SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT dated as of February 2, 2000 ("Agreement"), among
Saratoga International Holdings Corp., a Nevada corporation ("Saratoga"), and
Virtual Media Group Inc., a Washington corporation and its wholly owned
subsidiary, Virtual Media Group Inc. a Province of Alberta Corporation
hereinafter collectively referred to as "Virtual".
BACKGROUND
The respective Boards of Directors of Saratoga and Virtual have each approved,
upon the terms and subject to the conditions set forth in this Agreement, the
share exchange between Saratoga and Virtual whereby each issued and outstanding
share of common stock of Virtual will be exchanged for shares of Common Stock
and Warrants to be issued by Saratoga as set forth in Article I and by which
Virtual shall become a wholly-owned subsidiary of Saratoga.
In consideration of the respective representations, warranties, covenants and
agreements contained in this Agreement, Saratoga and Virtual hereby agree as
follows:
ARTICLE I
THE SHARE EXCHANGE
1.01 The Share Exchange. Upon the terms and subject to the conditions hereof,
Virtual shall become a wholly-owned subsidiary of Saratoga upon closing of
this Agreement subject to the conditions set forth in Article VI.
1.02 Effective Time. This Agreement shall become effective at such time
("Effective Time") as the conditions set forth in Article VI are satisfied
or waived, if permissible.
1.03 Shares. At or prior to the Effective Time, by virtue of this Agreement, the
following events shall occur.
a) Each issued and outstanding share of common stock of Virtual shall be
assigned, transferred and conveyed to Saratoga.
b) In exchange thereof, Saratoga shall issue from its treasury 900,000
shares of its common stock ("Common Stock") and warrants ("Warrants")
entitling the holders to purchase up to 1,000,000 shares of the common
stock of Saratoga on terms and conditions set forth in this Agreement
and in the Warrants. The Common Stock and Warrants referred to in this
Section 1.03 shall be issued to each of Virtual's shareholders, as set
forth on Exhibit 1.03 (b) annexed hereto, in the number of Common
Stock shares and Warrants set forth next to each name.
E-1
c) The Saratoga Warrants issued to Virtual's shareholders under this
Agreement shall contain the following provisions.
1) The holder's right to exercise the Warrants shall vest at the
rate of 20% of the total number of Warrants issued hereunder each
year beginning one year from the Effective Time of this
Agreement.
2) Holder's right to vest shall be contingent upon and subject to
holder's continued employment with Saratoga or its subsidiaries
at each vesting anniversary date ("Vesting Date").
3) The holder may exercise the warrants at any time following the
Vesting Date and prior to the date of expiration of the Warrants,
which shall be six years from the Effective Time of this
Agreement.
4) The exercise price is $0.165 per share.
5) Redemption provisions and other terms and conditions of the
Warrant shall be as set forth in the sample Warrant certificate
and agreement annexed hereto as Exhibit 1.03 (c).
1.04 Private Placement.
a) The Common Stock and Warrants and the Common Stock underlying the
Warrants issued to Virtual's shareholders have not been and will not
be registered with the Securities and Exchange Commission ("SEC") or
the securities commission of any state, including but not limited to
Nevada and Washington state, pursuant to an exemption from
registration by virtue of Saratoga's intended compliance with the
provisions of Sections 4(2) and 4(6) of the Securities Act of 1933, as
amended ("Securities Act"), and the Common Stock and Warrants will be
made available only to "accredited investors" or Virtual shareholders
who have used a "Purchaser representative", as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act. Such exemption
limits the number and types of investors to which the offering of
Common Stock and warrants may be made and restricts subsequent
transfers of the Common Stock so offered which also may be restricted
by state securities laws. The Common Stock and Warrants may not be
resold or otherwise disposed of by Virtual's shareholders unless, in
the opinion of counsel to Saratoga, registration under federal and
applicable state securities laws is not required or compliance is made
with the registration requirements of such laws.
