Exhibit 10.1
REORGANIZATION AND
STOCK PURCHASE AGREEMENT
by and between
Fransaction, Inc.,
a Florida corporation
and
Ultimate Franchise Systems, Inc.,
a Nevada corporation
on the one hand
and
The Halls of Hip Hop, Inc.,
a Delaware corporation,
and
its shareholders
on the other hand
REORGANIZATION AND STOCK PURCHASE AGREEMENT
This Reorganization and Stock Purchase Agreement (the "Agreement") is
dated as of April 14, 2005 by and between Fransaction, Inc., a Florida
corporation ("Fransaction"), and Ultimate Franchise Systems, Inc., a Nevada
corporation ("UFSY"), on the one hand, and The Halls of Hip Hop, Inc., a
Delaware corporation ("Hip Hop" or the "Target Company") and its shareholders
(the "Shareholders"), on the other hand. Each of Fransaction, UFSY, Hip Hop, and
the Shareholders shall be referred to as a "Party" and collectively as the
"Parties."
W I T N E S S E T H
WHEREAS, the Shareholders own 100% of the issued and outstanding common
stock of Hip Hop as set forth in Exhibit A attached hereto (the "Target
Shares");
WHEREAS, the Shareholders desire to sell, and Fransaction desires to
purchase, all of the Target Shares in accordance with the terms set forth
herein;
WHEREAS, the Parties desire and intend that the transactions
contemplated by this Agreement will be a tax free reorganization under Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
NOW THEREFORE, in consideration of the premises and respective mutual
agreements, covenants, representations and warranties herein contained, it is
agreed between the Parties hereto as follows:
ARTICLE 1
SALE AND PURCHASE OF THE TARGET SHARES
1.1 Sale of the Target Shares. At the Closing, subject to the terms and
conditions herein set forth, and on the basis of the representations, warranties
and agreements herein contained, the Shareholders shall sell to Fransaction, and
Fransaction shall purchase from the Shareholders, all of the Target Shares.
1.2 Purchase Price. As consideration for the purchase of the Target
Shares, Fransaction shall pay the following (the "Purchase Price"):
1.2.1 Fransaction shall issue to the Shareholders, as set
forth in Exhibit A attached hereto and made a part hereof, a total of
One Million Five Hundred Thousand (1,500,000) shares of Fransaction
common stock (the "Fransaction Common Shares"); and
1.2.2 Fransaction shall issue to the Shareholders, as set
forth in Exhibit A attached hereto and made a part hereof, a total of
Three Hundred Thousand (300,000) shares of Fransaction Series B
Convertible Preferred Stock (the "Fransaction Series B Shares"), the
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rights, privileges, and preferences of which are set forth in that
Certificate of Designation attached hereto as Exhibit B (the "Series B
Certificate of Designation").
1.3 Additional Transactions. As consideration for the purchase and sale
of the Target Shares, the following transactions shall take place:
1.3.1 UFSY shall transfer Seven Million Five Hundred Thousand
(7,500,000) shares of common stock of Fransaction (the "Control
Shares") to the Shareholders as set forth in Exhibit A;
1.3.2 Fransaction will issue to UFSY, in exchange for the
transfer of the Control Shares, One Hundred Fifty Thousand (150,000)
shares of Fransaction Series A Convertible Preferred Stock (the
"Fransaction Series A Shares"), the rights, privileges, and preferences
of which are set forth in that certain Certificate of Designation
attached hereto as Exhibit C (the "Series A Certificate of
Designation");
1.3.3 Six Hundred Thirty Five Thousand (635,000) shares of
Fransaction common stock, currently issued to "1 Potato 2", "Wrapster"
and "Fransaction" will be cancelled without consideration;
1.3.4 Public Corporate Consultants, Inc., a Florida
corporation ("PCC") and Roy Meadows, an individual ("Meadows"), the
holders of warrants to purchase a total of Three Million (3,000,000)
shares of Fransaction common stock (the "Consultant Warrants"), will
assign one-half (1/2) of the Consultant Warrants to the Shareholders as
set forth in Exhibit A;
1.3.5 One Million Two Hundred Eighty Nine Thousand Three
Hundred Sixty Three and Seventy-Five-One-Hundredths (1,289,363.75)
shares of Fransaction common stock currently held in escrow by The
Lebrecht Group, APLC (the "Escrow Shares") will be transferred to the
parties as set forth in Schedule 1.3.5;
1.3.6 PCC will terminate its options to acquire One Million
(1,000,000) of the Escrow Shares, effective as of the Closing Date;
1.3.7 As of the Closing Date, UFSY shall have acquired all of
the assets and assumed all of the liabilities of Fransaction in
accordance with Section 1.4 hereof.
1.4 Purchase and Sale of Assets; Assumption of Liabilities. As
additional consideration for the transactions contemplated by this Agreement,
the following transactions shall take place:
1.4.1 As of the Closing Date, Fransaction shall sell, convey,
assign, transfer and deliver to UFSY, and UFSY shall purchase and
acquire from Fransaction, all of Fransaction's right, title, and
interest in and to all of Fransaction's property and assets, real,
personal or mixed, tangible and intangible, of every kind and
description, wherever located (the "Fransaction Assets").
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1.4.2 As of the Closing Date, UFSY shall assume and agree to
discharge all of the obligations of Fransaction (the "Assumed
Liabilities"). For purposes of this Agreement, the term "Liabilities"
means any existing liability, obligation, debt, account payable, lease
obligation, contract, agreement, duty or commitment of Fransaction of
any kind, character or description, whether known or unknown, absolute
or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to
become due, vested or unvested, executory, determined, determinable or
otherwise, and whether or not the same is required to be accrued on the
financial statements of Fransaction.
1.4.3 FCTN shall not assume and shall not be obligated to pay
any liability or obligation previously owed by FCTN or any lien or
encumbrance on the assets previously owned by FCTN. UFSY agrees to
indemnify, defend and hold FCTN harmless from and against any loss or
liability (including reasonable attorney's fees) arising out of; or
resulting from, operation of FCTN's business prior to the date of
closing, including but not limited to all obligations and liabilities
to be assumed by UFSY; and from and against any and all loss, liability
or deficiency (including reasonable attorney's fees) arising out of or
resulting from any misrepresentation, breach of warranty or covenant of
UFSY under this Agreement, or under any certificate, agreement,
appendix, schedule or instrument furnished H3 or its Shareholders
pursuant to this Agreement or in connection with any of the
transactions contemplated hereby. The above notwithstanding, UFSY shall
have no responsibility for breach of a representation or warranty, or
for failure to perform any covenant under this Agreement unless H3 or
its Shareholders give UFSY written notice of any such claim prior to
the expiration of six months following the date such claim arises, or
six months following the date of discovery or the date such claim
should have been discovered with reasonable diligence.
