EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
AMONG
SCORES HOLDING COMPANY INC.
A UTAH CORPORATION
SCORES ACQUISITION CORP.
A DELAWARE CORPORATION
AND
HEIR HOLDING CO., INC.
A DELAWARE CORPORATION
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LIST OF EXHIBITS AND SCHEDULES
TO
AGREEMENT AND PLAN OF MERGER
EXHIBITS
Exhibit 2.1 Form of Parent Convertible Debenture
Exhibit 2.2 Escrow Agreement
Exhibit 6.1(b) Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
Exhibit 6.2(b) Opinion of ▇▇▇▇▇▇ Gottbetter & ▇▇▇▇▇▇▇▇, LLP
SCHEDULES
Schedule 2.1(b) List of Company Shareholders and Number of Parent Exchange
Shares to be Received
Schedule 4.1(a) Company Jurisdictions
Schedule 4.1(b) Company Conflicts
Schedule 4.1(f) Company Real Property/Leases/Personal Property
Schedule 4.1(h) Company Accounts Receivable
Schedule 4.1(j) Company Taxes
Schedule 4.1(m) Company Legal Proceedings
Schedule 4.1(n) Company Absence of Certain Changes
Schedule 4.1(o) Company Material Contracts
Schedule 4.1(p) Company Insurance
Schedule 4.1(s) Company Intellectual Property
Schedule 4.1(x) Company Related Transactions
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
August 7, 2002, by and among Scores Holding Company Inc., a Utah corporation
("Parent"), Scores Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Parent ("Acquisition"), and HEIR Holding Co. Inc., a Delaware
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Acquisition and the
Company have each determined that it is in the best interests of their
respective shareholders for Acquisition to merge with and into the Company and
for the Company to become a wholly-owned subsidiary of Parent, upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of Parent has approved this
Agreement and the merger of Acquisition with and into the Company in exchange
for stock of the Parent as provided herein (the "Merger"); and
WHEREAS, the Board of Directors of the Company has, in light of and
upon the terms and subject to the conditions set forth herein, (i) determined
that the Merger is fair to and in the best interests of the Company and its
shareholders and (ii) resolved to approve and adopt this Agreement and the
transactions contemplated hereby and to recommend approval and adoption by the
shareholders of the Company of this Agreement and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Acquisition and the Company hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined) and
upon the terms and subject to the conditions of this Agreement and the Delaware
General Corporation Law (the "DGCL"), Acquisition shall be merged with and into
the Company pursuant to the Merger. Following the Merger, the Company shall
continue as the surviving corporation (the "Surviving Corporation") under the
name Scores Licensing Corp. and the separate corporate existence of Acquisition
shall cease. As part of the Merger, the 3,000,000 Company shares owned by the
Company shareholders shall be exchanged for 3,000,000 shares of Parent's
restricted common stock as more fully described in Section 2.1(b) of this
Agreement.
1.2 Effective Time. The Merger shall be consummated as promptly as
practicable after satisfaction or waiver of all conditions to the Merger set
forth herein, by filing with the Secretary of State of the State of Delaware a
certificate of merger (the "Certificate of Merger") or other appropriate
documents, executed in accordance with the relevant provisions of the DGCL. The
Merger shall become effective upon the filing of the Certificate of Merger. The
time of such filing shall be referred to herein as the "Effective Time."
1.3 Effects of the Merger. At the Effective Time, all the rights,
privileges, immunities, powers and franchises of the Company and Acquisition and
all property, real, personal
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and mixed, and every other interest of, or belonging to or due to each of the
Company and Acquisition shall vest in the Surviving Corporation, and all debts,
liabilities, obligations and duties of the Company and Acquisition shall become
the debts, liabilities, obligations and duties of the Surviving Corporation
without further act or deed, all in the manner and to the full extent provided
by the DGCL. Whenever a conveyance, assignment, transfer, deed or other
instrument or act is necessary to vest any property or right in the Surviving
Corporation, the directors and officers of the respective constituent
corporations shall execute, acknowledge and deliver such instruments and perform
such acts, for which purpose the separate existence of the constituent
corporations and the authority of their respective directors and officers shall
continue, notwithstanding the Merger.
1.4 Certificate of Incorporation. The Certificate of Incorporation
of the Company, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation and thereafter may
be amended or repealed in accordance with its terms and applicable law.
1.5 By-Laws. At the Effective Time and without any further action on
the part of the Company and Acquisition, the By-laws of the Company shall be the
By-laws of the Surviving Corporation and thereafter may be amended or repealed
in accordance with their terms or the Certificate of Incorporation of the
Surviving Corporation and as provided by law.
1.6 Directors. The directors of the Company at the Effective Time
shall be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
1.7 Officers. The officers of the Company at the Effective Time
shall be the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly appointed
and qualified, as the case may be.
1.8 Tax-Free Reorganization. The parties intend that the Merger
shall be treated as a tax-free exchange pursuant to Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code"). No party shall take any action or
fail to take any action that would adversely affect the treatment of the Merger
as a tax-free exchange.
ARTICLE II
CONVERSION OF SHARES
2.1 Cancellation of Acquisition Shares; Acquisition of Company
Shares by Parent; Issuance of Parent Shares to Company Shareholders; Exchange of
Parent's Convertible Debentures for Company's Convertible Debentures. (a) All
1,000 of the shares of common stock, par value $.001, of Acquisition outstanding
immediately prior to the Effective Time (all of which shares are owned by
Parent) shall, by virtue of the Merger and without any action on the part of
Parent, be automatically cancelled.
(b) All 3,000,000 of the outstanding shares of common stock, $.001
par value, of the Company outstanding immediately prior to the Effective Time
(the "Company Shares") shall, by
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virtue of the Merger, be exchanged with Parent, on a one for one basis, in
accordance with Schedule 2.1(b) hereof, for an aggregate of 3,000,000 restricted
common shares of Parent (the "Parent Exchange Shares").
(c) The $1,000,000 of convertible debentures of the Company (the
"Company Debentures") outstanding immediately prior to the Effective Time shall,
pursuant to the Merger, be exchanged for $1,000,000 of convertible debentures of
Parent in the form attached hereto as Exhibit 2.1 (the "Parent Debentures"). The
Parent Debentures shall be identical in all material respects to the Company
Debentures. Following such exchange, the Company Debentures shall be cancelled
by Parent. By virtue of operation of law, this Agreement and Plan of Merger and
the Certificate of Merger, Parent, through the Parent Debentures, will assume
and be responsible for all Company obligations under the Company Debentures and
where applicable, the Convertible Debenture Purchase Agreement (the "Purchase
Agreement") made as of August 7, 2002 by and between the Company and HEM Mutual
Assurance LLC.
2.2 Escrowed Shares. (a) At the Closing, Parent shall deposit into
escrow with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, as escrow agent (the "Escrow
Agent"), 6,000,000 shares of Parent (the "Escrowed Shares") in the denominations
set forth in Schedule 1 of the Purchase Agreement, in accordance with the escrow
agreement substantially in the form of Exhibit 2.2 annexed hereto. The Escrowed
Shares shall be released from escrow only in accordance with this Section 2.2
and the Escrow Agreement.
(b) Upon conversion of the unpaid principal part of the Parent
Debentures by the holder or holders thereof, in accordance with the terms of the
Parent Debentures, which as to conversion rights and procedures is contained in
Section 4 of the Parent Debentures, Parent shall direct the Escrow Agent to
release Escrowed Shares to such holder or holders.
(c) The Escrow Agent shall retain custody of the Escrowed Shares
until the earlier of (i) full conversion of the Parent Debentures; (ii) the
Maturity Date of the Parent Debentures; or (iii) the written agreement of the
parties to terminate the Escrow Agreement.
2.3 Rule 504 Securities. The Company Debentures (which include the
Company shares issuable upon conversion of the Company Debentures) were sold in
accordance with Rule 504 of Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"), and Article 51 and related regulations of the
Colorado Securities Act, to an accredited investor residing in the State of
Colorado. Accordingly, pursuant to Rule 504, the applicable Colorado statutes,
and Section 3(a)(9) of the Securities Act, the Company Debentures (which include
the Company Shares issuable upon conversion thereof) and subsequently the Parent
Debentures (which include the Escrowed Shares issuable upon conversion thereof)
may be issued without a restrictive legend and will be available for immediate
resale in accordance with Rule 504.
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ARTICLE III
CLOSING
Subject to satisfaction of the conditions to closing set forth in
this Agreement and unless this Agreement is otherwise terminated in accordance
with the provisions contained herein, the closing of the Merger and the
transactions contemplated hereby (the "Closing") shall take place (i) at the
offices of ▇▇▇▇▇▇ Gottbetter & ▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ as promptly as practicable (and in any event within five business days)
after satisfaction or waiver, if permissible, of the conditions set forth in
this Agreement or (ii) at such other time, date or place as Parent and the
Company may mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The Company and
the Company Shareholders jointly and severally represent and warrant to Parent
and Acquisition as follows:
(a) Organization and Good Standing.
i. Schedule 4.1(a) contains a complete and accurate list for
the Company of its jurisdiction of incorporation and other jurisdictions in
which it is qualified to do business. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that it owns or
uses, and to perform all its obligations under the Applicable Contracts. The
Company is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) Authority; No Conflict.
i. This Agreement and any agreement executed in connection
herewith constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms. The
Company has the absolute and unrestricted right, power, authority and capacity
to execute and deliver this Agreement and any agreement executed in connection
herewith and to perform its obligations hereunder and thereunder.
ii. Except as set forth in Schedule 4.1(b), neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
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a. contravene, conflict with or result in a violation of
(x) any provision of the Organizational Documents of the Company or (y) any
resolution adopted by the board of directors or the shareholders of the Company;
b. contravene, conflict with or result in a violation
of, or give any governmental body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which the Company or any of the
assets owned or used by the Company may be subject;
c. contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, any Applicable Contract;
d. result in the imposition or creation of any material
encumbrance upon or with respect to any of the assets owned or used by the
Company;
e. cause the Company to become subject to, or to become
liable for the payment of, any tax; or
f. cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other governmental body,
except in connection with the transfer of real estate pursuant to this Agreement
or the transactions contemplated hereby.
(c) Capitalization and Ownership of the Shares of the Company. The
authorized capital stock of the Company consists of 10,000,000 shares of common
stock, $.001 par value, of which 3,000,000 shares (the "Shares") are issued and
outstanding and 1,000,000 shares of preferred stock, $.001 par value, of which
no shares are issued and outstanding. With the exception of the Shares, there
are no other outstanding equity securities of the Company. No legend or other
reference to any purported encumbrance appears upon any certificate representing
the Shares other than a standard Securities Act legend. The Shares have been
duly authorized and validly issued and are fully paid and non-assessable. There
are no contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the Company. None of the outstanding Shares
were issued in violation of the Securities Act or any other legal requirement.
The Company does not own, and has no contract to acquire, any equity securities
or other securities of any Person or any direct or indirect equity or ownership
interest in any other business.
(d) Financial Statements. The Company has delivered to Parent a
balance sheet of the Company as at July 31, 2002 (the "Company Balance Sheet"),
and a profit and loss statement for the seven month period ended July 31, 2002.
Such financial statements fairly present the financial condition and the results
of operations of the Company as at the respective dates of and for the periods
referred to in such financial statements.
(e) Books and Records. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Parent, are complete and correct and have been maintained in
accordance with sound business practices, including the
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maintenance of an adequate system of internal controls. The minute books of the
Company contain accurate and complete records of all meetings held of, and
corporate action taken by, the shareholders, the Board of Directors, and any
committees of the Board of Directors.
(f) Title to the Properties; Encumbrances. Schedule 4.1(f) contains
a complete and accurate list of all real property owned by the Company and all
material fixed personal property, leaseholds or other interests therein owned or
leased by the Company. The Company has good and marketable title to all the
properties, interest in such properties and assets, real and personal, reflected
in the Company Balance Sheet or acquired after the date of such balance sheet
(except properties, interests and assets sold or otherwise disposed of since
such date, in the Ordinary Course of Business), free and clear of all mortgages,
liens, pledges, charges or encumbrances except (i) mortgages and other
encumbrances referred to in the notes to such balance sheet, (ii) liens for
current taxes not yet due and payable and (iii) such imperfections of title and
easements as do not materially detract from or interfere with the present use of
the properties subject thereto or affected thereby, or otherwise materially
impair present business operations at such properties.
(g) Condition and Sufficiency of Assets. The buildings, plants,
structures, and equipment of the Company are structurally sound, are in good
operating condition and repair and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs. The building, plants, structures and equipment of the Company are
sufficient for the continued conduct of the Company's business after the Closing
in substantially the same manner as conducted prior to the Closing.
(h) Accounts Receivable. All accounts receivable of the Company that
are reflected on the Company Balance Sheet or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date collectible net of the respective reserves shown on the Company
Balance Sheet or on the accounting records of the Company as of the Closing Date
(which reserves are adequate and calculated consistent with past practice).
Subject to such reserves, to the Company's Knowledge, each of the Accounts
Receivable either have been or will be collected in full without set-off. There
is no contest, claim or right of set-off, other than returns in the Ordinary
Course of Business, under any contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Schedule 4.1(h) contains a complete and accurate list of all Accounts Receivable
as of the date of the Balance Sheet, which list sets forth the aging of such
Accounts Receivable.
(i) No Undisclosed Liabilities. There are no material liabilities of
the Company other than:
i. Liabilities set forth on, reserved against or reflected in
the Company Balance Sheet and notes thereto;
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ii. Liabilities disclosed in this Agreement, the Exhibits
attached hereto, and in the Schedules or lists furnished pursuant hereto (and
for this purpose, the disclosure of facts, circumstances, situations and
conditions in the Schedules shall be deemed disclosure of liabilities which
arise from such facts, circumstances, situations and conditions regardless of
whether, when or in what form such liabilities may arise in the future); or
iii. Liabilities incurred in the Ordinary Course of Business
since the Company Balance Sheet date, none of which had a material adverse
effect on the business, financial condition or results of operations of the
Company, and none of which is required to be recorded under GAAP in respect of
any period prior to the Company Balance Sheet date, and none of which is in
respect of a material claim for damages, fines or other legal relief.
(j) Taxes.
i. The Company has filed or caused to be filed on a timely
basis all tax returns that are or were required to be filed by it pursuant to
applicable Legal Requirements. The Company has paid, or made provision for the
payment of, all taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by the Company,
except such taxes, if any, as are listed in Schedule 4.1(j) and are being
contested in good faith as to which adequate reserves have been provided in the
Company Balance Sheet.
ii. All tax returns filed by the Company are true, correct and
complete in all material respects.
(k) Employee Benefits. The Company does not sponsor or otherwise
maintain a "pension plan" within the meaning of Section 3(2) of ERISA or any
other retirement plan other than the Company Profit Sharing and 401(k) Plan and
Trust that is intended to qualify under Section 401 of the Code, nor do any
unfunded liabilities exist with respect to any employee benefit plan, past or
present. No employee benefit plan, any trust created thereunder or any trustee
or administrator thereof has engaged in a "prohibited transaction," as defined
in Section 4975 of the Code, which may have a material adverse effect on the
condition, financial or otherwise, of the Company.
