EXHIBIT 12
SHARE EXCHANGE AGREEMENT
BY AND AMONG
CHANTAL SKIN CARE CORPORATION
CORPORATE SPORTS INCENTIVES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇, AN INDIVIDUAL
AND
THE STOCKHOLDERS OF CORPORATE SPORTS INCENTIVES, INC.
DATED AS OF OCTOBER 31, 2003
TABLE OF CONTENTS
ARTICLE I - THE EXCHANGE
Preamble.......................................................................3
Certain Definitions............................................................3
Section 1.01 The Exchange....................................................5
Section 1.02 Closing.........................................................6
Section 1.03 Effective Time..................................................7
Section 1.04 Effect of the Exchange..........................................7
Section 1.05 Articles of Incorporation and Bylaws; Directors and Officers....7
Section 1.06 Further Actions.................................................7
Section 1.07 Restrictions on Resale..........................................7
Section 1.08 Exchange of Certificates........................................8
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF CHANTAL AND THE CHANTAL PRINCIPAL
STOCKHOLDER
Section 2.01 Organization, Standing and Power................................9
Section 2.02 Capitalization..................................................9
Section 2.03 Authority for Agreement........................................10
Section 2.04 Issuance of Chantal Shares.....................................10
Section 2.05 No Operating Business; Liabilities.............................10
Section 2.06 Absence of Certain Changes or Events...........................10
Section 2.07 Intellectual Property and Intangible Assets....................11
Section 2.08 Governmental Consent...........................................11
Section 2.09 Litigation.....................................................11
Section 2.10 Interested Party Transactions..................................11
Section 2.11 Compliance with Applicable Laws................................11
Section 2.12 No Undisclosed Liabilities.....................................12
Section 2.13 Tax Returns and Payment........................................12
Section 2.14 Assets; Encumbrances...........................................12
Section 2.15 Chantal Agreements.............................................12
Section 2.16 Labor and Employment Matters...................................12
Section 2.17 Employee Benefits..............................................13
Section 2.18 Restrictions on Business Activities............................13
Section 2.19 Brokers & Finders Fees.........................................13
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF CSI.
Section 3.01 Organization, Standing and Power...............................13
Section 3.02 Capitalization.................................................14
Section 3.03 Authority for Agreement........................................14
Section 3.04 Financial Statements...........................................14
Section 3.05 Absence of Certain Changes or Events...........................14
Section 3.06 Governmental Consent...........................................15
Section 3.07 Title and Related Matters......................................15
Section 3.08 Intellectual Property and Intangible Assets....................16
Section 3.09 Litigation.....................................................16
Section 3.10 Interested Party Transactions..................................16
Section 3.11 Compliance with Applicable Laws................................16
Section 3.12 Tax Returns and Payment........................................16
ARTICLE IV - CERTAIN COVENANTS AND AGREEMENTS
Section 4.01 Covenants of CSI...............................................16
Section 4.02 Covenants of Chantal and the Chantal Principal Stockholder.....17
Section 4.03 Covenants of the Parties.......................................19
ARTICLE V - CONDITIONS PRECEDENT
Section 5.01 Conditions Precedent to the Parties' Obligations...............21
Section 5.02 Conditions Precedent to the Obligations of Chantal.............21
Section 5.03 Conditions Precedent to the Obligations of CSI.................22
ARTICLE VI - TERMINATION
Section 6.01 Termination....................................................23
Section 6.02 Effect of Termination..........................................23
ARTICLE VII - CONFIDENTIALITY
Section 7.01 Confidentiality................................................23
ARTICLE VIII - INDEMNIFICATION
Section 8.01 Indemnification by Chantal ....................................24
Section 8.02 Indemnification by CSI.........................................24
Section 8.03 Indemnification of Exchange Agent..............................24
Section 8.04 Survival of Indemnification....................................25
ARTICLE IX - MISCELLANEOUS
Section 9.01 Non-survival of Representations and Warranties.................25
Section 9.02 Expenses.......................................................25
Section 9.03 Applicable Law; Arbitration....................................25
Section 9.04 Notices........................................................26
Section 9.05 Entire Agreement...............................................27
Section 9.06 Assignment.....................................................27
Section 9.07 Headings; References...........................................27
Section 9.08 Counterparts...................................................27
Section 9.09 No Third Party Beneficiaries...................................27
Section 9.10 Severability; Enforcement......................................27
Section 9.11 Rules of Construction..........................................27
Section 9.12 Exhibits.......................................................27
Section 9.13 Interpretation.................................................28
SCHEDULES
EXHIBITS
EXHIBIT A Form of Chantal Note
EXHIBIT B Form of Chantal Warrant
EXHIBIT C Form of Chantal Lock-up Agreement
EXHIBIT D Form of Additional Chantal Note
EXHIBIT E Stock Option Plan
EXHIBIT F Voting Agreement
EXHIBIT G ▇▇▇▇▇ Family Trust Voting Agreement
SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT dated as of October 31, 2003 (the "AGREEMENT")
by and among CHANTAL SKIN CARE CORPORATION, a corporation formed under the laws
of the State of Delaware ("CHANTAL"), CORPORATE SPORTS INCENTIVES, INC., a
corporation formed under the laws of the State of New Hampshire ("CSI"), ▇▇▇▇
▇▇▇▇▇▇▇, an individual (the "CHANTAL PRINCIPAL STOCKHOLDER"), and the
stockholders of CSI who are signatories hereto (the "CSI STOCKHOLDERS").
Chantal, CSI, the Chantal Principal Stockholder, and the CSI Stockholders are
referred to herein individually as a "PARTY" and collectively as the "PARTIES."
PREAMBLE
WHEREAS, Chantal and CSI have determined that a business combination
between the Parties is advisable and in the best interests of their respective
companies and stockholders, and presents an opportunity for their respective
companies to achieve long-term strategic and financial benefits;
WHEREAS, the CSI Stockholders are the record and beneficial owners of
100% of the issued and outstanding capital stock of CSI;
WHEREAS, Chantal has proposed to acquire CSI pursuant to an exchange
transaction (the "EXCHANGE") whereby, pursuant to the terms and subject to the
conditions of this Agreement and in accordance with the GCL (as hereinafter
defined), CSI shall become a wholly owned subsidiary of Chantal in consideration
for the issuance of shares of common stock of Chantal, $0.001 par value per
share (the "CHANTAL COMMON SHARES") to the stockholders of CSI and reservation
for issuance of Chantal Common Shares to current warrant holders and convertible
debt holders of CSI (collectively, the "EXCHANGE SHARES");
WHEREAS, the Chantal Common Shares shall be issued or reserved for
issuance, as the case may be, in exchange for 100% of the shares of capital
stock of CSI as more fully described in Section 1.1;
WHEREAS, in the Exchange all issued and outstanding shares of capital
stock of CSI and all rights to receive capital stock of CSI, upon exercise of
outstanding CSI warrants and/or conversion of CSI convertible notes or other
securities (the "CSI SHARES") held by the stockholders, warrant holders and
convertible debt holders of CSI, respectively, shall be exchanged for that
number of Chantal Common Shares, warrants or convertible notes that upon
issuance, exercise or conversion, respectively, shall represent 71.6% of the
Fully-Diluted Chantal Shares (as hereinafter defined);
WHEREAS, the obligation of the Parties to effect the Exchange is
subject to the conditions set forth in Articles IV and V hereof;
WHEREAS, the Parties intend that the Exchange qualify as a tax-free
exchange transaction within the meaning of Section 351 of the Internal Revenue
Code of 1986, as amended (the "CODE"); and
WHEREAS, Chantal and CSI are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Section 4(2) of the Securities Act of 1933, as amended (the
"SECURITIES ACT").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations and warranties contained herein, the Parties,
intending to be legally bound, hereby agree as follows:
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth below:
"ACQUIRING ENTITY" shall have the meaning ascribed thereto in the GCL and shall
for purposes of this Agreement refer to Chantal.
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"APPLICABLE LAW" means any domestic or foreign law, statute, regulation, rule,
policy, guideline or ordinance applicable to the businesses of the Parties, the
Exchange and/or the Parties.
"DOLLAR" and "$" means lawful money of the United States of America.
"FULLY-DILUTED CHANTAL SHARES" means, at any applicable point in time, the
issued and outstanding shares of Chantal capital stock, on a fully-diluted
basis, after giving effect to (a) all issued and outstanding shares of Chantal
common stock, (b) all issued and outstanding shares of Chantal preferred stock,
(c) all shares of Chantal capital stock issuable upon exercise of any
outstanding options, warrants or other rights to purchase Chantal capital stock,
and/or (d) all shares of Chantal capital stock issuable upon conversion of any
outstanding notes, preferred stock, or other securities convertible into or
exchangeable for shares of Chantal capital stock.
"FULLY-DILUTED CSI SHARES" means, at any applicable point in time, the issued
and outstanding shares of CSI capital stock, on a fully-diluted basis, after
giving effect to (a) all issued and outstanding shares of CSI common stock, (b)
all issued and outstanding shares of CSI preferred stock, if any, (c) all shares
of CSI capital stock issuable upon exercise of any outstanding options, warrants
or other rights to purchase CSI capital stock, and/or (d) all shares of CSI
capital stock issuable upon conversion of any outstanding notes, preferred
stock, or other securities convertible into or exchangeable for shares of CSI
capital stock.
"GAAP" means generally accepted accounting principles in the United States of
America as promulgated by the American Institute of Certified Public Accountants
and the Financial Accounting Standards Board or any successor institutes
concerning the treatment of any accounting matter.
"GCL" means the General Corporation Law of the State of Delaware.
"LIEN" means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, claim, encumbrance, royalty interest, any other
adverse claim of any kind in respect of such property or asset, or any other
restrictions or limitations of any nature whatsoever.
"MATERIAL ADVERSE EFFECT" with respect to any entity or group of entities means
any event, change or effect that has or would have a materially adverse effect
on the financial condition, business or results of operations of such entity or
group of entities, taken as a whole.
"PERSON" means any individual, corporation, partnership, trust or unincorporated
organization or a government or any agency or political subdivision thereof.
"TAX" (and, with correlative meaning, "TAXES" and "TAXABLE") means:
(i) any income, alternative or add-on minimum tax, gross receipts tax,
sales tax, use tax, ad valorem tax, transfer tax, franchise tax, profits tax,
license tax, withholding tax, payroll tax, employment tax, excise tax, severance
tax, stamp tax, occupation tax, property tax, environmental or windfall profit
tax, custom, duty or other tax, impost, levy, governmental fee or other like
assessment or charge of any kind whatsoever together with any interest or any
penalty, addition to tax or additional amount imposed with respect thereto by
any governmental or Tax authority responsible for the imposition of any such tax
(domestic or foreign), and
(ii) any liability for the payment of any amounts of the type described
in clause (i) above as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period, and
(iii) any liability for the payment of any amounts of the type
described in clauses (i) or (ii) above as a result of any express or implied
obligation to indemnify any other person.
"TAX RETURN" means any return, declaration, form, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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ARTICLE I
THE EXCHANGE
SECTION 1.01 THE EXCHANGE.
Upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the GCL, at the Effective Time (as defined
herein), all issued and outstanding CSI Shares and rights to receive CSI Shares
upon exercise and conversion of outstanding CSI warrants and CSI convertible
notes, respectively, shall be exchanged for Exchange Shares or rights to receive
Exchange Shares, as applicable. In connection therewith, the following terms
shall apply:
(a) EXCHANGE AGENT. ▇▇▇▇▇▇▇, Savage, Kaplowitz, Wolf & Marcus, LLP,
CSI's counsel ("GSK"), shall act as the exchange agent (the "EXCHANGE AGENT")
for the purpose of exchanging CSI Shares for the Exchange Shares. At or prior to
the Closing (as hereinafter defined):
(i) the CSI Stockholders shall deliver to the Exchange Agent
certificates evidencing all issued and outstanding shares of CSI
capital stock, all outstanding CSI warrants and all outstanding
convertible notes or other securities (collectively, the "CSI
SECURITIES"), duly endorsed in blank for transfer or accompanied by
stock powers with the signatures of the holders appropriately
notarized, as appropriate, and
(ii) Chantal shall deliver to the Exchange Agent an aggregate
of (A) 10,792,599 Chantal Common Shares to be used as the Exchange
Shares, registered in amounts and in the names of the CSI Stockholders
listed on SCHEDULE 1.01 annexed hereto, and (B) revised warrants and
convertible notes and debentures (as contemplated by Section 1.01(e)
and Section 1.01(f) hereof), entitling the holders to receive an
aggregate of 2,707,401 additional Chantal Common Shares upon the
exercise or conversion thereof, and registered in amounts and in the
names of the CSI Stockholders listed on SCHEDULE 1.01 annexed hereto.
(b) EXCHANGE SHARES. The Exchange Shares issuable hereunder shall
consist of 10,792,599 Chantal Common Shares to be issued to the CSI Stockholders
at the Closing (as hereinafter defined) and 2,707,401 Chantal Common Shares to
be reserved for issuance as provided by Section 1.01(d) below.
(1) Each of the 111.5 issued and outstanding CSI Common Shares
(as defined hereinafter) immediately prior to the Effective Time shall be
exchanged for 96,794.609 Exchange Shares, or (if other than 111.5 CSI Common
Shares shall then be issued and outstanding) such other number of Exchange
Shares as shall be determined by dividing 10,792,599 by the number of then
issued and outstanding CSI Common Shares (the "CSI EXCHANGE RATE").
(2) Each of the warrants or convertible notes that are
exercisable or convertible into an aggregate of 27.82673 additional shares of
CSI capital stock (the "CSI SHARE EQUIVALENTS") immediately prior to the
Effective Time shall be exchanged for Chantal warrants or Chantal convertible
notes that will entitle the holder of each CSI Share Equivalent to exercise the
Chantal warrant or convert the Chantal notes into a pro-rata portion of the
2,707,401 Exchange Shares, or, if other than 27.82673 CSI Share Equivalents
shall be issuable on the Effective Date upon full exercise of the CSI warrants
or CSI convertible notes, such other number of Exchange Shares as shall be
determined by dividing 2,707,401 by the number of CSI Share Equivalents then
issued and outstanding.
(3) The Exchange Shares shall represent 71.6% of the
Fully-Diluted Chantal Shares as at the Effective Time after giving effect to the
Exchange.
(c) EXCHANGE PROVISIONS. At the Closing, and subject to the terms and
conditions of this Agreement, the CSI Stockholders shall deliver their
respective CSI Common Shares, as such CSI Common Shares are set forth on
SCHEDULE 1.01 hereto, to the Exchange Agent in exchange for the Exchange Shares.
In connection therewith, the CSI Stockholders shall convey to Chantal good and
marketable title to the CSI Common Shares, free and clear of all liens, claims,
debts, obligations or other encumbrances except such
5
restrictions as are imposed by Federal or state securities laws. Chantal shall
convey to the CSI Stockholders good and marketable title to their proportionate
share of the Exchange Shares, free and clear of all liens, claims, debts,
obligations or other encumbrances, except such restrictions as are imposed by
Federal or state securities laws. The exchange of voting shares as herein
provided shall be the sole consideration for the acquisition by the CSI
Stockholders of the Exchange Shares. The principles governing the mechanics of
the Exchange are more fully set forth under Section 1.08 hereinafter.
(d) CHANTAL COMMON SHARES TO BE RESERVED. Subject to the terms and
conditions set forth in this Agreement, at and after the Closing, Chantal shall
reserve such number of Chantal Common Shares (the "RESERVED SHARES") as are
required for issuance in connection with:
(i) the issuance to individuals and/or entities set forth
on SCHEDULE 1.01 who are holders of warrants to
purchase CSI Share Equivalents that will be exchanged
for Chantal Warrants (as defined hereinafter)
exercisable for Exchange Shares as provided by
Section 1.01(f) hereof; and
(ii) the issuance to individuals and/or entities set forth
on SCHEDULE 1.01 who are holders of CSI convertible
notes that will be exchanged for Chantal Notes (as
defined hereinafter) that are convertible into
Exchange Shares as provided by Section 1.01(e)
hereof.
(e) CANCELLATION OF CSI CONVERTIBLE NOTES AND SALE OF CHANTAL
CONVERTIBLE NOTES. On the Closing Date, the existing outstanding $225,000 of
convertible notes of CSI set forth on Schedule 1.01 shall be cancelled, and
Chantal shall issue to the holders of such CSI convertible notes, a like
principal amount of Chantal convertible notes, which Chantal notes shall:
(i) mature on a date which shall be one year from the
Effective Date,
(ii) grant to the holders thereof the right to convert such
Chantal convertible notes into an aggregate pro rata number and
proportion of the 2,707,401 Chantal Common Shares representing the
Reserved Shares as are set forth on SCHEDULE 1.01 annexed hereto;
(iii) entitle the holders of such Chantal convertible notes
(in consideration of the extension of the maturity date hereof) to
receive on the Closing Date for $.01 per share, one additional Chantal
Common Share for each dollar amount of principal of the Chantal
convertible note so extended,
(iv) be unconditionally guaranteed as to payment by CSI, and
(v) be in the form of EXHIBIT A annexed hereto and made a part
hereof (the "CHANTAL NOTES").
(f) CANCELLATION OF CSI WARRANTS AND ISSUANCE OF CHANTAL WARRANTS. On
the Closing Date, the existing outstanding CSI warrants shall be cancelled, and
Chantal shall issue to the holders of such CSI warrants, warrants to purchase
Chantal Common Shares; which Chantal warrants shall (i) have a term of five
years from the Effective Date, (ii) entitle the holders to purchase the
aggregate pro-rata number and proportion of the 2,707,401 Chantal Common Shares
representing the Reserved Shares as are set forth on SCHEDULE 1.01 annexed
hereto; and (iii) be in the form of EXHIBIT B annexed hereto and made a part
hereof (the "CHANTAL WARRANTS").
(g) EXEMPTION FROM REGISTRATION. The Parties intend that the Exchange
Shares to be conveyed by Chantal to the CSI Stockholders shall be exempt from
the registration requirements of the Securities Act pursuant to Section 4(2) of
the Securities Act and the rules and regulations promulgated thereunder to the
CSI Stockholders.
SECTION 1.02 CLOSING.
The closing of the Exchange (the "CLOSING") will take place at the
offices of Gersten, Savage,
6
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel to CSI ("GSK"), at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, within one (1) business day following the
satisfaction or waiver of the conditions precedent set forth in Articles IV and
V or at such other date as Chantal and CSI shall agree (the "CLOSING DATE"), but
in any event no later than November 10, 2003.
SECTION 1.03 EFFECTIVE TIME.
The Exchange shall become effective (the "EFFECTIVE TIME") at the time
of the Closing, subject to the satisfaction or waiver of each of the conditions
set forth in Articles IV and V. The date on which the Effective Time occurs is
referred to as the "EFFECTIVE DATE."
SECTION 1.04 EFFECT OF THE EXCHANGE.
At and after the Effective Time, the Exchange shall be effective as
provided in the applicable provisions of the GCL. The existence of Chantal, as
the Acquiring Entity, with all of its purposes and powers, shall continue
unaffected and unimpaired by the Exchange, and, as the Acquiring Entity, it
shall remain governed by the laws of the State of Delaware. The existence of
CSI, as the entity whose ownership interests are being acquired, shall continue
unaffected and unimpaired as a corporation governed by the laws of the State of
New Hampshire, with the exception that it shall be a wholly owned and operated
subsidiary of Chantal.
SECTION 1.05 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Pursuant to the Exchange:
(a) The Certificate of Incorporation and Bylaws of Chantal as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of Chantal following the Exchange.
(b) The officers and directors of the Acquiring Entity following the
Exchange shall be those persons listed on SCHEDULE 1.05, until the earlier of
their death, resignation or removal or until their respective successors are
duly appointed and qualified
SECTION 1.06 FURTHER ACTIONS.
If at any time after the Effective Time, Chantal and CSI shall consider
or be advised that any further assignment or assurances or any other things that
are necessary or desirable to vest, perfect or confirm, of record or otherwise,
in the Acquiring Entity, the title to any property or right of CSI acquired or
to be acquired by reason of or as a result of the Exchange, then Chantal, CSI
and their respective officers and directors in office shall use all reasonable
efforts to execute and deliver, or cause to be executed and delivered, all such
proper deeds, assignments and assurances and do all things reasonably necessary
and proper to vest, perfect or confirm title to such property or rights in the
Acquiring Entity and otherwise carry out the purpose of this Agreement, and the
officers of Chantal are fully authorized in the name of Chantal and CSI or
otherwise to take any and all such action with the same effect as if such
persons were officers of CSI.
SECTION 1.07 RESTRICTIONS ON RESALE
(a) THE EXCHANGE SHARES. The Exchange Shares will not be registered
under the Securities Act, or the securities laws of any state, and cannot be
transferred, hypothecated, sold or otherwise disposed of until (i) a
registration statement with respect to such securities is declared effective
under the Securities Act, or (ii) Chantal receives an opinion of counsel for the
stockholder, reasonably satisfactory to counsel for Chantal, that an exemption
from the registration requirements of the Securities Act is available.
The certificates representing the number of Exchange Shares for which
the CSI Shares shall have been issued pursuant to this Agreement shall contain a
legend substantially as follows:
"THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
7
MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER SUCH ACT, OR CHANTAL SKIN CARE CORPORATION RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO COUNSEL
FOR CHANTAL SKIN CARE CORPORATION THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE."
(b) THE RESERVED SHARES. The Reserved Shares will not be registered
under the Securities Act, or the securities laws of any state, and cannot be
transferred, hypothecated, sold or otherwise disposed of until (i) a
registration statement with respect to such securities is declared effective
under the Securities Act, or (ii) Chantal receives an opinion of counsel for the
stockholder, reasonably satisfactory to counsel for Chantal, that an exemption
from the registration requirements of the Securities Act is available.
