shareholder agree:
(a) If any event should occur, either within or without the knowledge
or control of FFS or the Shareholder, which would prevent fulfillment of the
conditions to the obligations of any party hereto, to use his or their
commercially reasonable efforts to cure the same as expeditiously as possible;
and
(b) To cooperate fully with each other in preparing, filing,
prosecuting and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party, to accomplish the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS OF FFS AND SHAREHOLDER
5.1 Mutual Cooperation. Following the execution of this
Agreement, FFS and the -Shareholder agree:
(a) If any event should occur, either within or
without the knowledge or control of FFS or the Shareholder, which would prevent
fulfillment of the conditions to the obligations of any party hereto, to use his
or their commercially reasonable efforts to cure the same as expeditiously as
possible; and
(b) To cooperate fully with each other in
preparing, filing, prosecuting and taking any other actions which are or may be
reasonable and necessary to obtain the consent of any governmental
instrumentality or any third party, to accomplish the transactions contemplated
by this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
SHAREHOLDER
The obligations of the Parties to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the following
conditions, any of which may be waived by the Shareholder.
6.1 Filings; Consents; Waiting Periods. All registrations,
filings, applications, notices, transfers, consents, approvals, orders,
qualifications, waivers and other actions of any kind required of any Persons in
connection with the consummation of the transactions contemplated in this
Agreement have been filed, made or obtained and all applicable waiting periods
shall have expired or been terminated.
6.2 Deliveries by FFS. FFS shall have made delivery to the
Shareholder of the documents and items specified in Section 8.3.
6.3 Representations and Warranties of FFS. All representations
and warranties made by FFS in this Agreement shall be true and correct on and as
of the Effective Date, as if made by FFS on and as of that date.
6.4 Performance of Obligations of FFS. FFS shall have
performed and complied with the covenants, agreements, obligations and
conditions required by this Agreement to be performed or complied with by FFS at
or prior to the Effective Date.
6.5 Absence of Action Restraining or Affecting Transaction. No
action or proceeding by any Person or court shall have been instituted or
threatened to restrain or prohibit the consummation of the transactions
contemplated by this Agreement.
ARTICLE 7
TERMINATION
7.1 Events of Termination. Notwithstanding any provision to
the contrary herein, this Agreement may be terminated at any time on or prior to
the Effective Date:
(a) By mutual written consent of the Shareholder
and FFS;
(b) By either the Shareholder or FFS in the
event any federal or state agency having jurisdiction over the approval of the
transactions contemplated hereby disapproves of any part of such transactions;
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF FFS
The obligations of FFS to consummate the transactions
contemplated by this Agreement are subject to the satisfaction on or prior to
the Effective Date of all of the following conditions, any of which may be
waived by FFS:
8.1 Filings.- Consents; Waiting Periods. All registrations,
filings, applications, notices, transfers, consents, approvals, orders,
qualifications, waivers and other actions of any kind required of any Persons in
connection with the consummation of the transactions contemplated in this
Agreement have been filed, made or obtained and all applicable waiting periods
shall have expired or been terminated.
8.2 Deliveries by the Shareholder. The Shareholder shall have
made delivery to FFS of the documents and items specified in Section 8.2.
8.3 Representations and Warranties of the Shareholder. All
representations and warranties made by the Shareholder in this Agreement shall
be true and correct on and as of the Effective Date, as if made by the
Shareholder on and as of that date.
8.4 Performance of Obligations of the Shareholder. The
Shareholder shall have performed and complied with all the covenants,
agreements, obligations and conditions required by this Agreement to be
performed or complied with by the Shareholder at or prior to the Effective Date.
8.5 Absence of Action Restraining or Affecting Transaction. No
action or proceeding by any Person or court shall have been instituted or
threatened to restrain or prohibit the consummation of the transactions
contemplated by this Agreement.
ARTICLE 9
MANAGEMENT OF THE COMPANY
9.1 Financial Management. FFS agrees that it will permit the
Company to operate autonomously so long as the Board of Directors of the Company
meets its obligation to exercise good business judgment and to fulfill its
obligations to Shareholder as set forth in the By-laws of the Company. FFS
agrees not to adopt a dividend policy for the Company inconsistent with the
provisions of this Agreement.