ARTICLE II
EXCHANGE OF SHARES
2.01 Issuance of Certificates. Promptly after the Effective Time, Saratoga shall
issue to each person set forth on Exhibit 1.03 (b) a certificate
representing the Common Stock and Warrants to be issued to each Virtual
shareholder and simultaneously
E-2
each Virtual shareholder shall exchange and surrender the certificate
representing all of such Virtual shareholder's shares in Virtual.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
SARATOGA
Saratoga represents and warrants to Virtual as of the date of this Agreement and
as of the Effective Time as follows:
3.01 Existence: Good Standing. Saratoga is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation.
3.02 Capitalization. The authorized capital stock of Saratoga consists of
200,000,000 shares of Common Stock, par value $0.001 ("Shares") and
50,000,000 shares of Preferred Stock, par value $0.001. As of October 31,
1999, Saratoga's most recent fiscal year end, there were 377,742 shares of
8% cumulative convertible redeemable shares of Preferred Stock issued and
outstanding and 54,058,125 shares of Common Stock issued and outstanding
including 2,000,000 shares of Common Stock held in escrow pending
completion and outcome of Saratoga's claim against Language Force Inc. All
issued and outstanding shares of Preferred Stock and issued and outstanding
shares of Common Stock are duly authorized, validly issued, free of
preemptive rights, non-assessable, and, except for the 2,000,000 shares of
Common Stock held in escrow, are fully paid. Options, warrants and other
rights to acquire from Saratoga or any of its subsidiaries and obligations
of Saratoga or any of its subsidiaries to issue, any capital stock, or
securities convertible into or exchangeable for capital stock or voting
securities of Saratoga as of October 31, 1999 are as set forth in
Saratoga's audited financial statements as of and for the fiscal year ended
October 31, 1999, a copy of which has been provided to Virtual and is
annexed hereto as Exhibit 3.02.
3.03 Authorization: Validity and Effect of Agreements. Saratoga has the
requisite corporate power and authority to execute and deliver this
Agreement. The consummation by Saratoga of the transactions contemplated
hereby has been duly authorized by all requisite corporate action and the
issuance of the Common Stock and warrants to Virtual's shareholders has
been approved by the board of directors of Saratoga at a meeting held
February 1, 2000. This Agreement constitutes the valid and legally binding
obligation of Saratoga, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
3.04 No Violation. To the best of Saratoga's knowledge neither the execution and
delivery by Saratoga of this Agreement, nor the consummation by Saratoga of
the transactions contemplated hereby in accordance with the terms hereof,
will: (i) conflict with or result in a breach of any provisions of the
Articles of Incorporation or Bylaws of Saratoga (ii)violate, or conflict
with, or result in a breach of any provision of, or constitute a default
(or an event which with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right of
E-3
termination or cancellation of, or accelerate the performance required by,
or result in the triggering of any payment of compensation under, or result
in the creation of any lien, security interest, charge or
encumbrance("Lien")upon any of the material properties of Saratoga or its
subsidiaries under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any material license,
franchise permit, lease, contract, agreement or other instrument,
commitment or obligation to which Saratoga or any of Saratoga's
subsidiaries is a party, or by which Saratoga or any of Saratoga's
subsidiaries or any of their respective properties is bound or affected,
except for any of the foregoing matters which would not have a material
adverse effect on the business, results of operations, financial condition
or prospects of Saratoga and its subsidiaries taken as a whole ("Saratoga
Material Adverse Effect"); or (iii) other than the filings required under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1978 ("HSR Act"), the
Securities Exchange Act of 1934, ("Exchange Act"), the Securities Act or
applicable state securities and "Blue Sky" laws or filings in connection
with the maintenance of its qualification to do business in other
jurisdictions, and the filings contemplated by Section 5.02 of this
Agreement (collectively, "Regulatory Filings"), require any material
consent, approval or authorization of, or declaration, filings or
registration with, any domestic governmental or regulatory authority, the
failure to obtain or make which would have a Saratoga Material Adverse
Effect.
3.05 Documents. Saratoga has delivered to Virtual the following documents:
- Audited financial statements for the year ended October 31, 1999;
- Registration Statement on Form 10-SB filed with the Securities and Exchange
Commission on January 24, 2000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF VIRTUAL
Virtual represents and warrants to Saratoga as of the date of this Agreement and
as of the Effective Time as follows:
4.01 Existence; Good Standing; Corporate Authority; Compliance with Law. Virtual
is a corporation duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The copies of
Virtual's Articles of Incorporation and by laws previously delivered to
Saratoga are true and correct and have not since been amended, modified or
rescinded.
4.02 Authorization, Validity and Effect of Agreements. Virtual has the requisite
corporate power and authority to execute and deliver this Agreement. The
consummation by Virtual of all transactions contemplated hereby has been
duly authorized by all requisite corporate action and is required to be
approved by the shareholders of Virtual and such approval was obtained by
shareholder consent on February 1, 2000. This Agreement constitutes the
valid and legally binding obligation of Virtual,
E-4
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
and general principles of equity.
