EXHIBIT 10.1
REVERSE SHARE EXCHANGE AGREEMENT
EXHIBIT 10.1
EXECUTION COPY
REVERSE SHARE EXCHANGE AGREEMENT
by and among
The Fashion House, Inc.,
a Delaware corporation
and
the Shareholders of
The Fashion House, Inc.,
on the one hand;
and
TDI Holding Corporation,
a Colorado corporation,
on the other hand
August 19, 2005
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REVERSE SHARE EXCHANGE AGREEMENT
This Reverse Share Exchange Agreement, dated as of August 19, 2005
(this "Agreement"), is made and entered into by and among The Fashion House,
Inc., a Delaware corporation ("The Fashion House"), and the shareholders of The
Fashion House listed on Schedule I attached (each, a "Fashion House
Shareholder," collectively, the "Fashion House Shareholders"), on the one hand;
and TDI Holding Corporation, a publicly traded Colorado corporation (OTCBB:
TDIH.OB) ("TDI"), on the other hand. The Fashion House is a party to this
agreement solely to make representations and warranties as set forth herein.
RECITALS
WHEREAS, the Board of Directors of TDI has adopted resolutions
approving and adopting the acquisition of shares of The Fashion House (the
"Reverse Share Exchange") upon the terms and conditions hereinafter set forth in
this Agreement;
WHEREAS, each Fashion House Shareholder owns the number of shares of
common stock of The Fashion House set forth opposite such Fashion House
Shareholder's name on Schedule I attached hereto (collectively, the "Fashion
House Shares");
WHEREAS, the Fashion House Shareholders own, collectively, 10,000
shares of common stock of The Fashion House, constituting 100% of the issued and
outstanding capital stock of The Fashion House, and the Fashion House
Shareholders desire to sell their respective Fashion House Shares pursuant to
the terms and conditions of this Agreement;
WHEREAS, it is intended that the terms and conditions of this Agreement
comply in all respects with Section 368(a)(1)(B) of the Code and the regulations
corresponding thereto, so that the Reverse Share Exchange shall qualify as a tax
free reorganization under the Code;
WHEREAS, this Reverse Share Exchange will close concurrently with the
initial closing of an equity offering with a minimum of $2,500,000 and a maximum
of $4,600,000 as described in that certain Confidential Private Placement
Memorandum dated June 1, 2005 (the "Financing");
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1
THE REVERSE SHARE EXCHANGE
1.1 The Reverse Share Exchange. Upon the terms and subject to the
conditions hereof, at the Closing (as hereinafter defined) the Fashion House
Shareholders will sell, convey, assign, transfer and deliver to TDI one or more
stock certificates representing the Fashion House Shares, and as consideration
for the acquisition of the Fashion House Shares, TDI will issue to each Fashion
House Shareholder, in exchange for such Fashion House Shareholder's pro rata
portion of the Fashion House Shares, one or more stock certificates representing
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the number of shares of TDI common stock set forth opposite such Fashion House
Shareholder's name on Schedule I attached hereto (collectively, the "TDI
Shares").
1.2 Closing. The closing of the Reverse Share Exchange (the "Closing")
shall take place on or before August 19, 2005, or on such other date as may be
mutually agreed upon by the parties. Such date is referred to herein as the
"Closing Date."
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE FASHION HOUSE
The Fashion House hereby represents and warrants to TDI as follows:
2.1 Organization. The Fashion House has been duly incorporated, is
validly existing as a corporation and is in good standing under the laws of its
jurisdiction of incorporation, and has the requisite power to carry on its
business as now conducted.
2.2 Capitalization. The authorized capital stock of The Fashion House
consists of 10,000 shares of common stock, no par value, of which 10,000 shares
are issued and outstanding, and no shares of preferred stock. All of the issued
and outstanding shares of capital stock of The Fashion House are duly
authorized, validly issued, fully paid, non-assessable and free of preemptive
rights. There are no outstanding or authorized options, rights, warrants, calls,
convertible securities, rights to subscribe, conversion rights or other
agreements or commitments to which The Fashion House is a party or which are
binding upon The Fashion House providing for the issuance or transfer by The
Fashion House of additional shares of its capital stock and The Fashion House
has not reserved any shares of its capital stock for issuance, nor are there any
outstanding stock option rights, phantom equity or similar rights, contracts,
arrangements or commitments which are binding upon The Fashion House other than
as set forth on Schedule 2.2 attached hereto. There are no voting trusts or any
other agreements or understandings with respect to the voting of The Fashion
House's capital stock.
2.3 Certain Corporate Matters. The Fashion House is duly qualified to
do business as a corporation and is in good standing in each jurisdiction in
which the ownership of its properties, the employment of its personnel or the
conduct of its business requires it to be so qualified, except where the failure
to be so qualified would not have a material adverse effect on The Fashion
House's financial condition, results of operations or business. The Fashion
House has full corporate power and authority and all authorizations, licenses
and permits necessary to carry on the business in which it is engaged and to own
and use the properties owned and used by it.