9.2 Actions Requiring Unanimous Consent. Notwithstanding any
other requirement set forth herein or the Articles of Incorporation of the
Company, the Parties expressly agree that a unanimous vote of all of the
directors of the Company who form a quorum of Directors convened to discuss such
issues, after due notice, shall be obtained before any of the following actions
shall be taken by the Company: (a) the appointment of any new or replacement
Directors of the Company; (b) the issuance of any shares, or of any warrants or
debentures, options or rights in or to shares of the common or other capital
stock of the Company; (c) any pledge, mortgage, sale, lease or other transfer,
except in normal course of business or as part of a complete dissolution or
winding up, or any material portion of its business; (d) any merger,
consolidation or amalgamation with or into another company or corporation; (e)
any change to, or the conduct of any business outside, the general business of
the Company; (f) the incurring of any indebtedness to any third person or entity
for borrowed funds or for the deferred purchase price of purchased goods, or any
other indebtedness of any kind, except as otherwise permitted herein; (g) the
extension of credit to any one debtor in an amount exceeding US$10,000 or its
equivalent in another currency; (h) the agreement of the Company to waive or not
enforce any rights it may have under any agreements, or in respect of
transactions to which it may be a party; (i) the adoption of any dividend policy
calling for the payment of dividends greater than the amounts required to meet
the objectives of this Agreement, or any departure from the dividend policies
set forth herein or in any of the Articles of Incorporation; provided, however,
that the Board of Directors may establish the initial dividend policy consistent
with the terms of this Agreement; or 0) any change in the outside auditors of
the Company.
ARTICLE 10
MISCELLANEOUS
10.1 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by the
Parties and delivered to each other Party.
10.2 Governing Law; Arbitration. This Agreement shall be
governed by and construed in accordance with the laws of the State of Utah
without reference to the choice of law principles thereof. Any controversy or
claim arising out of or in connection with this Agreement shall be finally
settled in accordance with the Commercial Arbitration Rules and supplementary
procedures for commercial arbitrations of the American Arbitration Association
(the "AAA") then in force, by submitting such dispute for binding arbitration
before a jointly-designated arbitrator. If the Parties are unable to agree on a
single arbitrator, then such binding arbitration shall be conducted before a
panel of three arbitrators that shall be chosen as follows: each Party shall
designate one arbitrator and such arbitrators shall designate a third
arbitrator. This arbitration provision shall be deemed to be self executing, and
in the event that either Party fails to appear at any properly noticed
arbitration proceeding award may be entered against such Party notwithstanding
such failure to appear. Any award granted by such arbitral panel shall be
self-executing, to the greatest extent permitted by applicable law, and in any
case shall be eligible for entry of judgment and for enforcement by a court of
appropriate and competent jurisdiction. The location or site of such arbitration
proceeding shall be (i) Salt Lake City, Utah, or (ii) another location mutually
acceptable to the Parties, or (iii) if for any reason it is or becomes
impossible or impracticable for the Parties to conduct arbitration proceedings
in Salt Lake City, Utah and the Parties are unable to agree on another location,
then at a location determined by the American Arbitration Association. Nothing
in this Section shall be construed or deemed to prevent either party from
seeking injunctive relief pursuant to the terms hereof in a court of appropriate
jurisdiction.
10.3 Entire Agreement. This Agreement and the Exhibits
attached hereto and made a part hereof contain the entire agreement between the
Parties, and there are no agreements, understandings, representations or
warranties between the Parties other than those set forth or referred to herein.
10.4 Expenses. Except as set forth in this Agreement, FFS and
the Shareholder shall be responsible for their own legal and other costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
10.5 Notices. All notices hereunder shall be sufficiently
given for all purposes hereunder if in writing and (i) delivered personally,
(ii) sent by certified mail, postage prepaid, (iii) sent by overnight courier or
(iv) sent by facsimile transmission, to the appropriate address as set forth
below. Notices to the Shareholder shall be addressed to:
Mr. Roger Royce
4362 South Parkview
Salt Lake City, Utah 84124
Telephone: (801) 273-8517
Facsimile: (801) 273-8516
or at such other address and to the attention of such other person
as Shareholder or the Company may designate by notice to FFS Notices to FFS
shall be addressed to:
Fortune Financial System, Inc.
1200 West State Road 434
Longwood, FL 32750
Attention: Mr. James Byrd
Telephone: (407) 331-1272
Facsimile: (407) 331-3327
or at such other address and to the attention of such other person
as FFS may designate by notice to Shareholder.