4.03 Capitalization. The authorized capital stock of Virtual consists of
100,000,000 shares of $0.001 par value common stock and no other classes of
stock, common or preferred, or other securities. There are 900,000 shares
of common stock issued and outstanding as of February 2, 2000. All issued
and outstanding shares of common stock are duly authorized, validly issued,
fully paid, non-assessable and free of preemptive rights. Virtual is not a
party to or bound by any written or oral contract or agreement which grants
to any person an option, warrant or right of first refusal or other right
of any character to acquire at any time, or upon the happening of any
stated events, any shares of or interest in Virtual, whether or not
presently authorized, issued or outstanding. There are outstanding (i) no
shares of capital stock or other voting securities of Virtual, (ii) no
securities of Virtual or any of its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of Virtual,
(iii) no options or other rights to acquire from Virtual or any of its
subsidiaries, and no obligations of Virtual or any of its subsidiaries to
issue, any capital stock, voting securities or securities convertible into
or exchangeable for capital stock or voting securities of Virtual, and (iv)
no equity equivalents, interest in the ownership or earnings of Virtual or
any of its subsidiaries or other similar rights. There are no outstanding
obligations of Virtual or any of its subsidiaries to repurchase, redeem or
otherwise acquire any securities of Virtual.
4.04 No Violation. Neither the execution and delivery by Virtual of this
Agreement nor the consummation by Virtual of the transactions contemplated
hereby in accordance with the terms hereof will: (i) conflict with or
result in a breach of any provisions of the Articles of Incorporation or
Bylaws of Virtual or its subsidiaries, (ii) violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right of termination
or cancellation of, or accelerate the performance required by, or result in
the triggering of any payment or compensation under, or result in the
creation of any Lien upon any of the properties of Virtual or its
subsidiaries under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation of which Virtual or its subsidiaries is a party,
or by which Virtual or its subsidiaries or any of their respective
properties or assets is bound or affected, except for any of the foregoing
matters which, singularly or in the aggregate, would not have a Virtual
Material Adverse Effect; (iii) other than the Regulatory filings, require
any material consent, approval or authorization of, or declaration, filing
or registration with, any domestic governmental or regulatory authority,
the failure to obtain or make which would have a Virtual Material Adverse
Effect, as defined in Section 7.01(c) below, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to
Virtual, any of its subsidiaries or any of their assets, except for
violations which in the aggregate would not have a Virtual Material Adverse
Effect or materially adversely affect the ability of Virtual to consummate
the Merger.
E-5
4.05 Employment Agreements. Virtual has entered into employment agreements with
two of its Officers, Mr. ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, which are set
forth on Exhibit 6.01 (i) and 6.01 (i) (1) annexed hereto.
4.06 Documents. Virtual has delivered to Saratoga the following documents:
1. Unaudited financial statements from inception through December 31,
1999.
2. Subscription Agreement, Debenture Agreement and other documentation
relating to Virtual's Series A Senior Subordinated Redeemable
Convertible Debentures issued to ZZG Holdings LLC.
3. List of Assets
4.07 Intellectual Property Rights. Virtual hereby warrants and represents that
it is the sole and exclusive owner of the intellectual property and
development rights to the proprietary software commonly referred to as
"Happy" and that it has the right, title and interest to such property free
from any liens, claims or other encumbrances.
4.08 Wholly-Owned Subsidiary. Virtual hereby represents and warrants that
Virtual Media Group Inc. ("Virtual Canada"), a company incorporated under
the Corporations Act of the Province of Alberta, is a subsidiary of Virtual
all of whose issued and outstanding voting Common Stock and other equity
securities are held by Virtual, free and clear of any liens or
encumbrances. At time of and following Closing, Virtual Canada shall be a
wholly owned subsidiary of Virtual.
4.09 Assets and Liabilities. Virtual hereby represents and warrants that it and
its wholly-owned subsidiary, Virtual Canada, collectively and consolidated
have no contingent or other liabilities other than those listed in Exhibit
4.09 annexed hereto. The assets owned by Virtual and Virtual Canada, as set
forth in Exhibit 4.09(a) annexed hereto, at time of closing shall be free
and clear of any and all liens, claims or other encumbrances except for the
security lien interest under the loan agreement between Virtual and the
Business Development Bank of Canada ("Bank") as soon as practical following
the Closing and payment to the Bank under this Agreement. Virtual shall
secure appropriate documents evidencing the Bank's release of its liens and
security interest on Virtual and its assets.