(l) Governmental Authorizations. The Company has all permits that
are or will be legally required to enable it to conduct its business in all
material respects as now conducted.
(m) Legal Proceedings; Orders.
i. Except as set forth in Schedule 4.1(m), there is no
material pending Proceeding:
a. that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
Contemplated Transaction.
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ii. Except as set forth in Schedule 4.1(m):
a. there is no material Order to which the Company, or
any of the assets owned or used by the Company, is subject; and
b. no officer, director, agent, or employee of the
Company is subject to any material Order that prohibits such offer, director,
agent or employee from engaging in or continuing any conduct, activity or
practice relating to the business of the Company.
(n) Absence of Certain Changes and Events. Except as set forth in
Schedule 4.1(n), since the date of the Company Balance Sheet, the Company has
conducted its business only in the Ordinary Course of Business, there has not
been any material adverse effect on the Company's business or operations, and
there has not been any:
i. change in the authorized or issued capital stock of the
Company; grant of any stock option or right to purchase shares of capital stock
of the Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or other
acquisition or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
ii. amendment to the Organizational Documents of the Company;
iii. payment or increase by the Company of any bonuses,
salaries, or other compensation to any shareholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
iv. adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
the Company;
v. damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Company, taken as a whole;
vi. receipt of notice that any of its substantial customers
has terminated or intends to terminate its relationship, which termination would
have a material adverse effect on its financial condition, results or
operations, business assets or properties;
vii. entry into any transaction other than in the Ordinary
Course of Business;
viii. entry into, termination of, or receipt of written notice
of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
contract or transaction involving a total remaining commitment by or to the
Company of at least $10,000.
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ix. sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company;
x. cancellation or waiver of any claims or rights with a value
to the Company in excess of $10,000.
xi. material change in the accounting methods used by the
Company; or
xii. agreement, whether oral or written, by the Company to do
any of the foregoing.
(o) Contracts; No Defaults.
i. Schedule 4.1(o) contains a complete and accurate list, and
complete copies of:
a. each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount or value
in excess of $10,000;
b. each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount or value
in excess of $10,000;
c. each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures by or receipts of
the Company in excess of $10,000;
d. each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property (except personal property leases and
installment and conditional sales agreements with terms of less than one year);
e. each licensing agreement or other Applicable Contract
with respect to patents trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors;
f. each Applicable Contract for capital
expenditures in excess of $10,000;
ii. Except as set forth in Schedule 4.1(o), each contract
identified or required to be identified therein is in full force and effect and
is valid and enforceable in accordance with its terms.
iii. The Company is, and at all times since the Company
Balance Sheet date has been, in material compliance with all applicable terms
and requirements of each contract under which the Company has or had any
obligation or liability or by which the Company or any of the assets owned or
used by the Company is or was bound.
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(p) Insurance. Schedule 4.1(p) contains a schedule of all insurance
policies to which the Company is a party or under which the Company, or any
director of the Company, is or has been covered at any time within the two (2)
years preceding the date of this Agreement. All such insurance policies are
sufficient for material compliance with all Legal Requirements and contracts to
which the Company is a party or by which it is bound. Schedule 4.1(p) contains a
list of material insurance claims relating to the Company within the last two
(2) years.
(q) Environmental Matters.
i. The Company is in compliance in all material respects with
all Environmental Laws (as defined below).
ii. There are no existing or, to the Company's Knowledge,
potential Environmental Claims (as defined below), nor has the Company or any
Company Shareholder have Knowledge or received any notification of alleged,
actual or potential responsibility for, or any inquiry or investigation
regarding, any disposal, release, or threatened release at any location of any
Hazardous Substance (as defined below) stored, generated or transported by the
Company.
iii. Definitions. For purposes of this Agreement,
Environmental Laws shall mean all federal, state, district, local and foreign
laws, all rules or regulations promulgated thereunder, and all orders, consent
orders, judgments, notices, permits, or demand letters issued, promulgated, or
entered pursuant thereto, relating to pollution or protection of the environment
(including without limitation ambient air, surface water, ground water, land
surface, or subsurface strata), including without limitation (x) laws relating
to emissions, discharges, releases or threatened releases, or threatened
releases of pollutants, contaminants, chemicals, materials, wastes or other
substances into the environment and (y) laws relating to the identification,
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, recovery, transport or other handling of pollutants, contaminants,
chemicals, industrial materials, wastes or other substances.
iv. For purposes of this Agreement, Environmental Claims shall
mean all accusations, allegations, notice of violations, liens, claims, demands,
suits or causes of action or any damage, including without limitation, personal
injury, property damage (including any depreciation of property values), lost
use of property, or consequential damages, arising directly or indirectly out of
Environmental Conditions or Environmental Laws.
v. For purposes of this Agreement, Environmental Conditions
shall mean the state of environment, including natural resources (e.g. flora and
fauna), soil, surface water, ground water, any present or potential drinking
water supply, subsurface strata, or ambient air, relating to or arising out of
the use, handling, storage, treatment, recycling, generation, transportation,
release, spilling, leaking, pumping, pouring, emptying, discharging, injection,
escaping, leaching, disposal, dumping, or threatened release of Hazardous
Substances by the Company, any of its subsidiaries or any of their respective
predecessors or such predecessors in interest, agents, representatives,
employees, or independent contractors.
vi. For purposes of this Agreement, Hazardous Substances shall
mean all pollutants, contaminants, chemicals, wastes, and any other
carcinogenic, ignitable, corrosive,
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reactive, toxic, or otherwise hazardous substances or materials (whether solids,
liquids or gases), including but not limited to any substances, materials, or
wastes subject to regulation, control, or remediation under Environmental Laws.
(r) Labor Relations; Compliance. Since the Company Balance Sheet
date, there has not been, there is not presently pending or existing, and to the
Company's Knowledge there is not threatened, (a) any strike, slowdown,
picketing, work stoppage or employee grievance process, (b) any Proceeding
against or affecting the Company relating to the alleged violation of any Legal
Requirement pertaining to labor relations or employment matters, including any
charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or any comparable
governmental body, organizational activity, or other labor or employment dispute
against or affecting any of the Company or its premises or (c) any application
for certification of a collective bargaining agent. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by the Company, and no such
action is contemplated by the Company. To the Company's Knowledge, the Company
has complied in all material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health and plant closing. The Company has
not been determined liable for the payment of any compensation, damages, taxes,
fines, penalties or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
(s) Intellectual Property.
i. Schedule 4.1(s) sets forth a complete and accurate list of
(a) all patents, patent applications, patent pendings, copyrights, trademarks,
trademark registrations and trademark registration applications (collectively
referred to herein as "Intellectual Property") which the Company owns or uses
(whether or not under license from third parties) together with identification
of all parties thereto under which the Company either obtains or grants the
right to use any of said Intellectual Property; (b) all agreements and
identification of all parties thereto under which the Company either obtains or
grants the right to use any of said Intellectual Property; and (c) all validity,
infringement or other opinions of counsel which relate to the validity,
infringement and/or enforceability of any patent owned or controlled by a party
other than the Company, which relates to any aspect of the business of the
Company.
ii. The Company is the sole and exclusive owner of, and has
the sole and exclusive right to use, all of said Intellectual Property without
any obligation, consent or assignment of any kind from any third party. The
Company's rights in the Intellectual Property are not being infringed by others,
nor does the conduct by the Company infringe or conflict in any way upon the
rights of the type enumerated herein owned by others. There is no claim, suit,
action or proceeding pending or threatened against the Company or any of its
subsidiaries (i) alleging any such conflict or infringement with any third
party's proprietary rights or (ii) challenging the ownership, use, validity or
enforceability of any of the Intellectual Property.
iii. The Company employs procedures to maintain the
proprietary nature of, and owns and has the unrestricted right to use, all trade
secrets, including know-how, inventions,
20
designs, processes, computer software and documentation for such software and
technical data, required for or incident to the development, manufacture,
operation and sale of all products and services sold or proposed to be sold by
the Company, free and clear of any liens or other encumbrances whatsoever,
including without limitation all claims of current and former employees,
consultants, officers, directors and shareholders of the Company.
iv. The Company has not entered into any consent,
indemnification, forbearance to ▇▇▇, settlement agreement or cross-licensing
arrangement with any Person relating to the Intellectual Property.
v. The Company is not, nor will be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property.
(t) Certain Payments. Since the Company Balance Sheet Date, neither
the Company nor any director, officer, agent or employee of the Company has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any Person, private or public,
regardless of form, whether in money, property or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or (iv) in
violation of any Legal Requirement, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Company.
(u) Brokers or Finders. The Company has not incurred any obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
(v) Collective Bargaining. There are no labor contracts, collective
bargaining agreements, letters of undertaking or other arrangements, formal or
informal, between the Company and any union labor organization covering any of
the Company's employees and none of said employees are represented by any union
or labor organization.
(w) Investment Intent. The shareholders of the Company acquiring the
Parent Exchange Shares are acquiring such Parent Shares for their own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
(x) Related Transactions. Except as set forth on Schedule 4.1(x), no
shareholder of the Company or any related Person of the Company has any material
interest in any property (whether real or personal, tangible or intangible),
used in or pertaining to the business of the Company or has owned, as a record
or beneficial owner, an equity interest or any other material financial or
profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with the Company or (ii) engaged in
competition with the Company with respect to any line of the products or
services of the Company in any market presently serviced by the Company.
21
(y) Inventory. To the Company's Knowledge: (i) All inventory of the
Company, whether or not reflected in the Company Balance Sheet, consists of a
quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Company Balance
Sheet or on the accounting records of the Company as of the Closing Date, as the
case may be; (ii) all inventories not written off have been priced as the lower
of cost or market and subject to net realizable evaluation on a weighted average
basis; and (iii) the quantities of each item of inventory (whether raw
materials, work-in-process or finished goods) are not excessive and are
reasonable based upon the present circumstances of the Company.
4.2 Representations and Warranties of Parent and Acquisition. Parent
and Acquisition jointly and severally represent and warrant to the Company as
follows:
(a) Organization and Good Standing. Parent and Acquisition are
corporations duly organized, validly existing and in good standing under the
laws of the States of Utah and Delaware, respectively, with full power and
authority to conduct their businesses as they are now being conducted, to own or
use the properties and assets that they own or use, and to perform all of their
respective obligations under this Agreement and the Applicable Contracts.
Acquisition is a newly-organized corporation formed for the sole purpose of
consummating the Merger and the transactions contemplated thereby and has not
conducted any business operations.
(b) Capitalization. The authorized capital stock of Parent as of the
date hereof consists of 50,000,000 shares of Common Stock, of which 15,999,676
shares of Common Stock were issued and outstanding as of July 31, 2002. The
authorized, issued and outstanding capital stock of Acquisition consists of
1,000 shares of common stock, par value $.001 per share, all of which are owned
by Parent.
(c) Authority; No Conflict.
i. This Agreement constitutes the legal, valid and binding
obligation of Parent and Acquisition, enforceable against Parent and Acquisition
in accordance with its terms. Upon the execution and delivery by Parent and
Acquisition of this Agreement, the Agreement will constitute the legal, valid
and binding obligation of Parent and Acquisition, enforceable against Parent and
Acquisition in accordance with its terms. Parent and Acquisition have the
absolute and unrestricted right, power and authority to execute and deliver this
Agreement and to perform their respective obligations thereby.
ii. Neither the execution and delivery of this Agreement by
Parent and Acquisition nor the consummation or performance of any obligations
contained in this Agreement by Parent or Acquisition will give any Person the
right to prevent, delay, or otherwise interfere with this Agreement and any of
the Contemplated Transactions.
iii. Neither Parent nor Acquisition is required to obtain any
consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
22
(d) Financial Statements. Parent has delivered to the Company a copy
of its Form 10-KSB Annual Report for the fiscal year ended December 31, 2001
filed with the SEC ("Parent's Form 10-KSB Report"). The financial statements
contained in Parent's Form 10-KSB Report are in all material respects in
accordance with the books and records of Parent and have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated, all as more particularly set forth in the notes to such statements.
The consolidated balance sheets present fairly as of their dates the
consolidated financial condition of Parent and its subsidiaries. Except as and
to the extent reflected or reserved against in such balance sheets (including
the notes thereto), Parent did not have, as of the date of any such balance
sheet, any material liabilities or obligations (absolute or contingent) of a
nature customarily reflected in a balance sheet or the notes thereto. The
Consolidated Statements of Operations, Consolidated Statements of Shareholders'
Equity and changes in Consolidated Statements of Cash Flows present fairly the
results of operations and changes in financial position of Parent and its
subsidiaries for the periods indicated.
(e) SEC Filings. Parent has delivered to the Company a copy of
Parent's Form 10-KSB Report for the year ended December 31, 2001. Since December
31, 2001, Parent has timely filed all reports required to be filed with the SEC
under the rules and regulations of the SEC and all such reports have complied in
all material respects, as of their respective filing dates and effective dates,
as the case may be, with all the applicable requirements of the Securities
Exchange Act of 1934, as amended. As of the respective filing and effective
dates, none of such reports (including without limitation, Parent's Form 10-KSB
Report) contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(f) Absence of Material Adverse Change. Since the date of the most
recent balance sheet provided under Section 4.2(d) hereof, there have been no
events, changes or occurrences which have had or are reasonably likely to have,
individually or in the aggregate, a material adverse effect on Parent.
(g) Issuance of Parent Exchange Shares and Escrowed Shares. The
Parent Exchange Shares and Escrowed Shares, when issued in accordance with this
Agreement, shall be duly authorized, validly issued, fully-paid and
nonassessable.
(h) Certain Proceedings. There is no pending Proceeding that has
been commenced against Parent and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Parent's knowledge, no such Proceeding has been
threatened.
(i) Brokers or Finders. Parent has incurred no liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
23
ARTICLE V
COVENANTS
5.1 Covenants of the Company.
(a) Conduct of Business. Prior to and through the Closing Date, the
Company shall:
i. conduct its business only in the Ordinary Course of
Business;
ii. use its commercially reasonable efforts to preserve intact
the current business organization of the Company, keep available the services of
the current officers, employees and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents and others having business relationships with the Company;
iii. not pay, incur or declare any dividends or distributions
with respect to its shareholders or amend its Certificate of Incorporation or
By-Laws, without the prior written consent of Parent;
iv. not authorize, issue, sell, purchase or redeem any shares
of its capital stock or any options or other rights to acquire ownerships
interests without the prior written consent of Parent;
v. not incur any indebtedness for money borrowed or issue and
debt securities, or incur or suffer to be incurred any liability or obligation
of any nature whatsoever, or cause or permit any lien, encumbrance or security
interest to be created or arise on or in respect of any of its properties or
assets;
vi. not make any investment of capital nature either by
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
vii. not do any other act which would cause representation or
warranty of the Company in this Agreement to be or become untrue in any material
respect or that is not in the ordinary course of business consistent with past
practice;
viii. report periodically to Parent concerning the status of
the business and operations of the Company; and
ix. confer with Parent concerning operational matters of a
material nature.