The certificates representing the Reserved Shares shall contain a
legend substantially as follows:
"THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER
SUCH ACT, OR CHANTAL SKIN CARE CORPORATION RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO COUNSEL FOR CHANTAL
SKIN CARE CORPORATION THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE."
SECTION 1.08 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE OF CERTIFICATES. At the Closing and pursuant to a
customary letter of transmittal or other instructional form provided by the
Exchange Agent to the CSI Stockholders, the CSI Stockholders shall be required
to surrender all their CSI Common Shares to the Exchange Agent, and the CSI
Stockholders shall be entitled upon such surrender to receive in exchange
therefore certificates representing the proportionate number of Exchange Shares
into which the CSI Common Shares theretofore represented by the stock transfer
forms so surrendered shall have been exchanged pursuant to the CSI Exchange Rate
in this Agreement. Until so surrendered, each outstanding certificate which,
prior to the Effective Time, represented CSI Common Shares shall be deemed for
all corporate purposes, subject to the further provisions of this Article I, to
evidence the ownership of the number of whole Exchange Shares for which such CSI
Common Shares have been so exchanged. No dividend payable to holders of Exchange
Shares of record as of any date subsequent to the Effective Time shall be paid
to the owner of any certificate which, prior to the Effective Time, represented
CSI Common Shares, until such certificate or certificates representing all the
relevant CSI Common Shares, together with a stock transfer form, are surrendered
as provided in this Article I or pursuant to letters of transmittal or other
instructions with respect to lost certificates provided by the Exchange Agent.
(b) FULL SATISFACTION OF RIGHTS. All Exchange Shares for which the CSI
Common Shares shall have been exchanged pursuant to this Article I shall be
deemed to have been issued in full satisfaction of all rights pertaining to the
CSI Common Shares.
(c) EXCHANGE OF CERTIFICATES. All certificates representing CSI Common
Shares converted into the right to receive Exchange Shares pursuant to this
Article I shall be furnished to Chantal subsequent to delivery thereof to the
Exchange Agent pursuant to this Agreement.
(d) CLOSING OF TRANSFER BOOKS. On the Effective Date, the stock
transfer book of CSI shall be deemed to be closed and no transfer of CSI capital
stock shall thereafter be recorded thereon.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CHANTAL
AND THE CHANTAL PRINCIPAL STOCKHOLDER
Except as set forth in the schedules to this Agreement, disclosure in
any one of which shall apply to any and all representations and warranties made
in this Agreement, and except as otherwise disclosed in writing to CSI, Chantal
and the Chantal Principal Stockholder hereby jointly and severally represents
and warrants to CSI, as of the date of this Agreement and as of the Effective
Time (unless otherwise indicated), as follows:
SECTION 2.01 ORGANIZATION, STANDING AND POWER.
As of the Effective Time, Chantal is a company duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has corporate power and authority to conduct its business as presently
conducted by it. As of the Effective Time, Chantal is duly qualified to do
business as a foreign corporation doing business in each state in which it owns
or leases real property and where the failure to be so qualified and in good
standing would not have a Material Adverse Effect on Chantal, or its business.
Chantal has the corporate power and authority to enter into and perform this
Agreement and to carry out the transactions contemplated by this Agreement.
Other than as contemplated by this Agreement or for the purposes of effecting
the Exchange and Closing pursuant to this Agreement, Chantal does not have an
ownership interest in any corporation, partnership (general or limited), limited
liability company or other entity, whether foreign or domestic (collectively
such ownership interests including capital stock).
SECTION 2.02 CAPITALIZATION.
(a) As of the Effective Time, there are 60,000,000 shares of capital
stock of Chantal authorized, consisting of 50,000,000 shares of common stock,
$0.001 par value per share, and 10,000,000 shares of preferred stock, the terms
and conditions of which have not been designated. There are 5,350,000 Chantal
Common Shares issued and outstanding and no shares of preferred stock
outstanding.
(b) Subject to Section 2.02(d), the Chantal Principal Stockholder owns
of record and beneficially 4,395,000 Chantal Common Shares. The balance of the
Chantal Common Shares issued and outstanding includes 250,000 shares owned by
Livigi, Inc. and 705,000 Chantal Common Shares in the public float. Except as
pursuant to and as provided in this Agreement, no Chantal Common Shares have
been reserved for issuance to any Person, and there are no other outstanding
rights, warrants, options or agreements for the purchase of Chantal Common
Shares. Except as pursuant to and as provided in this Agreement, no person is
entitled to any rights with respect to the issuance or transfer of Chantal
Common Shares.
(c) All outstanding Chantal Common Shares are validly issued, fully
paid, non-assessable, not subject to pre-emptive rights and have been issued in
compliance with all state and federal securities laws or other Applicable Law.
(d) Pursuant to a consulting agreement, on or before the Effective
Date, the Chantal Principal Stockholder shall transfer to each of the ▇▇▇▇▇
Family Irrevocable Stock Trust and ▇▇▇ ▇▇▇▇▇ 1,875,000 of his Chantal Common
Shares (▇▇▇▇▇ Family Irrevocable Stock Trust and ▇▇▇ ▇▇▇▇▇ are collectively
referred to as the "▇▇▇▇▇ GROUP"). Accordingly, as at the Closing and the
Effective Date and immediately prior to issuance of the Exchange Shares and the
Reserved Shares, the Fully-Diluted Chantal Shares shall consist of 5,350,000
Chantal Common Shares, of which (i) the ▇▇▇▇▇ Group shall own 3,750,000 Chantal
Common Shares, (ii) the Chantal Principal Stockholder shall own 645,000 Chantal
Common Shares, and (iii) third persons shall own 955,000 Chantal Common Shares.
(e) At the Closing and the Effective Time, Chantal will issue to the
CSI Stockholders 10,792,599 Exchange Shares and have designated and reserved for
issuance to former CSI security holders entitled to receive Chantal Notes and
Chantal Warrants pursuant to Sections 1.01(e) and (f), an aggregate of 2,707,401
Reserve Shares, subject to equitable adjustment as provided in Section 1.01(b).
9
SECTION 2.03 AUTHORITY FOR AGREEMENT.
The execution, delivery, and performance of this Agreement by Chantal
has been duly authorized by all necessary corporate and shareholder action, and
this Agreement, upon its execution by the Parties, will constitute the valid and
binding obligation of Chantal enforceable against it in accordance with and
subject to its terms, except as enforceability may be affected by bankruptcy,
insolvency or other laws of general application affecting the enforcement of
creditors' rights. The execution and consummation of the transactions
contemplated by this Agreement and compliance with its provisions by Chantal
will not violate any provision of Applicable Law and will not conflict with or
result in any breach of any of the terms, conditions, or provisions of, or
constitute a default under, Chantal's Certificate of Incorporation or its
Bylaws, in each case as amended, or, in any material respect, any indenture,
lease, loan agreement or other agreement or instrument to which Chantal is a
party or by which it or any of its properties are bound, or any decree,
judgment, order, statute, rule or regulation applicable to Chantal except to the
extent that any breach or violation of any of the foregoing would not constitute
or result in a Material Adverse Effect on Chantal.
SECTION 2.04 ISSUANCE OF CHANTAL SHARES
The Exchange Shares issuable to the CSI Stockholders as the holders of
the CSI Shares will when issued pursuant to this Agreement be duly and validly
authorized and issued, fully paid and non-assessable.
SECTION 2.05 NO OPERATING BUSINESS; LIABILITIES.
(a) Chantal has no operating business and, other than as contemplated
by this Agreement or for the purposes of effecting the Exchange and Closing
pursuant to this Agreement, Chantal has no operating subsidiaries.
(b) To the knowledge of Chantal, there has been no material change in
the financial condition, operations or business of Chantal since July 29, 1994.
(c) As at the date of this Agreement and the Effective Time, Chantal
shall have no balance sheet and contingent liabilities, and no commitments to
incur liabilities.
SECTION 2.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
SCHEDULE 2.06, and as pursuant to the terms of this Agreement, since July 29,
1994:
(a) there has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of Chantal or (ii) any damage,
destruction, or loss to Chantal (whether or not covered by insurance) materially
and adversely affecting the business, operations, properties, assets, or
condition of Chantal;
(b) Chantal has not (i) amended its certificate of organization; (ii)
declared or made, or agreed to declare or make, any payment of dividends or
distributions of any assets of any kind whatsoever to stockholders or purchased
or redeemed, or agreed to purchase or redeem, any outstanding capital stock;
(iii) waived any rights of value which in the aggregate are extraordinary or
material considering the business of Chantal; (iv) made any material change in
its method of management, operation, or accounting; (v) entered into any other
material transaction; (vi) made any accrual or arrangement for payment of
bonuses or special compensation of any kind or any severance or termination pay
to any present or former officer or employee; (vii) increased the rate of
compensation payable or to become payable by it to any of its officers or any of
its employees whose monthly compensation exceeds $5,000; or (viii) made any
increase in any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or arrangement
made to, for, or with its officers, directors, or employees;
(c) Chantal has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability (absolute
or contingent) except liabilities incurred in the ordinary course of business;
(ii) paid any material obligation or liability (absolute or contingent) other
than current liabilities incurred since that date in the ordinary course of
business; (iii) sold or transferred, or agreed to sell or transfer, any of its
assets, properties, or rights (except assets, properties, or rights not used or
useful in its business which,
10
in the aggregate have a value of less than $5,000), or canceled, or agreed to
cancel, any debts or claims (except debts or claims which in the aggregate are
of a value of less than $5,000); (iv) made or permitted any amendment or
termination of any contract, agreement, or license to which it is a party if
such amendment or termination is material, considering the business of Chantal;
or (v) issued, delivered, or agreed to issue or deliver any stock, bonds or
other corporate securities including debentures (whether authorized and unissued
or held as treasury stock);
(d) to the best knowledge of Chantal, Chantal has not become subject to
any law or regulation which materially and adversely affects, or in the future
may adversely affect, the business, operations, properties, assets, or condition
of Chantal; and
(e) as at the date of this Agreement, Chantal has no aggregate
liabilities which would be required to be disclosed on a balance sheet prepared
in accordance with GAAP, and as at the Closing Date Chantal shall have no
liabilities outstanding and no commitments to incur liabilities.
SECTION 2.07 INTELLECTUAL PROPERTY AND INTANGIBLE ASSETS.
To the knowledge of Chantal, Chantal has full legal right, title and
interest in and to all of the intellectual property utilized in the operation of
its business. No rights of any other person are violated by the use by Chantal
of the intellectual property. None of the intellectual property has ever been
declared invalid or unenforceable, or is the subject of any pending or, to the
knowledge of Chantal, threatened action for opposition, cancellation,
declaration, infringement, or invalidity, unenforceability or misappropriation
or like claim, action or proceeding.
SECTION 2.08 GOVERNMENTAL CONSENT
No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission or any third party, including a
party to any agreement with Chantal, is required by or with respect to Chantal
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under (i) applicable securities laws, or (ii) the
GCL.
