Exhibit 2.1
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT, dated as of the 30th day of June, 2003
(the "Agreement"), is by and among New York Film Works, Inc., a New York
corporation (the "Acquirer"), Michael Cohen and Stephen Cohen (each an "Acquirer
Shareholder and collectively the "Acquirer Shareholders"), and shareholders of
Bladon Studios Limited, a company organized under the laws of England and Wales
("Target") listed in Schedule 1.1 of this Agreement (the "Target Shareholders").
W I T N E S S E T H:
WHEREAS, Target Shareholders own 100% of the capital stock of Target,
in the denominations as set forth opposite their respective names on Schedule
1.1 to this Agreement which shares constitute all of the issued and outstanding
shares of capital stock of Target (the "Target Shares");
WHEREAS, Acquirer desires to acquire from Target Shareholders, and
Target Shareholders desire to sell to Acquirer, all of Target Shares in exchange
for the issuance by Acquirer of warrants ("Warrants") to acquire for $100.00 an
aggregate of 940,909,091 shares (the "Acquirer Shares"), being equal to
eighty-nine percent (89%) of the issued and outstanding shares of Acquirer's
common stock, par value $0.001 per share (the "Acquirer Common Stock"), on the
terms and conditions set forth below; and
WHEREAS, Acquirer Shareholders are the principal shareholders of
Acquirer and will benefit from the transactions contemplated herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and agreements set forth herein, the parties hereto
agree as follows:
ARTICLE I
EXCHANGE OF SHARES
1.1 Exchange of Shares. Subject to the terms and conditions of this
Agreement, on the Closing Date (as hereinafter defined):
(a) Acquirer shall issue and deliver to each Target Shareholder
Warrants, in the form annexed hereto as Exhibit "A" and incorporated herein by
reference, to purchase the Acquirer Shares set forth opposite such Target
Shareholder's name set forth on Schedule 1.1 hereto, and
(b) each Target Shareholder agrees to deliver to Acquirer, the
Target Shares set forth opposite such Target Shareholder's name on Schedule 1.1
hereto along with an appropriately executed stock power endorsed in favor of
Acquirer.
The exchange of Warrants and Target Shares as provided in this Section 1.1 and
the other transactions contemplated by this Agreement are referred to herein as
the "Exchange".
1.2 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at 185 Madison Avenue, 10th
Floor, New York, New York, simultaneous with the execution hereof (the "Closing
Date").
1.3 Deliveries by Acquirer and Acquirer Shareholders. At the Closing,
Acquirer and Acquirer Shareholders shall deliver or cause to be delivered to
Target Shareholders:
(a) certificates representing Warrants to purchase Acquirer
Shares, issued in the respective names of Target Shareholders as set forth on
Schedule 1.1;
(b) a copy of each material consent of any person necessary to the
consummation of the Closing and the Exchange, including consents from parties to
loans, contracts, leases or other agreements and consents from governmental
agencies, whether foreign, federal, state or local;
(c) a resolution from Acquirer's current Board of Directors
appointing Roger Bailey, Michael Allen and Barrington Fludgate to Acquirer's
Board of Directors;
(d) letters of resignation from Acquirer's current officers and
directors, other than Michael Cohen, to be effective upon Closing and after the
appointments described in the Section 1.3(c); and
(e) any other document reasonably requested by Target Shareholders
that they deem necessary for the consummation of the Exchange.
1.4 Deliveries by Target Shareholders. At the Closing, Target
Shareholders shall deliver or cause to be delivered to Acquirer and Acquirer
Shareholders:
(a) certificates representing Target Shares with stock powers duly
endorsed in blank;
(b) any other document reasonably requested by Acquirer and
Acquirer Shareholders that they deem necessary for the consummation of the
Exchange.
1.5 Irrevocable Proxy and Voting Agreement. The parties hereby agree
that Roger Bailey ("Bailey") may vote the Acquirer Common Stock owned by the
Acquirer Shareholders and Gerald Cohen for the purpose of amending Acquirer's
charter to permit the issuance of the Acquirer Shares upon exercise of the
Warrants and such other matters as determined in Bailey's sole discretion. It is
hereby expressly understood that this Section 1.5 constitutes a voting agreement
under Section 620(a) of the New York Business Corporation Law. In furtherance of
such voting agreement, at the Closing, each Acquirer Shareholder and Gerald
Cohen shall deliver an irrevocable proxy to Bailey, in the form annexed hereto
as Exhibit "B" and incorporated herein by reference, wherein Bailey shall be
permitted to vote the Acquirer Common Stock as provided in this Section 1.5 and
as provided in the irrevocable proxy.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ACQUIRER
Except as specifically set forth in the Disclosure Schedule prepared
by Acquirer and delivered to Target Shareholders simultaneously with the
execution hereof ("Acquirer Disclosure Schedule"), Acquirer makes the following
representations and warranties. In the event of any inconsistency between
statements in the body of this Agreement and statements in the Acquirer
Disclosure Schedule (excluding exceptions expressly set forth in the Acquirer
Disclosure Schedule with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement shall control.
2.1 Organization and Qualification; Subsidiaries. Acquirer is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of formation, with full corporate power and authority
to own, lease and operate its business and properties and to carry on its
business in the places and in the manner as presently conducted or proposed to
be conducted. Acquirer is in good
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standing as a foreign corporation in each jurisdiction in which the properties
owned, leased or operated, or the business conducted, by it requires such
qualification except for any such failure, which when taken together with all
other failures, is not likely to have a material adverse effect on the business
of Acquirer. Acquirer does not own, directly or indirectly, any capital stock,
equity or interest in any corporation, firm, partnership, joint venture or other
entity.
2.2 Authorization; Enforceability. Acquirer has all requisite corporate
power and authority to execute and deliver this Agreement, and to consummate the
transactions contemplated hereby and thereby. Acquirer has taken all corporate
action necessary for the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and no other corporate
action on the part of Acquirer is necessary to authorize the execution and
delivery by Acquirer of this Agreement or the consummation by it of the
Exchange. This Agreement constitutes the valid and binding obligation of each of
Acquirer and each Acquirer Shareholder, enforceable against each of Acquirer and
each Acquirer Shareholder in accordance with its respective terms, except as may
be affected by bankruptcy, insolvency, moratoria or other similar laws affecting
the enforcement of creditors' rights generally and subject to the qualification
that the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefore may be brought. No vote of, or
consent by, the holders of any class or series of capital stock or voting debt
issued by Acquirer is necessary to authorize the execution and delivery by
Acquirer or any Acquirer Shareholder of this Agreement or the consummation by it
of the Exchange.
2.3 No Conflicts or Defaults. The execution and delivery of this
Agreement by each of Acquirer and each Acquirer Shareholder and the consummation
of the transactions contemplated hereby do not and shall not (a) contravene the
certificate of incorporation or by-laws of Acquirer or (b) with or without the
giving of notice or the passage of time (i) violate, conflict with, or result in
a breach of, or a default or loss of rights under, any material covenant,
agreement, mortgage, indenture, lease, instrument, permit or license to which
Acquirer is a party or by which Acquirer is bound, or any judgment, order or
decree, or any law, rule or regulation to which Acquirer is subject, (ii) result
in the creation of, or give any party the right to create, any lien, charge,
encumbrance or any other right or adverse interest upon any of the assets of
Acquirer, (iii) terminate or give any party the right to terminate, amend,
abandon or refuse to perform, any material agreement, arrangement or commitment
to which Acquirer is a party or by which Acquirer's assets are bound, or (iv)
accelerate or modify, or give any party the right to accelerate or modify, the
time within which, or the terms under which, Acquirer is to perform any duties
or obligations or receive any rights or benefits under any material agreement,
arrangement or commitment to which it is a party.
