EXHIBIT 2
EXCHANGE AGREEMENT
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THIS EXCHANGE AGREEMENT (this "Agreement") is made and entered into as
of the 24th day of January, 2000, by and between Aden Enterprises, Inc., a
California corporation, with its principal place of business at 00000 X Xxxxxx,
Xxxxx, XX 00000 ("Aden"), and MercExchange, LLC, a Virginia limited liability
company, with its principal place of business at 000 X. Xxxxxx Xxxxxx,
Xxxxxxxxxx, XX 00000 ("MercExchange").
WHEREAS, MercTravel, Incorporated, a Delaware corporation
("MercTravel"), is a wholly owned subsidiary of MercExchange; and
WHEREAS, Aden desires to acquire all of the issued and outstanding
shares of common stock of MercTravel on the terms and conditions hereinafter set
forth; and
WHEREAS, the parties desire that the transactions contemplated by this
Agreement constitute an exchange of property as provided in Section 351 of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants set forth herein, the parties agree as follows:
1. Representations of MercExchange.
a. To the knowledge of MercExchange, the authorized capital stock
of MercTravel consists of 1,000 shares of common stock, par
value $.01 per share, of which 1,000 shares are issued and
outstanding. MercExchange is the sole shareholder. There are
no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require
such corporation to issue, sell or otherwise cause to become
outstanding any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to such
corporation. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the
capital stock of such corporation.
b. To the knowledge of MercExchange, MercTravel is a corporation
duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and
operate its properties and to carry on its businesses as now
being conducted, and is duly qualified to do business as a
foreign corporation, if required, and is in good standing in
each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business require such
qualification, except where the failure to be so qualified
would not have a material adverse effect on the assets,
business, results of operations or conditions (financial or
otherwise) of each of such corporation. MercTravel has
previously delivered to Aden true, complete and correct copies
of its charter and by-laws, as currently in effect.
c. To the knowledge of MercExchange, MercTravel has no
subsidiaries, or any direct or indirect interest, whether by
way of stock ownership or otherwise, in any corporation, firm,
association or business enterprise.
d. To the knowledge of MercExchange, MercTravel owns and
possesses, or is duly licensed in respect of, all licenses,
trademarks, trademark rights, applications for trademarks,
trade names, trade name rights, processes, and formulas,
necessary for the operation of its business, with no known
material conflict with the rights of others, and the same are
subject to no liens, encumbrances, claims, or charges.
e. As of the date of this Agreement, to the knowledge of
MercExchange, there are no actions, suits, or proceedings
pending or, to the knowledge of MercExchange, threatened,
against MercTravel, at law or in equity, or before or by any
federal, state, municipal, or other governmental agency or
instrumentality, domestic or foreign, except for those
actions, suits, or proceedings which would not have a material
and adverse effect on the financial condition of MercTravel.
MercTravel is not in default with respect of any order or
decree of any court or of any such governmental agency or
instrumentality.
f. Neither the execution and delivery of this Agreement nor the
consummation of the transactions herein contemplated, will
conflict with or result in the breach of, or accelerate the
performance required by, any terms of any agreement to which
either of MercTravel or MercExchange are now a party, or
constitute a default thereunder, or result in the creation of
any lien, charge, or encumbrance upon any of the properties or
assets of MercTravel.
g. To the knowledge of MercExchange, MercTravel is not a party to
any agreement or instrument subject to any charter or other
corporate restriction materially and adversely effecting the
business, property, or assets, operations or condition
(financial or otherwise) of such corporation.
h. To the knowledge of MercExchange, MercTravel and MercExchange
have timely filed all tax returns and reports required to be
filed by each, including without limitation all federal,
state, local and foreign tax returns, and all such tax returns
and reports are true, complete and correct in all material
respects. MercTravel has paid in full or made adequate
provision by the establishment of reserves for all such taxes
and other charges which have become due or have been asserted
in writing by any taxing authority to be due, relating to each
such corporation, including, if such corporation was an S
Corporation prior to the consummation of the transactions
contemplated by this Agreement, taxes and other charges
attributable to the S Corporation election by each such
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corporation, and has withheld with respect to their employees
all federal and state income taxes, FICA, FUTA and any other
taxes or charges required to be withheld except for those
taxes or other charges the failure of which to pay or withhold
would not have a material and adverse effect on the financial
condition of MercTravel. To the knowledge of MercExchange,
there is no tax deficiency proposed or threatened against
MercTravel. To the knowledge of MercExchange, MercTravel has
made all payments of estimated taxes, if any, when due in
amounts sufficient to avoid the imposition of any penalty
except where such penalty would not have a material and
adverse effect on the financial condition of MercTravel. There
are no outstanding agreements, waivers, or arrangements
extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of,
taxes due from or with respect to MercTravel for any taxable
period, and no power of attorney granted by or with respect to
MercTravel relating to taxes is currently in force. No closing
agreement pursuant to Section 7121 of the Internal Revenue
Code of 1986, as amended, (or any predecessor provision) or
any similar provision of any state, local, or foreign law has
been entered into by or with respect to MercTravel that could
materially and negatively effect the future liability for
taxes of MercTravel. No audit or other proceeding by any
governmental authority has formally commenced and no written
notification has been given that such an audit or other
proceeding is pending or threatened with respect to any taxes
due from or with respect to MercTravel that could materially
and negatively affect the future liability for taxes of
MercTravel. No unpaid assessment of tax has been proposed in
writing against MercTravel other than assessment of a type
that arise on a recurring basis in the ordinary course of
business.