1.4.4 H3 or its Shareholders shall notify UFSY in writing
after the occurrence of any event or the discovery of any fact which,
in its opinion, entitles or may entitle it to indemnification under
this paragraph, provided that the failure to give such notice shall not
affect the liability of UFSY under this paragraph except to the extent
that it can prove that a failure to give such notice adversely affects
to a material degree its ability to defend itself against a claim or to
cure a default giving rise to a claim. With respect to a threatened or
asserted claim by third parties, UFSY, subject to the provisions of
this paragraph, shall, at its expense, promptly defend such claim in a
manner which would be required by the exercise of reasonable prudence
by counsel of its own choosing acting in the exercise of its reasonable
discretion. H3 or its Shareholders shall cooperate with UFSY in such
defense, but H3 or its Shareholders shall not be required to incur any
expense.
1.4.5 If UFSY, within a reasonable time after notice of claim,
fails to defend H3 or its Shareholders in a manner which would be
required by the exercise of reasonable prudence, in the judgment of H3
or its Shareholders, acting in the exercise of its reasonable
discretion, H3 or its Shareholders shall be entitled to undertake the
defense, compromise or settlement at the expense of and for the account
and risk of UFSY.
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1.4.6 H3 and its Shareholders agree to indemnify, defend and
hold UFSY harmless from and against any loss or liability arising out
of, or resulting from, the operation of FCTN or H3 from and after the
closing date; and from and against any and all loss, liability or
deficiency (including reasonable attorney's fees) arising out of, or
resulting from, any misrepresentation, breach of warranty or covenant
of H3 or its Shareholders under this Agreement or under any
certificate, agreement, appendix, schedule or instrument furnished to
UFSY pursuant to this Agreement or in connection with any of the
transactions contemplated hereby, provided that the following
limitations shall be applicable:
(A) UFSY will notify H3 and its Shareholders in
writing after the occurrence of any event, or the discovery of
any fact which, in its opinion, entitles it or may entitle it
to indemnification under this paragraph, provided that the
failure to give such notice shall not affect the liability of
H3 or its Shareholders under this paragraph except to the
extent it can prove that the failure to give such notice
adversely affected to a material degree its ability to defend
against a claim or to cure a default giving rise to a claim.
With respect to asserted or threatened claims by third
parties, H3 or its Shareholders, at its expense, shall
promptly defend such claim in a manner which would be required
by the exercise of reasonable prudence by counsel of its own
choosing acting in the exercise of its reasonable discretion.
Without the written consent of UFSY (which shall not be
unreasonably withheld), neither H3 nor its Shareholders will
settle or compromise any claim or consent to the entry of any
judgment which does not include as an unconditional term
thereof, the giving by the claimant or plaintiff to UFSY of a
release of all liability in respect to such claim.
(B) If H3 or its Shareholders, within a reasonable
time after notice of claim, fails to defend UFSY in a manner
required by reasonable prudence, UFSY shall be entitled to
undertake the defense, compromise or settlement of such claim
at the expense of and for the account and risk of H3 or its
Shareholders.
1.4.7 If UFSY, within a reasonable time after notice of claim,
fails to defend H3 or its Shareholders UFSY agrees to indemnify, defend
and hold H3 and its shareholders harmless from and Neither H3 nor its
Shareholders shall have liability for breach of a representation or a
warranty or failure to perform any covenant under this Agreement unless
UFSY gives H3 and its Shareholders written notice of a claim prior to
the expiration of six months from the date of this Agreement, or unless
the claim relates to a tax liability, or unless the claim was not known
or discoverable by UFSY with reasonable diligence within such six month
period, in which event notice must be given within six months following
the date of discovery, or the date such claim should have been
discovered with reasonable diligence.
1.4.8 If, after the closing, any claim is asserted against
FCTN, H3 or its Shareholders as a result of an unsatisfied obligation
assumed by UFSY pursuant to this Agreement, then H3 will notify UFSY of
such claim and, within ten days following such notification, UFSY shall
commence proceedings to contest the claim or to defend H3 against the
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claim. If UFSY fails to contest or defend the claim, or if contested, a
final and non-appealable order in favor of the claimant is entered,
then H3 may pay the claim and set off the amount paid against all sums
due on the notes delivered to UFSY at the closing.
1.4.9 Any dispute regarding indemnification shall be resolved
by arbitration conducted pursuant to the Rules of the American
Arbitration Association. The arbitrator shall be selected by agreement
of the parties, but if they cannot agreed within twenty days of any
objection to a claim for indemnification, or if not objection is made
thereto prior to twenty following the demand, the selection shall be
made pursuant to the Rules of the American Arbitration Association. Any
award rendered by an arbitrator shall be conclusive and binding on the
parties hereto. The parties shall each pay their own expenses of
arbitration and the expense of the arbitrator shall be shared one-half
by H3 and one-half by UFSY, provided that the arbitrator shall be
entitled to award the prevailing party reasonable expenses (including
reasonable legal fees and costs) from the other party.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE TARGET COMPANY AND THE SHAREHOLDERS
2.1 Representations and Warranties of the Target Company and the
Shareholders. To induce Fransaction and UFSY to enter into this Agreement and to
consummate the transactions contemplated hereby, the Target Company and the
Shareholders, and each of them, represent and warrant as of the date hereof and
as of the Closing, as follows:
2.1.1 Authority of the Target Company and the Shareholders;
Transfer of Target Shares. The Target Company and the Shareholders have
the full right, power and authority to enter into this Agreement and to
carry out and consummate the transactions contemplated herein. This
Agreement, and all of the Exhibits attached hereto, constitutes the
legal, valid and binding obligation of the Target Company and the
Shareholders. The Shareholders shall transfer title in and to the
Target Shares to Fransaction free and clear of all liens, security
interests, pledges, encumbrances, charges, restrictions, demands, and
claims of any kind or nature whatsoever, whether direct or indirect or
contingent.
2.1.2 Corporate Existence of Target Company. The Target
Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware. The Target Company
has all requisite corporate power, franchises, licenses, permits and
authority to own its properties and assets and to carry on its business
as it has been and is being conducted. The Target Company is in good
standing in each state, nation or other jurisdiction wherein the
character of the business transacted by it makes such qualification
necessary.