2.4 Authority Relative to this Agreement. The Fashion House has the
requisite power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by The Fashion House and the consummation by The Fashion House of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of The Fashion House and no other actions on the part of The Fashion
House are necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by The
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Fashion House and constitutes a valid and binding agreement of The Fashion
House, enforceable against The Fashion House in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE FASHION HOUSE SHAREHOLDERS
The Fashion House Shareholders hereby represent and warrant to TDI as
follows:
3.1 Ownership of the Fashion House Shares. Each Fashion House
Shareholder owns, beneficially and of record, good and marketable title to the
Fashion House Shares set forth opposite such Fashion House Shareholder's name on
Schedule I attached hereto, free and clear of all security interests, liens,
adverse claims, encumbrances, equities, proxies, options or stockholders'
agreements. Each Fashion House Shareholder represents that such person has no
right or claims whatsoever to any shares of The Fashion House capital stock,
other than shares listed across such Fashion House Shareholder on Schedule I and
does not have any options, warrants or any other instruments entitling such
Fashion House Shareholder to exercise to purchase or convert into shares of The
Fashion House capital stock. At the Closing, the Fashion House Shareholders will
convey to TDI good and marketable title to the Fashion House Shares, free and
clear of any security interests, liens, adverse claims, encumbrances, equities,
proxies, options, stockholders' agreements or restrictions.
3.2 Authority Relative to this Agreement. This Agreement has been duly
and validly executed and delivered by each Fashion House Shareholder and
constitutes a valid and binding agreement of each Fashion House Shareholder,
enforceable against each Fashion House Shareholder in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity.
3.3 Restricted Securities. Each Fashion House Shareholder acknowledges
that the TDI Shares will not be registered pursuant to the Securities Act of
1933, as amended (the "Securities Act") or any applicable state securities laws,
that the TDI Shares will be characterized as "restricted securities" under
federal securities laws, and that under such laws and applicable regulations the
TDI Shares cannot be sold or otherwise disposed of without registration under
the Securities Act or an exemption therefrom. In this regard, each Fashion House
Shareholder is familiar with Rule 144 promulgated under the Securities Act, as
currently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.
3.4 Accredited Investor. Each Fashion House Shareholder is an
"Accredited Investor" as that term is defined in rule 501 of Regulation D
promulgated under the Securities Act. Each Fashion House Shareholder is able to
bear the economic risk of acquiring the TDI Shares pursuant to the terms of this
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Agreement, including a complete loss of such Fashion House Shareholder's
investment in the TDI Shares.
3.5 Legend. Each Fashion House Shareholder acknowledges that the
certificate(s) representing such Fashion House Shareholder's pro rata portion of
the TDI Shares shall each conspicuously set forth on the face or back thereof a
legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TDI
TDI hereby represents and warrants to The Fashion House and the Fashion
House Shareholders as follows:
4.1 Organization. TDI is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation, and has
the requisite corporate power to carry on its business as now conducted.
4.2 Capitalization. TDI's authorized capital stock consists of
1,000,000,000 shares of capital stock, all of which are designated as Common
Stock, and of which 21,938,308 shares are outstanding and at the Closing
1,006,344 shares will be issued and outstanding following a duly authorized and
properly implemented reverse split of the outstanding shares at a ratio of 21.8
to 1 (the "Reverse Split"). No shares are designated as Preferred Stock. All
issued and outstanding shares of TDI Common Stock are duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights. When issued,
the TDI Shares will be duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights. There are no outstanding or
authorized options, rights, warrants, calls, convertible securities, rights to
subscribe, conversion rights or other agreements or commitments to which TDI is
a party or which are binding upon TDI providing for the issuance by TDI or
transfer by TDI of additional shares of TDI's capital stock, other than as
expressly set forth on Schedule 4.2 attached hereto, and TDI has not reserved
any shares of its capital stock for issuance, nor are there any outstanding
stock option rights, phantom equity or similar rights, contracts, arrangements
or commitments to issue capital stock of TDI. There are no voting trusts or any
other agreements or understandings with respect to the voting of TDI's capital
stock. There are no obligations of TDI to repurchase, redeem or otherwise
require any shares of its capital stock as of the Closing. No options, warrants
or other convertible securities have ever been granted with an exercise price
less than $0.25 per share.
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4.3 Certain Corporate Matters. TDI is duly licensed or qualified to do
business and is in good standing as a foreign corporation in every jurisdiction
in which the character of TDI's properties or nature of TDI's business requires
it to be so licensed or qualified other than such jurisdictions in which the
failure to be so licensed or qualified does not, or insofar as can reasonably be
foreseen, in the future will not, have a material adverse effect on its
financial condition, results of operations or business. TDI has full corporate
power and authority and all authorizations, licenses and permits necessary to
carry on the business in which it is engaged or in which it proposes presently
to engage and to own and use the properties owned and used by it. TDI has
delivered to The Fashion House true, accurate and complete copies of its
certificate or articles of incorporation and bylaws, which reflect all
restatements of and amendments made thereto at any time prior to the date of
this Agreement. The records of meetings of the stockholders and Board of
Directors of TDI are complete and correct in all material respects. The stock
records of TDI and the stockholder lists of TDI that TDI has previously
furnished to The Fashion House are complete and correct in all material respects
and accurately reflect the record ownership and the beneficial ownership of all
the outstanding shares of TDI's capital stock and any other outstanding
securities issued by TDI. TDI is not in default under or in violation of any
provision of its certificate or articles of incorporation or bylaws in any
material respect. TDI is not in any material default or in violation of any
restriction, lien, encumbrance, indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability by which it is bound or to
which any of its assets is subject, excepting judgment stipulation with Radiant
Partners - TDI's former landlord.