(b) Proposals; Other Offers. Commencing on the date of execution of
this Agreement through the Closing Date, the Company shall not, directly or
indirectly (whether through an employee, a representative, an agent or
otherwise) solicit or encourage any inquiries or proposals, engage in
negotiations for or consent to or enter into any agreement providing for the
acquisition of the business. The Company shall not, directly or indirectly
(whether through an employee, a
24
representative, an agent or otherwise) disclose any nonpublic information
relating to the Company or afford access to any of the books, records or other
properties of the Company to any person or entity that is considering, has
considered or is making any such acquisition inquiry or proposal relating to the
Company's business.
(c) Further Assurances. Prior to the Closing Date, with the
cooperation of Parent and Acquisition where appropriate, the Company shall use
commercially reasonable efforts to:
i. promptly comply with all filing requirements which federal,
state or local law may impose on the Company with respect to the transactions
contemplated by this Agreement; and
ii. take all actions necessary to be taken, make any filing
and obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of the Company and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by the Company in connection
with the transactions contemplated by this Agreement.
(d) Access to Additional Agreements and Information. Prior to the
Closing Date, the Company shall make available to the Parent and Acquisition (as
well as its counsel, accountants and other representatives) any and all
agreements, contracts, documents, other instruments and personnel material to
the Company's business, including without limitation, those contracts to which
the Company is a party and those by which its business or any of the Company's
assets are bound.
(e) Financial Information. The Company will furnish to Parent
monthly financial information since the Company Balance Sheet date until the
Closing in such form reasonably requested by Parent.
5.2 Covenants of Parent and Acquisition.
(a) Third Party Consents. Parent and Acquisition shall use all
reasonable efforts to obtain any consent, authorization or approval of, or
exemption by, any governmental authority or agency or other third party required
to be obtained or made by it in connection with this Agreement or the
consummation of the transactions contemplated hereby.
(b) Further Assurances. Prior to the Closing Date, with the
cooperation of the Company where appropriate, Parent and Acquisition shall:
i. promptly comply with all filing requirements which federal,
state or local law may impose on Parent or Acquisition with respect to the
transactions contemplated by this Agreement; and
ii. use its diligent efforts to take all actions necessary to
be taken, make any filing and obtain any consent, authorization or approval of
or exemption by any governmental authority, regulatory agency or any other third
party which is required to be filed or obtained by Parent or Acquisition in
connection with the transactions contemplated by this Agreement.
25
(c) Actions by Acquisition. Acquisition shall take no action or
enter into any agreements or arrangements except as may be required by this
Agreement.
(d) No Change in Capital Stock. Prior to the Effective Time, no
change will be made in the authorized, issued or outstanding capital stock of
Parent or Acquisition, and no subscriptions, options, rights, warrants, calls,
commitments or agreements relating to the authorized, issued or outstanding
capital stock of Parent or Acquisition will be entered into, issued, granted or
created, except in the Ordinary Course of Business or with the prior written
approval of the Company.
5.3 Governmental Filings and Consents. The Company, Parent and
Acquisition shall cooperate with one another in filing any necessary
applications, reports or other documents with any federal or state agencies,
authorities or bodies having jurisdiction with respect to the business of the
Company or the transactions contemplated by this Agreement and in seeking any
necessary approval, consultation or prompt favorable action of, with or by any
of such agencies, authorities or bodies.
5.4 Publicity. Any public announcement or press release relating to
this Agreement or the transactions contemplated hereby must be approved by both
the Company and Parent, in writing before being made or released. Parent shall
have the right to issue a press release without Company's written approval if in
the opinion of Parent's counsel such a release is necessary to comply with SEC
Rules and Regulations provided that, the Company receives a copy of such
prepared press release for purposes of review at least 24 hours before it is
issued. This 24 hour period may be shortened if in the opinion of Parent's
counsel it is required by law, provided that, the Company receives a copy of
such release as long as reasonably practical before it is issued.
5.5 Tax Returns. The current officers of the Company shall have the
right to prepare any tax returns of the Company with respect to any period that
ends on or before the Closing Date, which tax returns shall be prepared in a
manner consistent with prior tax returns. Such tax returns shall be timely filed
by the Company. Parent, Acquisition and the Company shall cooperate with said
officers in the preparation of such tax returns. Neither Parent, Acquisition nor
the Company may amend any Company tax return relating to a period through or
including the Closing Date without the prior written consent of the shareholders
of the Company immediately prior to the Closing Date.
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of Parent and Acquisition. The
obligation of Parent and Acquisition to consummate the transactions contemplated
by this Agreement is subject to the fulfillment of each of the following
conditions, which may be waived in whole or in part by Parent and Acquisition to
the extent permitted by applicable law:
(a) Copies of Resolutions. At the Closing, the Company shall have
furnished Parent and Acquisition with certified copies of resolutions duly
adopted by the board of directors of
26
the Company authorizing the execution, delivery and performance of the terms of
this Agreement and all other necessary or proper corporate action to enable the
Company to comply with the terms of this Agreement.
(b) Opinion of Company's Counsel. The Company shall have furnished
to Parent and Acquisition, at the Closing, with an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇, LLP, counsel to the Company, dated as of the Closing Date,
substantially in the form of Exhibit 6.1(b) annexed hereto.
(c) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of the Company set forth
in this Agreement was true, correct and complete in all material respects when
made and shall also be true, correct and complete in all material respects at
and as of the Closing Date, with the same force and effect as if made at and as
of the Closing Date. The Company shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed by the Company at or prior to the Closing Date.
(d) Delivery of Certificate. The Company shall have delivered to
Parent and Acquisition a certificate, dated the Closing Date, and signed by an
executive officer of the Company as set forth in Section 4.1 of this Agreement
representing and affirming that the representations and warranties made by the
Company were and are true, correct and complete as required by Section 6.1(c)
above.
(e) Consents and Waivers. At the Closing, any and all necessary
consents, authorizations, orders or approvals shall have been obtained, except
as the same shall have been waived by Parent and Acquisition.
(f) Litigation. On the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to the Company issued by a court or governmental agency
(or other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated
hereby or making consummation thereof unduly burdensome to Parent. On the
Closing Date and immediately prior to consummation of the transactions
contemplated by this Agreement, no proceeding or lawsuit shall have been
commenced, be pending or have been threatened by any governmental or regulatory
agency or authority or any other person with respect to the transactions
contemplated by this Agreement.
(g) Delivery of Documents and Other Information. Prior to the
Closing Date, the Company shall have made available or delivered to Parent and
Acquisition all of the agreements, contracts, documents and other instruments
required to be delivered pursuant to the provisions of this Agreement.
6.2 Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment of each of the following conditions, which may be
waived in whole or in part by the Company to the extent permitted by law:
27
(a) Copies of Resolutions. At the Closing, Parent and Acquisition
shall have furnished the Company with certified copies of resolutions duly
adopted by the board of directors of the Parent and Acquisition authorizing the
execution, delivery and performance of the terms of this Agreement and all other
necessary or proper corporate action to enable Parent and Acquisition to comply
with the terms of this Agreement.
(b) Opinion of Parent and Acquisition's Counsel. Parent and
Acquisition shall have furnished the Company at the Closing, with an opinion of
▇▇▇▇▇▇ Gottbetter & ▇▇▇▇▇▇▇▇, LLP, counsel to Parent and Acquisition, dated as
of the Closing Date, substantially in the form of Exhibit 6.2(b) annexed hereto.
(c) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of Parent and Acquisition
was true, correct and complete in all material respects when made and shall also
be true, correct and complete in all material respects at and as of the Closing
Date, with the same force and effect as if made at and as of the Closing Date.
Parent and Acquisition shall have performed and complied in all material
respects with all agreements and covenants required by this Agreement to be
performed by the Parent and Acquisition at or prior to the Closing Date.
(d) Delivery of Certificate. Parent and Acquisition each shall have
delivered to the Company a certificate, dated the Closing Date and signed by an
executive officer of Parent and Acquisition, affirming that the representations
and warranties of Parent and Acquisition as set forth in Section 4.2 of this
Agreement were and are true, correct and complete as required by Section 6.2(c).
(e) Consents and Waivers. On or prior to the Closing Date, any and
all necessary consents, authorizations, orders or approvals shall have been
obtained, except as the same shall have been waived by the Company.
(f) Litigation. On the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to Company issued by a court or governmental agency (or
other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated
herein or making the consummation thereof unduly burdensome to the Company. On
the Closing Date, no proceeding or lawsuit shall have been commenced, threatened
or be pending or by any governmental or regulatory agency or authority or any
other person with respect to the transactions contemplated by this Agreement.
(g) Delivery of Documents and Other Information. Prior to the
Closing Date, Parent and Acquisition shall have made available or delivered to
the Company all of the agreements, contracts, documents and other instruments
required to be delivered pursuant to the provisions of this Agreement.
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ARTICLE VII
TERMINATION
7.1 Termination by Mutual Agreement. This Agreement may be
terminated at any time by mutual consent of the parties hereto, provided that
such consent to terminate is manifested in writing and is signed by each of the
parties hereto.
7.2 Termination for Failure to Close. This Agreement may be
terminated by any party hereto if the Closing shall not have occurred by August
17, 2002, provided that, the right to terminate this Agreement pursuant to this
Section 7.2 shall not be available to any party whose failure to fulfill any of
its obligations hereunder has been the cause of or resulted in the failure to
consummate the transactions contemplated hereby by the foregoing date.
7.3 Termination by Operation of Law. This Agreement may be
terminated by any party hereto if there shall be any statute, rule or regulation
that renders consummation of the transactions contemplated hereby illegal or
otherwise prohibited, or a court of competent jurisdiction or any government (or
governmental authority) shall have issued an order, decree or ruling, or has
taken any other action restraining, enjoining or otherwise prohibiting the
consummation of such transactions and such order, decree, ruling or other action
shall have become final and nonappealable.
7.4 Termination for Failure to Perform Covenants or Conditions. This
Agreement may be terminated prior to the Closing Date:
(a) by Acquisition or Parent if: (i) any of the representations and
warranties made in this Agreement by the Company shall not be materially true
and correct, when made or at any time prior to consummation of the transactions
contemplated hereby as if made at and as of such time; (ii) any of the
conditions set forth in Section 6.1 hereof have not been fulfilled by the
Closing Date; (iii) the Company shall have failed to observe or perform any of
its material obligations under this Agreement; or (iv) as otherwise set forth
herein; or
(b) by the Company if: (i) any of the representations and warranties
of Acquisition or Parent shall not be materially true and correct when made or
at any time prior to consummation of the transactions contemplated hereby as if
made at and as of such time; (ii) any of the conditions set forth in Section 6.2
hereof have not been fulfilled by the Closing Date; (iii) Parent and Acquisition
shall have failed to observe or perform any of their material respective
obligations under this Agreement; or (iv) as otherwise set forth herein.
7.5 Effect of Termination or Default; Remedies. In the event of
termination of this Agreement as set forth above, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto,
provided that such party is a Non-Defaulting Party (as defined below). The
foregoing shall not relieve any party from liability for damages actually
incurred as a result of such party's breach of any term or provision of this
Agreement.
29
7.6 Remedies; Specific Performance. In the event that any party
shall fail or refuse to consummate the transactions contemplated by this
Agreement or if any default under or beach of any representation, warranty,
covenant or condition of this Agreement on the part of any party (the
"Defaulting Party") shall have occurred that results in the failure to
consummate the transactions contemplated hereby, then in addition to the other
remedies provided herein, the non-defaulting party (the "Non-Defaulting Party")
shall be entitled to seek and obtain money damages from the Defaulting Party, or
may seek to obtain an order of specific performance thereof against the
Defaulting Party from a court of competent jurisdiction, provided that the
Non-Defaulting Party seeking such protection must file its request with such
court within forty-five (45) days after it becomes aware of the Defaulting
Party's failure, refusal, default or breach. In addition, the Non-Defaulting
Party shall be entitled to obtain from the Defaulting Party court costs and
reasonable attorneys' fees incurred in connection with or in pursuit of
enforcing the rights and remedies provided hereunder.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations and Warranties of the Company. All
representations and warranties of the Company shall survive the execution and
delivery of this Agreement and the Closing hereunder and, except as set forth
below, shall thereafter continue in full force and effect until the second
anniversary of the Closing Date and shall thereafter terminate except to the
extent that notice of the Company's liability in respect of any inaccuracy in or
breach of any representation or warranty shall have been given on or prior to
such first anniversary. Notwithstanding the foregoing, the representations and
warranties of the Company set forth in Sections 4.1(j), 4.1(q) and 4.1(s) shall
survive the Closing hereunder and shall thereafter continue in full force and
effect until the sixth anniversary of the Closing Date and shall thereafter
terminate except to the extent that notice of the Company's liability in respect
of any inaccuracy in or breach of any representation or warranty shall have been
given on or prior to such fourth anniversary.
8.2 Survival of Representations and Warranties of the Parent and
Acquisition. All representations and warranties of Parent and Acquisition shall
terminate upon the Closing.
8.3 Obligation of the Company and the Company Shareholders To
Indemnify. The Company and each of the Company Shareholders jointly and
severally agree to indemnify, defend and hold harmless the Parent and
Acquisition (and their respective directors, officers, employees, affiliates,
shareholders, agents, attorneys, successors and assigns) from and against all
losses, liabilities, damages, deficiencies, costs or expenses (including
interest, penalties and reasonable attorneys' and consultants' fees and
disbursements) (collectively, "Losses") based upon, arising out of or otherwise
in respect of any (i) inaccuracy in any representation or warranty of the
Company contained in this Agreement or in the Schedules and Exhibits hereto or
(ii) breach of any covenant or agreement contained in this Agreement or the
transactions contemplated hereby.
8.4 Obligation of the Parent and Acquisition to Indemnify. The
Parent and Acquisition agree jointly and severally to indemnify, defend and hold
harmless the Company (and its directors, officers, employees, affiliates,
shareholders, agents, attorneys, successors and assigns) from
30
and against any Losses based upon, arising out of or otherwise in respect of any
(i) inaccuracy in any representation or warranty of Parent or Acquisition
contained in this Agreement or (ii) breach of any covenant or agreement
contained in this Agreement or the transactions contemplated hereby.
8.5 Notice and Opportunity to Defend.
(a) Promptly after receipt by any person entitled to indemnity under
this Agreement (an "Indemnitee") of notice of any demand, claim or circumstances
which, with the lapse of time, would or might give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) who is or may be obligated to provide indemnification pursuant to
Section 8.3 or 8.4 (the "Indemnifying Party"). The Claims Notice shall describe
the Asserted Liability in reasonable detail and shall indicate the amount
(estimated, if necessary and to the extent feasible) of the Loss that has been
or may be suffered by the Indemnitee.