2.1.3 Capitalization of Target Company. The authorized equity
securities of the Target Company consists of 50,000,000 shares of
common stock, par value $0.001, of which 50,000,000 shares are issued
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and outstanding. No other shares of capital stock of the Target Company
are issued and outstanding. All of the issued and outstanding shares of
the Target Company have been duly and validly issued in accordance and
compliance with all applicable laws, rules and regulations and are
fully paid and nonassessable. There are no options, warrants, rights,
calls, commitments, plans, contracts or other agreements of any
character granted or issued by the Target Company which provide for the
purchase, issuance or transfer of any shares of the capital stock of
the Target Company nor are there any outstanding securities granted or
issued by the Target Company that are convertible into any shares of
the equity securities of the Target Company, and none is authorized.
The Target Company is not obligated or committed to purchase, redeem or
otherwise acquire any of its equity. All presently exercisable voting
rights in the Target Company are vested exclusively in its outstanding
shares of common stock, each share of which is entitled to one vote on
every matter to come before it's shareholders, and other than as may be
contemplated by this Agreement, there are no voting trusts or other
voting arrangements with respect to any of the Target Company's equity
securities.
2.1.4 Subsidiaries. "Subsidiary" or "Subsidiaries" means all
corporations, trusts, partnerships, associations, joint ventures or
other Persons, as defined below, of which a corporation or any other
Subsidiary of such corporation owns not less than twenty percent (20%)
of the voting securities or other equity or of which such corporation
or any other Subsidiary of such corporation possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies, whether through ownership of voting shares,
management contracts or otherwise. "Person" means any individual,
corporation, trust, association, partnership, proprietorship, joint
venture or other entity. The Target Company does not have any
Subsidiaries.
2.1.5 Execution of Agreement. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any Party any right
to declare any default or acceleration upon notice or passage of time
or both), in whole or in part, any charter, article of incorporation,
bylaw, mortgage, lien, deed of trust, indenture, lease, agreement,
instrument, order, injunction, decree, judgment, law or any other
restriction of any kind to which the Target Company, its Subsidiaries,
or the Shareholders are a party or by which any of them or any of their
properties are bound; (b) result in the creation of any security
interest, lien, encumbrance, adverse claim, proscription or restriction
on any property or asset (whether real, personal, mixed, tangible or
intangible), right, contract, agreement or business of the Target
Company, its Subsidiaries, or the Shareholders; (c) violate any law,
rule or regulation of any federal or state regulatory agency; or (d)
permit any federal or state regulatory agency to impose any
restrictions or limitations of any nature on the Target Company, its
Subsidiaries, or the Shareholders or any of their respective actions.
2.1.6 Taxes.
2.1.6.1 All taxes, assessments, fees, penalties,
interest and other governmental charges with respect to the
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Target Company and its Subsidiaries which have become due and
payable on the date hereof have been paid in full or
adequately reserved against by the Target Company, (including
without limitation, income, property, sales, use, franchise,
capital stock, excise, added value, employees' income
withholding, social security and unemployment taxes), and all
interest and penalties thereon with respect to the periods
then ended and for all periods thereto;
2.1.6.2 There are no agreements, waivers or other
arrangements providing for an extension of time with respect
to the assessment of any tax or deficiency against the Target
Company or its Subsidiaries, nor are there any actions, suits,
proceedings, investigations or claims now pending against the
Target Company or its Subsidiaries, nor are there any actions,
suits, proceedings, investigations or claims now pending
against the Target Company or its Subsidiaries in respect of
any tax or assessment, or any matters under discussion with
any federal, state, local or foreign authority relating to any
taxes or assessments, or any claims for additional taxes or
assessments asserted by any such authority, and there is no
basis for the assertion of any additional taxes or assessments
against the Target Company or its Subsidiaries; and
2.1.6.3 The consummation of the transactions
contemplated by this Agreement will not result in the
imposition of any additional taxes on or assessments against
the Target Company or its Subsidiaries.
2.1.7 Disputes and Litigation. There is no suit, action,
litigation, proceeding, investigation, claim, complaint, or accusation
pending, threatened against or affecting the Target Company, its
Subsidiaries, or any of their properties, assets or business or to
which they are a party, in any court or before any arbitrator of any
kind or before or by any governmental agency (including, without
limitation, any federal, state, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality), and
there is no basis for such suit, action, litigation, proceeding,
investigation, claim, complaint, or accusation; (b) there is no pending
or threatened change in any environmental, zoning or building laws,
regulations or ordinances which affect or could affect the Target
Company, its Subsidiaries, or any of their properties, assets or
businesses; and (c) there is no outstanding order, writ, injunction,
decree, judgment or award by any court, arbitrator or governmental body
against or affecting the Target Company, its Subsidiaries, or any of
their properties, assets or business. There is no litigation,
proceeding, investigation, claim, complaint or accusation, formal or
informal, or arbitration pending, or any of the aforesaid threatened,
or any contingent liability which would give rise to any right of
indemnification or similar right on the part of any director or officer
of the Target Company or its Subsidiaries, or any such person's heirs,
executors or administrators as against the Target Company or its
Subsidiaries.
2.1.8 Compliance with laws. The Target Company and its
Subsidiaries have at all times been, and presently are, in full
compliance with, and have not received notice of any claimed violation
of, any applicable federal, state, local, foreign and other laws, rules
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and regulations. The Target Company and its Subsidiaries have filed all
returns, reports and other documents and furnished all information
required or requested by any federal, state, local or foreign
governmental agency and all such returns, reports, documents and
information are true and complete in all respects. All permits,
licenses, orders, franchises and approvals of all federal, state, local
or foreign governmental or regulatory bodies required of the Target
Company and its Subsidiaries for the conduct of their business have
been obtained, no violations are or have been recorded in respect of
any such permits, licenses, orders, franchises and approvals, and there
is no litigation, proceeding, investigation, arbitration, claim,
complaint or accusation, formal or informal, pending or threatened,
which may revoke, limit, or question the validity, sufficiency or
continuance of any such permit, license, order, franchise or approval.
Such permits, licenses, orders, franchises and approvals are valid and
sufficient for all activities presently carried on by the Target
Company and its Subsidiaries.
2.1.9 Guaranties. The Target Company and its Subsidiaries have
not guaranteed any dividend, obligation or indebtedness of any Person;
nor has any Person guaranteed any dividend, obligation or indebtedness
of the Target Company or its Subsidiaries.