4.4 Authority Relative to this Agreement. TDI has the requisite power
and authority to enter into this Agreement and carry out its or his obligations
hereunder. The execution, delivery and performance of this Agreement by TDI and
the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of TDI, and with respect to the Reverse
Split, the shareholders of TDI, and no other actions on the part of TDI are
necessary to authorize this Agreement or the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by TDI and, with
respect to Section 8, the Large Block Shareholders, and constitutes a valid and
binding obligation of TDI and each Large Block Shareholder, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity.
4.5 Consents and Approvals; No Violations. Except for applicable
requirements of federal securities laws and state securities or blue-sky laws,
no filing with, and no permit, authorization, consent or approval of, any third
party, public body or authority is necessary for the consummation by TDI of the
transactions contemplated by this Agreement. Neither the execution and delivery
of this Agreement by TDI nor the consummation by TDI of the transactions
contemplated hereby, nor compliance by TDI with any of the provisions hereof,
will (a) conflict with or result in any breach of any provisions of the charter
or Bylaws of TDI, (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
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contract, agreement or other instrument or obligation to which TDI or any
Subsidiary (as hereinafter defined) is a party or by which they any of their
respective properties or assets may be bound or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to TDI or any
Subsidiary, or any of their respective properties or assets, except in the case
of clauses (b) and (c) for violations, breaches or defaults which are not in the
aggregate material to TDI or any Subsidiary taken as a whole.
4.6 SEC Documents. TDI hereby makes reference to the documents filed
with the United States Securities and Exchange Commission (the "SEC"), as posted
on the SEC's website, ▇▇▇.▇▇▇.▇▇▇: (collectively, the "SEC Documents"). TDI is
not subject to the reporting obligations of the Securities Exchange Act of 1934
("Exchange Act") and the rules and regulations promulgated thereunder by the
SEC, and TDI has filed the SEC Documents as a voluntary filer. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and/or the Exchange Act, as the case may
require, and the rules and regulations promulgated thereunder and none of the
SEC Documents contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of TDI included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles in the United States (except, in the case of unaudited statements, as
permitted by the applicable form under the Securities Act and/or the Exchange
Act) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the financial position of TDI
as of the dates thereof and its consolidated statements of operations,
stockholders' equity and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal and recurring year-end audit adjustments
which were and are not expected to have a material adverse effect on TDI, its
business, financial condition or results of operations). Except as and to the
extent set forth on the consolidated balance sheet of TDI as of March 31, 2005,
including the notes thereto, TDI has no liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise and whether required to be
reflected on a balance sheet or not).
4.7 Financial Statements.
--------------------
(a) Included in the SEC Documents are the audited consolidated
balance sheet of TDI as at March 31, 2005, and the related statement of
operations, stockholders' equity and cash flows for the two years then ended,
together with the unqualified report thereon (except with respect to
continuation as a going concern) of ▇▇▇▇ & Associates LLP ("▇▇▇▇"), independent
auditors (collectively, "TDI's Audited Financials").
(b) Attached hereto as Schedule 4.7 are the unaudited
consolidated balance sheet of TDI as at May 31, 2005, and the related statement
of operations, stockholders' equity and cash flows for the two months then ended
("TDI's Interim Financials").
(c) TDI's Audited Financials and TDI's Interim Financials
(collectively "TDI's Financial Statements") are (i) in accordance with the books
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and records of TDI, (ii) correct and complete, (iii) fairly present the
financial position and results of operations of TDI as of the dates indicated,
and (iv) prepared in accordance with U.S. GAAP (except that (x) unaudited
financial statements may not be in accordance with GAAP because of the absence
of footnotes normally contained therein, and (y) interim (unaudited) financials
are subject to normal year-end audit adjustments that in the aggregate will not
have a material adverse effect on TDI, its business, financial condition or
results of operation).
4.8 Events Subsequent to Financial Statements. Since May 31, 2005,
there has not been:
(a) Any sale, lease, transfer, license or assignment of any
assets, tangible or intangible, of TDI;
(b) Any damage, destruction or property loss, whether or not
covered by insurance, affecting adversely the properties or business of TDI;
(c) Any declaration or setting aside or payment of any
dividend or distribution with respect to the shares of capital stock of TDI or
any redemption, purchase or other acquisition of any such shares;
(d) Any subjection to any lien on any of the assets, tangible
or intangible, of TDI;
(e) Any incurrence of indebtedness or liability or assumption
of obligations by TDI;
(f) Any waiver or release by TDI of any right of any material
value;
(g) Any compensation or benefits paid to officers or directors
of TDI;
(h) Any change made or authorized in the Certificate of
Incorporation or Bylaws of TDI;
(i) Any loan to or other transaction with any officer,
director or stockholder of TDI giving rise to any claim or right of TDI against
any such person or of such person against TDI; or
(j) Any material adverse change in the condition (financial or
otherwise) of the respective properties, assets, liabilities or business of TDI.