2.4 Capitalization. The authorized capital stock of Acquirer
immediately prior to giving effect to the transactions contemplated hereby
consists of one hundred twenty million (120,000,000) shares of Acquirer Common
Stock par value $.001 per share, of which 103,500,000 shares are issued and
outstanding as of the date hereof. All of the outstanding shares of Acquirer
Common Stock are, and Acquirer Shares when issued in accordance with the terms
hereof and the Warrants, will be, duly authorized, validly issued, fully paid
and nonassessable, and have not been or, with respect to Acquirer Shares, will
not be issued in violation of any preemptive right of stockholders. Acquirer
Shares are not subject to any preemptive or subscription right. There is no
outstanding voting trust agreement or other contract, agreement, arrangement,
option, warrant, call, commitment or other right of any character obligating or
entitling Acquirer to issue, sell, redeem or repurchase any of its securities,
and there is no outstanding security of any kind convertible into or
exchangeable for Acquirer Common Stock. Acquirer has not granted registration
rights to any person.
2.5 Financial Statements. The balance sheet (the "Acquirer Balance
Sheet") as of April 30, 2003 (the "Acquirer Balance Sheet Date") and the
statement of operation for the period ended April 30,
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2003 (collectively the "Acquirer Financial Statements") (i) has been prepared
from, and is in accordance with, the books and records of Acquirer and (ii)
fairly presents the financial position and the results of operations of Acquirer
as of the times and for the periods referred to therein.
2.6 No Undisclosed Liabilities. Except as disclosed in the Acquirer
Financial Statements and for liabilities and obligations incurred in the
ordinary course of business and consistent with past practice since the Acquirer
Balance Sheet Date pursuant to the terms of this Agreement, Acquirer has no
liability or obligation of any nature, whether or not accrued, contingent or
otherwise, that has, or would be reasonably likely to have, a material adverse
effect on Acquirer. The reserves reflected in the Financial Statements are
adequate, appropriate and reasonable and have been calculated in a consistent
manner. The term "material adverse effect" in this Agreement means, with respect
to any person, a material adverse effect on the business, assets, liabilities,
financial condition or results of operations of such person and the ability of
such person to conduct business in the manner in which such person currently
conducts business.
2.7 Absence of Certain Changes. Except as disclosed in the Acquirer
Financial Statements or expressly required by this Agreement, since the Acquirer
Balance Sheet Date:
(a) no event that would result in a material adverse effect on
Acquirer has occurred,
(b) Acquirer has not (i) amended its certificate of incorporation
or by-laws or similar organizational documents, (ii) excluding the issuance of
12.5 million shares of Common Stock to Gerald Cohen for forgiveness of certain
indebtedness, issued, sold, transferred, pledged, disposed of or encumber any
shares of any class or series of its capital stock, or securities convertible
into or exchangeable for, or options, warrants, calls, commitments or rights of
any kind to acquire, any shares of any class or series of its capital stock,
(iii) declared, set aside or paid any dividend or other distribution payable in
cash, stock or property with respect to any shares of any class or series of its
capital stock; (iv) split, combine or reclassify any shares of any class or
series of its stock; or (v) redeemed, purchased or otherwise acquired directly
or indirectly any shares of any class or series of its capital stock, or any
instrument or security which consists of or includes a right to acquire such
shares;
(c) Acquirer has not sold, leased, licensed, mortgaged, pledged or
encumbered any assets other than in the ordinary and usual course of business
and consistent with the past practice;
(d) Acquirer has not adopted a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of Acquirer; and
(e) neither Acquirer nor Acquirer Shareholders, have taken, or
agreed to or commit to take, any action that would or is reasonably likely to
result in any representation or warranty of Acquirer contained herein inaccurate
in any material respect at the Closing Date, or that would materially impair the
ability of the parties to consummate the Closing in accordance with the terms
hereof.
2.8 Taxes. Acquirer has filed all United States federal, state, county,
local and foreign national, provincial and local returns and reports which were
required to be filed on or prior to the date hereof in respect of all income,
withholding, franchise, payroll, excise, property, sales, use, value-added or
other taxes or levies, imposts, duties, license and registration fees, charges,
assessments or withholdings of any nature whatsoever (together, "Taxes"), and
has paid all Taxes (and any related penalties, fines and interest) which have
become due pursuant to such returns or reports or pursuant to any assessment
which has become payable, or, to the extent its liability for any Taxes (and any
related penalties, fines and interest) has not been fully discharged, the same
have been properly reflected as a liability on the Acquirer Financial Statements
of Acquirer and adequate reserves therefore have been
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established. All such returns and reports filed on or prior to the date hereof
have been properly prepared and are true, correct (and to the extent such
returns reflect judgments made by Acquirer, as the case may be, such judgments
were reasonable under the circumstances) and complete in all material respects.
No tax return or tax return liability of Acquirer has been audited or, presently
under audit. Acquirer has not given or been requested to give waivers of any
statute of limitations relating to the payment of any Taxes (or any related
penalties, fines and interest). There are no claims pending or, to the knowledge
of Acquirer, threatened, against Acquirer for past due Taxes. All payments for
withholding taxes, unemployment insurance and other amounts required to be paid
for periods prior to the date hereof to any governmental authority in respect of
employment obligations of Acquirer have been paid and have been duly provided
for in the Acquirer Financial Statements.
2.9 Contracts; No Defaults. Neither Acquirer, nor, to Acquirer's
knowledge, any other person or entity is in breach in any material respect of,
or in default in any material respect under, any material contract, agreement,
arrangement, commitment or plan to which Acquirer is a party, and no event or
action has occurred, is pending or is threatened, which, after the giving of
notice, passage of time or otherwise, would constitute or result in such a
material breach or material default by Acquirer or, to the knowledge of
Acquirer, any other person or entity. Acquirer has not received any notice of
default under any contract, agreement, arrangement, commitment or plan to which
it is a party, which default has not been cured to the satisfaction of, or duly
waived by, the party claiming such default on or before the date hereof.
2.10 Compliance with Law. Acquirer is not conducting its business or
affairs in violation of any applicable federal, state or local law, ordinance,
rule, regulation, court or administrative order, decree or process, or any
requirement of insurance carriers. Acquirer has not received any notice of
violation or claimed violation of any such law, ordinance, rule, regulation,
order, decree, process or requirement.
2.11 Litigation. There is no claim, dispute, action, suit, proceeding
or investigation pending or, to the knowledge of Acquirer, threatened, against
or affecting the business of Acquirer, or challenging the validity or propriety
of the transactions contemplated by this Agreement, at law or in equity or
admiralty or before any federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality, nor to the knowledge of
Acquirer, has any such claim, dispute, action, suit, proceeding or investigation
been pending or threatened, during the 12 month period preceding the date
hereof. There is no outstanding judgment, order, writ, ruling, injunction,
stipulation or decree of any court, arbitrator or federal, state, local, foreign
or other governmental authority, board, agency, commission or instrumentality,
against or materially affecting the business of Acquirer. Acquirer has not
received any written or verbal inquiry from any federal, state, local, foreign
or other governmental authority, board, agency, commission or instrumentality
concerning the possible violation of any law, rule or regulation or any matter
disclosed in respect of its business.
2.12 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Acquirer and Acquirer
Shareholders directly with Target and Target Shareholders without the
intervention of any person on behalf of Acquirer or Acquirer Shareholders in
such a manner as to give rise to any valid claim by any person against any
Acquirer Shareholder for a finder's fee, brokerage commission or similar
payment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET SHAREHOLDERS
Except as specifically set forth in the Disclosure Schedule prepared by
Target Shareholders and delivered to Acquirer simultaneously with the execution
hereof ("Target Disclosure Schedule"), Target
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Shareholders make the following representations and warranties. In the event of
any inconsistency between statements in the body of this Agreement and
statements in the Target Disclosure Schedule (excluding exceptions expressly set
forth in the Target Disclosure Schedule with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement shall control.