ARTICLE V
COVENANTS
5.01 Conduct of Business. From and after the date of this Agreement until
Closing or this Agreement is terminated, unless Virtual has consented in
writing thereto, Saratoga, and, with respect to (e) and (f) below, Saratoga
and Virtual:
a) Shall, and shall cause its subsidiaries to, conduct its operations
according to its usual, regular and ordinary course in substantially
the same manner as heretofore conducted;
b) Shall use reasonable efforts, and shall cause its subsidiaries to use
reasonable efforts, to preserve intact its business organization and
goodwill, keep available
E-6
the services of its officers and employees and maintain satisfactory
relationships with those persons having business relationships with
it;
c) Shall confer on a regular basis with one or more representatives of
Saratoga to report operational matters of materiality and any
proposals to engage in material transactions;
d) Shall not amend its Articles of Incorporation or By Laws;
e) Shall promptly notify the other parties hereto of any material
emergency or other material change in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects or
the normal course of its businesses or in the operation of its
properties, any material litigation or material governmental
complaints, investigations or hearings (or communications indicating
that the same may be contemplated), or the breach in any material
respect of any representation or warranty contained herein;
f) Shall promptly deliver to the other parties hereto true and correct
copies of any report, statement or schedule filed with or delivered to
the SEC, any other Governmental entity (other than routine corporate
tax and other filings in the ordinary course of business) or any
shareholder of Virtual or Saratoga, as the case may be, subsequent to
the date of this Agreement;
g) Shall not (i) issue, sell or pledge, or agree to issue, sell or
pledge, any shares of its capital stock, effect any stock split or
otherwise change its capitalization as it existed on the date hereof,
(ii) grant, confer or award any option, warrant, conversion right or
other right to acquire any shares of its capital stock or grant any
right to convert or exchange any securities of Virtual for Common
Stock, (iii) increase any compensation or enter into or amend any
employment agreement with any of its present or future officers or
directors, other than in the ordinary course of Virtual's business,
(iv) adopt any new employee benefit plan, other than in the ordinary
course of Virtual's business (including any stock option, stock
benefit or stock purchase plan) or amend any existing employee benefit
plan in any material respect, other than in the ordinary course of
business, except, in each case, for changes which are less favorable
to participants in such plans or as may be required by applicable law,
or (v) amend any Officer Employment Agreement or increase any
compensation payable pursuant to such Officer Employment Agreements;
h) Shall not (i) except in the normal course of business as consistent
with prior practice, declare, set aside or pay any dividend (whether
in cash, stock or property) or make any other distribution or payment
with respect to any shares of its capital stock or (ii) directly or
indirectly redeem, purchase or otherwise acquire any shares of its
capital stock or make any commitment for any such action;
i) Shall not, and shall not permit its subsidiaries to (i) sell, lease or
otherwise dispose of any assets of Virtual or its subsidiaries
(including capital stock) which are of a material amount, individually
or in the aggregate, or (ii) make any
E-7
acquisition, by means of merger or otherwise, of any assets or
securities which are of a material amount, individually or in the
aggregate; and
j) Shall not, and shall not permit its subsidiaries to, agree in writing
to take or otherwise take (i) any of the foregoing actions or (ii) any
action which would make any representation or warranty of Virtual
herein untrue or incorrect.
5.02 Filings; Other Action. Subject to the terms and conditions herein provided,
Virtual and Saratoga shall: (i) promptly make their respective filings and
thereafter make any other required submissions under the HSR act with
respect to the Closing if required; (ii) use all reasonable efforts to
cooperate with one another in (a) determining which filings are required to
be made prior to the Effective Time with, and which consents, approvals,
permits or authorizations are required to be obtained prior to the
Effective Time from, governmental or regulatory authorities of the United
States, the several states, Canada, the provinces of Canada and other
jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
(b) timely making all such filings and timely seeking all such consents,
approvals, permits or authorizations; and (iii) use best efforts to take,
or cause to be taken, all other action and do, or cause to be done, all
other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement. If, at any time
after the Effective Time, any further action is necessary or desirable to
carry out the purpose of this Agreement, the proper officers and directors
of Saratoga and Virtual shall use best efforts to take all such necessary
action.
5.03 Inspection of Records. From the date hereof to the Effective Time, each of
Saratoga and Virtual shall allow all designated officers, attorneys,
accountants and other representatives of Saratoga and Virtual, as the case
may be, access at all reasonable times to the records and files,
correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or
otherwise pertaining to the business and affairs of Saratoga, Virtual and
their subsidiaries.