(b) The Indemnifying Party may elect to compromise or defend, at its
own expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall within 30
days after the date the Claims Notice is given (or sooner, if the nature of the
Asserted Liability so requires) notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in
the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify the Indemnitee of its election as herein provided or contests
its obligation to indemnify under this Agreement, the Indemnitee may pay,
compromise or defend such Asserted Liability and all reasonable expenses
incurred by the Indemnitee in defending or compromising such Asserted Liability,
all amounts required to be paid in connection with any such Asserted Liability
pursuant to the determination of any court, governmental or regulatory body or
arbitrator, and amounts required to be paid in connection with any compromise or
settlement consented to by the Indemnitee, shall be borne by the Indemnifying
Party. Except as otherwise provided in the immediately preceding sentence,
neither the Indemnifying Party nor the Indemnitee may settle or compromise any
claim over the objection of the other, provided, however, that consent to
settlement or compromise shall not be unreasonably withheld. In any event, the
Indemnitee and the Indemnifying Party may participate, at their own expense, in
the defense of such Asserted Liability. If the Indemnifying Party chooses to
defend any claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are necessary or
appropriate for such defense.
ARTICLE IX
DEFINITIONS
The following terms, which are capitalized in this Agreement, shall
have the meanings set forth below for the purpose of this Agreement.
"Applicable Contract" means any Contract (a) under which the Company
has or may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability or (c) by which the Company or any of the
assets owned or used by it is or may become bound.
31
"Company Shareholders" means ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Contemplated Transactions" means all of the transactions
contemplated by this Agreement, including:
(1) the Merger; and
(2) the performance by the parties of their respective covenants and
obligations under this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to such law or any
successor law.
"GAAP" means generally accepted accounting principles in the United
States, applied on a consistent basis.
"Knowledge" means actual awareness by a Person of a fact or other
matter after all due inquiry; references to "Company's Knowledge" shall be
deemed to include the actual awareness after all due inquiry of each of the
directors, executive officers and principal shareholders of the Company.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational or other administrative law, ordinance,
principle of common law, regulation, statute or treaty.
"Order" means any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other governmental body or by any arbitrator.
"Ordinary Course of Business" means an action taken by a Person
where:
(1) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(2) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(3) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Organizational Documents" means the articles or certificate of
incorporation and the by-laws of a corporation and any amendment thereto.
32
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any governmental body or arbitrator.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE X
MISCELLANEOUS
10.1 Fees and Expenses. Except as otherwise provided in this
Agreement, each party hereto will bear its own legal, accounting and other fees
and expenses incident to the transactions contemplated herein.
10.2 Modification, Amendments and Waiver. The parties hereto may
amend, modify or otherwise waive any provision of this Agreement by mutual
consent, provided that such consent and any amendment, modification or waiver is
in writing and is signed by each of the parties hereto.
10.3 Assignment. Neither the Company nor Parent or Acquisition shall
have the authority to assign its respective rights or obligations under this
Agreement without the prior written consent of the other parties hereto, except
that Parent and Acquisition may assign all or any portion of its respective
rights hereunder as security, without the prior written consent of the Company,
to any lender, bank, financial institution or other entity providing financing
to Parent and Acquisition in connection with consummation of the transactions
contemplated hereby and the Company shall execute such documents as are
necessary in order to effectuate such assignments.
10.4 Successors. This Agreement shall be binding upon and, to the
extent permitted in this Agreement, shall inure to the benefit of the parties
and their respective successors and permitted assigns.
10.5 Entire Agreement. This Agreement and the exhibits, lists and
other documents referred to herein contain the entire agreement among the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior agreements with respect thereto, whether written or oral.
10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts or choice of laws thereof.
33
10.7 Notices. Any notice, request, instruction or other document to
be given hereunder by any party hereto shall be in writing and delivered
personally or sent by registered or certified mail (return receipt requested),
postage prepaid, or by recognized overnight carrier, addressed as follows:
If to Parent or Acquisition: Scores Holding Company Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
If to the Company: HEIR Holding Co., Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
with a copy to:
▇▇▇▇▇▇ Gottbetter & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If mailed as aforesaid, the day of mailing or
transmission shall be the date any such notice shall be deemed to have been
delivered.
10.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
10.9 Rights Cumulative. All rights, powers and privileges conferred
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
10.10 Severability of Provisions. The provisions of this Agreement
shall be considered severable in the event that any of such provisions are held
by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable. Such invalid, void or otherwise unenforceable provisions shall be
automatically replaced by other provisions which are valid and
34
enforceable and which are as similar as possible in term and intent to those
provisions deemed to be invalid, void or otherwise unenforceable.
Notwithstanding the foregoing, the remaining provisions hereof shall remain
enforceable to the fullest extent permitted by law.
10.11 Headings. The headings set forth in the articles and sections
of this Agreement and in the exhibits and the schedules to this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
a part hereof.
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered on the date and year first above written.
SCORES HOLDING COMPANY INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
SCORES ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
HEIR HOLDING CO., INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
36
The undersigned hereby execute and deliver this Agreement solely for
the purpose of being bound by the representations and warranties contained in
Section 4.1 hereof and the indemnification provisions contained in Section 8.3
hereof.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
37
EXHIBIT 2.1
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER RULE 504 OF REGULATION D PROMULGATED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS.
US $1,000,000 August 7, 2002
1% CONVERTIBLE DEBENTURE DUE AUGUST 6, 2007
THIS DEBENTURE of Scores Holding Company Inc., a Utah corporation (the
"Company"), in the aggregate principal amount of One Million Dollars (US
$1,000,000) is designated as its $1,000,000 1% Convertible Debenture, due August
6, 2007 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to HEM Mutual Assurance
LLC or its registered assigns (the "Holder"), the aggregate principal sum of One
Million Dollars (US $1,000,000), on or prior to August 6, 2007 (the "Maturity
Date") and to pay interest to the Holder on the principal sum at the rate of one
percent (1%) per annum. Interest shall accrue daily commencing on the Original
Issuance Date (as defined in Section 1 below) in the form of cash, common stock
of the Company or additional Debentures selected by the Company subject to the
provisions of Section 2(b) hereof, until payment in full of the principal sum,
together with all accrued and unpaid interest, has been made or duly provided
for. If at any time after the Original Issuance Date an Event of Default has
occurred and is continuing, interest shall accrue at the rate of fifteen percent
(15%) per annum from the date of the Event of Default and the applicable cure
period through and including the date of payment. Interest due and payable
hereunder shall be paid to the person in whose name this Debenture (or one or
more successor Debentures) is registered on the records of the Company regarding
registration and transfers of the Debentures (the "Debenture Register");
provided, however, that the Company's obligation to a transferee of this
Debenture shall arise only if such transfer, sale or other disposition is made
in accordance with the terms and conditions hereof and of the Convertible
Debenture Purchase Agreement (the "Purchase Agreement") by and between HEIR
Holding Co., Inc. and the Purchaser (as such term is defined in the Purchase
Agreement), dated as of August 7, 2002, as amended from time to time. A transfer
of the right to receive principal and interest under this Debenture shall be
transferable only through an appropriate entry in the Debenture Register as
provided herein.
This Debenture is subject to the following additional provisions:
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings given such terms in the Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:
38
"Adjusted Conversion Price" means the lesser of the Fixed Conversion Price
or the Floating Conversion Price one day prior to the record date set for the
determination of stockholders entitled to receive dividends, distributions,
rights or warrants as provided for in Sections 4(c)(ii), (iii) and (iv).
"Conversion Date" shall have the meaning set forth in Section 4(a) hereof.
"Conversion Ratio" means, at any time, a fraction, the numerator of which
is the principal amount represented by the Debentures plus accrued but unpaid
interest thereon, and the denominator of which is the Conversion Price at such
time.
"Fixed Conversion Price" shall have the meaning set forth in Section 4(c)
hereof.
"Floating Conversion Price" shall have the meaning set forth in Section
4(c) hereof.
"Notice of Conversion" shall have the meaning set forth in Section 4(a)
hereof.
"Original Issuance Date" shall mean the date of the first issuance of this
Debenture regardless of the number of transfers hereof.
Section 2. Denominations of Debentures; Interest on Debentures. The
Debentures are issuable in denominations of One Thousand Dollars (US$1,000.00)
and integral multiples of One Thousand Dollars (US$1,000.00) in excess thereof.
The Debentures are exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, as requested by the Holder
surrendering the same, but shall not be issuable in denominations of less than
integral multiplies of One Thousand Dollars (US$1,000.00). No service charge to
the Holder will be made for such registration of transfer or exchange.
Section 3. Events of Default and Remedies.
I. "Event of Default," when used herein, means any one of the following
events (whatever the reason and whether any such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(a) any default in the payment of the principal of or interest on
this Debenture as and when the same shall become due and payable either at the
Maturity Date, by acceleration, conversion, or otherwise;
(b) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of, this
Debenture, and such failure or breach shall not have been remedied within three
(3) Business Days of its receipt of notice of such failure or breach;
(c) the occurrence of any event or breach or default by the Company
under the Purchase Agreement or any other Transaction Document and such failure
or breach shall not have been remedied within the cure period, if any, provided
for therein;
39
(d) the Company or any of its Subsidiaries shall commence a
voluntary case under the United States Bankruptcy Code as now or hereafter in
effect or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against the Company under the Bankruptcy Code and the petition is
not controverted within thirty (30) days, or is not dismissed within sixty (60)
days, after commencement of the case; or a "custodian" (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or any substantial
part of the property of the Company or the Company commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or there
is commenced against the Company any such proceeding which remains undismissed
for a period of sixty (60) days; or the Company is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Company suffers any appointment of any custodian
or the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of thirty (30) days; or the Company makes
a general assignment for the benefit of creditors; or the Company shall fail to
pay, or shall state that it is unable to pay, or shall be unable to pay, its
debts generally as they become due; or the Company shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts; or
the Company shall by any act or failure to act indicate its consent to, approval
of or acquiescence in any of the foregoing; or any corporate or other action is
taken by the Company for the purpose of effecting any of the foregoing;
(e) the Company shall default in any of its obligations under any
mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of the Company in an amount
exceeding One Hundred Thousand Dollars ($100,000.00), whether such indebtedness
now exists or shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
(f) the Company shall have its Common Stock deleted or delisted, as
the case may be, from the OTCBB or other national securities exchange or market
on which such Common Stock is listed for trading or suspended from trading
thereon, and shall not have its Common Stock relisted or have such suspension
lifted, as the case may be, within five (5) Trading Days of such deletion or
delisting;
(g) notwithstanding anything herein to the contrary, the Company
shall fail to deliver to the Escrow Agent share certificates representing the
shares of Common Stock to be issued upon conversion of the Debentures within
three (3) Business Days pursuant to the Company's receipt of notice from the
Escrow Agent to the Company that additional shares of Common Stock are required
to be placed in escrow pursuant to Section 4.13 of the Purchase Agreement,
Article 2 of the Escrow Agreement, and/or Section 4(b) of this Debenture;
(h) the Company shall issue a press release, or otherwise make
publicly known, that it is not honoring a properly executed Notice of Conversion
(as defined in Section 4(a) hereof) for any reason whatsoever;
(i) the Company issues or enters into an agreement to issue any
equity or equity equivalent security with a floating conversion price
substantially similar to the Debentures other than
40
any securities issued at any time or from time to time to the Purchaser or any
of its Affiliates or assigns during the period commencing on the date hereof and
ending on the third anniversary of the date hereof.
II. (a) If any Event of Default occurs and continues, beyond a cure
period, if any, then the Holder may, by notice to the Company, accelerate all of
the payments due under this Debenture by declaring all amounts so due under this
Debenture, whereupon the same shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, notwithstanding anything contained herein to the
contrary, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by the Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon. This shall include, but not be limited to the
right to temporary, preliminary and permanent injunctive relief without the
requirement of posting any bond or undertaking.
(b) The Holder may thereupon proceed to protect and enforce its
rights either by suit in equity and/or by action at law or by other appropriate
proceedings whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this Debenture or in aid of the
exercise of any power granted in this Debenture, and proceed to enforce the
payment of any of the Debentures held by it, and to enforce any other legal or
equitable right of such Holder.
(c) Except as expressly provided for herein, the Company
specifically (i) waives all rights it may have (A) to notice of nonpayment,
notice of default, demand, presentment, protest and notice of protest with
respect to any of the obligations hereunder or the shares of Common Stock and
(B) notice of acceptance hereof or of any other action taken in reliance hereon,
notice and opportunity to be heard before the exercise by the Holder of the
remedies of self-help, set-off, or other summary procedures and all other
demands and notices of any type or description except for cure periods; and (ii)
releases the Holder, its officers, directors, agents, employees and attorneys
from all claims for loss or damage caused by any act or failure to act on the
part of the Holder, its officers, attorneys, agents, directors and employees
except for gross negligence or willful misconduct.
(d) As a non-exclusive remedy, upon the occurrence of an Event of
Default, the Holder may convert the remaining principal amount of the Debentures
and accrued interest thereon at the lesser of the Fixed Conversion Price or the
Floating Conversion Price upon giving a Notice of Conversion to the Company.
Except as otherwise provided herein, the Company shall not have the right to
object to the conversion or the calculation of the applicable conversion price,
and the Escrow Agent shall release the shares of Common Stock from escrow upon
notifying the Company of the conversion.
III. To effectuate the terms and provision of this Debenture, the Holder
may give notice of any default to the Attorney-in-Fact as set forth herein and
give a copy of such notice to the Company and its counsel, simultaneously, and
request the Attorney-in-Fact to comply with the terms of this Debenture and the
Purchase Agreement and all agreements entered into pursuant to the Purchase
Agreement on behalf of the Company.
41
Section 4. Conversion.
(a) The unpaid principal amount of this Debenture shall be convertible
into shares of Common Stock at the Conversion Ratio as defined below, and
subject to the Limitation on Conversion described in Section 4.18 of the
Purchase Agreement, at the option of the Holder, in whole or in part, at any
time, commencing on the Original Issuance Date. Such shares of Common Stock
shall be without any restriction and freely tradable upon resale pursuant to
Rule 504 of Regulation D of the Securities Act. Any conversion under this
Section 4(a) shall be for a minimum principal amount of $10,000.00 of the
Debentures plus the interest accrued and due thereon. The Holder shall effect
conversions by surrendering the Debenture to be converted to the Escrow Agent,
together with the form of notice attached hereto as Appendix I ("Notice of
Conversion") in the manner set forth in Section 4(j) hereof. In connection with
such conversions, Holder shall follow the Conversion Procedure as set forth in
Appendix II attached hereto. Each Notice of Conversion shall specify the
principal amount of Debentures to be converted, and the date on which such
conversion is to be effected (the "Conversion Date") shall be on the date the
Notice of Conversion is delivered pursuant to Section 4(j). Subject to Section 4
hereof, each Notice of Conversion, once given, shall be irrevocable. If the
Holder is converting less than all of the principal amount represented by the
Debentures tendered by the Holder in the Notice of Conversion, the Company shall
deliver to the Holder a new Debenture for such principal amount as has not been
converted within two (2) Business Days of the Conversion Date. In the event that
the Escrow Agent holds the Debentures on behalf of the Holder, the Company
agrees that in lieu of surrendering the Debentures upon every partial
conversion, the Escrow Agent shall give the Company and the Holder written
notice of the amount of the Debentures left unconverted. Upon conversion in full
of the Debentures or upon the Maturity Date, the Escrow Agent shall return the
Debentures to the Company for cancellation.