3.1 Organization and Qualification; Subsidiaries. Target is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of formation, with full corporate power and authority
to own, lease and operate its business and properties and to carry on its
business in the places and in the manner as presently conducted or proposed to
be conducted. Target is in good standing as a foreign corporation in each
jurisdiction in which the properties owned, leased or operated, or the business
conducted, by it requires such qualification except for any such failure, which
when taken together with all other failures, is not likely to have a material
adverse effect on the business of Target. Except for Research Services
International Limited, a wholly-owned subsidiary of Target, Target does not own,
directly or indirectly, any capital stock, equity or interest in any
corporation, firm, partnership, joint venture or other entity.
3.2 Enforceability. This Agreement constitutes the valid and binding
obligation of each Target Shareholder, enforceable against each Target
Shareholder in accordance with its terms, except as may be affected by
bankruptcy, insolvency, moratoria or other similar laws affecting the
enforcement of creditors' rights generally and subject to the qualification that
the availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefore may be brought. No vote of, or consent by,
the holders of any class or series of capital stock or voting debt issued by
Target is necessary to authorize the execution and delivery by Target
Shareholders of this Agreement or the consummation by them of the Exchange.
3.3 No Conflicts or Defaults. The execution and delivery of this
Agreement by each Target Shareholder and the consummation of the transactions
contemplated hereby do not and shall not (a) contravene the governing documents
of Target, or (b) with or without the giving of notice or the passage of time,
(i) violate, conflict with, or result in a breach of, or a default or loss of
rights under, any material covenant, agreement, mortgage, indenture, lease,
instrument, permit or license to which Target or any Target Shareholder is a
party or by which Target or any Target Shareholder or any of their respective
assets are bound, or any judgment, order or decree, or any law, rule or
regulation to which Target or any Target Shareholder or any of their respective
assets are subject, (ii) result in the creation of, or give any party the right
to create, any lien, charge, encumbrance, or other right or adverse interest
upon any of the assets of Target, (iii) terminate or give any party the right to
terminate, amend, abandon or refuse to perform, any material agreement,
arrangement or commitment to which Target is a party or by which Target or any
of its assets are bound, or (iv) accelerate or modify, or give any party the
right to accelerate or modify, the time within which, or the terms under which,
Target is to perform any duties or obligations or receive any rights or benefits
under any material agreement, arrangement or commitment to which it is a party.
3.4 Capitalization. (a) The authorized capital stock of Target consists
of 2,000,000 Ordinary Shares, par value (pound)1 per share ("Ordinary Shares").
As of the date hereof, 2,000,000 Ordinary Shares are issued and outstanding, and
no Ordinary Shares are issued and held in the treasury of Target. As of the date
hereof, (i) there are no existing options, warrants, calls, pre-emptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of Target,
obligating Target to issue, transfer or sell or cause to be issued, transferred
or sold any shares of capital stock of, or other equity or debt interest in,
Target or securities convertible into or exchangeable for such shares or equity
interests, or obligating Target to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or commitment
and (ii) there are no outstanding contractual obligations of Target to
repurchase, redeem or otherwise acquire any
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Ordinary Shares, or other capital stock of Target. There are no voting trusts or
other agreements or understandings to which any Target Shareholder or Target is
a party.
3.5 Financial Statements. The balance sheet (the "Target Balance
Sheet") as of May 31, 2003 (the "Target Balance Sheet Date") and the statement
of operations for the period ended May 31, 2003 (collectively the "Target
Financial Statements") (i) has been prepared from, and is in accordance with,
the books and records of Target and (ii) fairly presents the financial position
and the results of operations of Target as of the times and for the periods
referred to therein.
3.6 No Undisclosed Liabilities. Except (a) as disclosed in the Target
Financial Statements and (b) for liabilities and obligations incurred in the
ordinary course of business and consistent with past practice since the Balance
Sheet Date pursuant to the terms of this Agreement, Target has no liability or
obligation of any nature, whether or not accrued, contingent or otherwise, that
has, or would be reasonably likely to have, a material adverse effect on Target.
The reserves reflected in the Target Financial Statements are adequate,
appropriate and reasonable and have been calculated in a consistent manner.
3.7 Absence of Certain Changes. Except as disclosed in the Target
Financial Statements or expressly required by this Agreement, since the Target
Balance Sheet Date:
(a) no event that would result in a material adverse effect on
Target has occurred,
(b) Target has not (i) amended its certificate of incorporation or
by-laws or similar organizational documents, (ii) issued, sold, transferred,
pledged, disposed of or encumber any shares of any class or series of its
capital stock, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of any
class or series of its capital stock, (iii) declared, set aside or paid any
dividend or other distribution payable in cash, stock or property with respect
to any shares of any class or series of its capital stock; (iv) split, combine
or reclassify any shares of any class or series of its stock; or (v) redeemed,
purchased or otherwise acquired directly or indirectly any shares of any class
or series of its capital stock, or any instrument or security which consists of
or includes a right to acquire such shares;
(c) Target has not sold, leased, licensed, mortgaged, pledged or
encumbered any assets other than in the ordinary and usual course of business
and consistent with the past practice; (d) Target has not adopted a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of Target; and
(e) neither Target nor Target Shareholders, have taken, or agreed
to or commit to take, any action that would or is reasonably likely to result in
any representation or warranty of Target contained herein inaccurate in any
material respect at the Closing Date, or that would materially impair the
ability of the parties to consummate the Closing in accordance with the terms
hereof.
3.8 Taxes. Target has filed all returns and reports which were required
to be filed on or prior to the date hereof, and has paid all Taxes (and any
related penalties, fines and interest) which have become due pursuant to such
returns or reports or pursuant to any assessment which has become payable, or,
to the extent its liability for any Taxes (and any related penalties, fines and
interest) has not been fully discharged, the same have been properly reflected
as a liability on the books and records of Target and adequate reserves
therefore have been established. All such returns and reports filed on or prior
to the date hereof have been properly prepared and are true, correct (and to the
extent such returns reflect judgments made by Target such judgments were
reasonable under the circumstances) and complete in all material
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respects. No extension for the filing of any such return or report is currently
in effect. No tax return or tax return liability of Target has been audited or,
presently under audit. All taxes and any penalties, fines and interest which
have been asserted to be payable as a result of any audits have been paid.
Target has not given or been requested to give waivers of any statute of
limitations relating to the payment of any Taxes (or any related penalties,
fines and interest). There are no claims pending or, to the knowledge of Target
for past due Taxes. All payments for withholding taxes, unemployment insurance
and other amounts required to be paid for periods prior to the date hereof to
any governmental authority in respect of employment obligations of Target, have
been paid or shall be paid prior to the Closing and have been duly provided for
in the Target Financial Statements.
3.9 Contracts; No Defaults. Neither Target, nor, to any Target
Shareholder's knowledge, any other person or entity is in breach in any material
respect of, or in default in any material respect under, any material contract,
agreement, arrangement, commitment or plan to which Target is a party, and no
event or action has occurred, is pending or is threatened, which, after the
giving of notice, passage of time or otherwise, would constitute or result in
such a material breach or material default by Target or, to the knowledge of
Target, any other person or entity. Target has not received any notice of
default under any contract, agreement, arrangement, commitment or plan to which
it is a party, which default has not been cured to the satisfaction of, or duly
waived by, the party claiming such default on or before the date hereof.
3.10 Compliance with Law. Target is not conducting its business or
affairs in material violation of any applicable UK or US federal, state or local
law, ordinance, rule, regulation, court or administrative order, decree or
process, or any requirement of insurance carriers. Target has not received any
notice of violation or claimed violation of any such law, ordinance, rule,
regulation, order, decree, process or requirement.