5.04 Indemnification.
a) (i) After the Effective Time, Saratoga shall, to the fullest extent
permitted, indemnify, defend and hold harmless the present and former
directors and officers of Saratoga and Virtual and any subsidiaries
and their respective heirs, executors, administrators and legal
representatives (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties" ) against all losses,
expenses, claims, damages or liabilities arising out of actions or
omissions occurring on or prior to the Effective Time (including,
without limitation, acts or omissions relating to the transactions
contemplated by this Agreement (collectively "Losses")). In connection
with the foregoing obligations from and after the Effective Time,
Saratoga shall bear the cost of expenses incurred in defending against
any claim, action, suit, proceeding or investigation arising out of
any alleged acts or omissions occurring on or prior to the Effective
Time (including, without limitation, acts or omissions relating to the
transactions contemplated by this Agreement), as incurred to the
fullest extent permitted
E-8
under applicable law. All rights to indemnification, including
provisions relating to advances, expenses and exculpation of director
liability, existing in favor of the Indemnified Parties as provided in
Saratoga's or Virtual's Articles of Incorporation and Bylaws, as in
effect as of the date of this Agreement, with respect to matters
occurring through the Effective Time, will survive the Effective Time
and will continue in full force and effect.
(ii) Any Indemnified Party will promptly notify Saratoga of any claim,
action, suit, proceeding or investigation for which such party may
seek indemnification under this Section (a "Third Party Claim"). In
the event of any such Third Party Claim, (x) within twenty (20) days
of receipt of such notice, Saratoga will have the right to assume the
defense thereof, and Saratoga will not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred thereafter by such Indemnified Parties in
connection with the defense thereof, except that all Indemnified
Parties (as a group) will have the right to retain one separate
counsel, acceptable to such Indemnified Parties, as the expense of the
Indemnifying Party if the named parties to any such proceeding include
both the Indemnified Party and Saratoga and the representation of such
parties by the same counsel would be inappropriate due to a conflict
of interest between them, and each Indemnified Party will have the
right to retain a separate counsel, acceptable to such Indemnified
Party, at the expense of the Indemnifying Party, if representation of
such Indemnified Party and the other Indemnified Parties as a group
would be inappropriate due to a conflict of interest between them and
(y) the Indemnified Parties will cooperate in the defense of any such
matter. If Saratoga fails to take action within twenty (20) days as
set forth in (x) above, then the Indemnified Party shall have the
right to pay, compromise or defend any Third Party Claim and to assert
the amount of any payment on the Third Party Claim plus the expense of
defense or settlement as a Loss. Saratoga will not be liable for any
settlement affected without its prior written consent, unless it has
failed to take action within the twenty (20) day period after receipt
of notice as set forth above. Notwithstanding the foregoing, Saratoga
will not have any obligation under this Section 5.04 to indemnify an
Indemnified Party when and if a court of competent jurisdiction
ultimately determines and such determination becomes final, that the
indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law.
b) Saratoga shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Parties in
enforcing the indemnity and other obligations provided for in this
Section 5.04.
c) The rights of each Indemnified Party hereunder shall be in addition to
any other rights such Indemnified Party may have under the Articles of
Incorporation or by laws of Saratoga, under the Nevada Statute or
otherwise. The provisions of this Section shall survive the
consummation of the Closing and expressly are intended to benefit each
of the Indemnified Parties and will be binding on all successors and
assigns of Saratoga.
E-9
5.05 Further Action. Each party hereto shall, subject to the fulfillment at or
before the Effective Time of each of the conditions of performance set
forth herein or the waiver thereof, perform such further acts and execute
such documents as may be reasonably required to effect the Closing.
5.06 Expenses. Whether or not the Closing is consummated, except as provided in
Section 7.02 hereof or as provided otherwise herein, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
5.07 Consent of Virtual's Shareholders. Virtual shall submit the Agreement to
their shareholders for their consideration in accordance with Chapter
23B.11 of the Washington State Business Corporation Act and other
provisions of applicable law, and obtain the consent of its shareholders.
Virtual shall notify Saratoga in writing that the consent of the
shareholders has been obtained, and shall set forth the names of any
dissenting shareholders at least one (1) day prior to the Effective Time.
5.08 Publicity. The initial press release relating to this Agreement shall be a
joint press release and thereafter Virtual and Saratoga shall, subject to
their respective legal obligations (including requirements of the Nasdaq
National Market, stock exchanges and other similar regulatory bodies),
consult with each other, and use reasonable efforts to agree upon the text
of any press release, before issuing any such press release or otherwise
making public statements with respect to the transactions contemplated
hereby and in making any filings with any federal or state governmental or
regulatory agency or with Nasdaq National Market, or any national
securities exchange with respect thereto.