4.9 Liabilities. Except as otherwise disclosed in TDI's Financial
Statements, TDI has no liability or obligation whatsoever, either direct or
indirect, matured or unmatured, accrued, absolute, contingent or otherwise. In
addition, TDI represents that upon Closing, TDI will have no liability or
obligation whatsoever, either direct or indirect, matured or unmatured, accrued,
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absolute, contingent or otherwise. The Large Block Shareholders, severally and
not jointly, represent that upon Closing, TDI will have no liability or
obligation whatsoever, either direct or indirect, matured or unmatured, accrued,
absolute, contingent or otherwise, owing to them.
4.10 Tax Matters.
-----------
(a) TDI has duly filed all material federal, state, local and
foreign tax returns required to be filed by or with respect to them with the
Internal Revenue Service or other applicable taxing authority, and no extensions
with respect to such tax returns have been requested or granted;
(b) TDI has paid, or adequately reserved against in TDI's
Financial Statements, all material taxes due, or claimed by any taxing authority
to be due, from or with respect to them;
(c) To the best knowledge of TDI, there has been no material
issue raised or material adjustment proposed (and none is pending) by the
Internal Revenue Service or any other taxing authority in connection with any of
TDI's tax returns;
(d) No waiver or extension of any statute of limitations as to
any material federal, state, local or foreign tax matter has been given by or
requested from TDI; and
For the purposes of this Section 4.10, a tax is due (and must
therefore either be paid or adequately reserved against in TDI's Financial
Statements) only on the last date payment of such tax can be made without
interest or penalties, whether such payment is due in respect of estimated
taxes, withholding taxes, required tax credits or any other tax.
4.11 Real Property. TDI owns or leases no real property.
4.12 Books and Records. The books and records of TDI delivered to the
Fashion House Shareholders prior to the Closing fully and fairly reflect the
transactions to which TDI is a party or by which it or its properties are bound.
4.13 Questionable Payments. TDI, nor any employee, agent or
representative of TDI has, directly or indirectly, made any bribes, kickbacks,
illegal payments or illegal political contributions using Company funds or made
any payments from TDI's funds to governmental officials for improper purposes or
made any illegal payments from TDI's funds to obtain or retain business.
4.14 SEC Review. No order suspending the effectiveness of a
registration statement of the shares of common stock of TDI has been issued by
the SEC and, to TDI's knowledge, no proceedings for that purpose have been
initiated or threatened by the SEC.
4.15 Intellectual Property. TDI does not own or use any trademarks,
trade names, service marks, patents, copyrights or any applications with respect
thereto. TDI has no knowledge of any claim that, or inquiry as to whether, any
product, activity or operation of TDI infringes upon or involves, or has
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resulted in the infringement of, any trademarks, trade-names, service marks,
patents, copyrights or other proprietary rights of any other person, corporation
or other entity; and no proceedings have been instituted, are pending or are
threatened.
4.16 Insurance. TDI has no insurance policies in effect.
4.17 Contracts. Except as set forth on Schedule 4.17, TDI has no
contracts, leases, arrangements or commitments (whether oral or written). TDI is
not a party to or bound by or affected by any contract, lease, arrangement or
commitment (whether oral or written) relating to: (a) the employment of any
person; (b) collective bargaining with, or any representation of any employees
by, any labor union or association; (c) the acquisition of services, supplies,
equipment or other personal property; (d) the purchase or sale of real property;
(e) distribution, agency or construction; (f) lease of real or personal property
as lessor or lessee or sublessor or sublessee; (g) lending or advancing of
funds; (h) borrowing of funds or receipt of credit; (i) incurring any obligation
or liability; or (j) the sale of personal property.
4.18 Litigation. TDI is not subject to any judgment or order of any
court or quasijudicial or administrative agency of any jurisdiction, domestic or
foreign, nor is there any charge, complaint, lawsuit or governmental
investigation pending against TDI (other than a stipulated agreement with
Radiant Partners - TDI's former landlord). TDI is not a plaintiff in any action,
domestic or foreign, judicial or administrative. There are no existing actions,
suits, proceedings against or investigations of TDI, and TDI knows of no basis
for such actions, suits, proceedings or investigations. There are no unsatisfied
judgments, orders, decrees or stipulations affecting TDI or to which TDI is a
party.
4.19 Employees. TDI has no employees. At the Closing, TDI owes no
compensation of any kind, deferred or otherwise, to any current or previous
employees. TDI has no written or oral employment agreement with any officer or
director of TDI. TDI is not a party to or bound by any collective bargaining
agreement.