3.11 Litigation. There is no claim, dispute, action, suit, proceeding
or investigation pending or, to the knowledge of Target, threatened, against or
affecting the business of Target, or challenging the validity or propriety of
the transactions contemplated by this Agreement, at law or in equity or
admiralty or before any federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality, nor to the knowledge of
Target, has any such claim, dispute, action, suit, proceeding or investigation
been pending or threatened, during the 12 month period preceding the date
hereof. here is no outstanding judgment, order, writ, ruling, injunction,
stipulation or decree of any court, arbitrator or federal, state, local, foreign
or other governmental authority, board, agency, commission or instrumentality,
against or materially affecting the business of Target. Target has not received
any written or verbal inquiry from any federal, state, local, foreign or other
governmental authority, board, agency, commission or instrumentality concerning
the possible violation of any law, rule or regulation or any matter disclosed in
respect of its business.
3.12 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Target and Target
Shareholders directly with Acquirer and Acquirer Shareholders without the
intervention of any person on behalf of Target or an Target Shareholder in such
a manner as to give rise to any valid claim by any person against Acquirer,
Target or any Target Shareholder for a finder's fee, brokerage commission or
similar payment.
3.13 Ownership of Target Shares. The assignments, endorsements, stock
powers and other instruments of transfer delivered by the Target Shareholders to
Acquirer at the Closing will be sufficient to transfer each Target Shareholder's
entire interest, legal and beneficial, in the Target Shares. Each Target
Shareholder has full power and authority to convey good and marketable title to
all of the Target Shares owned by such Target Shareholder as set forth on
Schedule 1.1, and upon transfer to Acquirer of certificates evidencing the
Target Shares, Acquirer will receive good and marketable title to such Target
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Shares, free and clear of any and all liens, charges, security interests,
options, claims, mortgages, pledges, proxies, voting trusts or agreements,
obligations, understandings or arrangements or other restrictions on title or
transfer, including restrictions imposed by any governmental entity, of any
nature whatsoever ("Encumbrances").
3.14 Purchase for Investment. Each Target Shareholder is acquiring the
Warrants and, upon exercise of the Warrants, the Acquirer Shares for investment
for such Target Shareholder's own account and not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and such Target
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. Each Target Shareholder further represents
that he does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to such person or to any
third person, with respect to any of the Warrants or the Acquirer Shares. Each
Target Shareholder understands that the offer and sale of neither the Warrants
or the Acquirer Shares have been registered under the U.S. Securities Act of
1933, as amended (the "Securities Act") on the ground that the sale and the
issuance of securities hereunder is exempt from registration under the
Securities Act pursuant to Section 4(2) thereof, and that Acquirer's reliance on
such exemption is predicated on such Target Shareholder's representations set
forth herein.
3.15 Investment Experience. Each Target Shareholder acknowledges that
he can bear the economic risk of his investment, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment in the Warrants and Acquirer Shares.
3.16 Information. Each Target Shareholder has carefully reviewed such
information as such Target Shareholder deemed necessary to evaluate an
investment in Acquirer Shares. To the full satisfaction of each Target
Shareholder, he has been furnished all materials that he has requested relating
to Acquirer and the issuance of the Acquirer Shares hereunder, and each Target
Shareholder has been afforded the opportunity to ask questions of
representatives of Acquirer to obtain any information necessary to verify the
accuracy of any representations or information made or given to Target
Shareholders. Notwithstanding the foregoing, nothing herein shall derogate from
or otherwise modify the representations and warranties of Acquirer set forth in
this Agreement, on which each Target Shareholder has relied in making an
exchange of Target Shares for the Warrants and Acquirer Shares.
3.17 Restricted Securities. Each Target Shareholder understands that
neither the Warrants or the Acquirer Shares may be sold, transferred, or
otherwise disposed of without registration under the Securities Act or an
exemption there from, and that in the absence of an effective registration
statement covering the Warrants and the Acquirer Shares or any available
exemption from registration under the Securities Act, the Warrants and the
Acquirer Shares must be held indefinitely. Each Target Shareholder is aware that
the Warrants and the Acquirer Shares may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that Rule
are met. Among the conditions for use of Rule 144 may be the availability of
current information to the public about Acquirer.
ARTICLE IV
INDEMNIFICATION
4.1 Survival of Covenants, Warranties and Representations. Each of the
covenants, representations and warranties of Target Shareholders, Acquirer and
Acquirer Shareholders in this Agreement or in any certificate, schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Closing Date and shall continue in force until the first anniversary of the
Closing Date (the "Termination Date").
9
4.2 Indemnification by Acquirer Shareholders. Subject to the
limitations set forth in this Section 4.2, Acquirer Shareholders hereby agree
to, jointly and severally, indemnify, defend and hold harmless Acquirer, Target,
Target Shareholders and their respective officers, directors, agents, attorneys
and employees, and each person, if any, who controls or may control Acquirer or
Target within the meaning of the Securities Act (individually a "Target
Indemnified Person" and collectively the "Target Indemnified Persons") from and
against any and all losses, costs, damages, liabilities and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
legal fees, (collectively, "Damages") arising out of any misrepresentation or
breach of or default in connection with any of the representations, warranties,
covenants and agreements given or made by Acquirer or any Acquirer Shareholder
in this Agreement, Acquirer Disclosure Schedule or any exhibit or schedule to
this Agreement. Target Indemnified Persons shall act in good faith and in a
commercially reasonable manner to mitigate any Damages they may suffer. The
aggregate indemnification obligations of Acquirer Shareholders hereunder shall
not exceed $200,000; provided, however, that there shall be no limitation on
liability of Acquirer Shareholders for (i) any breach of any representation,
warranty or covenant if the Closing does not occur, or (ii) fraud, criminal
activity or intentional breach of any covenant contained in this Agreement. No
claim for Damages shall be made under this Section 4.2 unless the aggregate of
Damages exceeds $10,000 for which claims are made hereunder by Target
Indemnified Persons in which case Target Indemnified Person shall be entitled to
seek compensation for all Damages without regard to the limitation set forth in
this sentence (the "Target Indemnified Person Limitation").
4.3 Indemnification by Target Shareholders. Subject to the limitations
set forth in this Section 7.3, Target Shareholders hereby agree to, jointly and
severally, indemnify, defend and hold harmless Acquirer, Target and Acquirer
Shareholders and their respective officers, directors, agents, attorneys and
employees, and each person who controls or may control Acquirer or Target
(individually an "Acquirer Indemnified Person" and collectively, the "Acquirer
Indemnified Persons") from and against any and all Damages which arising out of
any misrepresentation or breach of or default in connection with the
representations, warranties, covenants and agreements given or made by Target or
Target Shareholders in this Agreement, Target Disclosure Schedule or any exhibit
or schedule to this Agreement. Acquirer Indemnified Persons shall act in good
faith and in a commercially reasonable manner to mitigate any Damages they may
suffer. The aggregate indemnification obligations of Target Shareholders
hereunder shall not exceed $200,000; provided, however, that there shall be no
limitation on liability of Target Shareholders for (i) any breach of any
representation, warranty or covenant if the Closing does not occur, or (ii)
fraud, criminal activity or intentional breach of any covenant contained in this
Agreement. No claim for Damages shall be made under this Section 4.3 unless the
aggregate of Damages exceeds $10,000 for which claims are made hereunder by
Acquirer Indemnified Persons in which case Acquirer Indemnified Persons shall be
entitled to seek compensation for all Damages without regard to the limitation
set forth in this sentence (the "Acquirer Indemnified Person Limitation").
4.4 Claims. The provisions of this Section 4.4 shall be subject to
Section 4.5. As soon as is reasonably practicable after becoming aware of a
claim for indemnification under this Agreement, the indemnified person
("Indemnified Person") shall promptly give notice to the indemnifying person
("Indemnified Person") of such claim and the amount the Indemnified Person will
be entitled to receive hereunder from the Indemnifying Person; provided that the
failure of the Indemnified Person to promptly give notice shall not relieve the
Indemnifying Person of its obligations except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. If the Indemnifying
Person does not object in writing to such indemnification claim within thirty
(30) days of receiving notice thereof, the Indemnified Person shall be entitled
to recover, on the thirty-fifth (35th) day after such notice was given, from the
Indemnifying Person the amount of such claim, and no later objection by the
Indemnifying Person shall be permitted; if the Indemnifying Person agrees that
it has an indemnification obligation but objects that it is obligated to pay
only a lesser amount, the Indemnified Person shall nevertheless be
10
entitled to recover, on the thirty-fifth (35th) day after such notice was given,
from the Indemnifying Person the lesser amount, without prejudice to the
Indemnified Person's claim for the difference.