2.1.10 Books and Records. The Target Company and its
Subsidiaries keep their books, records and accounts (including, without
limitation, those kept for financial reporting purposes and for tax
purposes) in accordance with good business practice and in sufficient
detail to reflect the transactions and dispositions of their assets,
liabilities and equities. The minute books of the Target Company and
its Subsidiaries contain records of their shareholders' and directors'
meetings and of action taken by such shareholders and directors. The
meetings of directors and shareholders referred to in such minute books
were duly called and held, and the resolutions appearing in such minute
books were duly adopted. The signatures appearing on all documents
contained in such minute books are the true signatures of the persons
purporting to have signed the same. Attached hereto as Exhibit D is (a)
an income statement and a balance sheet as of and for the year ended
December 31, 2004, (b) an income statement for the quarter ended
December 31, 2004, and (c) an income statement and a balance sheet as
of the Closing Date and for the period from January 1, 2005 through the
Closing Date. Attached hereto as Exhibit E is a list of all contracts
to which the Target Company and its Subsidiaries are a party or
obligated as of the Closing Date, and the Target Company hereby
represents and warrants that there are no other material contracts or
agreements in existence as of the Closing Date.
2.1.11 Securities to be Restricted Securities. The
Shareholders acknowledge that all of the Fransaction Common Shares,
Fransaction Series B Shares, and the Control Shares will be "restricted
securities" (as such term is defined in Rule 144 promulgated under the
Securities Act of 1933, as amended ("Rule 144")), and will include the
restrictive legend set forth in Section 4.2.1(a) hereof, and, except as
otherwise set forth in this Agreement, that the shares cannot be sold
for a period of at least one year from the date of issuance unless
registered with the United States Securities and Exchange Commission
("SEC") and qualified by appropriate state securities regulators, or
unless the Shareholders obtain written consent from Fransaction and
otherwise comply with an exemption from such registration and
qualification (including, without limitation, compliance with Rule
144).
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2.1.12 Acknowledgement of Post-Closing Capital Structure. The
Target Company and each of the Shareholders acknowledge that the
capital structure of Fransaction as of the Closing shall be as set
forth in Exhibit F.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF FRANSACTION AND UFSY
3.1 Representations and Warranties of Fransaction and UFSY. To induce
the Target Company and the Shareholders to enter into this Agreement and to
consummate the transactions contemplated hereby, Fransaction and UFSY represent
and warrant, as of the Closing, as follows:
3.1.1 Authority of Fransaction and UFSY. Fransaction and UFSY
have the full right, power and authority to enter into this Agreement
and to carry out and consummate the transactions contemplated herein.
This Agreement, and all of the Exhibits attached hereto constitutes the
legal, valid and binding obligations of Fransaction and UFSY.
3.1.2 Corporate Existence and Authority of Fransaction.
Fransaction is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida. It has all
requisite corporate power, franchises, licenses, permits and authority
to own its properties and assets and to carry on its business as it has
been and is being conducted. It is in good standing in each state,
nation or other jurisdiction wherein the character of the business
transacted by it makes such qualification necessary.
3.1.3 Capitalization of Fransaction. The authorized equity
securities of Fransaction consists of 50,000,000 shares of common
stock, no par value, of which 13,717,328 shares are outstanding as of
the date hereof and of which approximately 68,586,640 will be issued
and outstanding as of the Closing (after giving effect to the 5-for-1
forward stock split contemplated by Section 5.1.1(g)). As of the
Closing, there will be 250,000,000 shares of common stock, par value
$0.001, and 10,000,000 shares of preferred stock, par value $0.001,
authorized. As of the Closing there will be outstanding options and
warrants to acquire a total of 15,000,000 shares (after giving effect
to the 5-for-1 forward stock split contemplated by Section 5.1.1(g)) of
Fransaction common stock. No other shares of capital stock of
Fransaction are issued and outstanding. All of the issued and
outstanding shares have been duly and validly issued in accordance and
compliance with all applicable laws, rules and regulations and are
fully paid and nonassessable. All presently exercisable voting rights
in Fransaction are vested exclusively in its outstanding shares of
common stock, each share of which is entitled to one vote on every
matter to come before its shareholders.
3.1.4 Subsidiaries. Fransaction has no Subsidiaries.
3.1.5 Execution of Agreement. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any Party any right
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to declare any default or acceleration upon notice or passage of time
or both), in whole or in part, any charter, article of incorporation,
bylaw, mortgage, lien, deed of trust, indenture, lease, agreement,
instrument, order, injunction, decree, judgment, law or any other
restriction of any kind to which Fransaction or its Subsidiaries are a
party or by which they or any of their properties are bound; (b) result
in the creation of any security interest, lien, encumbrance, adverse
claim, proscription or restriction on any property or asset (whether
real, personal, mixed, tangible or intangible), right, contract,
agreement or business of Fransaction or its Subsidiaries; (c) violate
any law, rule or regulation of any federal or state regulatory agency;
or (d) permit any federal or state regulatory agency to impose any
restrictions or limitations of any nature on Fransaction or its
Subsidiaries or any of their actions.
3.1.6 Securities to be Restricted Securities. UFSY
acknowledges that all of the Fransaction Series A Shares will be
"restricted securities" as such term is defined in Rule 144 and will
include the restrictive legend set forth in Section 4.2.1(a) hereof,
and, except as otherwise set forth in this Agreement, that the shares
cannot be sold for a period of at least one year from the date of
issuance unless registered with the SEC and qualified by appropriate
state securities regulators, or unless UFSY obtains written consent
from Fransaction and otherwise complies with an exemption from such
registration and qualification (including, without limitation,
compliance with Rule 144).
ARTICLE 4
CLOSING AND DELIVERY OF DOCUMENTS
4.1 Closing. The Closing (the "Closing") shall take place at the
offices of The Lebrecht Group, APLC, 22342 Avenida Empresa, Suite 220, Rancho
Santa Margarita, CA 92688, no later than the close of business (Pacific Standard
Time) on May 16, 2005, 2005, or at such other place, date and time as the
Parties may agree in writing (the "Closing Date").