Any notice hereunder shall be deemed to have been served or
given as of (a) the date such notice is personally delivered, (b) three business
days after it is mailed certified U.S. mail, First Class postage prepaid, (c)
one business day after it is sent for overnight delivery by Federal Express or
similar next-day courier, or (d) the same day as it is sent by facsimile
transmission with confirmation of receipt.
10.6 Successors and Assigns. The rights and obligations of any
party to this Agreement shall not be assignable by such party without the prior
written consent of all other Parties. Notwithstanding the previous sentence,
this Agreement may be assigned by FFS to any Affiliate of FFS without the
Shareholder's prior written consent; provided, however, no such assignment shall
have the effect of releasing or reducing the obligations of FFS pursuant to this
Agreement, or any other instruments, agreements or covenants provided in or
contemplated by this Agreement. This Agreement shall inure to the benefit and
shall be binding upon the respective successors and permitted assigns of the
Parties. Nothing herein expressed or implied is intended to confer upon any
person, other than to the Parties or their respective heirs, personal
representatives, successors or permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
10.7 Headings. The headings contained in this Agreement are
solely for convenience of reference and shall not affect its interpretation.
10.8 Severability of Provisions. In the event that any of the
provisions contained herein would be held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason because of the scope, duration
or area of its applicability or for other reasons, unless narrowed by
construction, such provision shall for purposes of such jurisdiction only, be
construed as if such invalid, prohibited or unenforceable provision had been
more narrowly drawn so as not to be invalid, prohibited or unenforceable (or if
such language cannot be drawn narrowly enough, the court making any such
determination shall have the power to modify, to the extent necessary to make
such provision or provisions enforceable in such jurisdiction, such scope,
duration or area or all of them, and such provision shall then be applicable in
such modified form). If, notwithstanding the foregoing, any such provision would
be held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, such provision, as to such jurisdiction only, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability, without
invalidating the remaining provisions. No narrowed construction,
court-modification or invalidation of any provision shall affect the
construction, validity or enforce ability of such provision in any other
jurisdiction. Subject to the foregoing, in case any one or more of the
provisions contained in this Agreement or any other documents executed in
connection herewith should be invalid, illegal or unenforceable in any respect,
the validity, legality and unenforceability of the remaining provisions
contained herein and therein shall not be affected in any way thereby.
10.9 Gender. Whenever in this Agreement any masculine,
feminine or neuter pronoun is used, such pronouns shall also include the other
genders whenever required by the context.
10.10 Further Assurances. The Shareholder and FFS shall each
execute and deliver instruments and take such other actions as may be reasonably
required in order to carry out the intent of this Agreement.
10.11 Public Announcement. Neither FFS, Shareholder nor the
Company shall make any announcement or issue any press release relating to this
Agreement or the transactions contemplated hereby without the consent of the
other Parties.
10.12 Amendment; Waiver. This Agreement may be amended,
modified, superseded or canceled, and any of its terms, covenants,
representations, warranties or conditions hereof may be waived, only by a
written instrument executed by FFS and the Shareholder or, in the case of a
waiver, by the party waiving compliance. The failure of any party at any time or
times to require performance of any provision hereof shall in no manner affect
the right of such party at a later time to enforce the same. No waiver by any
party of any condition, or of the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be construed as a
further or continuing waiver of any such condition or of the breach of any other
provision, term, covenant, representation or warranty of this Agreement.
10.13 Costs. In the event litigation is instituted between or
among any of the Parties, with respect to all or any part of this Agreement, the
prevailing party therein shall be entitled to recover, in addition to all other
relief obtained, its costs, expenses and fees, including reasonable attorneys'
fees incurred in such litigation.
IN WITNESS WHEREOF, this Amended and Restated Agreement and
Plan of Reorganization has been signed by or on behalf of the Parties as of the
day and year first above written.
Shareholder
/s/ Roger C. Royce
------------------
Roger C. Royce
Fortune Financial Systems, Inc.
/s/ James S. Byrd
-----------------
James S. Byrd
Schedule A
1. License Agreement to use "Academic Excellence Institute"
trademarks
2. Distribution Agreement for "Business of Learning Programs" - A
tutor training program
3. Distribution Agreement for " EZ Math" Level I and Level 2 -
Accelerated Math Leaning Program utilizing manipulatives for
parents and tutors..
4. Distribution Agreement for "Teach Your Child to Read Using the
Bible. "- A Reading Program with phonetics for parents and
tutors..
5. Distribution Agreement for "Readwrite II'- A Integrated
Reading and Writing Program with phonetics for parents and
tutors..