4.5 Notice of Third-Party Claims; Assumption of Defense. The
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Person of the assertion of any claim, or the commencement of
any suit, action or proceeding, by any Person not a party hereto in respect of
which indemnity may be sought under this Agreement; provided that the failure of
the Indemnified Person to promptly give notice shall not relieve the
Indemnifying Person of its obligations except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. The Indemnifying Person
may, at its own expense, (a) participate in the defense of any claim, suit,
action or proceeding and (b) upon notice to the Indemnified Person and the
Indemnifying Person's delivering to the Indemnified Person a written agreement
that the Indemnified Person is entitled to indemnification for all Damages
arising out of such claim, suit, action or proceeding and that the Indemnifying
Person shall be liable for the entire amount of any Damages, at any time during
the course of any such claim, suit, action or proceeding, assume the defense
thereof; provided, however, that (i) the Indemnifying Person's counsel is
reasonably satisfactory to the Indemnified Person, and (ii) the Indemnifying
Person shall thereafter consult with the Indemnified Person upon the Indemnified
Person's reasonable request for such consultation from time to time with respect
to such claim, suit, action or proceeding. If the Indemnifying Person assumes
such defense, the Indemnified Person shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Person. If, however, the
Indemnified Person reasonably determines in its judgment that representation by
the Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest or
that the Indemnifying Person's counsel is inadequate to properly defend the
Indemnified Person, then such Indemnified Person may employ separate counsel to
represent or defend it in any such claim, action, suit or proceeding and the
Indemnifying Person shall pay the fees and disbursements of such separate
counsel. Whether or not the Indemnifying Person chooses to defend or prosecute
any such claim, suit, action or proceeding, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
4.6 Settlement or Compromise. Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Person, as the
case may be, of any claim, suit, action or proceeding shall also be binding upon
the Indemnifying Person or the Indemnified Person, as the case may be, in the
same manner as if a final judgment or decree had been entered by a court of
competent jurisdiction in the amount of such settlement or compromise; provided,
however, that no obligation, restriction or Damages shall be imposed on the
Indemnified Person as a result of such settlement without its prior written
consent. The Indemnified Person will give the Indemnifying Person at least 30
days' notice of any proposed settlement or compromise of any claim, suit, action
or proceeding it is defending, during which time the Indemnifying Person may
reject such proposed settlement or compromise; provided, however, that from and
after such rejection, the Indemnifying Person shall be obligated to assume the
defense of and full and complete liability and responsibility for such claim,
suit, action or proceeding and any and all Damages in connection therewith in
excess of the amount of unindemnifiable Damages which the Indemnified Person
would have been obligated to pay under the proposed settlement or compromise.
4.7 Failure of Indemnifying Person to Act. In the event that the
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
11
ARTICLE V
POST-CLOSING COVENANTS
5.1 Blue Sky Laws. Acquirer shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions applicable
to the issuance of Acquirer Common Stock in connection with the Exchange. Each
Target Shareholder shall use his commercially reasonable efforts to assist
Acquirer to comply with the securities and blue sky laws of all jurisdictions
applicable to the issuance of Acquirer Common Stock in connection with the
Exchange.
5.2 Reorganization. Acquirer and Target shall each use its best efforts
to cause the business combination to be effected by the Exchange to be qualified
as a "reorganization" described in Section 368 of the Code.
5.3 Expenses. Whether or not the Exchange is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense.
5.4 Rescission. In the event that, after using all commercially
reasonable efforts by Bailey and his affiliates to increase the authorized
Acquirer Common Stock to permit the exercise of all of the Warrants in their
entirety, Acquirer is unable to amend its charter to increase the authorized
Acquirer Common Stock to permit the exercise of all of the Warrants in their
entirety, Bailey shall have the right to cause the Warrants to be put to
Acquirer and Acquirer to return the Target Shares to the Target Shareholders.
The right to put the Warrants shall terminate on the earlier of (i) one year
from the date of this Agreement and (ii) exercise of the Warrants.
ARTICLE VI
MISCELLANEOUS
6.1 Amendment and Modification. This Agreement may be amended, modified
and supplemented in any and all respects, but only by a written instrument
signed by all of the parties hereto expressly stating that such instrument is
intended to amend, modify or supplement this Agreement.
6.2 No Third Party Beneficiaries. This Agreement is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
6.3 Further Assurances. If, at any time after the Closing, the parties
shall consider or be advised that any further deeds, assignments or assurances
in law or that any other things are necessary, desirable or proper to complete
the Exchange in accordance with the terms of this Agreement or to vest, perfect
or confirm, of record or otherwise, the title to any property or rights of the
parties hereto, the Parties agree to execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary, desirable or
proper to vest, perfect or confirm title to such property or rights and
otherwise to carry out the purpose of this Agreement and cause the Warrants to
become exercisable.
6.4 Notice. All communications, notices, requests, consents or demands
given or required under this Agreement shall be in writing and shall be deemed
to have been duly given when delivered to, or received by prepaid registered or
certified mail or recognized overnight courier addressed to the party for whom
intended, as follows, or to such other address as may be furnished by such party
by notice in the manner provided herein:
12
If to either Target Shareholder:
c/o Bladon Studios Limited
52 High Street
Harrow-on-the-Hill
Middlesex HA1 3LL
England
with a copy to:
James G. Smith, Esq.
Raice Paykin & Krieg, LLP
185 Madison Avenue, 10th Floor
New York, NY 10016
If to Acquirer or either Acquirer Shareholder:
c/o New York Film Works, Inc.
928 Broadway
New York, NY 10010
With a copy to:
Gerald Cohen, Esq.
655 Third Avenue, 16th Floor
New York, NY 10017
6.5 Entire Agreement. This Agreement, the Disclosure Schedules and any
instruments and agreements to be executed pursuant to this Agreement, sets forth
the entire understanding of the parties hereto with respect to its subject
matter, merges and supersedes all prior and contemporaneous understandings with
respect to its subject matter.
6.6 Successors and Assigns. This Agreement shall be binding upon,
enforceable against and inure to the benefit of, the parties hereto and their
respective heirs, administrators, executors, personal representatives,
successors and assigns, and nothing herein is intended to confer any right,
remedy or benefit upon any other person.
6.7 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the internal laws of the State of New York
applicable to agreements made and fully to be performed in such state, without
giving effect to conflicts of law principles.
6.8 Jurisdiction of Disputes. In the event any party to this Agreement
commences any litigation, proceeding or other legal action in connection with or
relating to this Agreement or any matters described or contemplated herein, with
respect to any of the matters described or contemplated herein or therein, the
parties to this Agreement hereby (a) agree under all circumstances absolutely
and irrevocably to institute any litigation, proceeding or other legal action in
a court of competent jurisdiction located within the City, County and State of
New York, whether a state or federal court; (b) agree that in the event of any
such litigation, proceeding or action, such parties will consent and submit to
personal jurisdiction in such court; and (c) agree to waive to the full extent
permitted by law any objection that they may now or hereafter have to the venue
of any such litigation, proceeding or action in any such court or that any such
litigation, proceeding or action was brought in an inconvenient forum.
6.9 Time of Essence. Each of the parties hereto hereby agrees that,
with regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
13
6.10 Severability. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, this Agreement
shall be interpreted and enforceable as if such provision were severed or
limited, but only to the extent necessary to render such provision and this
Agreement enforceable.
6.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
content of the other parties.
6.12 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[remainder of page intentionally left blank]
14
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first set forth above.
NEW YORK FILM WORKS, INC.