4.2 Deliveries by Fransaction. At the Closing, or as otherwise set
forth below, Fransaction shall deliver the following:
4.2.1 Fransaction shall deliver to the Shareholders:
(a) the Fransaction Common Shares to which
Shareholders are entitled, fully paid and non-assessable and
subject to no liens, security interests, pledges,
encumbrances, charges, restrictions, demands or claims in any
other party whatsoever, except as set forth in the legend on
the certificate(s), which legend shall provide substantially
as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF FOR A
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PERIOD OF ONE YEAR FROM THE ISSUANCE THEREOF EXCEPT
(i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND ANY APPLICABLE STATE LAWS OR (ii)
UPON THE EXPRESS WRITTEN AGREEMENT OF THE COMPANY AND
COMPLIANCE, TO THE EXTENT APPLICABLE, WITH RULE 144
UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES).
(b) the Fransaction Series B Shares to which
Shareholders are entitled, fully paid and non-assessable and
subject to no liens, security interests, pledges,
encumbrances, charges, restrictions, demands or claims in any
other party whatsoever, except as set forth in the legend on
the certificates as described in 4.2.1(a) above.
4.2.2 Fransaction shall deliver to the Target Company:
(a) written confirmation of the approval of the
herein described transactions by Fransaction's Board of
Directors and shareholders;
(b) an officers certificate, executed by the
President and Secretary of Fransaction, in the form attached
hereto as Exhibit G;
(c) written confirmation of the filing of the
Amendment contemplated by Section 5.1.1(g);
(d) written confirmation of the cancellation of
635,000 shares of Fransaction common stock as contemplated by
Section 1.3.3;
(e) written confirmation of the assignment of the
Consultant Warrants as contemplated by Section 1.3.4;
(f) written confirmation of the transfer of the
Escrow Shares as contemplated by Section 1.3.5;
(g) written confirmation of the termination of
options to acquire 1,000,000 of the Escrow Shares as
contemplated by Section 1.3.6; and
(h) a written assumption of liabilities in the form
attached hereto as Exhibit H, as contemplated by Section
1.4.2.
4.2.3 Fransaction shall deliver to UFSY:
(a) the Fransaction Series A Shares to which UFSY is
entitled, fully paid and non-assessable and subject to no
liens, security interests, pledges, encumbrances, charges,
11
restrictions, demands or claims in any other party whatsoever,
except as set forth in the legend on the certificates as
described in 4.2.1(a) above; and
(b) a Bill of Sale in the form attached hereto as
Exhibit I for the transfer of the Assets, as contemplated by
Section 1.4.2.
4.3 Delivery by the Target Company: At the Closing, the Target Company
shall deliver the following:
4.3.1 The Target Company shall deliver to Fransaction:
(a) written confirmation of the approval of the
herein described transactions by the Target Company's Board of
Directors and shareholders;
(b) an officers certificate, executed by the
President and Secretary of the Target Company, in the form
attached hereto as Exhibit J;
(c) the financial statements and list of contracts of
the Target Company as set forth in Section 2.1.10 and in
Exhibits D and E, respectively.
4.4 Delivery by The Shareholders: At the Closing, the Shareholders
shall deliver the following:
4.4.1 The Shareholders shall deliver to Fransaction:
(a) the Target Shares subject to no liens, security
interests, pledges, encumbrances, charges, restrictions,
demands or claims in any other party whatsoever, except as set
forth in the legend on the certificates as described in
4.2.1(a) above, executed or accompanied by a stock power for
valid transfer of the Target Shares to Fransaction.
4.5 Delivery by UFSY: At the Closing, UFSY shall deliver the following:
4.5.1 UFSY shall deliver to the Shareholders:
(a) the Control Shares subject to no liens, security
interests, pledges, encumbrances, charges, restrictions,
demands or claims in any other party whatsoever, executed or
accompanied by a stock power for valid transfer of the Control
Shares to the Shareholders.
(b) a written assumption of liabilities in the form
attached hereto as Exhibit H, as contemplated by Section
1.4.2.
12
ARTICLE 5
CONDITIONS, TERMINATION, AMENDMENT AND WAIVER
5.1 Conditions Precedent. This Agreement, and the transactions
contemplated hereby, shall be subject to the following conditions precedent:
5.1.1 The obligations of Fransaction and UFSY to pay the
Purchase Price and to satisfy their other obligations hereunder shall
be subject to the fulfillment (or waiver by Fransaction), at or prior
to the Closing, of the following conditions, which the Target Company
agrees to use its best efforts to cause to be fulfilled:
(a) Representations, Performance. If the Closing Date
is not the date hereof, the representations and warranties
contained in Section 2.1 hereof shall be true at and as of the
date hereof and shall be repeated and shall be true at and as
of the Closing Date with the same effect as though made at and
as of the Closing Date, except as affected by the transactions
contemplated hereby; the Target Company and the Shareholders
shall have duly performed and complied with all agreements and
conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(b) Consents. Any required consent to the
transactions contemplated by this Agreement shall have been
obtained or waived.
(c) Litigation. No suit, action, arbitration or other
proceeding or investigation shall be threatened or pending
before any court or governmental agency in which it is sought
to restrain or prohibit or to obtain material damages or other
material relief in connection with this Agreement or the
consummation of the transactions contemplated hereby or which
is likely to affect materially the value of the Target
Company.
(d) Proceedings and Documentation. All corporate and
other proceedings of the Target Company in connection with the
transactions contemplated by this Agreement, and all documents
and instruments incident to such corporate proceedings, shall
be satisfactory in form and substance to Fransaction and
Fransaction's counsel, and Fransaction and Fransaction's
counsel shall have received all such receipts, documents and
instruments, or copies thereof, certified if requested, to
which Fransaction is entitled and as may be reasonably
requested.
(e) Property Loss. No portion of the Target Company's
assets shall have been destroyed or damaged or taken by
condemnation under circumstances where the loss thereof will
not be substantially reimbursed to Fransaction through the
proceeds of applicable insurance or condemnation award.
13
(f) Consents and Approvals. All material licenses,
permits, consents, approvals, authorizations, qualifications
and orders of governmental or regulatory bodies which are (1)
necessary to enable Fransaction to fully operate the business
of the Target Company and its Subsidiaries as contemplated
from and after the Closing shall have been obtained and be in
full force and effect, or (2) necessary for the consummation
of the transactions contemplated hereby, shall have been
obtained. Any notices to or consents of any party to any
agreement or commitment constituting part of the transactions
contemplated hereby, or otherwise required to consummate any
such transactions, shall have been delivered or obtained.