(b) Not later than two (2) Business Days after the Conversion Date, the
Escrow Agent shall deliver to the Holder (i) a certificate or certificates
representing the number of shares of Common Stock being acquired upon the
conversion of the Debentures, and once the Debentures so converted in part shall
have been surrendered to the Company, the Company shall deliver to the Holder
Debentures in the principal amount of the Debentures not yet converted;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of the
Debentures, until the Debentures are either delivered for conversion to the
Escrow Agent or the Company or any transfer agent for the Debentures or Common
Stock, or the Holder notifies the Company that such Debentures have been lost,
stolen or destroyed and provides an affidavit of loss and an agreement
reasonably acceptable to the Company indemnifying the Company from any loss
incurred by it in connection with such loss, theft or destruction. In the case
of a conversion pursuant to a Notice of Conversion, if such certificate or
certificates are not delivered by the date required under this Section 4(b), the
Holder shall be entitled, upon providing written notice to the Company at any
time on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event, the Company shall immediately return
the Debentures tendered for conversion.
The Company agrees that at any time the conversion price of the Debentures
are such that the number of Escrow Shares is less than 200% of the Full
Conversion Shares, upon three (3) Business Days of the Company's receipt of
notice of such circumstance from the Purchaser and/or the Escrow Agent, the
Company shall issue share certificates in the name of the Purchaser in
denominations of
42
10,000 shares and deliver the same to the Escrow Agent, in such number that the
new number of Escrow Shares is equal to 200% of the Full Conversion Shares.
(c) (i) The conversion price for the Debentures in effect on any
Conversion Date shall be the LESSER of (a) $1.15 OR sixty-five percent (65%) of
the average of the closing bid prices per share of the Common Stock during the
five (5) Trading Days immediately preceding the Closing (as defined in the
Purchase Agreement) (the "Fixed Conversion Price") OR (b) fifty percent (50%) of
the average of the three (3) lowest closing bid prices per share of the Common
Stock during the forty (40) Trading Days immediately preceding the Conversion
Date (the "Floating Conversion Price"). For purposes of determining the closing
bid price on any day, reference shall be to the closing bid price for a share of
Common Stock on such date on the NASD OTC Bulletin Board, as reported on
Bloomberg, L.P. (or similar organization or agency succeeding to its functions
of reporting prices).
(ii) If the Company, at any time while any of the Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock payable in shares of its capital
stock (whether payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification any shares of capital stock of the
Company, the Fixed Conversion Price as applied in Section 4(c)(i) shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock of the Company outstanding before such event and the denominator
of which shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section 4(c)(ii) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(iii) If, at any time while any of the Debentures are outstanding,
the Company issues or sells shares of Common Stock, or options, warrants or
other rights to subscribe for or purchase shares of Common Stock (excluding
shares of Common Stock issuable upon exercise of options, warrants or conversion
rights granted prior to the date hereof) and at a price per share less than the
Per Share Market Value of the Common Stock at the issue date mentioned below,
the Fixed Conversion Price shall be multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding on the date of issuance of such shares, options, warrants or
rights plus the number of shares which the aggregate offering price of the total
number of shares so offered would purchase at such Per Share Market Value, and
the denominator of which shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase. Such adjustment shall be made whenever such rights
or warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. However, upon the expiration of any right or warrant to purchase
Common Stock, the issuance of which resulted in an adjustment in the conversion
price designated in Section 4(c)(i) pursuant to this Section 4(c)(iii), if any
such right or warrant shall expire and shall not have been exercised, the Fixed
Conversion Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in
43
the conversion price made pursuant to the provisions of this Section 4 after the
issuance of such rights or warrants) had the adjustment of the conversion price
made upon the issuance of such rights or warrants been made on the basis of
offering for subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants actually
exercised.
(iv) If, at any time while Debentures are outstanding, the Company
distributes to all holders of Common Stock (and not to holders of Debentures)
evidences of Company indebtedness or assets, or rights or warrants to subscribe
for or purchase any security (excluding those referred to in Section 4(c)(iii)
above), then, in each such case, the conversion price at which each Debenture
shall thereafter be convertible shall be determined by multiplying (A) the Fixed
Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction, the numerator of which shall be the Per Share Market Value of the
Common Stock determined as of the record date mentioned above less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors in good faith and the denominator of
which shall be the Per Share Market Value of the Common Stock on such record
date; provided, however, that in the event of a distribution exceeding ten
percent (10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority of
the principal amount of the Debentures then outstanding; and provided, further,
that the Company, after receipt of the determination by such Appraiser, shall
have the right to select an additional Appraiser, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the Holder and all other holders of Debentures of the portion of
assets or evidences of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
(v) All calculations under this Section 4 shall be made to the
nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may
be. Any calculation over .005 shall be rounded up to the next cent or share and
any calculation less than .005 shall be rounded down to the previous cent or
share.
(vi) In the event the conversion price is not adjusted pursuant to
Section 4(c)(ii), (iii), (iv), or (v), within two (2) Business Days following
the occurrence of an event described therein, the Holder shall have the right to
require the Company to redeem the Debentures at 140% of the Minimum Per
Debenture Consideration and simultaneously pay such amount and all accrued
interest and dividends to the Holder pursuant to the written instructions
provided by the Holder.
(vii) Whenever the Fixed Conversion Price is adjusted pursuant to
Section 4(c)(ii),(iii), (iv) or (v), or this Debenture is redeemed pursuant to
Section 4(c)(vi), the Company shall within two (2) days after the determination
of the new Fixed Conversion Price mail and fax to the Holder and to each other
holder of Debentures, a notice ("Company Notice of Conversion")
44
setting forth the Fixed Conversion Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment.
(viii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then each holder of Debentures then
outstanding shall have the right thereafter to convert such Debentures only into
the shares of stock and other securities and property receivable upon or deemed
to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange (except in the event the
property is cash, then the Holder shall have the right to convert the Debentures
and receive cash in the same manner as other stockholders), and the Holder shall
be entitled upon such event to receive such amount of securities or property as
the holder of shares of the Common Stock into which such Debentures could have
been converted immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange would have been entitled. The terms of
any such consolidation, merger, sale, transfer or share exchange shall include
such terms so as to continue to give to the Holder the right to receive the
securities or property set forth in this Section 4(c)(viii) upon any conversion
following such consolidation, merger, sale, transfer or share exchange. This
provision shall similarly apply to successive reclassifications, consolidations,
mergers, sales, transfers or share exchanges;
(ix) If:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(B) the Company shall declare a special non-recurring cash
dividend redemption of its Common Stock; or
(C) the Company shall authorize the grant to all holders of
the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of
any rights; or
(D) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company (other than a subdivision or
combination of the outstanding shares of Common Stock),
any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all
of the assets of the Company, or any compulsory share
exchange whereby the Common Stock is converted into
other securities, cash or property; or
(E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding-up of the affairs of
the Company;
45
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed and faxed
to the Holder and each other holder of the Debentures at their last addresses
and facsimile number set forth in the Debenture Register at least thirty (30)
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice
(d) If at any time conditions shall arise by reason of action or inaction
taken by the Company, which action or inaction, in the opinion of the Board of
Directors of the Company, is not adequately covered by the other provisions
hereof and which might materially and adversely affect the rights of the Holder
and all other holders of Debentures (different or distinguishable from the
effect generally on rights of holders of any class of the Company's capital
stock), the Company shall, at least thirty (30) calendar days prior to the
effective date of such action, mail and fax a written notice to each holder of
Debentures briefly describing the action contemplated and the material adverse
effects of such action on the rights of such holders, and an Appraiser selected
by the holders of majority in principal amount of the outstanding Debentures
shall give its opinion as to the adjustment, if any (not inconsistent with the
standards established in this Section 4), of the conversion price (including, if
necessary, any adjustment as to the securities into which Debentures may
thereafter be convertible) and any distribution which is or would be required to
preserve without diluting the rights of the holders of Debentures; provided,
however, that the Company, after receipt of the determination by such Appraiser,
shall have the right to select an additional Appraiser, in which case the
adjustment shall be equal to the average of the adjustments recommended by each
such Appraiser. The Board of Directors of the Company shall make the adjustment
recommended forthwith upon the receipt of such opinion or opinions or the taking
of any such action contemplated, as the case may be; provided, however, that no
such adjustment of the conversion price shall be made which, in the opinion of
the Appraiser(s) giving the aforesaid opinion or opinions, would result in an
increase of the conversion price above the conversion price then in effect.
(e) The Company covenants and agrees that it shall, at all times, reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of the Debentures as herein provided,
free from preemptive rights or any other actual contingent purchase rights of
persons other than the Holder of the Debentures, two (2) times such number of
shares of Common Stock as shall be issuable (taking into account the adjustments
and restrictions of Section 4(c) and Section 4(d) hereof) upon the conversion of
the aggregate principal amount of the outstanding Debentures. The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issuance, be duly and validly authorized and issued and fully paid and
non-assessable.
46
(f) No fractional shares of Common Stock shall be issuable upon a
conversion hereunder and the number of shares to be issued shall be rounded up
to the nearest whole share. If a fractional share interest arises upon any
conversion hereunder, the Company shall eliminate such fractional share interest
by issuing to the Holder an additional full share of Common Stock.
(g) The issuance of a certificate or certificates for shares of Common
Stock upon conversion of the Debentures shall be made without charge to the
Holder for any documentary stamp or similar taxes that may be payable in respect
of the issuance or delivery of such certificate, provided that the Company shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in
a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
(h) The Debentures converted into Common Stock shall be canceled upon
conversion.
(i) On the Maturity Date, the unconverted principal amount of the
Debentures and all interest due thereon shall either be paid off in full by the
Company or, if payment in full is not received within five (5) Business Days
after the Maturity Date, convert automatically into shares of Common Stock at
the lesser of the Fixed Conversion Price and the Floating Conversion Price as
set forth in Section 4(c)(i).
(j) Each Notice of Conversion shall be given by facsimile to the Escrow
Agent no later than 4:00 p.m. New York time. Upon receipt of such Notice of
Conversion, the Escrow Agent shall forward such Notice of Conversion to the
Company by facsimile by the end of the Business Day on which such notice is
received by the Escrow Agent, assuming such receipt by 6:00 p.m. New York time,
and if received by the Escrow Agent thereafter, on the next Business Day, at the
facsimile number of the Company set forth in Section 12 hereof. Any such notice
shall be deemed given and effective upon the transmission of such facsimile at
the facsimile number specified in this Section 4(j) (with printed confirmation
of transmission), and if to the Company, with a copy to the Escrow Agent. In the
event that the Escrow Agent receives the Notice of Conversion after 4:00 p.m.
New York time on any Business Day or at any time on a day that is not a Business
Day, notice will be deemed to have been given the next following Business Day.
Section 5. Redemption of Debentures.
(a) At any time after the Execution Date, so long as no Event of Default
has occurred that has not been cured, the Company shall have the option to
redeem any unconverted amount of the Debentures, either in part or whole, upon
no less than thirty (30) days written notice thereof given to the Holder with a
copy to the Escrow Agent (the "Redemption Notice"), at one hundred forty percent
(140%) of the unconverted amount of the Debentures plus accrued interest thereon
(the "Redemption Price").
(b) Within five (5) Business Days after giving the Redemption Notice, the
Company shall deposit the Redemption Price by wire transfer to the ▇▇▇▇ account
of the Escrow Agent. Upon receipt of the Redemption Price, the Escrow Agent
shall release the Redemption Price to the Holder and return the remaining
Debentures and Underlying Shares to the Company.
47
(c) In the event that the Company fails to deposit the Redemption Price in
the Escrow Agent's ▇▇▇▇ account number within the time allocated in section (b)
above, then the redemption shall be declared null and void.
Section 6. Shelf Registration. If any of the Underlying Shares required to
be reserved for purposes of conversion of the Debentures require registration
with or approval of any governmental authority under any federal (including but
not limited to the Securities Act or similar federal statute then in force) or
state law, or listing on any national securities exchange, before the Underlying
Shares may be resold or transferred without any restrictions on their resale or
transfer for reasons including, but not limited to, a material change in Rule
504 of Regulation D promulgated under the Securities Act or a change to the
exemption for sales made to Accredited Investors in the state in which the
Purchaser resides, the Company will, at its expense, as expeditiously as
possible cause the Escrow Shares to be duly registered or approved or listed on
the relevant national securities exchange, as the case may be. The Escrow Shares
shall be registered by the Company under the Securities Act if required by
Section 7 and subject to the conditions stated therein.
Section 7. Changes To Federal And State Securities Laws. So long as the
Holder and/or its assigns owns any of the Debentures or the Underlying Shares
and the Underlying Shares would not be freely transferable without registration,
the Company agrees not to file a registration statement with the Commission,
other than on Form 10, Form S-4 (except for a public reoffering or resale) or
Form S-8 without first having registered the Escrow Shares for resale with the
SEC and for resale in such states of the United States as the Holders thereof
shall reasonably request. If the Company shall propose to file with the SEC any
registration statement other than a Form 10, Form S-4 (except for a public
reoffering or resale) or Form S-8 which would cause, or have the effect of
causing, the Company to become a Reporting Issuer or to take any other action,
other than the issuance of the Debentures to Holder, the effect of which would
be to cause the Underlying Shares to be restricted securities (as such term is
defined in Rule 144 promulgated under the Securities Act), the Company agrees to
give written notification of such to the Holders of the Debentures and the
Underlying Shares then outstanding at least two weeks prior to such filing or
taking of the proposed action. If any of the Debentures or the Underlying Shares
are then outstanding, the Company agrees to include in such registration
statement the Escrow Shares unless the Underlying Shares would be freely
transferable upon exercise of the Debentures without such registration, so as to
permit the public resale thereof. All costs and expenses of registration shall
be borne by the Company.
If the registration of which the Company gives notice is for a registered
public offering involving an underwriting, the Company will so advise the
Holders. In such event, these registration rights shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter
selected by the Company. In the event that the lead or managing underwriter in
its good faith judgment determines that material adverse market factors require
a limitation on the number of shares to be underwritten, the underwriter may
limit the number of Registrable Securities. In such event, the Company shall so
advise all holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the registration and
underwriting shall be allocated pro rata among all Holders and other
participants, including the Company, in proportion, as nearly as practicable, to
the respective
48
amounts of Registrable Securities and other securities which they had requested
to be included in such registration statement at the time of filing the
registration statement. If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter, provided such notice is delivered within sixty (60)
days of full disclosure of such terms to such Holder, without thereby affecting
the right of such Holder to participate in subsequent offerings hereunder.
Notwithstanding the foregoing, if the Company for any reason shall have
taken any action, other than the issuance of the Debentures to the Purchaser,
the effect of which would be to cause the Underlying Shares to be restricted
securities (as such term is defined in Rule 144 promulgated under the Securities
Act), the Company agrees to immediately file with the SEC and cause to become
effective a registration statement which would permit the public resale of the
Escrow Shares in such states of the United States as the Holders thereof shall
reasonably request. All costs and expenses of such registration and related Blue
Sky filings shall be borne by the Company.