5.09 Best Efforts to Close. The parties hereto agree to use their best efforts
to close the transactions contemplated hereby by February 9, 2000.
ARTICLE VI
CONDITIONS TO CONSUMMATION
OF THE SHARE EXCHANGE
6.01 Conditions to Each Party's Obligation to Effect the Share Exchange. The
respective obligations of each party to effect the Share Exchange are
subject to the satisfaction or waiver, where permissible, prior to the
Effective Time, of the following conditions:
a) This Agreement shall have been approved by the affirmative vote of the
shareholders of Virtual by the requisite vote in accordance with
applicable law, if required, and by the Board of Directors of Saratoga
by resolution in accordance with applicable law.
b) No statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent), shall have
been enacted,
E-10
entered, promulgated or enforced by any court or governmental
authority which is in effect and has the effect of prohibiting the
consummation of the Closing; provided, however, that each of the
parties shall have used its best efforts to prevent the entry of any
injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered;
c) The waiting period (and any extension thereof ) applicable to the
consummation of the Closing under the HSR Act if required shall have
expired or been terminated;
d) Each of the consent and resolution set forth on Schedule 6.01(d) and
6.01 (d) (1) hereto shall have been obtained.
e) Virtual has, or on or before the Effective Time of this Agreement
shall have completed the issuance of Virtual's Series A Senior
Subordinated Redeemable Convertible Debentures (the "Debentures") in
the face amount of $1,000,000 to ZZG Holdings LLC, a Washington
limited liability company, upon the terms and conditions set forth in
the Subscription Agreement and other documentation relating to the
issuance of the Debentures. Subject to and upon the Closing of this
Agreement, Saratoga agrees to assume the liabilities and obligations
of Virtual under the Debentures as further set forth in this
Agreement. On or prior to the Effective Time, Virtual shall secure, in
writing, from all of the holders of the Debentures, their consent to
Saratoga's assumption of Virtual's liability and obligations to
perform under the terms and conditions of the Debenture Agreement.
f) Virtual shall deliver the legal opinion of its general counsel,
substantially in the form annexed hereto as Exhibit 6.01 (f) and
Saratoga shall deliver the legal opinion of its counsel, substantially
in the form annexed hereto as Exhibit 6.01(f)(1).
g) At Closing, Virtual's assets shall include $1,000,000 of financing
proceeds from the issuance of its Debentures less finder's fees and
legal costs, relating to the issuance of the Debentures. The parties
hereto agree as follows:
1) $40,000 shall be used to pay the creditors of Virtual in the
amounts and to the persons and accounts listed in the Schedule of
Payments to Virtual's Creditors as set forth in Exhibit 6.01 (g)
annexed hereto.
2) $50,000 shall be used as interim working capital to pay Virtual's
operating expenses following the Closing of this Agreement in
accordance with Virtual's interim operating budget mutually
agreed upon by the parties.
3) $10,000 shall be used to pay ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ each
$5000 as provided for in their Employment Agreements referred to
in Section 6.01 (i) of this Agreement.
4) The balance shall be placed in such accounts with such signatory
requirements as authorized by the Board of Directors of Saratoga.
E-11
h) A consulting agreement between Virtual and ▇▇▇ ▇▇▇▇▇▇ shall have been
executed, a copy of which is annexed to this Agreement as Exhibit 6.0
(h). The consulting agreement shall become an obligation of Virtual
following the Closing of this Agreement.
i) Employment and Covenant Not To Compete Agreements ("Employment
Agreements") between Virtual and ▇▇▇▇▇ ▇▇▇▇▇▇ and Virtual and ▇▇▇▇
▇▇▇▇▇▇ shall have been executed, copies of which are annexed to this
Agreement as Exhibit 6.01 (i) and 6.01 (i) (1) respectively. Each
Employment Agreement shall contain a provision whereby ▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇ shall be paid, subject to and upon Closing, an initial
payment of $5000 each. These Employment Agreements shall become
obligations of Virtual following the Closing of this Agreement.
j) Following the Closing of this Agreement the parties hereto agree to
use their best efforts jointly to raise additional financing including
the private placement or public offering of Saratoga's securities.
k) Following the close of this Agreement, Virutal's name shall be changed
to "Saratoga Virtual Media Corp." Virtual's subsidiary, Virtual Media
Group Inc., incorporated under the Province of Alberta Corporations
Act shall continue to conduct business under the name Virtual Media
Group Inc.