(g) Effectiveness of Amendment. An amendment to the
Articles of Incorporation of Fransaction shall have been filed
and effective as of the Closing Date with the State of Florida
which (i) changes the name of Fransaction to H3 Enterprises,
Inc., (ii) effectuates a 5-for-1 forward split of
Fransaction's outstanding common stock, (iii) increases the
authorized common stock of Fransaction from 50 million shares,
no par value, to 250 million shares, par value $0.001, and
(iv) creates a class of blank check preferred stock consisting
of 10 million shares, par value $0.001, a copy of which is
attached hereto as Exhibit K (the "Amendment").
(h) Dissenter's Rights. The transactions contemplated
by this Agreement may be cancelled by Fransaction at any time
if Fransaction shareholders representing more than 1% of the
outstanding shares of Fransaction common stock have properly
exercised their right to dissent. If shareholders representing
less than 1% dissent, UFSY will assume the liability
associated therewith as part of the assumption of liabilities
in this Agreement.
(i) Issuance of Common Stock to Third Parties.
Fransaction shall issue, simultaneous with the Closing, a
total of 2,517,768 shares of its common stock to the parties
and in the amounts as set forth on Schedule 5.1.1(i) hereof.
5.1.2 The obligations of the Target Company and the Shareholders to
deliver the Target Shares and to satisfy their other obligations hereunder shall
be subject to the fulfillment (or waiver by the Target Company and the
Shareholders), at or prior to the Closing, of the following conditions, which
Fransaction and UFSY agree to use their best efforts to cause to be fulfilled:
(a) Representations, Performance. If the Closing Date
is not the date hereof, the representations and warranties
contained in Section 3.1 hereof shall be true at and as of the
date hereof and shall be repeated and shall be true at and as
of the Closing Date with the same effect as though made at and
as of the Closing Date, except as affected by the transactions
contemplated hereby; Fransaction and UFSY shall have duly
performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by
them prior to or on the Closing Date.
14
(b) Proceedings and Documentation. All corporate and
other proceedings of Fransaction and UFSY in connection with
the transactions contemplated by this Agreement, and all
documents and instruments incident to such corporate
proceedings, shall be satisfactory in form and substance to
the Target Company and the Target Company's counsel, and the
Target Company and the Target Company's counsel shall have
received all such receipts, documents and instruments, or
copies thereof, certified if requested, to which the Target
Company is entitled and as may be reasonably requested.
(c) Effectiveness of Amendment. The Amendment shall
have been filed and effective with the State of Florida.
(d) Resignation of Fransaction Officers and
Directors; Appointment of New Officers and Directors. The
existing officers and directors of Fransaction shall have
resigned, effective as of the Closing, and new officers and
directors of Fransaction shall have been appointed as set
forth in Exhibit L.
5.2 Termination. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned prior to the Closing Date only by the
mutual consent of all of the Parties. Following the Closing Date, in the event
the Closing does occur within ten (10) days of the Closing Date, this Agreement
may be terminated by either Party upon delivery of written notice to the other
Party.
5.3 Waiver and Amendment. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be waived, but only
by a written instrument signed by the Party entitled to the benefits thereof.
The failure or delay of any Party at any time or times to require performance of
any provision hereof or to exercise its rights with respect to any provision
hereof shall in no manner operate as a waiver of or affect such Party's right at
a later time to enforce the same. No waiver by any Party of any condition, or of
the breach of any term, provision, covenant, representation or warranty
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 condition or breach
or waiver of any other condition or of the breach of any other term, provision,
covenant, representation or warranty. No modification or amendment of this
Agreement shall be valid and binding unless it be in writing and signed by all
Parties hereto.
ARTICLE 6
COVENANTS, INDEMNIFICATION
6.1 To induce Fransaction and UFSY to enter into this Agreement and to
consummate the transactions contemplated hereby, and without limiting any
covenant, agreement, representation or warranty made, the Target Company and the
Shareholders covenant and agree as follows:
6.1.1 Notices and Approvals. The Target Company and the
Shareholders agree: (a) to give all notices to third parties which may
be necessary or deemed desirable by Fransaction or UFSY in connection
15
with this Agreement and the consummation of the transactions
contemplated hereby; (b) to use its best efforts to obtain all federal
and state governmental regulatory agency approvals, consents, permit,
authorizations, and orders necessary or deemed desirable by Fransaction
or UFSY in connection with this Agreement and the consummation of the
transaction contemplated hereby; and (c) to use its best efforts to
obtain all consents and authorizations of any other third parties
necessary or deemed desirable by Fransaction or UFSY in connection with
this Agreement and the consummation of the transactions contemplated
hereby.
6.1.2 Information for Fransaction's or UFSY's Statements and
Applications. The Target Company and the Shareholders and their
employees, accountants and attorneys shall cooperate fully with
Fransaction and UFSY in the preparation of any statements or
applications made by Fransaction or UFSY to any federal or state
governmental regulatory agency in connection with this Agreement and
the transactions contemplated hereby and to furnish Fransaction and
UFSY with all information concerning the Target Company and the
Shareholders necessary or deemed desirable by Fransaction or UFSY for
inclusion in such statements and applications, including, without
limitation, all requisite financial statements and schedules.
6.1.3 Access to Information. Fransaction and UFSY, together
with their appropriate attorneys, agents and representatives, shall be
permitted to make the full and complete investigation of the Target
Company and the Shareholders and have full access to all of the books
and records of the other during reasonable business hours.
Notwithstanding the foregoing, such Parties shall treat all such
information as confidential and shall not disclose such information
without the prior consent of the other.
6.2 To induce the Target Company and the Shareholders to enter into
this Agreement and to consummate the transactions contemplated hereby, and
without limiting any covenant, agreement, representation or warranty made,
Fransaction and UFSY covenant and agree as follows:
6.2.1 Access to Information. The Target Company and the
Shareholders, together with their appropriate attorneys, agents and
representatives, shall be permitted to make the full and complete
investigation of Fransaction and UFSY and have full access to all of
the books and records of the other during reasonable business hours.
Notwithstanding the foregoing, such Parties shall treat all such
information as confidential and shall not disclose such information
without the prior consent of the other.
6.3 Indemnification.
6.3.1 Indemnity of the Target Company and the Shareholders.
Fransaction and UFSY agree to indemnify, defend and hold the Target
Company and the Shareholders harmless from and against any and all
Losses (as hereinafter defined) arising out of or resulting from the
breach by Fransaction or UFSY of any representation, warranty, covenant
or agreement of Fransaction or UFSY contained in this Agreement or the
schedules and exhibits hereto. For purposes of Section 6.3, the term
16
"Losses" shall mean all damages, costs and expenses (including
reasonable attorneys' fees) of every kind, nature or description, it
being the intent of the Parties that the amount of any such Loss shall
be the amount necessary to restore the indemnified party to the
position it would have been in (economically or otherwise), including
any costs or expenses incident to such restoration, had the breach,
event, occurrence or condition occasioning such Loss never occurred.