By: /s/ MICHAEL V. COHEN
--------------------
Name: Michael V. Cohen
Title: President
TARGET SHAREHOLDERS:
/s/ ROGER BAILEY
-------------------------------------
Roger Bailey
/s/ MICHAEL ALLEN
-------------------------------------
Michael Allen
ACQUIRER SHAREHOLDERS:
/s/ MICHAEL COHEN
-------------------------------------
Michael Cohen
/s/ STEPHEN COHEN
-------------------------------------
Stephen Cohen
The undersigned hereby agrees to be bound by Section 1.5:
/s/ GERALD COHEN
-------------------------------------
Gerald Cohen
15
SCHEDULE 1.1
- ------------------------------------------------- ----------------------------------- --------------------------------
Target Shareholder's Name and Address Number of Target Shares Number of Acquirer Shares
- ------------------------------------------------- ----------------------------------- --------------------------------
Roger Bailey 1,880,000 884,454,546
- ------------------------------------------------- ----------------------------------- --------------------------------
Michael Allen 120,000 56,454,545
- ------------------------------------------------- ----------------------------------- --------------------------------
TOTAL 2,000,000 940,909,091
- ------------------------------------------------- ----------------------------------- --------------------------------
ACQUIRER DISCLOSURE SCHEDULE
Section 2.12
Interface Asset Management ("IAM") will receive certain compensation in
accordance with the agreement dated June 24, 2003.
TARGET DISCLOSURE SCHEDULE
Section 3.12
Interface Asset Management ("IAM") will receive certain compensation in
accordance with the agreement dated June 24, 2003.
18
EXHIBIT "A"
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY)
IN THE FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY STATING
THAT THE PROPOSED SALE, PLEDGE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
For the Purchase of No. __
__ shares of Common Stock
DATE OF WARRANT: June 30, 2003
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK OF
NEW YORK FILM WROKS, INC.
(A New York corporation)
WHEREAS, ___ ("Holder"), with his principal place of business at ___,
entered into a Share Exchange Agreement on even date herewith with, among
others, New York Film Works, Inc., a New York corporation, (the "Company"),
pursuant to which Holder transferred all of his right, title and interest in
Bladon Studios Limited, a company incorporated under the laws of England and
Wales; and
WHEREAS, the Company, as of the date hereof, has insufficient number of
authorized shares of its common stock, $0.001 par value per share ("Common
Stock") to issue to Holder ___ shares of Common Stock; and
WHEREAS, the Company and Holder desire to close the Share Exchange
Agreement prior to amending the Company's charter to increase the authorized
Common Stock of the Company.
NOW THEREFORE, FOR VALUE RECEIVED, the Company hereby certifies that
Holder, or his, her or its Permitted Transferees is entitled, subject to the
terms set forth below, to purchase from the Company, at any time or from time to
time during the period commencing on the date hereof and expiring on June 30,
2004, ___ shares of Common Stock, at a purchase price equal to $94.00 for all of
the Shares (the "Warrant"). The number of shares of Common Stock purchasable
upon exercise of this Warrant, and the purchase price for the Shares, each as
adjusted from time to time pursuant to the provisions of this Warrant, are
hereinafter referred to as the "Warrant Shares" and the "Exercise Price,"
respectively.
1. EXERCISE
(a) Procedure for Exercise. This Warrant may be exercised by
the Holder by the surrender of this Warrant (with the Notice of Exercise form
attached hereto duly executed by such Holder) at the principal office of the
Company, or at such other office or agency as the Company may designate,
accompanied by payment to the Company of the Exercise Price (i) in cash, (ii) by
certified check, (iii) by wire transfer, or (iv) by a combination of (i), (ii)
and (iii).
(b) Date of Exercise. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
day on which this Warrant, together with the Notice of Exercise form attached
hereto duly executed by such Holder or Permitted Transferee shall have been
surrendered to the Company. At such time, the person or persons in whose name or
names any certificates for Warrant Shares shall be issuable upon such exercise
shall be deemed to have become the holder or holders of record of the Warrant
Shares represented by such certificates.
(c) Issuance of Certificate. As soon as practicable after the
exercise of the purchase right represented by this Warrant, and in any event
within ten (10) business days thereafter, the Company at its expense will use
its best efforts to cause to be issued in the name of, and delivered to, the
Holder, or, subject to the terms and conditions hereof, to such other individual
or entity as such Holder (upon payment by such Holder of any applicable transfer
taxes) may direct (i) a certificate or certificates for the number of full
shares of Warrant Shares to which such Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, an additional share as determined pursuant to Section 3
hereof, and (ii) in case such exercise is in part only, a new Warrant or
Warrants (dated the date hereof) of like tenor, stating on the face or faces
thereof the number of shares currently stated on the face of this Warrant minus
the number of such shares purchased by the Holder upon such exercise as provided
in Section 1(a) above. The Company covenants and agrees that it will pay when
due any and all state and federal issue taxes which may be payable in respect of
the issuance of this Warrant or the issuance of any Warrant Shares upon exercise
of this Warrant.
2. ADJUSTMENTS.
(a) Split, Subdivision or Combination of Shares. If the
outstanding shares of the Company's Common Stock at any time while this Warrant
remains outstanding and unexpired shall be subdivided or split into a greater
number of shares, or a dividend in Common Stock shall be paid in respect of
Common Stock, the number of Warrant Shares purchasable upon the exercise of this
Warrant in effect immediately prior to such subdivision or at the record date of
such dividend shall, simultaneously with the effectiveness of such subdivision
or split or immediately after the record date of such dividend (as the case may
be), shall be proportionately increased. If the outstanding shares of Common
Stock shall be combined or reverse-split into a smaller number of shares, the
number of Warrant Shares purchasable upon the exercise of this Warrant in effect
immediately prior to such combination or reverse split shall, simultaneously
with the effectiveness of such combination or reverse split, be proportionately
decreased.
(b) Reclassification Reorganization, Consolidation or Merger.
In the case of any reclassification of the Common Stock (other than a change in
par value or a subdivision or combination as provided for in Section 2(a)
above), or any reorganization, consolidation or merger of the Company with or
into another corporation (other than a merger or reorganization with respect to
which the Company is the continuing corporation and which does not result in any
reclassification of the Common Stock), or a transfer of all or substantially all
of the assets of the Company, or the payment of a liquidating distribution then,
as part of any such reorganization, reclassification, consolidation, merger,
sale or liquidating distribution, lawful provision shall be made so that the
Holder of this Warrant shall have the right thereafter to receive upon the
exercise hereof, the kind and amount of shares of stock or other securities or
property which such Holder would have been entitled to receive if, immediately
prior to any such reorganization, reclassification, consolidation, merger, sale
or liquidating distribution, as the case may be, such Holder had held the number
of shares of Common Stock which were then purchasable upon the exercise of this
Warrant. In any such case, appropriate adjustment (as reasonably determined by
the Board of Directors of the Company) shall be made in the application of the
provisions set forth herein with respect to the rights and interests thereafter
of the Holder of this Warrant such that the provisions set forth in this Section
2 shall thereafter be applicable, as nearly as is reasonably practicable, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
2
(c) Merger, Consolidation, Share Exchange, Reorganization,
Etc. If all or any portion of this Warrant shall be exercised subsequent to any
merger, consolidation, recapitalization, exchange of shares, or reorganization
of the Company, sale or transfer of substantially all of the assets of the
Company, or other similar event, occurring after the date hereof, as a result of
which shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of securities of the
Company or another entity, then lawful provision shall be made by the Company so
that the Holder exercising this Warrant shall receive, for the Exercise Price
paid upon such exercise, the aggregate number and class of shares which such
Holder would have received if this Warrant had been exercised immediately prior
to such merger, consolidation, recapitalization, exchange of shares,
reorganization, sale or other similar event.