4.20 Employee Benefit Plans. TDI has no (a) non-qualified deferred or
incentive compensation or retirement plans or arrangements, (b) qualified
retirement plans or arrangements, (c) other employee compensation, severance or
termination pay or welfare benefit plans, programs or arrangements or (d) any
related trusts, insurance contracts or other funding arrangements maintained,
established or contributed to by TDI.
4.21 Legal Compliance. To the best knowledge of TDI, after due
investigation, no claim has been filed against TDI alleging a violation of any
applicable laws and regulations of foreign, federal, state and local governments
and all agencies thereof. TDI holds all of the material permits, licenses,
certificates or other authorizations of foreign, federal, state or local
governmental agencies required for the conduct of its respective business as
presently conducted.
4.22 Subsidiaries and Investments. TDI does not own any capital stock
or have any interest of any kind whatsoever in any corporation, partnership, or
other form of business organization.
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4.23 Broker's Fees. Neither TDI, nor anyone on its behalf has any
liability to any broker, finder, investment banker or agent, or has agreed to
pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
this Agreement, other than an agreement to pay LMU & Company $25,000 for
services. It is understood that there is an additional agreement between The
Fashion House and LMU & Company dated as of March 16, 2005, regarding management
advisory services in connection with the Reverse Share Exchange. There also
exists the Managing Dealer Agreement between The Fashion House and Brookstreet
Securities Corporation dated as of June 1, 2005, regarding brokerage fees and
expenses payable in connection with the Financing.
4.24 Internal Accounting Controls. TDI maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. TDI
has established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for TDI and designed such disclosure controls and
procedures to ensure that material information relating to TDI is made known to
the certifying officers by others within those entities, particularly during the
period in which the TDI's Form 10-KSB or 10-QSB, as the case may be, is being
prepared. TDI's certifying officers have evaluated the effectiveness of TDI's
controls and procedures as of the end of the filing period prior to the filing
date of the Form 10-KSB for the year ended March 31, 2005 (such date, the
"Evaluation Date"). TDI presented in its most recently filed Form 10-KSB the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in TDI's
internal controls (as such term is defined in Item 307(b) of Regulation S-K
under the Exchange Act) or, to the Company's knowledge, in other factors that
could significantly affect the Company's internal controls.
4.25 Listing and Maintenance Requirements. TDI is currently quoted on
the OTC Bulletin Board and TDI has not, in the 12 months preceding the date
hereof, received any notice from the OTC Bulletin Board or the NASD or any
trading market on which TDI's common stock is or has been listed or quoted to
the effect that TDI is not in compliance with the quoting, listing or
maintenance requirements of the OTCBB or such other trading market. TDI is, and
has no reason to believe that it will not, in the foreseeable future continue to
be, in compliance with all such quoting, listing and maintenance requirements.
4.26 Anti-Takeover Provisions. No anti-takeover, poison pill, or
anti-dilution provisions exist which will be triggered upon the Reverse Share
Exchange, either in TDI's certificate or articles of incorporation (or similar
charter documents) or existing agreements between TDI and any third parties to
this agreement.
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4.27 No SEC or NASD Inquiries. To the best of its knowledge, neither
TDI nor any of its past or present officers, directors or affiliates is, or has
ever been, the subject of any formal or informal inquiry or investigation by the
SEC, NASD or other civil, criminal or administrative proceeding or investigation
by any federal or state agency having regulatory authority over TDI, nor does
any reason exist which indicates such an inquiry, investigation or proceeding
will take place.
4.28 Disclosure. The representations and warranties and statements of
fact made by TDI in this Agreement are, as applicable, accurate, correct and
complete and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained herein not false or misleading.
4.29 Bankruptcy. TDI has not been the subject of any voluntary or
involuntary bankruptcy proceeding, nor has it been a party to any material
litigation.
4.30 No Registration Rights. TDI does not, on the Closing Date, have
any outstanding agreements obligating it to register any shares of its
outstanding common stock, or shares of common stock issuable upon exercise or
conversion of any outstanding securities, either on demand, piggybacked on other
registrations, or otherwise, other than the warrants set forth on Schedule 4.2.
ARTICLE 5
[Intentionally Omitted]
ARTICLE 6
COVENANTS AND AGREEMENTS OF THE PARTIES
EFFECTIVE PRIOR TO CLOSING
6.1 Corporate Examinations and Investigations. Prior to the Closing,
each party shall be entitled, through its employees and representatives, to make
such investigations and examinations of the books, records and financial
condition of The Fashion House and TDI as each party may request. In order that
each party may have the full opportunity to do so, The Fashion House and TDI,
and the Fashion House Shareholders shall furnish each party and its
representatives during such period with all such information concerning the
affairs of The Fashion House or TDI as each party or its representatives may
reasonably request and cause The Fashion House or TDI and their respective
officers, employees, consultants, agents, accountants and attorneys to cooperate
fully with each party's representatives in connection with such review and
examination and to make full disclosure of all information and documents
requested by each party and/or its representatives. Any such investigations and
examinations shall be conducted at reasonable times and under reasonable
circumstances, it being agreed that any examination of original documents will
be at each party's premises, with copies thereof to be provided to each party
and/or its representatives upon request.