Section 8. Absolute Payment Obligation; Limitation on Prepayment. Except
as expressly provided herein, no provision of this Debenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, and interest on, this Debenture at the time, place, and
rate, and in the coin or currency, herein prescribed. This Debenture is a direct
obligation of the Company. This Debenture ranks pari passu with all other
Debentures now or hereafter issued under the terms set forth herein. The Company
may not prepay any portion of the outstanding principal amount on the Debentures
except in accordance with Section 5 hereof.
Section 9. No Rights of Stockholders. Except as otherwise provided herein,
this Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
Section 10. Loss, Theft, Mutilation or Destruction. If this Debenture
shall be mutilated, lost, stolen or destroyed, the Company shall execute and
deliver, in exchange and substitution for and upon cancellation of a mutilated
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed but only upon receipt of an affidavit of
such loss, theft or destruction of such Debenture, and, if requested by the
Company, an agreement to indemnity the Company in form reasonably acceptable to
the Company.
Section 11. Governing Law. This Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof. Any action to
enforce the terms of this Debenture, the Purchase Agreement or any other
Transaction Document shall be exclusively brought in the state and/or federal
courts in the state and county of New York. Service of process in any action by
the Holder to enforce the terms of this Debenture may be made by serving a copy
of the summons and complaint, in addition to any other relevant documents, by
commercial overnight courier to the Company at its address set forth in the
Purchase Agreement.
49
Section 12. Notices. Except as otherwise provided in Section 4(j) hereof,
all notices or other communications required or permitted to be given hereunder
shall be deemed duly given and received if in writing upon facsimile
transmission (with written transmission confirmation report) at the number
designated below for the Company and at the facsimile number for the Holder set
forth in the Debenture Register (in each case, if delivered on a Business Day
during normal business hours where such notice is to be received), or the first
Business Day following such delivery (if delivered other than on a Business Day
during normal business hours where such notice is to be received) whichever
shall first occur. The addresses for such communications shall be:
If to the Company: Scores Holding Company Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇ Gottbetter & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Holder: To the address or/or facsimile number set forth
in the Debenture Register
With copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Levenson, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Escrow Agent: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Levenson, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as may be designated hereafter by notice given pursuant to
the terms of this Section 12.
Section 13. Waiver. Any waiver by the Company or the Holder of a breach
of any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the
50
Company or the Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Debenture. Any waiver must be in writing.
Section 14. Invalidity. If any provision of this Debenture is held to be
invalid, illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is held to be inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other persons and
circumstances.
Section 15. Payment Dates. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next following Business Day.
Section 16. Transfer; Assignment. This Debenture may not be transferred or
assigned, in whole or in part, at any time, except in compliance by the
transferor and the transferee with applicable federal and state securities laws.
Section 17. Fees of Enforcement. In the event any Party commences legal
action to enforce its rights under this Debenture, the non-prevailing party
shall pay all reasonable costs and expenses (including but not limited to
reasonable attorney's fees, accountant's fees, appraiser's fees and
investigative fees) incurred in enforcing such rights.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized as of the date first above
indicated.
SCORES HOLDING COMPANY INC.
Attest:_______________________________ By: _________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
51
APPENDIX I
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debentures)
Except as provided by Section 4(b) of the Debentures, the undersigned hereby
irrevocably elects to convert the attached Debenture into shares of Common
Stock, $.001 par value (the "Common Stock"), of HEIR Holding Co., Inc. (the
"Company") according to the provisions hereof, as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. A fee of $350 will be charged by the Escrow
Agent to the Holder for each conversion. No other fees will be charged to the
Holder, except for transfer taxes, if any.
Conversion calculations:
---------------------------------------------------------
---------------------------------------------------------
Principal Amount of Debentures to be Converted
---------------------------------------------------------
---------------------------------------------------------
Applicable Conversion Price (Pursuant to Section 4(c)(v))
---------------------------------------------------------
---------------------------------------------------------
Signature
---------------------------------------------------------
Name
---------------------------------------------------------
Address
52
APPENDIX II
CONVERSION PROCEDURE
1. At any time and from time to time during the term of the Debentures,
the Holder may deliver to the Escrow Agent written notice (a "Notice of
Conversion") that it has elected to convert the Debentures registered in the
name of such Holder in whole or in part in accordance with the terms of the
Debentures, and the Notice of Conversion shall be in the form annexed as
APPENDIX I to Debentures. A fee of $350 shall accompany every Notice of
Conversion delivered to the Escrow Agent.
2. The Holder shall send by facsimile the executed Notice of Conversion
to the Escrow Agent by 4:00 p.m. New York time on the Conversion Date. The
Escrow Agent shall send the Notice of Conversion by facsimile to the Company by
the end of the Business Day on the Conversion Date, assuming received by 6:00
p.m. New York time and if thereafter on the next Business Day, at the facsimile
telephone number of the Company. Any such notice shall be deemed given and
effective upon the transmission of such facsimile at the facsimile telephone
number specified in this paragraph 2 (with printed confirmation of
transmission). In the event that the Escrow Agent receives the Notice of
Conversion after 4:00 p.m. New York time on any Business Day or at any time on a
day that is not a Business Day, notice shall be deemed to have been given the
next following Business Day.
3. The Company shall have two (2) Business Days from transmission of
the Notice of Conversion by the Escrow Agent to object only to the calculation
of the number of Escrow Shares to be released. If the Company fails to object to
the calculation of the number of Escrow Shares to be released within said time,
then the Company shall be deemed to have waived any objections to said
calculation and to have directed Escrow Agent to release same. The Company's
only basis for any objection hereunder shall be to the calculation of the number
of Escrow Shares to be released. In the event of such an objection, the parties
shall have two (2) Business Days to agree on the number of Escrow Shares to be
released pursuant to said Conversion. In the event that the parties cannot agree
on the number of Escrow Shares to be released in said time, then the Company
shall commence a legal action in the appropriate state or federal court in the
state and county of New York, within five (5) Business Days of the transmittal
of the Notice of Conversion by the Escrow Agent to the Company. If the Company
does not commence such legal action within said five (5) Business Days, the
Escrow Agent shall release the number of shares stated in the Notice of
Conversion to the Holder and the Company's objection shall be deemed withdrawn
and waived with prejudice. If the Escrow Agent does not receive said objection
notice within the time period set forth above from the Company, the Escrow Agent
shall release from escrow and deliver to the Holder certificates or instruments
representing the number of Escrow Shares issuable to the Holder in accordance
with such conversion on the second Business Day from the transmittal to the
Company of the Notice of Conversion. In the event that the certificates
evidencing the Escrow Shares held by the Escrow Agent are not in denominations
appropriate for such delivery to the Holder, the Escrow Agent shall request the
Company to cause its transfer agent and registrar to reissue certificates in
smaller denominations. The Escrow Agent shall, however, immediately release to
the requesting Holder certificates representing such lesser number of shares as
the denominations in its possession will
53
allow that is closest to but no more than the actual number to be released to
such Holder. Upon receipt of the reissued shares in lesser denominations from
the Company's transfer agent, the Escrow Agent shall release to such Holder the
balance of the shares due to such Holder.
4. The Holder shall send the original Debentures and Notice of
Conversion to the Escrow Agent via FedEx or other commercial overnight courier,
along with a fee of $350, instructions regarding names and amount of
certificates for the issuance of the Underlying Shares and, if conversion is not
in full, instructions as to the re-issuance of the balance of the Debentures;
provided, however, that if the Escrow Agent is holding the Debentures, then the
Notice of Conversion may be faxed and the fee may be transmitted via wire
transfer to the Escrow Agent. The Escrow Agent shall deliver the foregoing to
the Company within two (2) Business Days of the Escrow Agent's receipt thereof.
In the event that the Escrow Agent has custody of the Debentures, the Escrow
Agent shall notify the Company and the Holder in writing of the balance of the
Debentures remaining and the Company and the Holder shall acknowledge such
notice in writing, in lieu of issuance of new Debentures for the balance.
5. If the Company will be issuing new Debentures, it will send such new
Debentures to the Escrow Agent within five (5) Business Days of its receipt of
the original Debentures and Notice of Conversion. The Escrow Agent shall send
the Underlying Shares to the Holder in accordance with Holder's instructions
within two (2) Business Days of receipt of the Notice of Conversion and will
send the new Debentures representing the Debentures (if any) to the Holder upon
receipt.
6. The Escrow Agent agrees to notify the Company in writing by
facsimile each time the Escrow Agent releases Escrow Shares to the Holder. Until
any such release and notification are given to the Company, the Escrow Shares
shall not be deemed to be validly issued and outstanding shares of capital stock
of the Company. Such notification shall be given when the Escrow Agent delivers
the Notice of Conversion Debentures.
7. The Company agrees that, at any time the conversion price of the
Debentures is such that the number of Escrow Shares with respect to the
Debentures is less than 200% of the number of shares of Common Stock that would
be needed to satisfy full conversion of all of the Debentures given the then
current conversion price (the "Full Conversion Shares"), upon five (5) days
written notice of such circumstance to the Company by a Holder and/or Escrow
Agent, it will issue additional share certificates, in the names of all Holders
and deliver same to the Escrow Agent, such that the new number of Escrow Shares
with respect to the Debentures is equal to 200% of the Full Conversion Shares.
54
EXHIBIT 2.2
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of August 7,
2002, by and among Scores Holding Company Inc., a Utah corporation with its
principal place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Company"); ▇▇▇▇▇▇ Gottbetter & ▇▇▇▇▇▇▇▇, LLP with its principal place of
business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Escrow Agent"); and HEM
Mutual Assurance LLC, a Colorado limited liability company with offices at
One ▇▇▇▇▇ Center, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Purchaser").
RECITALS
A. Immediately preceding the execution of this Agreement, the
Purchaser and HEIR Holding Co., Inc. ("HEIR") entered into a Convertible
Debenture Purchase Agreement (the "Purchase Agreement"), dated as of the date
hereof and incorporated herein by reference, pursuant to which HEIR issued and
sold and the Purchaser purchased certain of HEIR's debentures (the "HEIR
Debentures").
B. Simultaneous with the execution of this Agreement, the
Company has entered into an Agreement and Plan of Merger with Scores Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of the Company
("SAC"), and HEIR pursuant to which SAC has been merged with and into HEIR (the
"Merger") and all of the issued and outstanding capital stock of HEIR has been
acquired by the Company making HEIR, the surviving corporation in the Merger, a
wholly owned subsidiary of the Company.
C. Pursuant to the Merger and acquisition of HEIR by the
Company, the Company has agreed to assume HEIR's obligation to Purchaser under
the Purchase Agreement, to cancel the HEIR Debenture, to issue to Purchaser a
Company Debenture identical in all material respect to the HEIR Debenture and to
issue shares of the Company's common stock (the "Escrow Shares") into escrow
with the Escrow Agent for purposes of conversions of the Company Debentures, and
Purchaser has agreed to such assumption and related transactions.
D. In connection with the foregoing, the Escrow Agent has
agreed to act as Escrow Agent for the Company Debentures and Escrow Shares in
the same manner and to the same extent that it agreed to act as Escrow Agent for
the HEIR Debentures and underlying conversion shares.
E. The Company has granted the Escrow Agent a power of
attorney (the "Power of Attorney") with respect to the Company Debentures and
Escrow Shares (collectively the "Securities"), in the form attached hereto as
Appendix I.
F. The Escrow Agent is willing to act as escrow agent pursuant
to the terms of this Agreement with respect to the purchase of the Company
Debentures.
55
G. All capitalized terms used but not defined herein shall
have the meanings ascribed thereto in the Purchase Agreement.
NOW, THEREFORE, IT IS AGREED:
1. PROCEDURE FOR ESCROW. The procedures of the escrow shall be governed
by the provisions of Article 2 of the Purchase Agreement and Exhibit C thereto.
2. TERMS OF ESCROW. The terms of the escrow shall be governed by
Article 4 of the Purchase Agreement, and Articles 3 and 4 of the Company
Debentures.
3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
(a) The parties hereto agree that the duties and obligations
of the Escrow Agent shall be only those obligations herein specifically provided
and no other. The Escrow Agent's duties are those of a depositary only, and the
Escrow Agent shall incur no liability whatsoever, except as a direct result of
its willful misconduct or gross negligence in the performance of its duties
hereunder;
(b) The Escrow Agent may consult with counsel of its choice,
and shall not be liable for any action taken, suffered or omitted to be taken by
it in accordance with the advice of such counsel;
(c) The Escrow Agent shall not be bound in any way by the
terms of any other agreement to which the Purchaser and the Company are parties,
whether or not the Escrow Agent has knowledge thereof, and the Escrow Agent
shall not in any way be required to determine whether or not any other agreement
has been complied with by the Purchaser and the Company, or any other party
thereto. The Escrow Agent shall not be bound by any modification, amendment,
termination, cancellation, rescission or supersession of this Agreement unless
the same shall be in writing and signed by the Purchaser and the Company and
agreed to in writing by the Escrow Agent;
(d) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, the
Escrow Agent shall be entitled to refrain from taking any action other than
keeping safely the Consideration (as defined below) or taking certain action
until the Escrow Agent is directed otherwise in writing jointly by the Purchaser
and the Company or by a final judgment of a court of competent jurisdiction;
(e) The Escrow Agent shall be fully protected in relying upon
any written notice, demand, certificate or document which the Escrow Agent, in
good faith, believes to be genuine. The Escrow Agent shall not be responsible
for the sufficiency or accuracy of the form, execution, validity or genuineness
of documents or securities now or hereafter deposited hereunder or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement;
56
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration;
(g) If the Escrow Agent at any time, in its sole discretion,
deems it necessary or advisable to relinquish custody of any of the Securities
(to the extent delivered to the Escrow Agent pursuant hereto, the
"Consideration"), it may do so by delivering the same to another Person that
agrees to act as escrow agent hereunder and whose substitution for the Escrow
Agent is agreed upon in writing by the Purchaser and the Company. If no such
escrow agent is selected within three (3) days after the Escrow Agent gives
notice to the Purchaser and the Company of the Escrow Agent's desire to so
relinquish custody of the Consideration and resign as Escrow Agent, then the
Escrow Agent may do so by delivering the Consideration to the clerk or other
proper officer of a state or federal court of competent jurisdiction situate in
the state and county of New York. The fee of any court officer shall be borne by
the Company. Upon such delivery, the Escrow Agent shall be discharged from any
and all responsibility or liability with respect to the Consideration and this
Agreement and each of the Company and the Purchaser shall promptly pay all
monies it may owe to the Escrow Agent for its services hereunder, including, but
not limited to, reimbursement of its out-of-pocket expenses pursuant to
paragraph (i) below;
(h) This Agreement shall not create any fiduciary duty on the
Escrow Agent's part to the Purchaser or the Company, nor disqualify the Escrow
Agent from representing either party hereto in any dispute with the other,
including any dispute with respect to the Consideration; provided, however, that
in the event of such dispute, the Escrow Agent shall have the right to commence
an interpleader action in any court of competent jurisdiction of the state of
New York or of the United States located in the county and state of New York,
deposit the Consideration with such court;
(i) The parties acknowledge and agree that the Escrow Agent is
counsel to the Purchaser. The parties agree to, and agree not to object to, the
Escrow Agent's engagement as Escrow Agent hereunder;
(j) Upon the performance of this Agreement, the Escrow Agent
shall be deemed released and discharged of any further obligations hereunder.