SECTION 2.09 LITIGATION
There is no action, suit, investigation, audit or proceeding pending
against, or to the best knowledge of Chantal threatened against or affecting,
Chantal or any of its assets or properties before any court or arbitrator or any
governmental body, agency or official.
SECTION 2.10 INTERESTED PARTY TRANSACTIONS
Chantal is not indebted to any officer or director of Chantal (except
for compensation and reimbursement of expenses incurred in the ordinary course
of business), and no such person is indebted to Chantal, except as disclosed in
the reports filed with the Securities and Exchange Commission.
SECTION 2.11 COMPLIANCE WITH APPLICABLE LAWS.
The business of Chantal has not been, and is not being, conducted in
violation of any Applicable Law, except for possible violations which
individually or in the aggregate have not had and are not reasonably likely to
have a Material Adverse Effect. No investigation or review by any governmental
entity with respect to Chantal is pending or, to the knowledge of Chantal,
respectively, after reasonable inquiry, threatened, nor has any governmental
entity indicated an intention to conduct the same, except for investigations or
reviews which individually or in the aggregate would not have, nor be reasonably
likely to have, a Material Adverse Effect.
11
SECTION 2.12 NO UNDISCLOSED LIABILITIES.
There are no liabilities or debts of Chantal of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability or debt.
SECTION 2.13 TAX RETURNS AND PAYMENT
Chantal has duly and timely filed all material Tax Returns required to
be filed by it and has duly and timely paid all Taxes shown thereon to be due,
except for Taxes being contested in good faith. There is no material claim for
Taxes that is a Lien against the property of Chantal other than Liens for Taxes
not yet due and payable, none of which Taxes is material. Chantal has not
received notification of any audit of any Tax Return of Chantal being conducted
or pending by a Tax authority where an adverse determination could have a
Material Adverse Effect, no extension or waiver of the statute of limitations on
the assessment of any Taxes has been granted by Chantal which is currently in
effect, and Chantal is not a party to any agreement, contract or arrangement
with any Tax authority or otherwise, which may result in the payment of any
material amount.
SECTION 2.14 ASSETS; ENCUMBRANCES
Chantal does not own any real property. Chantal has good and valid
title to all of its assets. Chantal's assets comprise all of the business,
properties, assets (however, employees, to the extent that they could be
considered assets, are not included as assets in this Section) and goodwill
employed by Chantal and its affiliates in connection with its business.
All assets are owned by Chantal free and clear of all title defects or
objections, liens, claims, charges, rights of others, security interests or
other encumbrances of any nature whatsoever, including without limitation, any
leases, escrows, options, security or other deposits, rights of redemption,
chattel mortgages, conditional sales contracts, liens, collateral security
arrangements and other title or interest retention arrangements, except for
liens for current taxes not yet due.
SECTION 2.15 CHANTAL AGREEMENTS
Chantal is not a party to any material agreements.
SECTION 2.16 LABOR AND EMPLOYMENT MATTERS
Except for the Chantal Principal Stockholder, there are no current
full-time employees, current part-time employees, other employees or consultants
currently employed or engaged by Chantal or who render services to Chantal as of
the date hereof, and no written contracts, written agreements, written
commitments and written arrangements relating thereto. Chantal is not a party to
or bound by any collective bargaining agreement or any other agreement with a
labor union, and, to the knowledge of Chantal, there has been no effort by any
labor union or any other person during the twenty-four (24) months prior to the
date hereof to organize any employees or consultants of Chantal who are not
already members of a collective bargaining unit into one or more collective
bargaining units, nor, to the knowledge of the Chantal, are any such efforts
being conducted. There is no pending or, to the knowledge of Chantal, threatened
labor dispute, strike or work stoppage which affects or which may affect the
business of Chantal, or which may interfere with its continued operations. To
the knowledge of Chantal, neither the Chantal nor any agent, representative or
employee thereof has within the last twenty-four (24) months committed any
unfair labor practice as defined in the National Labor Relations Act, as
amended, and there is no pending or threatened charge or complaint against
Chantal by or with the National Labor Relations Board or any representative
thereof. There has been no strike, walkout or work stoppage involving any of the
employees or consultants during the twenty-four (24) months prior to the date
hereof. Chantal has complied, in all material respects, with applicable laws,
rules and regulations relating to employment, civil rights and equal employment
opportunities or other employment practices, including but not limited to, the
Civil Rights Act of 1964, the Fair Labor Standards Act, the Americans with
Disabilities Act, as amended and the Immigration Reform and Control Act of 1986,
as amended. Chantal has received no notice of any claim before any governmental
body brought by or on behalf of any employee, prospective employee,
12
former employee, retiree, labor organization or other representative of
employees or any governmental body or, to the knowledge of Chantal is any such
claim threatened against Chantal . Chantal is not a party to, or otherwise bound
by, any order relating to its employees or employment practices. Chantal has
paid in full to all of its employees all wages, salaries, commissions, bonuses,
benefits and other compensation due and payable to such employees. No current or
former employee of Chantal is (i) absent on a military leave of absence and/or
eligible for rehire under the terms of the Uniformed Services Employment and
Reemployment Rights Act, or (ii) absent on a leave of absence under the Family
and Medical Leave Act.
SECTION 2.17 EMPLOYEE BENEFITS
There is no employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and (ii)
no other benefit plan, program, contract or arrangement of any kind whatsoever,
covering the employees or consultants of Chantal or which is sponsored,
maintained or contributed to by Chantal or to which Chantal has an obligation to
contribute (all such employee benefit plans and other benefit plans, programs,
contracts or arrangements hereinafter individually and collectively called the
"EMPLOYEE BENEFIT PLAN(S)"). No Employee Benefit Plan is (i) subject to Section
412 of the Internal Revenue Code or Section 306 of ERISA, (ii) a "multiemployer
plan" within the meaning of Section 3(37) of ERISA, or (iii) a single employer
plan (within the meaning of Section 4001(a)(15) of ERISA) which has two or more
contributing sponsors at least two of whom are not under common control. Any and
all amounts which Chantal is required to pay as contributions or otherwise, or
with respect to the Employee Benefit Plans have been timely paid.
SECTION 2.18 RESTRICTIONS ON BUSINESS ACTIVITIES
There is no agreement (non-compete or otherwise), commitment, judgment,
injunction, order or decree to which Chantal is a party or otherwise binding
upon Chantal which has or may have the effect of prohibiting or impairing any
business practice of Chantal, any acquisition of property (tangible or
intangible) by Chantal or the conduct of business by Chantal.
SECTION 2.19 BROKERS' AND FINDERS' FEES.
Chantal has not incurred, nor will it incur, directly or indirectly,
any liability for brokers' or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CSI
Except as set forth in the schedules to this Agreement, disclosure in
any one of which shall apply to any and all representations and warranties made
in this Agreement, and except as otherwise disclosed in writing to Chantal, CSI
hereby represents and warrants to Chantal, as of the date of this Agreement and
as of the Effective Time, as follows:
SECTION 3.01 ORGANIZATION, STANDING AND POWER.
CSI is a privately held corporation duly incorporated, validly existing
and in good standing under the laws of the State of New Hampshire, and has full
corporate power and authority to conduct its business as presently conducted by
it and to enter into and perform this Agreement and to carry out the
transactions contemplated by this Agreement. CSI is duly qualified to do
business as a foreign corporation doing business in each state or other
jurisdiction in which it owns or leases real property and where the failure to
be so qualified and in good standing would have a Material Adverse Effect. CSI
does not have any ownership interest in any corporation, partnership (general or
limited), limited liability company or other entity, whether foreign or domestic
(collectively such ownership interests including capital stock).
13
SECTION 3.02 CAPITALIZATION.
(a) There are 60,000,000 shares of CSI capital stock authorized,
consisting of 50,000,000 shares of common stock, $0.001 par value per share (the
"CSI COMMON SHARES"), and 10,000,000 shares of preferred stock, the terms and
conditions of which have not been designated. As of the date of this Agreement,
there were (a) 111.5 issued and outstanding CSI Common Shares, (b) zero issued
and outstanding shares of preferred stock, and (c) 27.82673 CSI Common Shares
reserved for issuance upon exercise or conversion of CSI Share Equivalents.
Except as disclosed on SCHEDULE 3.02(a) hereto, no CSI Common Shares have been
reserved for issuance to any Person, and there are no other outstanding CSI
Share Equivalents or other rights, warrants, options or agreements for the
purchase of CSI Common Shares, except as provided in this Agreement. Except as
disclosed on SCHEDULE 3.02(a) hereto, no Person is entitled to any rights with
respect to the conversion, exchange or delivery of the CSI Common Shares. The
CSI Common Shares have been issued in compliance with all Applicable Law.
(b) As at the date of this Agreement, the Fully-Diluted CSI Shares are
139.32673 CSI Common Shares.
SECTION 3.03 AUTHORITY FOR AGREEMENT.
The execution, delivery and performance of this Agreement by CSI has
been duly authorized by all necessary corporate and shareholder action, and this
Agreement constitutes the valid and binding obligation of CSI, enforceable
against it in accordance with its terms, except as enforceability may be
affected by bankruptcy, insolvency or other laws of general application
affecting the enforcement of creditors' rights. The execution and consummation
of the transactions contemplated by this Agreement and compliance with its
provisions by CSI will not violate any provision of Applicable Law and will not
conflict with or result in any breach of any of the terms, conditions, or
provisions of, or constitute a default under, CSI's Articles of Incorporation or
Bylaws, in each case as amended, or, to the knowledge of CSI, in any material
respect, any indenture, lease, loan agreement or other agreement instrument to
which CSI is a party or by which it or any of its properties are bound, or any
decree, judgment, order, statute, rule or regulation applicable to CSI, except
to the extent that any breach or violation of any of the foregoing would not
constitute or result in a Material Adverse Effect on CSI.
SECTION 3.04 FINANCIAL STATEMENTS.
(a) CSI has made available to Chantal copies of its audited financial
statements for the years ended September 30, 2001 and September 30, 2002, and
the unaudited balance sheet, statement of operations and statement of cash flows
as at June 30, 2003 and for the nine months ended June 30, 2003 ("CSI FINANCIAL
STATEMENTS"). The financial statements as at June 30, 2003 and for the nine
months then ended will be audited on or before September 30, 2003.
(b) Each set of CSI financial statements (including, in each case, any
related notes thereto) contained in the CSI Financial Statements was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto). Such financial
statements fairly present in all material respects the financial position of CSI
as at the dates thereof and the results of their operations and their cash flows
for the periods then ended, subject, in the case of unaudited interim financial
statements, to normal, recurring year-end audit adjustments.
(c) To the knowledge of CSI, except as disclosed in the CSI Financial
Statements, there has been no material change in the financial condition,
operations or business of CSI since June 30, 2003.
(d) Except as set forth on the unaudited June 30, 2003 balance sheet or
on SCHEDULE 3.04 herof, CSI does not have any material liabilities.