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6.2 Cooperation; Consents. Prior to the Closing, each party shall
cooperate with the other parties to the end that the parties shall: (i) in a
timely manner make all necessary filings with, and conduct negotiations with,
all authorities and other persons the consent or approval of which, or the
license or permit from which is required for the consummation of the Reverse
Share Exchange and (ii) provide to each other party such information as the
other party may reasonably request in order to enable it to prepare such filings
and to conduct such negotiations.
6.3 Conduct of Business. Subject to the provisions hereof, from the
date hereof through the Closing, each party hereto shall: (i) conduct its
business in the ordinary course and in such a manner so that the representations
and warranties contained herein shall continue to be true and correct in all
material respects as of the Closing as if made at and as of the Closing and (ii)
not enter into any material transactions or incur any material liability not
required or specifically contemplated hereby, without first obtaining the
written consent of The Fashion House and the Fashion House Shareholders on the
one hand and TDI on the other hand. Without the prior written consent of The
Fashion House, the Fashion House Shareholders, or TDI, except as required or
specifically contemplated hereby, each party shall not undertake or fail to
undertake any action if such action or failure would render any of said
warranties and representations untrue in any material respect as of the Closing.
6.4 Litigation. From the date hereof through the Closing, each
party hereto shall promptly notify the representative of the other parties of
any lawsuits, claims, proceedings or investigations which after the date hereof
are threatened or commenced against such party or any of its affiliates or any
officer, director, employee, consultant, agent or shareholder thereof, in their
capacities as such, which, if decided adversely, could reasonably be expected to
have a material adverse effect upon the condition (financial or otherwise),
assets, liabilities, business, operations or prospects of such party or any of
its subsidiaries.
6.5 Notice of Default. From the date hereof through the Closing,
each party hereto shall give to the representative of the other parties prompt
written notice of the occurrence or existence of any event, condition or
circumstance occurring which would constitute a violation or breach of this
Agreement by such party or which would render inaccurate in any material respect
any of such party's representations or warranties herein.
6.6 Right of Participation. Until April 1, 2008, the Elevation Fund,
LLC, shall have a first right to purchase up to 50% of any equity or equity
linked securities (including derivative and convertible securities) to be issued
by TDI on the same terms as such securities are offered to all other parties
(related or otherwise), to the extent required by Section 8.8 of that certain
Loan Agreement between The Fashion House and The Elevation Fund, LLC, dated as
of April 1, 2005. This Right of Participation does not apply to the Financing as
defined herein or any Excluded Securities as defined in the Loan Agreement.
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ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of The Fashion House and the Fashion
House Shareholders. The obligations of The Fashion House and the Fashion House
Shareholders under this Agreement shall be subject to each of the following
conditions:
(a) Closing Deliveries. At the Closing, TDI shall have
delivered or caused to be delivered to The Fashion House and the Fashion House
Shareholders the following:
(i) resolutions duly adopted by the Board of
Directors of TDI authorizing and approving the Reverse Share
Exchange and the execution, delivery and performance of this
Agreement;
(ii) a certificate of good standing for TDI from the
Secretary of State of the State of Colorado, dated not earlier
than five days prior to the Closing Date (or such other period
of time as The Fashion House may accept);
(iii) written resignations of all officers and
directors of TDI in office immediately prior to the Closing,
and board resolutions electing the following individuals to
the positions with TDI and each Subsidiary listed opposite
their names below:
▇▇▇▇ ▇▇▇▇▇ Chairman of the Board; President
and CEO
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Director
▇▇▇▇▇▇ ▇▇▇▇▇▇ Director
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Director
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Director
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Treasurer, Chief Financial
Officer and Secretary
(iv) a file stamped copy of an amendment to the
Articles of Incorporation confirming implementation of the
Reverse Split and changing of the corporate name to The
Fashion House Holdings, Inc., or such other name as determined
by The Fashion House, subject only to the administrative delay
necessitated by notice requirements under Rule 10b-7 and the
Nasdaq OTC coordinator;
(v) irrevocable instructions to the Transfer Agent
authorizing and directing the issuance of a certificate for
and in the name of each Fashion House Shareholder representing
the number of TDI Shares set forth opposite such Fashion House
Shareholder's name on Schedule I attached hereto;
(vi) this Agreement duly executed by TDI;
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(vii) all corporate records, agreements, seals and
any other information reasonably requested by The Fashion
House's representatives with respect to TDI, to the extent
that TDI possesses such materials;
(viii) proof of filing of the Form 10-QSB for the
quarter ended June 30, 2005, with content reasonably
acceptable to The Fashion House;
(ix) a duly signed Officer's Certificate and
Secretary's Certificate in a form acceptable to The Fashion
House;
(x) a legal opinion of counsel for TDI in a form
acceptable to The Fashion House;
(xi) confirmation that all loans and other monetary
obligations listed on Schedule 4.19 have either been waived or
will be paid in full out of the proceeds of the $325,000
delivered at closing; and
(xii) such other documents as The Fashion House
and/or the Fashion House Shareholders may reasonably request
in connection with the transactions contemplated hereby, to
the extent that TDI possesses such materials.