l) Upon the close of this Agreement, Saratoga shall arrange to satisfy an
obligation owed by Virtual in the amount of approximately $25,400
owing to ▇▇▇ ▇▇▇▇▇▇ by Saratoga issuing to ▇▇▇ ▇▇▇▇▇▇ shares of
Saratoga's restricted common stock based on $0.165 per share.
m) Upon the close of this Agreement, the executive offices of Virtual
shall be relocated to ▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.01 Closing and Termination. Except as otherwise set forth in this Section
7.01, this Agreement shall close by no later than 11:59 p.m. Seattle,
Washington, February 9, 2000, ("Closing Date") provided that either party
may extend this Agreement for an additional seven (7) day period by written
notice to the other party prior to the Closing Date. This Agreement shall
terminate if not closed by 11:59 p.m., Seattle, Washington, February 16,
2000. Notwithstanding the foregoing and/or the approval of this Agreement
by the shareholders of Virtual and Saratoga, this Agreement may be
terminated and the Closing contemplated hereby may be abandoned at any time
prior to the Effective Time:
a) By mutual written consent, duly authorized by their respective Boards
of Directors, by Saratoga and Virtual;
b) By either Saratoga or Virtual
E-12
(i) if any court of competent jurisdiction or any other governmental
body shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise
permanently prohibiting the Closing and such order, decree,
ruling or other action shall have become final and
non-appealable;
(ii) if, upon a vote at a duly held meeting or upon any adjournment
thereof, the shareholders of Saratoga and the Board of Directors
of Saratoga shall have failed to give any required approvals; or
c) By Saratoga if Virtual shall have breached any of its representations
and warranties or covenants contained herein and if such breach or
breaches, either individually or in the aggregate, will have, or are
reasonably likely to have, a material adverse effect on the business,
results of operations, financial condition or prospects of Virtual (a
"Virtual Material Adverse Effect"), unless, in the case of a breach of
covenant, such failure to perform has been caused by a breach of this
Agreement by Saratoga.
d) By Virtual if Saratoga shall have breached any of its representations
and warranties and such breach or breaches, either individually or in
the aggregate, will have, or are reasonably likely to have, a Saratoga
Material Adverse Effect, or if a Saratoga shall have breached in any
material respect any of its covenants contained herein, unless, in the
case of a breach of any covenant, such failure to perform has been
caused by a breach of this Agreement by Virtual;
7.02 Effect of Termination. In the event of the termination and abandonment of
this Agreement pursuant to Section 7.01, this Agreement, except for the
obligations of the parties pursuant to this Section 7.02 and the provisions
of Section 5.06, shall forthwith become void and have no effect, without
any liability on the part of any party or its directors, officers or
shareholders; provided that nothing in this Section 7.02 shall relieve any
party to this Agreement of liability for breach of this Agreement.
7.03 Amendment. To the extent permitted by applicable law, this Agreement may be
amended by the parties, at any time before or after approval of this
Agreement and the share exchange by the shareholders of Virtual but, after
any such shareholder approval, no amendment shall be made that by law
requires further approval of such shareholders without the approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties.
7.04 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein by any
other applicable party or in any document, certificate or writing delivered
pursuant hereto by any other applicable party, or (iii) subject to the
terms hereof, waive compliance with any of the agreements or conditions of
the other parties contained herein. Any agreement on the part of any party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of a
party to this Agreement to
E-13
assert any of its rights under this Agreement shall not constitute a waiver
of those rights.
7.05 Procedure for Closing, Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment of
this Agreement pursuant to Section 7.03 or an extension or waiver pursuant
to Section 7.04 shall, in order to be effective, require (a) in the case of
Saratoga, action by its Board of Directors or the duly authorized designee
of its Board of Directors and (b) in the case of Virtual, action by its
Board of Directors.
ARTICLE VIII
MISCELLANEOUS
8.01 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be only
conditions to the Closing and shall not survive the Closing, provided,
however, that the representations and warranties contained in Section 1.07,
and in this Article VIII shall survive the Closing.
8.02 Assignment, Binding Effect; Benefit; Entire Agreement. 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 consent of the other parties. Subject
to the preceding sentence, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
heirs, successors, executors, administrators and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
This Agreement and any documents delivered by the parties in connection
herewith constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings (oral and written) among the parties with respect thereto.
No addition to or modification of any provision of this Agreement shall be
binding upon any party hereto unless made in writing and signed by all
parties hereto.