SECTION 3.05 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
SCHEDULE 3.05, to the knowledge of CSI, since June 30, 2003:
(a) there has not been (i) any material adverse change in the business,
operations, properties,
14
assets, or condition of CSI or (ii) any damage, destruction, or loss to CSI
(whether or not covered by insurance) materially and adversely affecting the
business, operations, properties, assets, or condition of CSI;
(b) CSI has not (i) amended its Articles of Incorporation or Bylaws;
(ii) declared or made, or agreed to declare or make, any payment of dividends or
distributions of any assets of any kind whatsoever to stockholders or purchased
or redeemed, or agreed to purchase or redeem, any outstanding capital stock;
(iii) waived any rights of value which in the aggregate are extraordinary or
material considering the business of CSI; (iv) made any material change in its
method of management, operation, or accounting; (v) other than in the ordinary
course of business, entered into any other material transaction; (vi) other than
pursuant to any existing employment agreement, made any accrual or arrangement
for payment of bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee; (vii) other than
pursuant to any existing employment agreement, increased the rate of
compensation payable or to become payable by it to any of its officers or any of
its employees whose monthly compensation exceeds $5,000; or (viii) other than
pursuant to any existing employment agreement, made any increase in any profit
sharing, bonus, deferred compensation, insurance, pension, retirement, or other
employee benefit plan, payment, or arrangement made to, for, or with its
officers, directors, or employees;
(c) CSI has not (i) materially borrowed or agreed to borrow any funds,
or incurred, or become subject to, any material obligation or liability
(absolute or contingent) except liabilities incurred in the ordinary course of
business; (ii) paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the most
recent CSI balance sheet, and current liabilities incurred since that date in
the ordinary course of business; (iii) sold or transferred, or agreed to sell or
transfer, any of its assets, properties, or rights (except non-material assets,
properties, or rights not used or useful in its business which, in the aggregate
have a value of less than $50,000), or canceled, or agreed to cancel, any debts
or claims (except non-material debts or claims which in the aggregate are of a
value of less than $50,000); (iv) made or permitted any amendment or termination
of any contract, agreement, or license to which it is a party if such amendment
or termination is material, considering the business of CSI; or (v) issued,
delivered, or agreed to issue or deliver any stock, bonds or other corporate
securities including debentures (whether authorized and unissued or held as
treasury stock); and
(d) to the knowledge of CSI, CSI has not become subject to any law or
regulation which materially and adversely affects, or in the future is
substantially likely to have a Material Adverse Effect on CSI.
SECTION 3.06 GOVERNMENTAL CONSENT
No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission, or, to the knowledge of CSI,
any third party, including a party to any agreement with CSI, is required by or
with respect to CSI in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under (i) applicable securities
laws, or (ii) the GCL.
SECTION 3.07 TITLE AND RELATED MATTERS.
To the knowledge of CSI, CSI has good and marketable title to all of
its owned real property and good title to all of its personal properties,
inventory, interests in personal properties, and assets which are reflected in
the most recent balance sheet included on the unaudited June 30, 2003 balance
sheet or acquired after that date (except properties, interests in properties,
and assets sold or otherwise disposed of since such date in the ordinary course
of business). To the knowledge of CSI, CSI owns, free and clear of any Liens,
except Liens for Taxes not yet due, any and all of its assets. To the knowledge
of CSI, CSI has not received any written notice of infringement of or conflict
with asserted rights of others with respect to any product, technology, data,
trade secrets, know-how, proprietary techniques, trademarks, service marks,
tradenames, or copyrights which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling, or finding, would have a Material Adverse
Effect on CSI.
15
SECTION 3.08 INTELLECTUAL PROPERTY AND INTANGIBLE ASSETS.
CSI has full legal right, title and interest in and to all of the
material intellectual property utilized in the operation of its business. CSI
has not received any written notice that the rights of any other person are
violated by the use by CSI of the material intellectual property. None of the
material intellectual property has ever been declared by a court of competent
jurisdiction invalid or unenforceable, or is the subject of any pending or, to
the knowledge of CSI, threatened action for opposition, cancellation,
declaration, infringement, or invalidity, unenforceability or misappropriation
or like claim, action or proceeding.
SECTION 3.09 LITIGATION
There is no action, suit, investigation, audit or proceeding pending
against or, to the knowledge of CSI, threatened, against or affecting CSI or any
of its material assets or properties before any court or arbitrator or any
governmental body, agency or official.
SECTION 3.10 INTERESTED PARTY TRANSACTIONS
Except as set forth in SCHEDULE 3.10(a) attached hereto, CSI is not
indebted to any officer or director of CSI (except for compensation and
reimbursement of expenses incurred in the ordinary course of business), and no
such person is indebted to CSI, except as disclosed in the CSI Financial
Statements.
SECTION 3.11 COMPLIANCE WITH APPLICABLE LAWS.
To the knowledge of CSI, the business of CSI has not been, and is not
being, conducted in violation of any Applicable Law, except for possible
violations which individually or in the aggregate have not had and are not
reasonably likely to have a Material Adverse Effect on CSI. To the knowledge of
CSI, no investigation or review by any governmental entity with respect to CSI
is pending or threatened, nor has any governmental entity indicated an intention
to conduct the same, except for investigations or reviews which individually or
in the aggregate would not have, nor be reasonably likely to have, a Material
Adverse Effect on CSI.
SECTION 3.12 TAX RETURNS AND PAYMENT
CSI has duly and timely filed all material Tax Returns required to be
filed by it and has duly and timely paid all Taxes shown thereon to be due,
except as reflected in the CSI Financial Statements and except for Taxes being
contested in good faith. To the knowledge of CSI, except as disclosed in the CSI
Financial Statements, there is no material claim for Taxes that is a Lien
against the property of CSI other than Liens for Taxes not yet due and payable,
none of which Taxes is material. CSI has not received written notification of
any audit of any Tax Return of CSI being conducted or pending by a Tax authority
where an adverse determination could have a Material Adverse Effect on CSI, no
extension or waiver of the statute of limitations on the assessment of any Taxes
has been granted by CSI which is currently in effect, and CSI is not a party to
any agreement, contract or arrangement with any Tax authority or otherwise,
which may result in the payment of any material amount in excess of the amount
reflected on the CSI Financial Statements.
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS
SECTION 4.01 COVENANTS OF CSI
CSI covenants and agrees that, during the period from the date of this
Agreement until the Closing Date, CSI shall, other than as contemplated by this
Agreement or for the purposes of effecting the Exchange and Closing pursuant to
this Agreement or other than to the extent no Material Adverse Effect on CSI
would be incurred, conduct its business as presently operated and solely in the
ordinary course, and consistent with such operation, and, in connection
therewith, without the written consent of Chantal:
(a) shall not amend its Articles of Incorporation or Bylaws, other than
to change its name;
16
(b) except as provided in the schedules attached hereto, shall not pay
or agree to pay to any employee, officer or director compensation that is in
excess of the current compensation level of such employee, officer or director
other than salary increases or payments made in the ordinary course of business
or as otherwise provided in any contracts or agreements with any such employees;
(c) shall not merge or consolidate with any other entity or acquire or
agree to acquire any other entity;
(d) shall not sell, transfer, or otherwise dispose of any material
assets required for the operations of CSI's business except in the ordinary
course of business consistent with past practices;
(e) shall not create, incur, assume, or guarantee any material
indebtedness for money borrowed except in the ordinary course of business, as
provided in the schedules attached hereto or as pursuant to the terms of this
Agreement, or create or suffer to exist any mortgage, lien or other encumbrance
on any of its material assets, except those in existence on the date hereof or
those granted pursuant to agreements in effect on the date of this Agreement or
provided by Chantal and/or any of its affiliates;
(f) shall not make any material capital expenditure or series of
capital expenditures except in the ordinary course of business;
(g) shall not declare or pay any dividends on or make any distribution
of any kind with respect to the CSI Shares;
(h) shall notify Chantal promptly in the event of any material loss or
damage to any of CSI's material assets;
(i) shall pay premiums in respect of all present insurance coverage of
the types and in the amounts as are in effect as of the date of this Agreement;
(j) shall seek to preserve the present material employees, reputation
and business organization of CSI and CSI's relationship with its significant
clients and others having business dealings with it;
(k) shall not issue any additional shares of CSI capital stock or take
any action affecting the capitalization of CSI or the Fully-Diluted CSI Shares;
(l) shall use commercially reasonable efforts to comply with and not be
in default or violation under any known law, regulation, decree or order
applicable to CSI's business, operations or assets where such violation would
have a Material Adverse Effect on CSI;
(m) shall not grant any severance or termination pay to any director,
officer or any other employees of CSI, other than pursuant to agreements in
effect on the date of this Agreement or as otherwise disclosed in the documents
delivered pursuant to this Agreement;
(n) shall not change any of the accounting principles or practices used
by it, except as may be required as a result of a change in law or in GAAP,
whether in respect of Taxes or otherwise;
(o) shall not terminate or waive any material right of substantial
value other than in the ordinary course of business; and
(p) except as provided in the schedules attached hereto, shall not
enter into any material contract or commitment other than in the ordinary course
of business.
SECTION 4.02 COVENANTS OF CHANTAL AND THE CHANTAL PRINCIPAL STOCKHOLDER
(a) ACTIONS PENDING CLOSING. Chantal and the Chantal Principal
Stockholder each covenants and agrees that, during the period from the date of
this Agreement until the Closing Date, Chantal shall, other than as
17
contemplated by this Agreement or for the purposes of effecting the Exchange and
Closing pursuant to this Agreement or other than to the extent no Material
Adverse Effect would be incurred, conduct its business as presently operated and
solely in the ordinary course, and consistent with such operation, and, in
connection therewith, without the written consent of CSI:
(i) shall not amend its Certificate of Incorporation or
Bylaws;
(ii) shall not pay or agree to pay to any employee, officer or
director compensation that is in excess of the current compensation level of
such employee, officer or director other than salary increases or payments made
in the ordinary course of business or as otherwise provided in any contracts or
agreements with any such employees;
(iii) shall not merge or consolidate with any other entity or
acquire or agree to acquire any other entity;
(iv) shall not create, incur, assume, or guarantee any
indebtedness for money borrowed, except those in existence on the date hereof or
provided by CSI and/or any of its affiliates;
(v) shall not make any capital expenditure or series of
capital expenditures except in the ordinary course of business;
(vi) shall not declare or pay any dividends on or make any
distribution of any kind with respect to the shares of capital stock of Chantal;
(vii) shall pay premiums in respect of all present insurance
coverage of the types and in the amounts as are in effect as of the date of this
Agreement;
(viii) shall seek to preserve the present employees,
reputation and business organization of Chantal and Chantal's relationship with
its clients and others having business dealings with it;
(ix) shall not issue any additional Chantal shares or take any
action affecting the capitalization of Chantal;
(x) shall use commercially reasonable efforts to comply with
and not be in default or violation under any law, regulation, decree or order
applicable to Chantal's business or operations where such violation would have a
Material Adverse Effect;
(xi) shall not grant any severance or termination pay to any
director, officer or any other employees of Chantal, other than pursuant to
agreements in effect on the date of this Agreement or as otherwise disclosed in
the documents delivered pursuant to this Agreement;
(xii) shall not change any of the accounting principles or
practices used by it, except as may be required as a result of a change in law
or in GAAP, whether in respect of Taxes or otherwise;
(xiii) shall not terminate or waive any right of substantial
value other than in the ordinary course of business; and
(xiv) shall not enter into any material contract or commitment
other than in the ordinary course of business.