(d) No Limitations on the Company. This Warrant shall not
affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve or liquidate, or to sell
or transfer all or any part of its business or assets. Nothing herein shall be
construed as creating any limitations upon the right and authority of the Board
of Directors of the Company to adopt such incentive compensation arrangements
(which arrangements may be applicable either generally to a class or classes of
individuals or specifically to a particular individual or individuals) as the
Board of Directors in its discretion determines desirable, including, without
limitation, the granting of stock options or stock appreciation rights.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such actions as may be necessary or
appropriate in order to protect against impairment of the rights of the Holder
of this Warrant to adjustments in the Exercise Price.
3. FRACTIONAL SHARES. The Company shall not be required to issue
fractions of shares of Common Stock upon exercise. If any fractions of a share
would, but for this Section 3, be issuable upon any exercise, in lieu of such
fractional share the Company shall round up to the nearest whole number.
4. LIMITATION ON SALES. Each holder of this Warrant acknowledges that
this Warrant and the Warrant Shares, as of the date of original issuance of this
Warrant, have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and agrees not to sell, pledge, distribute, offer for
sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued
upon its exercise in the absence of (a) an effective Registration Statement
under the Securities Act as to this Warrant or such Warrant Shares or (b) an
opinion of counsel, reasonably acceptable to the Company, that such registration
and qualification are not required. The Warrant Shares issued upon exercise
thereof shall be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY
THE COMPANY OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY
ACCEPTABLE TO THE COMPANY STATING THAT THE PROPOSED SALE, PLEDGE OR
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ALL APPLICABLE
STATE SECURITIES LAWS."
3
The Holder hereof and the Company agree to execute such other documents and
instruments as the Company reasonably deems necessary to effect the compliance
of the issuance of this Warrant and any shares of Common Stock issued upon
exercise hereof with applicable federal and state securities laws.
The Company covenants and agrees that (i) all Warrant Shares which may be issued
upon exercise of the Warrant, upon issuance, shall be fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof; and (ii) the Company will not close its books against the
exercise of the Warrant or the transfer of the Common Stock issued or issuable
upon exercise of the Warrant in any manner which would interfere with the timely
exercise of the Warrant.
5. Transfer of Warrant. This Warrant may not be transferred, in whole
or in part, whether by operation of law or otherwise, to any person or business
entity, without the prior written consent of the Company, and any assignment to
the contrary shall be null and void and of no force and effect. Notwithstanding
the foregoing, but subject to the provisions of Section 4, the Holder may
transfer the Warrant or a portion thereof to one or more trusts established for
the exclusive benefit of such Holder and/or one or more of the Holder's spouse,
children, grandchildren, parents, siblings, nieces or nephews (collectively,
"Permitted Transferees"), or at death to the Holder's estate, to any of the
Holder's Permitted Transferees, or to one or more trusts all of the
beneficiaries of which are one or more of the Holder's Permitted Transferees;
provided, however, that any such transferee shall hold the transferred Warrant
subject to the terms and conditions of this Agreement. Any transfer permitted by
the immediately preceding sentence shall be made by presentation of the Warrant
to the Company with written instructions for such transfer, including evidence
that the transfer is permitted hereunder. Upon such presentation for transfer,
the Company shall promptly execute and deliver a new Warrant or Warrants in the
form hereof in the name of the assignee or assignees and in the denominations
specified in such instructions. The Company shall pay all expenses incurred by
it in connection with the preparation, issuance and delivery of Warrants as
permitted under this Section.
6. GENERAL RESTRICTIONS. The Company shall not be required to sell or
issue any Warrant Shares under this Warrant if the sale or issuance of such
Warrant Shares would constitute a violation by the individual exercising the
Warrant or by the Company of any provision of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration, or qualification of any Warrant
Shares subject to the Warrant upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of Warrant Shares hereunder, the Warrant may not be exercised in whole
or in part unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company, and any delay caused thereby shall in no way affect
the date of termination of the Warrant. Specifically, in connection with the
Securities Act, unless a registration statement under the Securities Act is in
effect with respect to the Warrant Shares covered by the Warrant, the Company
shall not be required to sell or issue such Warrant Shares unless the Company
has received evidence satisfactory to it that the holder of the Warrant may
acquire such Warrant Shares pursuant to an exemption from registration under the
Securities Act. Any determination in this connection by the Company shall be
final, binding, and conclusive. Except as provided herein, the Company may, but
shall in no event be obligated to, register any securities covered hereby
pursuant to the Securities Act. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of the Warrant or the issuance
of Warrant Shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that the Warrant shall not be exercisable unless and until the
Warrant Shares covered by the Warrant are registered or are subject to an
available exemption from registration, the exercise of the Warrant (under
circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption. The Warrant shall not be exercisable unless the Holder shall
have received all required regulatory approvals with respect to ownership of the
Warrant Shares to be issued upon such exercise.
4
7. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
8. TRANSFERS. The Company will maintain a register containing the names
and addresses of the Holders of this Warrant. Any Holder may change its, his or
her address as shown on the warrant register by written notice to the Company
requesting such change. Until any transfer of this Warrant is made in the
warrant register, the Company may treat the Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
9. PAYMENT OF TAXES. The Holder agrees to promptly pay in cash to the
Company, upon demand, any taxes that Company (or any affiliate of the Company)
may be required to withhold or collect in connection with any exercise of the
Warrant.
10. CERTAIN NOTICES
(a) Notice of Adjustment. Upon any adjustment of the Exercise
Price, the Company shall forthwith give written notice thereto to the Holder of
this Warrant describing the event requiring the adjustment, stating the adjusted
Warrant Shares and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
(b) Notices of Record Date. In case: (i) the Company shall
take a record of the holders of its Common Stock (or other stock or securities
at the time deliverable upon the exercise of this Warrant) for the purpose of
entitling or enabling them to receive any dividend or other distribution, or to
receive any right to subscribe for or purchase any shares of any class or any
other securities, or to receive any other right, or (ii) of any capital
reorganization of the Company, any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
surviving entity), or any transfer of all or substantially all of the assets of
the Company, or (iii) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company, then, and in each such case, the Company will mail
or cause to be mailed to the Holder of this Warrant a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the notice shall not affect the legality or validity of any such
action.
(c) Form and Delivery Requirements. All notices, demands, requests, or
other communications which may be or are required to be given, served, or sent
by any party to any other party pursuant to this Warrant ("Notices") shall be in
writing and shall be provided or given in one of the following ways: (i)
personal delivery, or (ii) overnight courier service which provides a receipt
acknowledging delivery. All such Notices shall be deemed to have been so
provided or given as follows: (a) provided or given by personal delivery--upon
actual delivery to or refusal to
5
accept delivery by party of the Notice, or (b) provided or given by overnight
courier service which provides a receipt acknowledging delivery--upon actual
delivery to or refusal to accept delivery by party of the Notice during normal
business hours. Notices to a party shall be addressed to such party at its
following address and facsimile number, or at such other address and facsimile
number, and to the attention of such other officers or individuals as it may
from time to time designate to the other parties in writing:
(i) If to the Company:
New York Film Works, Inc.
Attn: Secretary
928 Broadway
New York, NY 10010
(ii) If to Holder, the address of the Holder as maintained on
the books and records of the Company,
or to such other address as may be designated by a party in a notice to the
other. Each notice, demand, request or communication that shall be given or made
in the manner described above shall be deemed sufficiently given or made for all
purposes at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, the affidavit of messenger or (with respect to a
facsimile) the facsimile confirmation report being deemed conclusive but not
exclusive evidence of such delivery) or at such time as delivery is refused by
the addressee upon presentation.
11. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the
Holder of this Warrant shall not have or exercise any rights by virtue hereof as
a shareholder of the Company. Holder will have and may exercise rights as a
shareholder on all stock of the Company held by Holder.
12. HEADINGS. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
13. AMENDMENTS. The terms and provisions of this Warrant may not be
modified or amended, or any provisions hereof waived, temporarily or
permanently, except by written consent of the Company and the Holder hereof.