Notwithstanding the foregoing provisions of this section, no claim for
indemnification shall be made by the Target Company or the Shareholders
under this section unless and until the aggregate amount of all Losses
of the Target Company and the Shareholders in respect thereof shall
exceed $5,000.
6.3.2 Indemnity of Fransaction and UFSY. The Target Company
and the Shareholders, and each of them, hereby agrees to indemnify,
defend and hold Fransaction and UFSY harmless from and against any and
all Losses arising out of or resulting from the breach by the Target
Company or the Shareholders of any representation, warranty, agreement
or covenant contained in this Agreement or the exhibits and schedules
hereto, including, without limitation, the failure to disclose any
liabilities or material contracts or agreements pursuant to Section
2.1.10. Notwithstanding the foregoing provisions of this section, no
claim for indemnification shall be made by Fransaction or UFSY under
this section unless and until the aggregate amount of all Losses of
Fransaction and UFSY in respect thereof shall exceed $5,000.
6.3.3 Indemnification Procedure.
(a) An indemnified party shall notify the
indemnifying party of any claim of such indemnified party for
indemnification under this Agreement within thirty days of the
date on which such indemnified party or an executive officer
or representative of such indemnified party first becomes
aware of the existence of such claim. Such notice shall
specify the nature of such claim in reasonable detail and the
indemnifying party shall be given reasonable access to any
documents or properties within the control of the indemnified
party as may be useful in the investigation of the basis for
such claim. The failure to so notify the indemnifying party
within such thirty-day period shall not constitute a waiver of
such claim but an indemnified party shall not be entitled to
receive any indemnification with respect to any additional
loss that occurred as a result of the failure of such person
to give such notice.
In the event any indemnified party is entitled to
indemnification hereunder based upon a claim asserted by a
third party (including a claim arising from an assertion or
potential assertion of a claim for Taxes), the indemnifying
party shall be given prompt notice thereof, in reasonable
detail. The failure to so notify the indemnifying party shall
not constitute a waiver of such claim but an indemnified party
shall not be entitled to receive any indemnification with
respect to any Loss that occurred as a result of the failure
of such person to give such notice. The indemnifying party
shall have the right (without prejudice to the right of any
indemnified party to participate at its expense through
counsel of its own choosing) to defend or prosecute such claim
17
at its expense and through counsel of its own choosing if it
gives written notice of its intention to do so not later than
twenty days following notice thereof by the indemnifying party
or such shorter time period as required so that the interests
of the indemnified party would not be materially prejudiced as
a result of its failure to have received such notice;
provided, however, that if the defendants in any action shall
include both an indemnifying party and an indemnified party
and the indemnified party shall have reasonably concluded that
counsel selected by the indemnifying party has a conflict of
interest because of the availability of different or
additional defenses to the indemnified party, the indemnified
party shall have the right to select separate counsel to
participate in the defense of such action on its behalf, at
the expense of the indemnifying party. If the indemnifying
party does not so choose to defend or prosecute any such claim
asserted by a third party for which any indemnified party
would be entitled to indemnification hereunder, then the
indemnified party shall be entitled to recover from the
indemnifying party, on a monthly basis, all of its attorneys'
reasonable fees and other costs and expenses of litigation of
any nature whatsoever incurred in the defense of such claim.
Notwithstanding the assumption of the defense of any claim by
an indemnifying party pursuant to this paragraph, the
indemnified party shall have the right to approve the terms of
any settlement of a claim (which approval shall not be
unreasonably withheld).
(b) The indemnifying party and the indemnified party
shall cooperate in furnishing evidence and testimony and in
any other manner which the other may reasonably request, and
shall in all other respects have an obligation of good faith
dealing, one to the other, so as not to unreasonably expose
the other to an undue risk of loss. The indemnified party
shall be entitled to reimbursement for out-of-pocket expenses
reasonably incurred by it in connection with such cooperation.
Except for fees and expenses for which indemnification is
provided pursuant to Section 6.3 or Section 6.4, as the case
may be, and as provided in the preceding sentence, each party
shall bear its own fees and expenses incurred pursuant to this
paragraph (b).
ARTICLE 7
MISCELLANEOUS
7.1 Expenses. Except as otherwise specifically provided for herein,
whether or not the transactions contemplated hereby are consummated, each of the
Parties hereto shall bear the cost of all fees and expenses relating to or
arising from its compliance with the various provisions of this Agreement and
such Party's covenants to be performed hereunder, and except as otherwise
specifically provided for herein, each of the Parties hereto agrees to pay all
of its own expenses (including, without limitation, attorneys and accountants'
fees and printing expenses) incurred in connection with this Agreement, the
transactions contemplated hereby, the negotiations leading to the same and the
preparations made for carrying the same into effect, and all such fees and
expenses of the Parties hereto shall be paid prior to Closing.
18
7.2 Notices. Any notice, request, instruction or other document
required by the terms of this Agreement, or deemed by any of the Parties hereto
to be desirable, to be given to any other Party hereto shall be in writing and
shall be delivered by facsimile or overnight courier to the following addresses:
To Fransaction or UFSY:
Fransaction, Inc.
Ultimate Franchise Systems, Inc.
300 International Parkway, Suite 100
Heathrow, FL 32746
Attn: Chris Swartz
Facsimile (407) 333-8852
with a copy to:
The Lebrecht Group, APLC
22342 Avenida Empresa, Suite 220
Rancho Santa Margarita, CA 92688
Attn: Brian A. Lebrecht, Esq.
Facsimile (949) 635-1244
To the Target Company or the Shareholders:
The Halls of Hip Hop, Inc.
4065 Duryea Avenue
Brooklyn, NY 10466
Attn: Brian Peters
Facsimile: (914) 530-0023
with a copy to:
R. Michael Jackson Attorney at Law
165 S. Union Blvd., Suite 705
Lakewood, CO 80228
Facsimile: (303) 986-5191
The persons and addresses set forth above may be changed from time to
time by a notice sent as aforesaid. Notice shall be conclusively deemed given at
the time of delivery if made during normal business hours, otherwise notice
shall be deemed given on the next business day.