(b) APPROVAL BY CHANTAL PRINCIPAL STOCKHOLDER. By his execution and
delivery of this Agreement, the Chantal Principal Stockholder does hereby
approve, adopt and ratify this Share Exchange Agreement, the Exchange and all of
the transactions contemplated hereby and pursuant to all exhibits hereto.
(c) RESIGNATION OF DIRECTORS. Chantal shall, prior to the Closing,
cause its directors to resign effective immediately subsequent to the Effective
Time. In addition, Chantal agrees and accepts that the seven
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(7) designees of CSI set forth in Schedule 1.05 hereto shall be appointed to the
Board of Directors subsequent to Closing.
(d) FILING OF REGISTRATION STATEMENT. Chantal shall file a registration
statement within thirty (30) days after the completion or termination of the
Rule 504 Offering (as defined in Section 4.03(i)) to register the Chantal Common
Shares owned of record or beneficially by the CSI Stockholders listed on
SCHEDULE 4.03(F) hereof, the ▇▇▇▇▇ Group and the Chantal Principal Stockholder.
(e) AMENDMENT OF ORGANIZATIONAL DOCUMENTS. Chantal shall hold a
shareholders' meeting and file, as soon as practicable following the execution
of this Agreement, a Restated and Amended Certificate of Incorporation (the
"Restated Certificate"), which Restated Certificate shall upon acceptance
thereof by the Secretary of State of Delaware have the effect of adopting the
provisions of CSI's Articles of Incorporation and By-laws and changing its name
from "Chantal Skin Care Corporation" to "Utix Group, Inc."
SECTION 4.03 COVENANTS OF THE PARTIES
(a) TAX-FREE REORGANIZATION. The Parties intend that the Exchange
qualify as a Tax-free exchange under Sections 351 of the Code, as amended, and
the Parties will take the position for all purposes that the Exchange shall
qualify under such Section.
(b) ANNOUNCEMENT. Neither CSI, on the one hand, nor Chantal on the
other hand, shall issue any press release or otherwise make any public statement
with respect to this Agreement or the transactions contemplated hereby without
the prior consent of the other Party (which consent shall not be unreasonably
withheld), except as may be required by applicable law or securities regulation.
Notwithstanding anything in this Section 4.03 to the contrary, the Parties will,
to the extent practicable, consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any such press release or
other public statements with respect to this Agreement and the transactions
contemplated hereby whether or not required by Applicable Law.
(c) NOTIFICATION OF CERTAIN MATTERS. CSI shall give prompt written
notice to Chantal, and Chantal shall give prompt written notice to CSI, of:
(i) The occurrence, or nonoccurrence, of any event the
occurrence, or nonoccurrence, of which would be reasonably likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time; and
(ii) Any material failure of CSI on the one hand, or Chantal,
on the other hand, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
(d) REASONABLE BEST EFFORTS. Before Closing, upon the terms and subject
to the conditions of this Agreement, the Parties agree to use their respective
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable (subject to
applicable laws) to consummate and make effective the Exchange and other
transactions contemplated by this Agreement as promptly as practicable
including, but not limited to:
(i) The preparation and filing of all forms, registrations and
notices required to be filed to consummate the Exchange, including without
limitation, any approvals, consents, orders, exemptions or waivers by any third
party or governmental entity; and
(ii) The satisfaction of the Party's conditions precedent to
Closing.
(e) ACCESS TO INFORMATION
(i) INSPECTION BY CSI. Chantal will make available for
inspection by CSI, during normal business hours and in a manner so as not to
interfere with normal business operations, all of Chantal's records (including
tax records), books of account, premises, contracts and all other documents in
Chantal's possession or
19
control that are reasonably requested by CSI to inspect and examine the business
and affairs of Chantal. Chantal will cause its managerial employees and regular
independent accountants to be available upon reasonable advance notice to answer
questions of CSI concerning the business and affairs of Chantal. CSI will treat
and hold as confidential any information they receive from Chantal in the course
of the reviews contemplated by this Section 4.03(e). No examination by CSI will,
however, constitute a waiver or relinquishment by CSI of its rights to rely on
Chantal's covenants, representations and warranties made herein or pursuant
hereto.
(ii) INSPECTION BY CHANTAL. CSI will make available for
inspection by Chantal, during normal business hours and in a manner so as not to
interfere with normal business operations, all of CSI's records (including tax
records), books of account, premises, contracts and all other documents in CSI's
possession or control that are reasonably requested by Chantal to inspect and
examine the business and affairs of CSI. CSI will cause its managerial employees
and regular independent accountants to be available upon reasonable advance
notice to answer questions of Chantal concerning the business and affairs of
CSI. Chantal will treat and hold as confidential any information they receive
from CSI in the course of the reviews contemplated by this Section 4.03(e). No
examination by Chantal will, however, constitute a waiver or relinquishment by
Chantal of its rights to rely on CSI's covenants, representations and warranties
made herein or pursuant hereto.
(f) RESALES OF FULLY-DILUTED CHANTAL SHARES.
(A) The members of the ▇▇▇▇▇ Group and the CSI
Stockholders that are listed on SCHEDULE 4.03(f) and own of record or
beneficially less than 10% of the issued and outstanding Chantal Common Shares
shall, on the Effective Date, execute and deliver to Chantal an agreement,
substantially in the form of EXHIBIT C annexed hereto and made a part hereof
(the "CHANTAL LOCK-UP AGREEMENT"), with respect to resales of the Chantal Common
Shares to be owned by them following the Exchange.
(B) Under the terms of the Chantal Lock-up Agreement,
those members of the ▇▇▇▇▇ Group and CSI Stockholders shall not, unless
permitted by the Board of Directors of Chantal, sell their Chantal Common Shares
for a period of one (1) year from the Effective Date.
(g) SALE OF ADDITIONAL CHANTAL NOTES. On or before the Closing, Chantal
and the ▇▇▇▇▇ Group shall have consummated the sale of not less than $300,000 of
7% non-convertible promissory notes of Chantal that (i) shall bear interest
only, payable quarterly, commencing ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) are payable as to
principal on a date that shall be not earlier than one year from the Effective
Date, (iii) are fully guaranteed by CSI, as a wholly-owned subsidiary of
Chantal, (iv) entitle the holder to receive for $.01 per share, one Chantal
Common Share for each $1.00 principal amount of Chantal note purchased, and (v)
be in substantially the form of EXHIBIT D annexed hereto and made a part hereof
(the "ADDITIONAL CHANTAL NOTES"). ▇▇▇▇▇ Family Irrevocable Stock Trust shall
subscribe to not less than $50,000 of such Additional Chantal Notes.
(h) SALE OF ADDITIONAL CHANTAL NOTES BY CSI CSI shall use its best
efforts (without being legally obligated so to do) to arrange for the sale to
existing CSI Stockholders or holders of CSI convertible notes of $75,000
principal amount of Additional Chantal Notes (exclusive of the $300,000 of
Additional Chantal Notes being purchased in accordance with Section 4.03(g)
above).
(i) POST-CLOSING SALES OF CHANTAL SECURITIES. Chantal and the ▇▇▇▇▇
Group shall use their best efforts to consummate by December 31, 2003, or as
soon thereafter as is practicable, a private offering, under Rule 504
promulgated under the Securities Act of 1933, as amended, of a minimum amount of
$500,000 and a maximum amount of $1,000,000 of common stock of Chantal (the
"RULE 504 OFFERING"). By the Closing Date, the Chantal Principal Stockholder
shall provide CSI with a list of potential investors for such Rule 504 Offering.
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ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 CONDITIONS PRECEDENT TO THE PARTIES' OBLIGATIONS.
The obligations of the Parties as provided herein shall be subject to
each of the following conditions precedent, unless waived in writing by both
Chantal and CSI:
(a) CONSENTS, APPROVALS. The Parties shall have obtained all necessary
consents and approvals of their respective boards of directors, their
stockholders (including any applicable classes thereof) and all consents,
approvals and authorizations required under their respective charter documents,
and all material consents, including any material consents and waivers by the
Parties' respective lenders and other third-parties, if necessary, to the
consummation of the transactions contemplated by this Agreement.
(b) ABSENCE OF CERTAIN LITIGATION. No action or proceeding shall be
threatened or pending before any governmental entity or authority which, in the
reasonable opinion of counsel for the Parties, is likely to result in a
restraint, prohibition or the obtaining of damages or other relief in connection
with this Agreement or the consummation of the Exchange.
SECTION 5.02 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CHANTAL
The obligations of Chantal on the Closing Date as provided herein shall
be subject to the satisfaction, on or prior to the Closing Date, of the
following conditions precedent, unless waived in writing by Chantal:
(a) CONSENTS AND APPROVALS. CSI shall have obtained all material
consents, including any material consents and waivers by CSI's lenders and other
third-parties, if necessary, to the consummation of the transactions
contemplated by this Agreement.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
by CSI in Article III herein shall be true and accurate in all material respects
on and as of the Closing Date with the same force and effect as though such
representations and warranties had been made at and as of the Closing Date,
except to the extent that any changes therein are specifically contemplated by
this Agreement or the same shall not have a Material Adverse Effect.
(c) PERFORMANCE. CSI shall have performed and complied in all material
respects with all agreements to be performed or complied with by it pursuant to
this Agreement prior at or prior to the Closing or except to the extent that the
failure to so perform or comply with the same shall not have a Material Adverse
Effect.
(d) PROCEEDINGS AND DOCUMENTS. All corporate, company and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to Chantal and its counsel, and
Chantal and its counsel shall have received all such counterpart originals (or
certified or other copies) of such documents as they may reasonably request.
(e) CERTIFICATE OF GOOD STANDING. CSI shall have delivered to Chantal a
certificate as to the good standing of CSI certified by the Secretary of State
of the State of New Hampshire on or within two (2) business days prior to the
Closing Date.
(f) MATERIAL CHANGES. Except as contemplated by this Agreement, since
the date hereof, CSI shall not have suffered a Material Adverse Effect.
(g) LOCK-UP AGREEMENT. Chantal and the designated CSI Stockholders that
are parties thereto shall have executed the Chantal Lock-up Agreement.
21
SECTION 5.03 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CSI
The obligations of CSI on the Closing Date as provided herein shall be
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions precedent, unless waived in writing by CSI:
(a) CONSENTS AND APPROVALS. Chantal shall have obtained all material
consents, including any material consents and waivers of its respective lenders
and other third-parties, if necessary, to the consummation of the transactions
contemplated by this Agreement.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties
by Chantal in Article II herein shall be true and accurate in all material
respects on and as of the Closing Date with the same force and effect as though
such representations and warranties had been made at and as of the Closing Date,
except to the extent that any changes therein are specifically contemplated by
this Agreement or the same shall not have a Material Adverse Effect.