4. INDEMNIFICATION.
(a) The Purchaser hereby indemnifies and holds free and
harmless the Escrow Agent from any and all losses, expenses, liabilities and
damages (including but not limited to reasonable attorney's fees, and amounts
paid in settlement) resulting from claims asserted by the Company against the
Escrow Agent with respect to the performance of any of the provisions of this
Agreement;
(b) The Company hereby indemnifies and holds free and harmless
the Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amount paid in
settlement) resulting from claims asserted by the
57
Purchaser against the Escrow Agent with respect to the performance of any of the
provisions of this Agreement;
(c) The Purchaser and the Company, jointly and severally,
hereby indemnify and hold the Escrow Agent harmless from and against any and all
losses, damages, taxes, liabilities and expenses that may be incurred by the
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to
this Agreement, the Purchase Agreement, the Securities and the Power of
Attorney, including, but not limited to, all legal costs and expenses of the
Escrow Agent incurred defending itself against any claim or liability in
connection with its performance hereunder, provided that the Escrow Agent shall
not be entitled to any indemnity for any losses, damages, taxes, liabilities or
expenses that directly result from its willful misconduct or gross negligence in
its performance as Escrow Agent hereunder
(d) In the event of any legal action or proceeding involving
any of the parties to this Agreement which is brought to enforce or otherwise
adjudicate any of the rights or obligations of the parties hereunder, the
non-prevailing party or parties shall pay the legal fees of the prevailing party
or parties and the legal fees, if any, of the Escrow Agent.
5. MISCELLANEOUS.
(a) All notices, including Notices of Conversion, objections,
requests, demands and other communications sent to any party hereunder shall be
deemed duly given if (x) in writing and sent by facsimile transmission to the
Person for whom intended if addressed to such Person at its facsimile number set
forth below or such other facsimile number as such Person may designate by
notice given pursuant to the terms of this Section 5 and (y) the sender has
confirmation of transmission:
(i) If to the Company: Scores Holding Company Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
President
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇ Gottbetter & ▇▇▇▇▇▇▇▇,
LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to the Purchaser: See Schedule 1 to the
Purchase Agreement.
58
With copies to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(iii) If to the Escrow Agent: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) This Agreement has been prepared, negotiated and delivered
in the state of New York and shall be governed by and construed and enforced in
accordance with the laws of the state of New York applicable to contracts
entered into and performed entirely within New York, without giving effect to
the principles of New York law relating to the conflict of laws.
(c) This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
(d) This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The
assignment by a party of this Agreement or any rights hereunder shall not affect
the obligations of such party under this Agreement.
6. TERMINATION OF ESCROW. The term of this Escrow Agreement shall begin
upon the date hereof and shall continue until terminated upon the earlier to
occur of (i) full conversion of the Debentures (ii) the Maturity Date (as
defined in the Debentures), and (iii) the written agreement of the parties to
terminate this Agreement. Upon the termination of this Escrow Agreement, the
Escrow Agent shall return any of the Consideration then held by it to the
Company pursuant to the Purchase Agreement and the other Transaction Documents.
[ SIGNATURE PAGE FOLLOWS ]
59
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed the day and year first above written.
Escrow Agent: The Company:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP SCORES HOLDING COMPANY INC.
By: By:
---------------------------- --------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Partner Title: President
Purchaser:
HEM MUTUAL ASSURANCE LLC
By:
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Manager
60
APPENDIX I
FORM 26/33-DPOA/S-97
Power of Attorney; Statutory Short Form, Revised 1/1/97 - (with Affidavit of
Effectiveness (C)
CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT - THIS INSTRUMENT SHOULD BE
USED BY LAWYERS ONLY
DURABLE GENERAL POWER OF ATTORNEY
NEW YORK STATUTORY SHORT FORM
THE POWERS YOU GRANT BELOW CONTINUE TO BE EFFECTIVE
SHOULD YOU BECOME DISABLED OR INCOMPETENT
CAUTION: THIS IS AN IMPORTANT DOCUMENT IT GIVES THE PERSON WHOM YOU DESIGNATE
(YOUR "AGENT") BROAD POWERS TO HANDLE YOUR PROPERTY DURING YOUR LIFETIME WHICH
MAY INCLUDE POWERS TO MORTGAGE, SELL, OR OTHERWISE DISPOSE OF ANY REAL OR
PERSONAL PROPERTY WITHOUT ADVANCE NOTICE TO YOU OR APPROVAL BY YOU. THESE POWERS
WILL CONTINUE TO EXIST EVEN AFTER YOU BECOME DISABLED OR INCOMPETENT. THESE
POWERS ARE EXPLAINED MORE FULLY IN NEW YORK GENERAL OBLIGATIONS LAW, ARTICLE 5,
TITLE 15, SECTION 5-1502A THROUGH 5-1503 WHICH EXPRESSLY PERMIT THE USE OF ANY
OTHER OR DIFFERENT FORM OF POWER OF ATTORNEY.
THIS DOCUMENT DOES NOT AUTHORIZE ANYONE TO MAKE MEDICAL OR OTHER HEALTH CARE
DECISIONS. YOU MAY EXECUTE A HEALTH CARE PROXY TO DO THIS.
(IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU SHOULD ASK
A LAWYER TO EXPLAIN IT TO YOU.)
THIS is intended to constitute a DURABLE GENERAL POWER OF ATTORNEY pursuant to
Article 5, Title 15 of the New York General Obligations Law:
SCORES HOLDING COMPANY INC., with an address at
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(insert your name and address)
does hereby appoint:__________________________ ___________________________
(If 1 person is to be appointed agent, insert the name and
address of your agent above)
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ residing at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ residing at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ residing at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(If 2 or more persons are to be appointed agents by you insert their
names and addresses above.)
my attorney(s)-in-fact TO ACT (If more than one agent is designated, CHOOSE ONE
of the following two choices by putting your initials in ONE of the blank spaces
to the left of your choice;)
(X) Each agent may SEPARATELY act.
( ) All agents must act TOGETHER.
(If neither blank space is initialed, the agents will be required to
act TOGETHER)
IN MY NAME, PLACE AND ▇▇▇▇▇ in any way which I myself could do, if I were
personally present, with respect to the following matters as each of them is
defined in Title 15 of Article 5 of the New York General Obligations Law to the
extent that I am permitted by law to act through an agent:
(DIRECTIONS: INITIAL IN THE BLANK SPACE TO THE LEFT OF YOUR CHOICE ANY ONE OR
MORE OF THE FOLLOWING LETTERED SUBDIVISIONS AS TO WHICH YOU WANT TO GIVE YOUR
AGENT AUTHORITY. IF THE BLANK SPACE TO THE LEFT OF ANY PARTICULAR LETTERED
SUBDIVISION IS NOT INITIALED, NO AUTHORITY WILL BE GRANTED FOR MATTERS THAT ARE
INCLUDED IN THAT SUBDIVISION. ALTERNATIVELY, THE LETTER CORRESPONDING TO EACH
POWER YOU WISH TO GRANT MAY BE WRITTEN OR TYPED ON THE BLANK LINE IN SUBDIVISION
"(Q)", AND YOU MAY THEN PUT YOUR INITIALS IN THE BLANK SPACE TO THE LEFT OF
SUBDIVISION "(Q)" IN ORDER TO GRANT EACH OF THE POWERS SO INDICATED)
( ) (A) real estate transactions;
( ) (B) chattel and goods transactions;
( ) (C) bond, share and commodity transactions;
( ) (D) banking transactions;
( ) (E) business operating transactions;
( ) (F) insurance transactions;
( ) (G) estate transactions;
( ) (H) claims and litigation;
( ) (I) personal relationships and affairs;
( ) (J) benefits from military service;
( ) (K) records, reports and statements;
( ) (L) retirement benefit transactions;
( ) (M) making gifts to my spouse, children and more remote descendants,
and parents, not to exceed in the aggregate $10,000 to each of such
persons in any year;
( ) (N) tax matters;
( ) (O) all other matters;
( ) (P) full and unqualified authority to my attorney(s)-in-fact to
delegate any or all of the foregoing powers to any person or persons
whom my attorney(s)-in-fact shall select;
(X) (Q) each of the matters identified by the following letters: C and E
(Special provisions and limitations may be included in the statutory short form
durable power of attorney only if they conform to the requirements of Section
5-1503 of the New York General Obligations Law.)
SEE ATTACHMENT A
Special Additional Provisions: The powers granted under (A) through (C) above
shall include the sale of a cooperative housing unit and are enlarged so that
all fixtures and articles of personal property which at the time of such
transaction are or which may thereafter be attached to or used in connection
with the real or personal property may be included in the agreements or other
instruments to be executed and delivered in connection with any transactions and
which may be described in said instruments with more particularity. This Power
of Attorney is not subject to question because an instrument executed hereunder
fails to recite or recites only nominal consideration paid therefore and any
person dealing with the subject matter of such instrument may do so as if full
consideration had been expressed therein.
THIS DURABLE POWER OF ATTORNEY SHALL NOT BE AFFECTED BY MY SUBSEQUENT DISABILITY
OR INCOMPETENCE.
If every agent named above is unable or unwilling to serve, I appoint
residing at
(insert name and address of successor)
to be my agent for all purposes hereunder. JUD 134
61
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, I HEREBY AGREE THAT ANY THIRD PARTY
RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND I FOR MYSELF
AND FOR MY HEIRS, EXECUTORS, LEGAL REPRESENTATIVES AND ASSIGNS, HEREBY AGREE TO
INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL
CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY
HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
THIS DURABLE GENERAL POWER OF ATTORNEY MAY BE REVOKED BY ME AT ANY TIME.
IN WITNESS WHEREOF I have hereunto signed my name this 7th day of August, 2002.
SCORES HOLDING COMPANY INC.
(YOU SIGN HERE:) = By: ______________________________________, President
(Signature of principal)
The statute requires that this instrument be acknowledged by the principal. No
express provision is made for proof by subscribing witness.
STATE OF COUNTY OF ) SS.:
On the day of ,20 , before me personally came
to me known to be the individual described in and who executed the foregoing
instrument and acknowledged that he executed same.
STATE OF COUNTY OF ) SS.:
On the day of ,20 , before me personally came
to me known to be the individual described in and who executed the foregoing
instrument and acknowledged that he executed same.
AFFIDAVIT OF EFFECTIVENESS (C)
STATE OF COUNTY OF ) SS.:
, residing at
being duly sworn does depose and
say that I am the Attorney-in-Fact under the above Power of Attorney. That said
Power of Attorney is a valid and subsisting Power which has not been revoked by
the death of the principal(s) or otherwise; that I have no actual knowledge of a
revocation of the foregoing Power; and, I warrant and represent that I have full
and unqualified authority to execute the
[Deed, Mortgage, etc.]
knowing that, will rely upon the representations made herein as inducement
to accept such instrument(s) and this Power of Attorney as evidence of my
authority to act.
ATTORNEY IN FACT
SWORN AND SUBSCRIBED TO BEFORE ME THIS DAY OF , 2002
(NOTARY AFFIX STAMP AT RIGHT)
DURABLE GENERAL POWER OF ATTORNEY
REVISED STATUTORY SHORT FORM
TITLE NO. DISTRICT
SECTION
BLOCK
LOT
COUNTY OR TOWN
--------------------------------------------------------------------------------
RECORDED AT THE REQUEST OF
--------------------------
RETURN BY MAIL TO:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RESERVED FOR RECORDING OFFICE USE
--------------------------------------------------------------------------------
62
DURABLE POWER OF ATTORNEY
NEW YORK STATUTORY SHORT FORM
DATED AUGUST 7, 2002,
BY SCORES HOLDING COMPANY INC. (THE "COMPANY")
ATTACHMENT A
The attached power of attorney is limited by and subject to the terms
and conditions of the Convertible Debenture Purchase Agreement by and between
HEIR Holding Co., Inc. ("HEIR") and HEM Mutual Assurance LLC (the "Purchaser")
dated August 7, 2002 (the "Purchase Agreement"), the Escrow Agreement by and
among the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP and the Purchaser dated
August 7, 2002 (the "Escrow Agreement"), and, to be issued upon the closing of,
and in accordance with, the Agreement and Plan of Merger dated August 7, 2002
among the Company, HEIR and Scores Acquisition Corp., the Company's one percent
(1%) Convertible Debentures, due August 6, 2007, for an aggregate purchase price
of $1,000,000 (the "Debentures"), and such power of attorney can only be acted
upon to enforce the rights of the Purchaser and its successors and assigns under
Section 4.15 of the Purchase Agreement and Section 4 of the Debentures and to
grant the appointed agents the power to issue the opinions of counsel in
substantially the same form as the opinions contained in Exhibit F to the
Purchase Agreement, all including, but not limited to, the issuance and delivery
of shares of Common Stock, removing stop transfer orders and restrictions, and
replenishing the Escrow Shares (as defined in the Purchase Agreement) under the
aforementioned documents.
This power of attorney shall expire upon the full and complete
satisfaction of all of the Company's obligations under the Purchase Agreement,
the Escrow Agreement and the Debentures.
IN WITNESS WHEREOF I have hereunto signed my name this 7th day of
August, 2002.
SCORES HOLDING COMPANY INC.
By:
--------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
Signed and sworn to before me on
August 7, 2002
-------------------------------
Notary Public
63
EXHIBIT 6.1(b)
August 7, 2002
Scores Holding Company Inc.
Scores Acquisition Corp.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
We have acted as counsel to HEIR Holding Co., Inc., a Delaware
corporation ("HEIR"), in connection with the Agreement and Plan of Merger (the
"Agreement") dated as of August 7, 2002, by and among HEIR, Scores Holding
Company Inc. ("SCOH") and Scores Acquisition Corp. ("SAC"). The Agreement
together with all other documents, instruments, agreements and certificates to
be delivered pursuant thereto are herewith referred to as the "Transaction
Documents."
In connection with this opinion, we have examined the Transaction
Documents and such other documents, agreements and records of HEIR as in our
judgment are necessary or appropriate to enable us to render the opinions
expressed below. In our examination of such documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to the original documents of all documents
submitted to us as copies, and we have relied upon the aforesaid documents with
respect to the accuracy of material factual matters contained therein. We have
also assumed, without verification, the due authorization, execution and
delivery by each party thereto other than HEIR of each of the Transaction
Documents and that such agreements constitute the legal, valid and binding
obligations of such parties, and are enforceable against such parties in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by the exercise of
judicial discretion in accordance with general principles of equity.