(b) Representations and Warranties to be True. The
representations and warranties of TDI herein contained shall be true in all
material respects at the Closing with the same effect as though made at such
time. TDI shall have performed in all material respects all obligations and
complied in all material respects with all covenants and conditions required by
this Agreement to be performed or complied with by them at or prior to the
Closing.
(c) Assets and Liabilities. At the Closing, TDI shall have no
material assets or liabilities, contingent or otherwise, or any tax obligations
or any material changes to its business or financial condition.
(d) SEC Filings. At the Closing, TDI will be current in all
SEC filings required by it to be filed, and will have filed its Annual Report on
Form 10-KSB for the period ended March 31, 2005 and its Quarterly Report on Form
10-QSB for the period ended June 30, 2005.
(e) Capital Structure. Before the Closing, TDI shall provide
proof satisfactory to The Fashion House's counsel or other agent that the
Reverse Split is effective and the total outstanding shares of TDI common stock
shall not exceed 1,006,344 shares of common stock plus the warrants to purchase
common stock set forth on Schedule 4.2.
(f) Minimum Financing. At the Closing, at least the $2,500,000
Minimum Offering Amount in the Financing shall have been raised, as noted in the
Recitals section of this Agreement.
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7.2 Conditions to Obligations of TDI. The obligations of TDI under
this Agreement shall be subject to each of the following conditions:
(a) Closing Deliveries. On the Closing Date, The Fashion
House and/or the Fashion House Shareholders shall have delivered to TDI the
following:
(i) certificates representing the Fashion House
Shares to be delivered pursuant to this Agreement duly
endorsed or accompanied by duly executed stock powers, or duly
signed and authorized stock assignments separate from
certificates;
(ii) this Agreement duly executed by The Fashion
House and the Fashion House Shareholders;
(iii) cash payment of $325,000 made by wire
transfer to TDI; and
(iv) such other documents as TDI may reasonably
request in connection with the transactions contemplated
hereby.
(b) Representations and Warranties to be True. The
representations and warranties of The Fashion House and the Fashion House
Shareholders herein contained shall be true in all material respects at the
Closing with the same effect as though made at such time. The Fashion House and
the Fashion House Shareholders shall have performed in all material respects all
obligations and complied in all material respects with all covenants and
conditions required by this Agreement to be performed or complied with by them
at or prior to the Closing.
ARTICLE 8
OTHER COVENANTS AND AGREEMENTS
8.1 Lock Up Agreement. Following the Closing, in no event shall ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, or Aspect Energy (the "Large Block Shareholders") or any
of their affiliates, acting as a group, sell or cause to be sold: (i) any shares
of TDI common stock within 30 days after the Closing; or (ii) with respect to
each of the Large Block Shareholders, no more than 10% of the daily volume per
day as measured (a) on a trailing 10 day average or (b) the day of trading,
which ever is greater. Furthermore, no more than 25% of the individual shares
held by any Large Block Shareholders may be sold per month. This Section 8.1
shall terminate 12 months after the Closing. Any shares permitted to be sold but
not sold during a month shall not accrue to the next month. The Fashion House
may request reports of trading activity by the Large Block Shareholders on a
monthly or quarterly basis.
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
sent by overnight courier or mailed by registered or certified mail (postage
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prepaid and return receipt requested) to the party to whom the same is so
delivered, sent or mailed at addresses set forth on the signature page hereof
(or at such other address for a party as shall be specified by like notice).
9.2 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
9.3 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify this Agreement to preserve each party's anticipated
benefits under this Agreement.
9.4 Miscellaneous. This Agreement (together with all other documents
and instruments referred to herein): (a) constitutes the entire agreement and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter hereof; (b) except as
expressly set forth herein, is not intended to confer upon any other person any
rights or remedies hereunder and (c) shall not be assigned by operation of law
or otherwise, except as may be mutually agreed upon by the parties hereto.
9.5 Separate Counsel. Each party hereby expressly acknowledges that it
has been advised to seek its own separate legal counsel for advice with respect
to this Agreement, and that no counsel to any party hereto has acted or is
acting as counsel to any other party hereto in connection with this Agreement.
9.6 Governing Law; Venue. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
U.S.A. Any and all actions brought under this Agreement shall be brought in the
state and/or federal courts of the United States sitting in the City of Los
Angeles, California and each party hereby waives any right to object to the
convenience of such venue.
9.7 Counterparts and Facsimile Signatures. This Agreement may be
executed in two or more counterparts, which together shall constitute a single
agreement. This Agreement and any documents relating to it may be executed and
transmitted to any other party by facsimile, which facsimile shall be deemed to
be, and utilized in all respects as, an original, wet-inked document.
9.8 Amendment. This Agreement may be amended, modified or supplemented
only by an instrument in writing executed by all parties hereto.