8.03 Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of
this Agreement or otherwise affecting the validity or enforceability of any
of the terms or provisions of this Agreement in any other jurisdiction. If
any provision, clause, section or part of this Agreement is so broad as to
be unenforceable, the provision, clause, section or part shall be
interpreted to be only so broad as is enforceable, and all other
provisions, clauses, sections or parts of this Agreement which can be
effective without such unenforceable provision, clause, section or part
shall, nevertheless, remain in full force and effect.
E-14
8.04 Notices. Any notice required to be given hereunder shall be sufficient if
in writing, and sent by facsimile transmission and by courier service (with
proof of service), hand delivery or certified or registered mail (return
receipt requested and first-class postage prepaid), addressed as follows:
If to Virtual, to
Virtual Media Group Inc.
▇▇▇ ▇▇▇▇▇▇ President ▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇ FAX
With a copy to:
If to Saratoga, to
Saratoga International Holdings Corp.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att'n: ▇▇▇ ▇▇▇▇▇▇▇, President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Attorney At Law
S.W. Fifth Avenue, Suite 1300
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the
date it is telecommunicated, personally delivered or mailed.
8.05 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to its rules
of conflict of laws.
8.06 Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled under the Arbitration
Rules of the State of Nevada.
E-15
8.07 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
8.08 Counterparts and Facsimile Signatures. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may
consist of a number of copies of this Agreement each of which may be signed
by less than all of the parties hereto, but together all such copies shall
constitute one and the same instrument. Execution and delivery of this
Agreement by exchange of facsimile copies bearing the facsimile signature
of a party hereto shall constitute a valid and binding execution and
delivery of this Agreement by such party. Such facsimile copies shall
constitute enforceable original documents.
8.09 Certain Definitions. For purposes of this Agreement, the following terms
shall have the meanings ascribed to them below:
a) "Affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is
under common control with, the first-mentioned person.
b) "Control" (including the terms "controlling", "controlled by" and
"under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a person, whether through ownership of voting securities,
by contract, or otherwise.
c) "Person" means a natural person, company, corporation, partnership,
joint venture, association, trust, unincorporated organization or
other entity.
d) "Subsidiary" of any person means a person in which such first
referenced person owns directly or indirectly an amount of the voting
securities, other voting ownership or voting partnership interest
which is sufficient to elect at least a majority of its Board of
directors or other governing body (or, if there are no such voting
interest, owns directly or indirectly 50% or more of the equity
interest).
8.10 Waivers. Except as provided in this Agreement, no action taken pursuant to
this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained in the Agreement. The waiver by any party
hereto to a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
8.11 U.S. Funds. All monetary amounts set forth herein are stated in currency of
the Untied States of America unless otherwise specifically stated.
8.12 Incorporation of Exhibits. All Exhibits and annexes attached hereto and
referred to herein are hereby incorporated herein and made a part hereof
for all purposes as if fully set forth herein.
E-16
8.13 Interpretation. In this Agreement, unless the context otherwise requires,
words describing the singular number shall include the plural and vice
versa, words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and
vice versa.
E-17
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
on its behalf by its respective officers thereunto duly authorized, all as of
the day and year first above written.
Saratoga International Holdings Corp.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________________
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and CEO
VIRTUAL MEDIA GROUP INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_______________________________
By: ▇▇▇ ▇▇▇▇▇▇, President & CEO
E-18
EXHIBITS TO SHARE EXCHANGE AGREEMENT
Between Saratoga International Holdings Corp.
and Virtual Media Group Inc.
Exhibit 1.03 (b) Shares and Warrants to be issued to Virtual's shareholders
Exhibit 1.03 (e) Sample Warrant Certificate and Agreement
Exhibit 3.02 Audited Financial Statements of Saratoga International
Holdings Corp. as of and for the year ended October 31,
1999
Exhibit 4.09 List of Virtual's Liabilities
Exhibit 4.09 (a) List of Virtual's Assets
Exhibit 6.01 (d) Consent of Virtual's Shareholders
Exhibit 6.01 (d) (1) Resolution of the Board of Directors of Saratoga
International Holdings Corp.
Exhibit 6.01 (e) Legal Opinion of Virtual's General Counsel
Exhibit 6.01 (e) (1) Legal Opinion of SHCC's General Counsel
Exhibit 6.01 (g) Schedule of Payments to Virtual's Creditors
Exhibit 6.01 (h) Consulting Agreement with ▇▇▇ ▇. ▇▇▇▇▇▇
Exhibit 6.01 (i) Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇▇
Exhibit 6.01 (i) (1) Employment Agreement with ▇▇▇▇ ▇▇▇▇▇▇
E-19