(c) PERFORMANCE. Chantal shall have performed and complied in all
material respects with all agreements to be performed or complied with by it
pursuant to this Agreement prior to or at the Closing or the same shall not have
a Material Adverse Effect.
(d) PROCEEDINGS AND DOCUMENTS. All corporate, company and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to CSI and its counsel, and CSI
and its counsel shall have received all such counterpart originals (or certified
or other copies) of such documents as they may reasonably request.
(e) CERTIFICATE OF GOOD STANDING. Chantal shall have delivered to CSI a
certificate as to the good standing of Chantal certified by the Secretary of
State of the State of Delaware on or within two (2) business days prior to the
Closing Date.
(f) MATERIAL CHANGES. Except as contemplated by this Agreement, since
the date hereof, Chantal shall not have suffered a Material Adverse Effect.
(g) LOCK-UP AGREEMENT. Chantal and the ▇▇▇▇▇ Family Irrevocable Stock
Trust shall have executed the Chantal Lock-up Agreement.
(h) CHANTAL BOARD OF DIRECTORS. At the Effective Time of the Exchange,
all of the officers and members of the board of directors of Chantal shall
tender their resignations as officers and directors of Chantal, and the
vacancies created on the Chantal board of directors shall be filled by the
persons designated by CSI that are listed on Schedule 1.05.
(i) ADOPTION OF STOCK OPTION PLAN. By the Closing Date, Chantal shall
have adopted a stock option plan (the "Plan") under which an aggregate of up to
4,000,000 shares of Chantal Common Stock shall be reserved for issuance to key
employees of Chantal, all in the form of EXHIBIT E attached hereto. The Chantal
Principal Stockholder, his transferees pursuant to Section 2.02(d) and the CSI
Stockholders shall enter into a voting agreement with Chantal in the form
attached hereto as EXHIBIT F (the "VOTING AGREEMENT") pursuant to which they
shall agree to vote in favor of the Plan.
(j) CONSUMMATION OF SALE OF ADDITIONAL CHANTAL NOTES. On the Closing
Date, the sale of not less than $300,000 of Additional Chantal Notes shall have
been consummated and the total proceeds thereof shall have been remitted to CSI
as additional working capital to be used to further its business purposes. No
sales commissions, fees or any other expenses shall be deducted from the gross
proceeds of the sale of the Additional Chantal Notes.
(k) ▇▇▇▇▇ FAMILY TRUST VOTING AGREEMENT. The ▇▇▇▇▇ Family Irrevocable
Stock Trust shall enter into a voting agreement with Chantal in the form
attached hereto as EXHIBIT G (the "▇▇▇▇▇ FAMILY TRUST VOTING AGREEMENT")
pursuant to which the ▇▇▇▇▇ Family Irrevocable Stock Trust shall transfer to the
Board of
22
Directors of Chantal, or its successor in interest, its voting rights with
respect to the 1,875,000 Chantal Common Shares owned of record or beneficially
by it, to appoint nominee(s) to the Board of Directors of Chantal.
ARTICLE VI
TERMINATION
SECTION 6.01 TERMINATION.
This Agreement may be terminated and the Exchange may be abandoned at
any time prior to the Effective Time by:
(a) The mutual written consent of the Boards of Directors of the
Parties;
(b) Either Chantal, on the one hand, or CSI, on the other hand, if any
governmental entity or court of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action (which order, decree, ruling
or other action the Parties shall use their commercially reasonable best efforts
to lift), which restrains, enjoins or otherwise prohibits the Exchange or the
issuance of the Exchange Shares pursuant to the Exchange and such order, decree,
ruling or other action shall have become final and non-appealable;
(c) Subject to Section 9.03(b), Chantal, if CSI shall have breached in
any material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, and the breach cannot be or has not been
cured within thirty (30) calendar days after the giving of written notice by
Chantal to CSI;
(d) Subject to Section 9.03(b), CSI, if Chantal shall have breached in
any material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, and the breach cannot be or has not been
cured within thirty (30) calendar days after the giving of written notice by CSI
to Chantal; or
(e) Without any action on the part of the Parties if required by
Applicable Law or if the Exchange shall not be consummated by November 10, 2003.
SECTION 6.02 EFFECT OF TERMINATION.
If this Agreement is terminated as provided in Section 6.01, written
notice of such termination shall be given by the terminating Party to the other
Party specifying the provision of this Agreement pursuant to which such
termination is made, this Agreement shall become null and void and there shall
be no liability on the part of Chantal or CSI, PROVIDED, that subject to Section
9.03(b), nothing in this Agreement shall relieve any Party from any liability or
obligation with respect to any willful breach of this Agreement and PROVIDED,
FURTHER, that subject to Section 9.03(b), termination shall not affect accrued
rights or liabilities of any party at the time of such termination.
ARTICLE VII
CONFIDENTIALITY
SECTION 7.01 CONFIDENTIALITY
Chantal, on the one hand, and CSI, on the other hand, will keep
confidential all information and documents obtained from the other, including
but not limited to any information or documents provided pursuant to Section
4.03(e) hereof, which are designated by such Party as confidential (except for
any information disclosed to the public pursuant to a press release authorized
by the Parties) and in the event the Closing does not occur or this Agreement is
terminated for any reason, will promptly return such documents and all copies of
such documents and all notes and other evidence thereof, including material
stored on a computer, and will not use such information for its own advantage,
except to the extent that (i) the information must be disclosed by law, (ii) the
information becomes publicly available by reason other than disclosure by the
Party subject to the confidentiality obligation, (iii) the information is
independently developed without use of or reference to the other Party's
confidential information, (iv) the information is obtained from another source
not obligated to keep such information confidential, (v) the information is
already publicly known or known to the receiving Party
23
when disclosed as demonstrated by written documentation in the possession of
such Party at such time, or (vi) in connection with any arbitration proceeding
hereunder pursuant to Section 9.03(b).
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01 INDEMNIFICATION BY CHANTAL
Chantal and the Chantal Principal Stockholder shall indemnify, defend
and hold harmless each of CSI, any subsidiary or affiliate thereof and each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Closing, an officer, director or partner of CSI, any
subsidiary or affiliate thereof or an employee of CSI, any subsidiary or
affiliate thereof and their respective heirs, legal representatives, successors
and assigns (the "CSI INDEMNIFIED PARTIES") against all losses, claims, damages,
costs, expenses (including reasonable attorneys' fees), liabilities or judgments
or amounts that are paid in settlement of or in connection with any threatened
or actual third party claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of (i) any material
breach of this Agreement by Chantal or any subsidiary or affiliate thereof,
including but not limited to failure of any representation or warranty to be
true and correct at or before the Closing, (ii) any willful or grossly negligent
act, omission or conduct of any officer, director or agent of Chantal or any
subsidiary or affiliate thereof prior to the Closing, whether asserted or
claimed prior to, at or after, the Closing, or (iii) relating to the
consummation of the transactions contemplated herein, and any action taken in
connection therewith ("CSI INDEMNIFIED LIABILITIES"). Any CSI Indemnified Party
wishing to claim indemnification under this Section 8.01, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify Chantal in
writing, but the failure to so notify shall not relieve Chantal from any
liability that it may have under this Section 8.01, except to the extent that
such failure would materially prejudice Chantal.
SECTION 8.02 INDEMNIFICATION BY CSI
CSI shall indemnify, defend and hold harmless each of Chantal, any
subsidiary or affiliate thereof and each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the Closing, an officer,
director or partner of Chantal, any subsidiary or affiliate thereof or an
employee of Chantal, any subsidiary or affiliate thereof and their respective
heirs, legal representatives, successors and assigns (the "CHANTAL INDEMNIFIED
PARTIES") against all losses, claims, damages, costs, expenses (including
reasonable attorneys' fees), liabilities or judgments or amounts that are paid
in settlement of or in connection with any threatened or actual third party
claim, action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of (i) any material breach of this Agreement by
CSI or any subsidiary or affiliate thereof, including but not limited to failure
of any representation or warranty to be true and correct at or before the
Closing, (ii) any willful or negligent act, omission or conduct of any officer,
director or agent of CSI or any subsidiary or affiliate thereof prior to the
Closing, whether asserted or claimed prior to, at or after, the Closing, or
(iii) relating to the consummation of the transactions contemplated herein, and
any action taken in connection therewith ("CHANTAL INDEMNIFIED LIABILITIES").
Any Chantal Indemnified Party wishing to claim indemnification under this
Section 8.02, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify CSI in writing, but the failure to so notify shall
not relieve CSI from any liability that it may have under this Section 8.02,
except to the extent that such failure would materially prejudice CSI.
SECTION 8.03 INDEMNIFICATION OF EXCHANGE AGENT
(a) Chantal and CSI (for the purposes of this Section 8.03, the
"INDEMNITORS") agree to indemnify the Exchange Agent and its partners, officers,
directors, employees and agents (collectively, the "INDEMNITEES") against, and
hold them harmless of and from, any and all loss, liability, cost, damage and
expense, including without limitation, reasonable counsel fees, which the
Indemnitees may suffer or incur by reason of any action, claim or proceeding
brought against the Indemnitees arising out of or relating in any way to the
Exchange Agent's service in such capacity, unless such action, claim or
proceeding is the result of the willful misconduct or gross negligence of the
Indemnitees.
(b) If the indemnification provided for in Section 8.03(a) is
applicable, but for any reason is held
24
to be unavailable, the Indemnitors shall contribute such amounts as are just and
equitable to pay, or to reimburse the Indemnitees for, the aggregate of any and
all losses, liabilities, costs, damages and expenses, including counsel fees,
actually incurred by the Indemnitees as a result of or in connection with, and
any amount paid in settlement of, any action, claim or proceeding arising out of
or relating in any way to any actions or omissions of the Indemnitors.
SECTION 8.04 SURVIVAL OF INDEMNIFICATION
All rights to indemnification under this Article 8 shall survive for
nine months after the Effective Date of the Exchange, and thereafter any rights
to make a claim for indemnity hereunder is hereby waived. The provisions of this
Article 8 are intended to be for the benefit of, and shall be enforceable by,
each Chantal Indemnified Party, each CSI Indemnified Party, and his or her heirs
and representatives, and the Exchange Agent. No Party shall enter into any
settlement regarding the foregoing without prior approval of the CSI Indemnified
Party or the Chantal Indemnified Party, as the case may be or, if related in any
way to the duties of the Exchange Agent hereunder, the Exchange Agent.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except as set forth in Article VIII. All such representations and
warranties will be extinguished upon the Effective Date of the Exchange and none
of the Parties nor any of their officers, directors, members, employees or
stockholders shall be under any liability whatsoever with respect to any such
representation or warranty after such time. This Section 9.01 shall not limit
any covenant or agreement of the Parties which by its terms contemplates
performance after the Effective Time.
SECTION 9.02 EXPENSES.
Except as contemplated by this Agreement, all costs and expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated by this Agreement shall be paid by the Party incurring
such expenses.
SECTION 9.03 APPLICABLE LAW; ARBITRATION.