9.9 Parties In Interest: No Third Party Beneficiaries. Except as other-
wise provided herein, the terms and conditions of this Agreement shall inure to
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the benefit of and be binding upon the respective heirs, legal representatives,
successors and assigns of the parties hereto. This Agreement shall not be deemed
to confer upon any person not a party hereto any rights or remedies hereunder.
9.10 Waiver. No waiver by any party of any default or breach by another
party of any representation, warranty, covenant or condition contained in this
Agreement shall be deemed to be a waiver of any subsequent default or breach by
such party of the same or any other representation, warranty, covenant or
condition. No act, delay, omission or course of dealing on the part of any party
in exercising any right, power or remedy under this Agreement or at law or in
equity shall operate as a waiver thereof or otherwise prejudice any of such
party's rights, powers and remedies. All remedies, whether at law or in equity,
shall be cumulative and the election of any one or more shall not constitute a
waiver of the right to pursue other available remedies.
9.11 Expenses. At or prior to the Closing, the parties hereto shall pay
all of their own expenses relating to the transactions contemplated by this
Agreement, including, without limitation, the fees and expenses of their
respective counsel and financial advisers.
[SIGNATURES FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
The Fashion House, Inc.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
Address:6310 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FASHION HOUSE SHAREHOLDERS:
/s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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[SIGNATURE PAGE OF TDI AND LARGE BLOCK SHAREHOLDERS]
TDI Holding Corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer, President
Address:
LARGE BLOCK SHAREHOLDERS:
By signing below, the undersigned express their agreement to Sections 4.4, 4.9,
and 8 hereof.
/s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
ASPECT ENERGY LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
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Schedule I
Shareholder Name Fashion House Shares TDI Shares (Post-Reverse Split)
▇▇▇▇ ▇▇▇▇▇ 4,900 6,915,958
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 4,900 6,915,958
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 200 282,284
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Schedule 2.2
List of Outstanding Options, Warrants and other Convertibles of The Fashion
House
o The Fashion House is obligated to issue a warrant to The Elevation Fund
to purchase 687,500 shares of common stock of TDI at an exercise price
of $0.80 per share pursuant to that certain Loan Agreement dated as of
April 1, 2005, as amended by that certain Extension Agreement dated as
of July 18, 2005.
o The Fashion House is obligated to issue a warrant to Brookstreet
Securities Corporation to purchase shares of common stock of TDI at an
exercise price of $1.00 per share pursuant to that certain Managing
Dealer Agreement dated as of June 1, 2005.
o The Fashion House has issued convertible bridge notes in the aggregate
amount of $325,000 which will convert into shares of TDI common stock
at a conversion price of $0.80 per share.
o The Fashion House is obligated to issue a warrant to American Microcap
Investment Fund 1, LLC to purchase 550,000 shares of common stock of
TDI at an exercise price of $0.80 per share pursuant to that certain
Loan Agreement dated as of July 21, 2005.
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Schedule 4.2
List of Outstanding Options, Warrants and other Convertibles of TDI
The following numbers and prices are as granted (pre-reverse split):
No. Warrant Holder Shares Price Issue Date Expiration Date
10 CCRI Corp. 18,750 $2.00 December 31, 2000 December 31, 2005
11 ▇▇▇▇▇▇ ▇▇▇▇▇▇ 18,750 $2.00 December 31, 2000 December 31, 2005
12 CCRI Corp. 21,375 $0.50 March 14, 2001 March 14, 2006
13 ▇▇▇▇▇▇ ▇▇▇▇▇▇ 21,375 $0.50 March 14, 2001 March 14, 2006
30 ▇▇▇▇▇▇ ▇▇▇▇▇▇ 74,400 $0.25 November 30, 2001 November 30, 2006
31 ▇▇▇ ▇▇▇▇▇▇▇▇▇ 39,000 $0.25 November 30, 2001 November 30, 2006
32 ▇▇▇▇▇▇▇ ▇▇▇▇ 10,800 $0.25 November 30, 2001 November 30, 2006
33 CCRI Corp. 75,900 $0.25 November 30, 2001 November 30, 2006
34 NJR Investment Group 7,500 $0.25 November 30, 2001 November 30, 2006
39 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 16,000 $0.40 February 25, 2003 February 25, 2007
40 ▇▇▇▇▇ ▇▇▇▇ 95,000 $0.40 February 25, 2003 February 25, 2007
41 ▇.▇. ▇▇▇▇▇▇▇ 16,000 $0.40 February 25, 2003 February 25, 2007
42 ▇▇▇▇▇ ▇▇▇▇▇▇▇ 16,000 $0.40 February 25, 2003 February 25, 2007
43 ▇▇▇ ▇▇▇▇▇▇▇ 16,000 $0.40 February 25, 2003 February 25, 2007
44 ▇▇▇▇▇ ▇▇▇▇▇▇▇ 10,000 $0.40 February 25, 2003 February 25, 2007
45 S.R. ▇▇▇▇▇▇, Inc. 6,000 $0.40 February 25, 2003 February 25, 2007
Total 462,850
Post reverse-split (21.8:1) 21,232
+
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