14. BINDING EFFECT. Subject to all restrictions provided for in this
Warrant and by applicable law relating to assignment and transfer of this
Warrant, this Warrant shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors, and permitted assigns.
15. ENTIRE AGREEMENT. This Warrant constitutes the entire agreement and
supersedes all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof. Neither this Warrant
nor any term hereof may be amended, waived, discharged, or terminated except by
a written instrument signed by the Company and the Holder; provided, however,
that the Company or the Holder unilaterally may waive any provision hereof in
writing to the extent that such waiver does not adversely affect the interests
of the other party hereunder, but no such waiver shall operate as or be
construed to be a subsequent waiver of the same provision or a waiver of any
other provision hereof.
16. COUNTERPARTS. To facilitate execution, this Warrant may be executed
in counterparts. It shall not be necessary that the signatures of, or on behalf
of, each party, or that the signatures of all persons required to bind any
party, appear on each counterpart; but it shall be sufficient that the signature
of, or on behalf of, each party, or that the signatures of the persons required
to bind any party, appear on one or more of the counterparts. All counterparts
shall collectively constitute a single contract. It shall not be necessary in
making proof of this Warrant to produce or account for more than a number of
counterparts containing the respective
6
signatures of, or on behalf of, all of the parties hereto. Without limiting the
generality of the foregoing, the exchange by the parties hereto of counterparts
by facsimile transmission shall be sufficient by create a binding and
enforceable agreement.
17 GOVERNING LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of New York (excluding the choice of law
rules thereof).
18. JURISDICTION AND VENUE. Any legal suit, action or proceeding
arising out of or relating to this Warrant shall be instituted exclusively in
New York State Supreme Court, County of New York or in the United States
District Court for the Southern District of New York. Each party hereto waives
any objection to the venue of any such suit, action or proceeding and the right
to assert that such forum is not a convenient forum for such suit, action or
proceeding and irrevocably consents to the jurisdiction of the New York State
Supreme Court, County of New York, and the United States District Court for the
Southern District of New York in any such suit, action or proceeding. Each party
hereto further agrees to accept and acknowledge service or any and all process
which may be served in any such suit, action or proceeding in New York State
Supreme Court, County of New York or in the United States District Court for the
Southern District of New York and agrees that service of process upon it mailed
by certified mail to its address shall be deemed in every respect effective
service of process upon it in any suit, action or proceeding.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Warrant or caused this Warrant to be duly executed on its behalf as of the date
first above written.
ISSUER:
NEW YORK FILM WORKS, INC.
By:
--------------------------------------------------
Title:
-----------------------------------------------
HOLDER:
- ----------------------------------------------------
7
NOTICE OF EXERCISE
TO: New York Film Works, Inc.
1. The undersigned hereby elects to purchase ________ shares of the
Common Stock of New York Film Works, Inc., pursuant to terms of the attached
Warrant, and tenders herewith payment of the Exercise Price of such shares in
full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of the Common Stock in the name of the undersigned or in such other name as is
specified below:
3. The undersigned represents that he/she/it will only sell the shares
of Common Stock pursuant to an effective Registration Statement under the
Securities Act of 1933, as amended, or an exemption from registration
thereunder.
- -----------------------------------------
(Name)
- -----------------------------------------
(Address)
- -----------------------------------------
- -----------------------------------------
(Telephone Number)
- -----------------------------------------
(Facsimile Number)
- -----------------------------------------
(E-mail Address)
- -----------------------------------------
(Taxpayer Identification Number)
By: ______________________________________
Title: _____________________________________
Date: _____________________________________
8
EXHIBIT "B"
IRREVOCABLE PROXY
In accordance with the Share Exchange Agreement (the "Exchange
Agreement") by and among, New York Film Works, a New York corporation, Michael
V. Cohen, Stephen M. Cohen, Roger Bailey and Michael Allen dated June 30, 2003,
the undersigned agrees as follows:
1. Grant of Irrevocable Proxy.
(a) The undersigned stockholder (the "Stockholder") with respect to all of
the shares (the "Shares") of common stock, par value $0.001 per share
(the "Common Stock") owned by the Stockholder in New York Film Works,
Inc., a New York corporation, (the "Company") hereby grants to Roger
Bailey (the "Holder") an irrevocable proxy under Section 609(f) of the
New York Business Corporation Law to vote the Shares until the earlier
of (i) the Warrant (as such term is defined in the Exchange Agreement)
granted to the Holder has been exercised or (ii) the Warrant has
expired by its terms, in any manner that the Holder may determine in
his sole and absolute discretion to be in the Holder's own best
interest, all of the Shares with respect to which the Stockholder has
voting power at the date hereof at any meeting of stockholders of the
Company or action by written consent with respect to any matter or the
transactions contemplated thereby. It is expressly understood and
agreed that the foregoing irrevocable proxy is hereby granted to the
Holder by the Stockholder pursuant to the voting agreement provisions
contained in the Exchange Agreement and is coupled with an interest.
(b) Because of this interest in the Shares, the Holder shall have no duty,
liability and obligation whatsoever to the Stockholder arising out of
the exercise by the Holder of the foregoing irrevocable proxy. The
Stockholder expressly acknowledges and agrees that (i) the Stockholder
will not impede the exercise of the Holder's rights under the
irrevocable proxy and (ii) the Stockholder waives and relinquishes any
claim, right or action the Stockholder might have, as a stockholder of
the Company or otherwise, against the Holder or any of his affiliates
in connection with any exercise of the irrevocable proxy granted
hereunder.
(c) The Stockholder has the right to notice of or to any and all special
and general meetings of stockholders during the term of this
Irrevocable Proxy and further severally agrees that if any notice is
given by the Company to the Stockholder, such notice will be deemed to
have been validly given to the Stockholder for all purposes.
2. Restrictions on Sale or other Disposition of Shares by the Stockholder. The
Stockholder hereby agrees that from and after the date hereof and during the
term of this Irrevocable Proxy, the Stockholder will not, directly or
indirectly, without the prior written consent of the Holder, sell, assign,
hypothecate, transfer, pledge, give, place in trust or dispose of (including,
without limitation, by granting of proxies, or relinquishment of voting rights,
with respect to) any of the Shares owned by the Stockholder, except for the
grant of the irrevocable proxy as provided for herein and except for
non-volitional transfers by operation of law. The Stockholder agrees to permit
an appropriate legend on certificates evidencing the Shares and stop transfer
instructions to the transfer agent reflecting the grant of the irrevocable proxy
and restrictions contained in the foregoing Section 1 and this Section 2.
3. Representations and Warranties. The Stockholder represents and warrants to
the Holder as follows:
(a) The Stockholder has the all necessary rights, power and authority to
execute, deliver and perform his obligations under this Irrevocable
Proxy. This Irrevocable Proxy has been duly executed and delivered by
the Stockholder and constitutes his legal and valid obligation
enforceable against the Stockholder in accordance with its terms.
(b) The Stockholder is the record owner of the Shares listed under his name
on Appendix A and the Stockholder has plenary voting and dispositive
power with respect to such Shares; the Stockholder owns no other shares
of the capital stock of the Company; there are no proxies, voting
trusts or other agreements or understandings to which such Stockholder
is a party or bound by and which expressly require that any of the
Shares be voted in any specific manner other than this Irrevocable
Proxy; and such Stockholder has not entered into any agreement or
arrangement inconsistent with this Irrevocable Proxy.
4. Equitable Remedies. The Stockholder acknowledges that irreparable damage
would result if this Irrevocable Proxy is not specifically enforced and that,
therefore, the rights and obligations of the Holder may be enforced by a decree
of specific performance issued by a court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, not be exclusive and shall be in
addition to any other remedies which the Holder may otherwise have available.
- ------------------------------
2
APPENDIX A
- ---------------------------------------- ----------------------------------
Certificate Number Number of Shares
- ---------------------------------------- ----------------------------------
- ---------------------------------------- ----------------------------------