(a) GOVERNING LAW. Except to the extent that the law of the State of
Delaware is mandatorily applicable to the Exchange (which shall be governed by
the GCL), this Agreement shall be governed by the laws of the State of New York,
without giving effect to the principles of conflicts of laws thereof, as applied
to agreements entered into and to be performed in such state.
(b) ARBITRATION. Any controversy or claim among the Parties arising out
of or relation to this Agreement or arising in connection with any breach
hereof, shall be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"), as such rules may be modified by this Section 9.03(b). In connection
with the foregoing, each of the Parties hereby waives the right to a trial by
jury any suit action or other proceeding in connection with this Agreement or
any breach hereof. Any award rendered in any arbitration hereunder or in
connection herewith shall be final and binding on the Parties and judgment upon
such award shall be rendered in any court of competent jurisdiction. Any
arbitration shall be held in New York, New York. A single arbitrator selected
jointly by the Parties hereunder shall conduct all arbitrations. If the Parties
are unable to agree on a single arbitrator within 30 days after a demand for
arbitration is made in writing by one Party upon the other, Chantal shall select
one arbitrator and CSI shall select one arbitrator and the two arbitrators so
selected shall select a third neutral arbitrator who shall have familiarity with
share exchange transactions and experience in dispute resolution. The
arbitrators shall render a reasoned written opinion together with their decision
and shall award costs and reasonable attorneys fees to the prevailing Party in
the arbitration. Notwithstanding the preceding sentence, in no event shall the
arbitrators be entitled to award punitive damages (or any award in the nature of
punitive damages) in any such arbitration.
25
SECTION 9.04 NOTICES.
All notices and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given or made as follows:
(a) If sent by registered or certified mail in the United States,
return receipt requested, upon receipt;
(b) If sent by reputable overnight air courier (such as Federal
Express), 2 business days after being sent;
(c) If sent by facsimile transmission, with a copy mailed on the same
day in the manner provided in clauses (i) or (ii) above, when transmitted and
receipt is confirmed by the fax machine; or
(d) If otherwise actually personally delivered, when delivered.
All notices and other communications under this Agreement shall be sent
or delivered as follows:
If to CSI, to:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇▇, Savage, Kaplowitz, Wolf & Marcus, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Chantal, to:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Chantal Principal Stockholder, to:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the CSI Stockholders, c/o:
Corporate Sports Incentives, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
26
Each Party may change its address by written notice in accordance with
this Section.
SECTION 9.05 ENTIRE AGREEMENT.
This Agreement (including the documents and instruments referred to in
this Agreement) contains the entire understanding of the Parties with respect to
the subject matter contained in this Agreement, and supersedes and cancels all
prior agreements, negotiations, correspondence, undertakings and communications
of the Parties, oral or written, respecting such subject matter.
SECTION 9.06 ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned by any of the Parties (whether by
operation of law or otherwise) without the prior written consent of the other
Parties; PROVIDED that in no event may the right to indemnification provided by
Article VIII hereto be assigned by any of the Parties, with or without consent,
except by operation of law. Subject to the immediately foregoing sentence of
this Section 9.06, this Agreement will be binding upon, inure to the benefit of
and be enforceable by, the Parties and their respective successors and assigns.
SECTION 9.07 HEADINGS; REFERENCES.
The article, section and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All references herein to "Articles",
"Sections", "Schedules" or "Exhibits" shall be deemed to be references to
Articles, Sections, Schedules and Exhibits of this Agreement unless otherwise
indicated.
SECTION 9.08 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which shall be considered one
and the same agreement.
SECTION 9.09 NO THIRD PARTY BENEFICIARIES.
Except as expressly provided by this Agreement, nothing herein is
intended to confer upon any person or entity not a Party to this Agreement any
rights or remedies under or by reason of this Agreement.
SECTION 9.10 SEVERABILITY; ENFORCEMENT.
Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provisions shall be interpreted to be only
so broad as is enforceable.
SECTION 9.11 RULES OF CONSTRUCTION.
The Parties agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
SECTION 9.12 EXHIBITS.
All of the Schedules and Exhibits to this Agreement are hereby
incorporated in this Agreement and shall be deemed and construed to be a part of
this Agreement for all purposes.
27
SECTION 9.13 INTERPRETATION.
The words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation." The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
[SIGNATURES ON THE FOLLOWING PAGE]
28
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
CHANTAL SKIN CARE CORPORATION CSI STOCKHOLDERS:
By:
----------------------------- -------------------------------
Name: Name:
Title:
-------------------------------
Name:
CHANTAL PRINCIPAL STOCKHOLDER
-------------------------------
Name:
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name:
CORPORATE SPORTS INCENTIVES, INC.
By:
----------------------------- -------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇ Name:
Title: President and CEO
SCHEDULES
SCHEDULE 1.01
Capital Stock
Name Exchange Shares
---- ---------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 5,710,882
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 2,323,071
▇▇▇▇▇▇ ▇▇▇▇ 1,209,933
▇▇▇▇ Financial Group 1,451,919
▇▇▇▇▇▇ ▇▇▇▇▇▇ 96,795
Warrants - A
Name Exchange Shares
---- ---------------
▇▇▇▇▇ ▇▇▇▇▇▇ 24,199
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 48,397
▇▇▇▇▇▇ ▇▇▇▇ 36,298
Warrants - B
Name Exchange Shares
---- ---------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 96,795
Warrants - C
Name Exchange Shares
---- ---------------
▇▇▇▇ ▇▇▇▇▇ Jr. Revocable Trust 19,359
▇▇▇▇ ▇▇▇▇▇▇▇ 145,192
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 48,397
▇▇▇▇▇ ▇▇▇▇▇▇▇ 96,795
▇▇▇▇▇ ▇▇▇▇▇▇ 96,795
▇▇▇▇▇▇▇ ▇▇▇▇ 193,589
Phil St. Germain 96,795
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 19,359
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 48,397
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 96,795
▇▇▇▇▇ ▇▇▇▇▇ 9,679
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 9,679
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 29,038
Redeemable Warrants
Name Exchange Shares
---- ---------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ 125,000
▇▇▇ ▇▇▇▇▇▇▇ 250,000
▇▇▇ ▇▇▇▇▇▇▇▇▇ 125,000
Convertible Note
Name Exchange Shares
---- ---------------
▇▇▇▇ ▇▇▇▇▇ Jr. Revocable Trust 23,231
▇▇▇▇ ▇▇▇▇▇▇▇ 174,230
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 58,077
▇▇▇▇▇ ▇▇▇▇▇▇▇ 116,154
▇▇▇▇▇ ▇▇▇▇▇▇ 116,154
▇▇▇▇▇▇▇ ▇▇▇▇ 232,307
Phil St. Germain 116,154
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 23,231
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 58,077
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 116,154
▇▇▇▇▇ ▇▇▇▇▇ 11,615
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 11,615
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 34,846
Notes to be Cancelled in Exchange for Chantal Notes
Name Cancelled Loan Amount
---- ---------------------
▇▇▇▇▇▇ ▇▇▇▇ $ 75,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ $100,000
▇▇▇▇▇ ▇▇▇▇▇▇ $ 50,000
SCHEDULE 1.05
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
SCHEDULE 3.02(a)
Upon the Closing Date, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President and CEO of CSI, shall
be granted, pursuant to an amended employment agreement, options to purchase the
greater of (i) 1,000,000 shares or (ii) 25% of the stock option pool of common
stock allocated for the Board of Directors and employees.
Upon the Closing Date, ▇▇▇▇▇ ▇▇▇▇▇▇ shall be granted, pursuant to an
amended employment agreement, options to purchase 100,000 shares from the stock
option pool of common stock allocated for the Board of Directors and employees.
Upon the Closing Date, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be granted, pursuant to a
consultant agreement, options to purchase the greater of (i) 1,000,000 shares or
(ii) 20% of the stock option pool of common stock allocated for the Board of
Directors and employees.
Upon the Closing Date, each newly-appointed independent director shall
be granted options to purchase approximately 100,000 shares from the stock
option pool of common stock allocated for the Board of Directors and employees.
SECTION 3.04(d)
CSI entered into a Business Loan Agreement with multiple individuals with a
current outstanding principal amount of $470,000. The note is secured by all of
the existing and future assets of CSI, excluding selective receivable financing
on bundled retail products. The loan is convertible into shares of the common
stock of CSI after July 15, 2004
SCHEDULE 3.05
SCHEDULE 3.05(b)(i)
Restated Articles of Incorporation including Designated Amendments
filed with the New Hampshire Secretary of State on September 19, 2003.
SCHEDULE 3.05(b)(v)
CSI recently hired a part-time CFO position. The position is paid
hourly, is at-will, and is expected to be eliminated after 1 year.
SCHEDULE 3.05(b)(vi)
Upon the Closing Date, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President and CEO of CSI,
pursuant to an amended employment agreement, will receive an annual salary
increase of $7,229 for the term of his employment agreement and a one-time bonus
of $25,000.
Upon the Closing Date, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be paid an annual
consulting fee of $75,000 pursuant to a new consultant agreement.
Upon the Closing Date, ▇▇▇▇▇ ▇▇▇▇▇▇, who is a part-time consultant
being paid an annual salary of $72,000 plus commission, will become a full-time
employee at an annual salary of $110,000 pursuant to an amended employment
agreement.
SCHEDULE 3.05(b)(vii)
Upon the Closing Date, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President and CEO of CSI,
pursuant to an amended employment agreement, will receive an annual salary
increase of $7,229 for the term of his employment agreement and a one-time bonus
of $25,000.
Upon the Closing Date, ▇▇▇▇▇ ▇▇▇▇▇▇, who is a part-time consultant
being paid an annual salary of $72,000 plus commission, will become a full-time
employee at an annual salary of $110,000 pursuant to an amended employment
agreement.
SCHEDULE 3.05(c)(i)
CSI entered into a Business Loan Agreement with multiple individuals
with a current outstanding principal amount of $470,000. The note is secured by
all of the existing and future assets of CSI, excluding selective receivable
financing on bundled retail products. The loan is convertible into shares of the
common stock of CSI after July 15, 2004.
SCHEDULE 3.05(c)(ii)
CSI paid off receivables financing in the amount of $320,348 in August
2003.
SCHEDULE 3.05(c)(iv)
The employment agreements with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ have
been amended effective as of the Closing Date.
SCHEDULE 3.10(a)
CSI entered into a Business Loan Agreement with multiple individuals
with a current outstanding principal amount of $470,000. The note is secured by
all of the existing and future assets of CSI, excluding selective receivable
financing on bundled retail products. The loan is convertible into shares of the
common stock of CSI after July 15, 2004.
SCHEDULE 4.03(f)
▇▇▇▇▇ Family Irrevocable Stock Trust
▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ on behalf of ▇▇▇▇ Financial Group
▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT A
Chantal Note
EXHIBIT B
Chantal Warrant
EXHIBIT C
Chantal Lock-up Agreement
EXHIBIT D
Additional Chantal Note
EXHIBIT E
Stock Option Plan
EXHIBIT F
Voting Agreement
EXHIBIT G
▇▇▇▇▇ Family Trust Voting Agreement