7.3 Entire Agreement. This Agreement, together with the schedules and
exhibits hereto, sets forth the entire agreement and understanding of the
Parties hereto with respect to the transactions contemplated hereby, and
19
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written or oral,
express or implied, whether by statute or otherwise, has been made by any Party
hereto which is not embodied in this Agreement, or exhibits hereto or the
written statements, certificates, or other documents delivered pursuant hereto
or in connection with the transactions contemplated hereby, and no Party hereto
shall be bound by or liable for any alleged understanding, promise, inducement,
statement, representation, warranty, covenant or condition not so set forth.
7.4 Survival of Representations. All statements of fact (including
financial statements) contained in the schedules, the exhibits, the certificates
or any other instrument delivered by or on behalf of the Parties hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the respective Party hereunder. All
representations, warranties, agreements, and covenants hereunder shall survive
the Closing and remain effective regardless of any investigation or audit at any
time made by or on behalf of the Parties or of any information a Party may have
in respect thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any Party hereto, notwithstanding that such Party knew or should have known at
the time of Closing that such right or remedy existed.
7.5 Incorporated by Reference. All documents (including, without
limitation, all financial statements) delivered as part hereof or incident
hereto are incorporated as a part of this Agreement by reference.
7.6 Remedies Cumulative. No remedy herein conferred upon any Party is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
7.7 Execution of Additional Documents. Each Party hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
7.8 Finders' and Related Fees. Each of the Parties hereto is
responsible for, and shall indemnify the other against, any claim by any third
party to a fee, commission, bonus or other remuneration arising by reason of any
services alleged to have been rendered to or at the instance of said Party to
this Agreement with respect to this Agreement or to any of the transactions
contemplated hereby.
7.9 Governing Law. This Agreement has been negotiated and executed in
the State of Florida and shall be construed and enforced in accordance with the
laws of such state.
7.10 Forum. Each of the Parties hereto agrees that any action or suit
which may be brought by any Party hereto against any other Party hereto in
20
connection with this Agreement or the transactions contemplated hereby may be
brought only in a federal or state court in Orange County, Florida.
7.11 Attorneys' Fees. Except as otherwise provided herein, if a dispute
should arise between the Parties including, but not limited to arbitration, the
prevailing Party shall be reimbursed by the nonprevailing Party for all
reasonable expenses incurred in resolving such dispute, including reasonable
attorneys' fees exclusive of such amount of attorneys' fees as shall be a
premium for result or for risk of loss under a contingency fee arrangement.
7.12 Binding Effect and Assignment. This Agreement shall inure to the
benefit of and be binding upon the Parties hereto and their respective heirs,
executors, administrators, legal representatives and assigns.
7.13 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
[remainder of page intentionally left blank]
21
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first written hereinabove.
"Fransaction" "Target Company"
Fransaction, Inc., The Halls of Hip Hop, Inc.,
a Florida corporation a Delaware corporation
- ------------------------------- ------------------------------
By: Christopher M. Swartz By: Brian Peters
Its: President Its: President
"UFSY" "Shareholders"
Ultimate Franchise Systems, Inc.,
a Nevada corporation ------------------------------
Brian Peters, an individual
- ------------------------------- ------------------------------
By: Christopher M. Swartz George Freedman, an individual
Its: President
22
Exhibit A
Target Shareholders
(All Share Numbers are After Giving Effect to 5-for-1 Forward Stock Split)
No. of Fransaction No. of Fransaction No. of Control No. of Consultant
No. of Target Common Shares to Series B Shares to Shares to be Warrants to be
Name Shares be Received be Received Received Received
- ---------------- ------------------ ------------------- ------------------ ------------------ ------------------
Brian Peters 25,000,000 3,750,000 150,000 18,750,000 3,750,000
George Freedman 25,000,000 3,750,000 150,000 18,750,000 3,750,000
A-1
Exhibit B
Series B Certificate of Designation
B-1
Exhibit C
Series A Certificate of Designation
C-1
Exhibit D
Target Company Financial Statements
D-1
Exhibit E
Target Company Contracts
E-1
Exhibit F
Post-Closing Capitalization of Fransaction
(All Share Numbers are After Giving Effect to 5-for-1 Forward Stock Split)
Name Shares
- --------------------------------------------------- -----------------
Shares of Fransaction outstanding (approximately) 68,586,640
Fransaction common stock to be cancelled (3,175,000)
Fransaction common stock to be issued pursuant to
Section 5.1.1(i) 12,588,840
Fransaction Common Shares to be issued to
Shareholders 7,500,000
-----------------
Subtotal: Shares Issued and Outstanding 85,500,480
Consultant Warrants Outstanding 15,000,000
Other Warrants and Options Outstanding -0-
Common Stock Upon Conversion of Fransaction
Series A Shares 23,318,313
Common Stock Upon Conversion of Fransaction
Series B Shares 46,636,625
-----------------
Total: Fully Diluted Capitalization 170,455,418
=================
F-1
Exhibit G
Fransaction Officers Certificate
G-1
Exhibit H
Assumption of Liabilities
H-1
Exhibit I
Bill of Sale
I-1
Exhibit J
Target Company Officers Certificate
J-1
Exhibit K
Amendment
K-1
Exhibit L
Fransaction Officers and Directors
Existing Fransaction Officers and Directors Resigning
- --------------------------------------------------------------------------------
Name Position
- ------------------------------- -----------------------------------
Christopher M. Swartz Director, President, Secretary, and
Chief Financial Officer
Eric Swartz Director
Harold Kestenbaum Director
New Fransaction Officers and Directors Appointed
- --------------------------------------------------------------------------------
Name Position
- ------------------------------- -----------------------------------
Brian Peters Director, President
Robert Palmer Secretary
Jamar McNeil Treasurer
Clyde Culp, III Chairman of the Board of Directors
Harold Kestenbaum Director
L-1
Schedule 1.3.5
Parties to Receive
Escrow Shares
(After Giving Effect to Stock Split)
Name # of Shares
- ------------------------------- ------------------------
Brian Peters 2,973,409.375
George Freedman 2,973,409.375
Robert Palmer 166,670
L. Bennett Berg 166,665
Clyde E. Culp, III 166,665
Schedule 5.1.1(i)
Fransaction Shareholders
to Receive 12,588,840 shares
(After Giving Effect to Stock Split)
Name No. of Fransaction Shares
- -------------------------------------------- -------------------------
Thomas E. Metzger 893,561
Robert Palmer 7,133,060
L. Bennett Berg and Catherine B. Berg, TTEE 1,683,318
Clyde E. Culp, III 1,826,828
Gary Palmer 1,052,073
Total 12,588,840