As to factual matters relevant to our opinion which were not
independently established, we have also relied, without independent
verification, on the representations and warranties of HEIR contained in the
Transaction, Documents and in certificates furnished by officers of HEIR in
connection with the related transactions.
64
In instances where we have expressed an opinion "to our knowledge," the
term "knowledge" refers to the actual knowledge of the attorneys at our firm who
have rendered legal services in connection with the Agreement and related
transactions, and we have not undertaken any independent investigation or made
inquiries of any outside third parties with respect to such matters.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that:
(1) HEIR has been duly incorporated and is validly existing and in good
standing under the laws of the State of Delaware.
(2) As of the date hereof and after giving effect to the Closing (as
defined in the Agreement), HEIR's authorized capital stock consists of
10,000,000 shares of common stock, par value $0.001 per share ("Common Stock"),
of which 3,000,000 shares of Common Stock are issued and outstanding and
1,000,000 shares of preferred stock, $.001 par value, of which no shares are
issued and outstanding. All such outstanding shares of Common Stock of HEIR have
been duly authorized and validly issued and are fully paid and non-assessable.
There are no outstanding rights, options, warrants or other securities which may
be convertible into equity securities of HEIR other than $1,000,000 of
Convertible Debentures of HEIR issued to HEM Mutual Assurance LLC which are
being cancelled and replaced by a like obligation of SCOH to HEM Mutual
Assurance LLC pursuant to the Agreement. There are no preemptive or other rights
to subscribe for or purchase any Common Stock or other securities of HEIR.
(3) HEIR has the full legal power and authority to enter into the
Agreement, and HEIR has full corporate power and authority to issue and deliver
the Company Shares (as defined in the Agreement) at the Closing. The Agreement,
and the completion of the activities contemplated by the Agreement, has been
duly and validly authorized by all necessary corporate action by HEIR. The
Agreement has been duly and validly executed and delivered by and on behalf of
HEIR, is a valid and binding Agreement of HEIR and is enforceable against HEIR
in accordance with its terms. No approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with any court,
regulatory, administrative or other governmental body is required for the
execution and delivery of the Agreement by HEIR or the completion of the
activities contemplated by the Agreement except for: (i) the filing of a
Certificate of Merger with the Delaware Secretary of State; and (ii) the filing
of Form D and blue sky filings (subject to availability of exemption therefrom)
by HEIR with the Securities & Exchange Commission and/or with the Colorado
Division of Securities.
(4) The execution and performance of the Agreement, and the
consummation of the transactions therein contemplated, did not and will not
conflict with or violate any law, statute, judgment, decree, order, rule or
regulation of any court or governmental body (including the Securities and
Exchange Commission) having jurisdiction over HEIR.
(5) No action, suit, claim, investigation or proceeding is pending or,
to our knowledge, threatened against HEIR.
The opinions expressed herein are subject to the following additional
limitations, qualifications and exceptions:
65
(a) We disclaim any opinion as to (i) any provisions in any documents
which purport to waive any procedural due process rights, and (ii) any
provisions relating to choice of governing law, which choice may depend upon
factual circumstances and the laws of other jurisdictions.
(b) We note that we are members of the bar of the State of New York and
express no opinion as to the effect on the matters covered herein of the laws of
any jurisdiction other than the State of New York and the Federal securities
laws of the United States.
(c) We express no opinion on the validity, binding effect or
enforceability under the provisions of the Transaction Documents: (i) which
waive any rights afforded to any party thereto under any statute or
constitutional provision; (ii) which waive broadly or vaguely stated rights or
future rights, or waive certain rights or defenses to obligations, in each case
where such waivers are against statutes, laws or public policy; (iii) that
provide that injunctive relief or specific performance may be available as a
remedy for breach of any of the Transaction Documents, or (iv) the breach of
which a court of competent jurisdiction concludes is not material or does not
adversely affect the non-breaching party.
(d) Insofar as the indemnity provisions of any of the Transaction
Documents may encompass indemnification with respect to violation of law,
enforcement thereof may be limited by public policies underlying such laws.
(e) Our opinions on the binding effect and enforceability of any
obligation are subject to limitations resulting from the effects of: (i)
bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent
conveyance, arrangement and assignment for the benefit of creditors laws and
similar laws or judicially developed doctrines, and (ii) general principles of
equity, whether applied by a court of law or a court of equity.
(f) We express no opinion on Federal patent, copyright or trademark,
state trademark or other Federal or state intellectual property laws or
regulations.
This opinion is given as of the date hereof and is necessarily limited
to the laws now in effect and the facts and circumstances known to us on the
date hereof, and we do not undertake or assume any obligations, to review update
or supplement this opinion to reflect any facts, circumstances which may
hereafter come to our attention or any changes in laws which may hereafter
occur.
These opinions are limited to the matters expressly stated herein and
are rendered solely for your benefit and may not be quoted or relied upon for
any other purpose or by any other person.
Very truly yours,
▇▇▇▇▇▇ GOTTBETTER & ▇▇▇▇▇▇▇▇, LLP
66
EXHIBIT 6.2(b)
August 7, 2002
HEIR Holding Co., Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
We have acted as counsel to Scores Holding Company, Inc., a Utah
corporation ("SCOH"), and Scores Acquisition Corp., a Delaware Corporation
("SAC"), in connection with the Agreement and Plan of Merger (the "Agreement")
dated as of August 7, 2002, by and among SCOH, SAC and HEIR Holding Co., Inc.
("HEIR"). The Agreement together with all other documents, instruments,
agreements and certificates to be delivered pursuant thereto are herewith
referred to as the "Transaction Documents."
In connection with this opinion, we have examined the Transaction
Documents and such other documents, agreements and records of SCOH and SAC as in
our judgment are necessary or appropriate to enable us to render the opinions
expressed below. In our examination of such documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to the original documents of all documents
submitted to us as copies, and we have relied upon the aforesaid documents with
respect to the accuracy of material factual matters contained therein. We have
also assumed, without verification, the due authorization, execution and
delivery by each party thereto other than SCOH and SAC of each of the
Transaction Documents and that such agreements constitute the legal, valid and
binding obligations of such parties, and are enforceable against such parties in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by the exercise of
judicial discretion in accordance with general principles of equity.
As to factual matters relevant to our opinion which were not
independently established, we have also relied, without independent
verification, on the representations and warranties of SCOH and SAC contained in
the Transaction, Documents and in certificates furnished by officers of SCOH and
SAC in connection with the related transactions.
67
In instances where we have expressed an opinion "to our knowledge," the
term "knowledge" refers to the actual knowledge of the attorneys at our firm who
have rendered legal services in connection with the Agreement and related
transactions, and we have not undertaken any independent investigation or made
inquiries of any outside third parties with respect to such matters.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that:
(1) SCOH has been duly incorporated and is validly existing and in good
standing under the laws of the State of Utah.
(2) SAC has been duly incorporated and is validly existing and in good
standing under the laws of the State of Delaware.
(3) As of the date hereof, SCOH's authorized capital stock consists of
50,000,000 shares of common stock, par value $0.001 per share ("Common Stock"),
of which 15,999,676 shares of Common Stock are issued and outstanding excluding
3,000,000 shares issuable to the shareholders of HEIR pursuant to the Agreement
and 4,000,000 shares issuable into escrow pursuant to the Agreement. All such
outstanding shares of Common Stock of SCOH have been duly authorized and validly
issued and are fully paid and non-assessable. There are no outstanding rights,
options, warrants or other securities which may be convertible into equity
securities of SCOH other than the $1,000,000 of Convertible Debentures of SCOH
issued to HEM Mutual Assurance LLC pursuant to the Agreement. There are no
preemptive or other rights to subscribe for or purchase any Common Stock or
other securities of SCOH.
(4) SCOH and SAC each has the full legal power and authority to enter
into the Agreement, and SCOH has full corporate power and authority to issue and
deliver the Parent Exchange Shares (as defined in the Agreement) at the Closing.
The Agreement, and the completion of the activities contemplated by the
Agreement, have been duly and validly authorized by all necessary corporate
action by SCOH and SAC. The Agreement has been duly and validly executed and
delivered by and on behalf of each of SCOH and SAC, is a valid and binding
Agreement of each of SCOH and SAC and is enforceable against SCOH and SAC in
accordance with its terms. No approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with any court,
regulatory, administrative or other governmental body is required for the
execution and delivery of the Agreement by SCOH and SAC or the completion of the
activities contemplated by the Agreement except for: (i) the filing of a
Certificate of Merger with the Delaware Secretary of State; and (ii) the filing
of a Form 8-K by SCOH within fifteen (15) days after the Closing.
(5) The execution and performance of the Agreement, and the
consummation of the transactions therein contemplated, did not and will not
conflict with or violate any law, statute, judgment, decree, order, rule or
regulation of any court or governmental body (including the Securities and
Exchange Commission) having jurisdiction over SCOH or SAC.
(6) No action, suit, claim, investigation or proceeding is pending or,
to our knowledge, threatened against SCOH.
68
The opinions expressed herein are subject to the following additional
limitations, qualifications and exceptions:
(a) We disclaim any opinion as to (i) any provisions in any documents
which purport to waive any procedural due process rights, and (ii) any
provisions relating to choice of governing law, which choice may depend upon
factual circumstances and the laws of other jurisdictions.
(b) We note that we are members of the bar of the State of New York and
express no opinion as to the effect on the matters covered herein of the laws of
any jurisdiction other than the State of New York and the Federal securities
laws of the United States.
(c) We express no opinion on the validity, binding effect or
enforceability under the provisions of the Transaction Documents: (i) which
waive any rights afforded to any party thereto under any statute or
constitutional provision; (ii) which waive broadly or vaguely stated rights or
future rights, or waive certain rights or defenses to obligations, in each case
where such waivers are against statutes, laws or public policy; (iii) that
provide that injunctive relief or specific performance may be available as a
remedy for breach of any of the Transaction Documents, or (iv) the breach of
which a court of competent jurisdiction concludes is not material or does not
adversely affect the non-breaching party.
(d) Insofar as the indemnity provisions of any of the Transaction
Documents may encompass indemnification with respect to violation of law,
enforcement thereof may be limited by public policies underlying such laws.
(e) Our opinions on the binding effect and enforceability of any
obligation are subject to limitations resulting from the effects of: (i)
bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent
conveyance, arrangement and assignment for the benefit of creditors laws and
similar laws or judicially developed doctrines, and (ii) general principles of
equity, whether applied by a court of law or a court of equity.
(f) We express no opinion on Federal patent, copyright or trademark,
state trademark or other Federal or state intellectual property laws or
regulations.
This opinion is given as of the date hereof and is necessarily limited
to the laws now in effect and the facts and circumstances known to us on the
date hereof, and we do not undertake or assume any obligations, to review update
or supplement this opinion to reflect any facts, circumstances which may
hereafter come to our attention or any changes in laws which may hereafter
occur.
These opinions are limited to the matters expressly stated herein and
are rendered solely for your benefit and may not be quoted or relied upon for
any other purpose or by any other person.
Very truly yours,
▇▇▇▇▇▇ GOTTBETTER & ▇▇▇▇▇▇▇▇, LLP
69
Schedule 2.1(b)
List of Company Shareholders and Number of Parent Exchange Shares to be Received
--------------------------------------------------------------------------------
NUMBER OF COMPANY SHARES NUMBER OF PARENT EXCHANGE
COMPANY SHAREHOLDER OWNED PRIOR TO MERGER SHARES TO BE RECEIVED
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,000,000 1,000,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ 1,000,000 1,000,000
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ 1,000,000 1,000,000
--------------------------------------------------------------------------------
70
Schedule 4.1(a)
Company Jurisdictions
Delaware - Jurisdiction of Incorporation
71
Schedule 4.1(b)
Company Conflicts
None
72
Schedule 4.1(f)
Company Real Property/Leases/Personal Property
None
73
Schedule 4.1(h)
Company Accounts Receivable
None
74
Schedule 4.1(j)
Company Taxes
None
75
Schedule 4.1(m)
Company Legal Proceedings
None
76
Schedule 4.1(n)
Company Absence of Certain Changes
On July 29, 2002 the Company's Certificate of Incorporation was amended to
increase its authorized capitalization from 1,500 shares of capital stock, no
par value to 10,000,000 shares of common stock, $.001 par value, and 1,000,000
shares of preferred stock, $.001 par value. At the time of the filing the
Company had 300 shares of stock issued and outstanding. As a result of the
filing, on July 30, 2002, the Company designated its outstanding shares as
common shares and effected a 10,000 for 1 forward split resulting an outstanding
capitalization of 3,000,000 common shares.
77
Schedule 4.1(o)
Company Material Contracts
1. Intellectual Property Purchase Agreement effective as of April
16, 2001 between the Company and Scores Entertainment, Inc.
2. License Agreement dated April 16, 2001 between the Company and
Scores Entertainment, Inc.
3. License Agreement between the Company and Go West
Entertainment Inc. dated August 15, 2001 as amended on March
3, 2002.
78
Schedule 4.1(p)
Company Insurance
None
79
Schedule 4.1(s)
Company Intellectual Property
A. U.S. Trademark Registration No. 1855829 for SCORES SHOWROOM
with design (INT 25, 41, 42);
B. U.S. Trademark Registration No. 1830405 for SCORES NEW YORK
with design (INT 25, 41, 42);
C. U.S. Trademark Registration No. 1830135 for SCORES (INT. 6,
41, 42);
D. European Community Trademark Application No. 001635283 for
SCORES (stylized) (INT 6, 25, 41, 42);
E. European Community Trademark Application No. 001636455 for
SCORES SHOWROOM and design (INT 6, 25, 41, 42);
F. Canadian Trademark Application No. 1062483 for SCORES
(stylized) (INT 6, 25, 41, 42);
G. Canadian Trademark Application No. 1062484 for SCORES SHOWROOM
and design (INT 6, 25, 41, 42);
H. Japanese Trademark Application No. 2000-048753 for SCORES
SHOWROOM and design (INT 6, 25, 41, 42);
I. Japanese Trademark Application NO. 2000-048754 for SCORES
(stylized) (INT 6, 25, 41, 42);
J. Mexican Trademark Application No. 425824 for SCORES SHOWROOM
and design (INT 6)
K. Mexican Trademark Application No. 425282 for SCORES SHOWROOM
and design (INT 25);
L. Mexican Trademark Application No. 425283 for SCORES SHOWROOM
and design (INT 41);
M. Mexican Trademark Application No. 425825 for SCORES SHOWROOM
and design (INT 42);
N. Mexican Trademark Application No. 423799 for SCORES (stylized)
(INT 6);
O. Mexican Trademark Application No. 423797 for SCORES (stylized)
(INT 25);
P. Mexican Trademark Application No. 423800 for SCORES (stylized)
(INT 41); and
Q. Mexican Trademark Application No. 423798 for SCORES (stylized)
(INT 42).
80
Schedule 4.1(x)
Company Related Transactions
The Company Shareholders, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇, are employees of Scores Entertainment, Inc., principal shareholders of
Scores Holding Company Inc., and officers and directors of Go West
Entertainment, Inc. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ is also an officer and director of Scores
Holding Company Inc.
81