i. To the knowledge of MercExchange, MercTravel has no direct or
indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, accrued, absolute,
contingent or otherwise ("Liabilities"), which would be
required by generally accepted accounting principles to be
disclosed in their respective financial statements (including,
without limitation, in the notes thereto), other than
liabilities fully and adequately reflected or reserved against
their respective balance sheet, prepared in accordance with
generally accepted accounting principles. To the knowledge of
MercExchange, since December 13, 1999, MercTravel has incurred
no liabilities which would be required by generally accepted
accounting principles to be disclosed in its financial
statements (including, without limitation, in the notes
thereto), other than Liabilities incurred since December 13,
1999 in the ordinary course of business.
j. To the knowledge of MercExchange, MercTravel is in compliance
in all material respects with all applicable laws (including,
but not limited to, rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of all federal, state or local governments, or any
agency or instrumentality of the foregoing, domestic or
foreign, in respect of the conduct of its business and
ownership or leasing of its properties, except where the
failure to so comply would not have a material adverse effect
on the assets, business, results of operations or condition
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(financial or otherwise) of such corporation. To the knowledge
of MercExchange, MercTravel has all licenses, permits, orders
or approvals of all federal, state or local governmental
bodies, quasi-governmental bodies or authorities, domestic or
foreign, which are material to, or necessary for, the conduct
of the operations of such corporation. To the knowledge of
MercExchange, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against MercTravel alleging any
failure so to comply, except where the failure to so comply
would not have a material and adverse effect on the assets,
business, results of operations or condition (financial or
otherwise) of such corporation.
k. Since December 13, 1999, there has not been any material
adverse change in the business, financial condition,
operations, results of operations, or future prospects of
MercTravel.
l. MercTravel has good and marketable title to, or a valid
leasehold interest in, the properties and assets used by it,
located on its premises, or shown in its balance sheet, or
acquired after the date thereof, free and clear of all liens,
claims, encumbrances, charges, and assessments, except for
properties and assets disposed of in the ordinary course of
business since December 13, 1999.
m. MercExchange further represents and warrants that:
i. The Aden Shares (as defined below) are being acquired
for investment for MercExchange's own account, not as a
nominee or agent, and not with a view to the resale or
distribution of any part thereof, and MercExchange has
no present intention of selling, granting any
participation in, or otherwise distributing the same.
MercExchange does not have any contract, undertaking,
agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any
third person, with respect to any of the Aden Shares.
ii. MercExchange believes it has received all information it
considers necessary or appropriate for deciding whether
to purchase the Aden Shares. MercExchange has had an
opportunity to ask questions and receive answers from
Aden regarding the terms and conditions of the offering
of the Aden Shares.
iii. MercExchange has previously invested in companies in the
development stage, can bear the economic risks of the
investment and has such knowledge and experience in
financial or business matters that it is capable of
evaluating the merits and risks of its investment in the
Aden Shares.
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iv. MercExchange is an accredited investor as defined in
Rule 501(a) of Regulation D, as amended, of the
Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended.
v. MercExchange understands that the Aden Shares it is
purchasing pursuant to this Agreement are characterized
as "restricted securities" under the federal securities
laws inasmuch as they are being acquired from Aden in a
transaction not involving a public offering and that
under such laws and applicable regulations the Aden
Shares may be resold without registration under the
Securities Act only in certain limited circumstances. In
this connection, MercExchange is familiar with SEC Rule
144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
vi. MercExchange will not dispose of any of the Aden Shares
(other than pursuant to SEC Rules 144 or 144A or any
similar or analogous rule or rules) unless and until (A)
MercExchange shall have notified Aden of the proposed
disposition and the circumstances surrounding the
proposed disposition and, if reasonably requested by
Aden, MercExchange shall have furnished Aden with an
opinion of counsel reasonably satisfactory in form and
substance to Aden to the effect that such disposition
will not require registration under the Securities Act;
or (B) there is in effect a registration statement under
the Securities Act covering the proposed disposition and
the proposed disposition is made in accordance with such
registration statement.
vii. The certificates evidencing the Aden Shares may bear the
restrictive legends set forth below, except that such
certificates shall not bear the legends set forth below
if: (x) the transfer was made in compliance with Rule
144; (y) there is in effect a registration statement
under the Securities Act covering the proposed
disposition and the proposed disposition is made in
accordance with such registration statement; or (z) if
the opinion of counsel, if any, delivered pursuant to
this Section is to the effect that such legend is not
required in order to establish compliance with any
provisions of the Securities Act:
(A) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("ACT"). THE SECURITIES MAY NOT BE TRANSFERRED
UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN
EFFECT AS TO SUCH TRANSFER OR SUCH TRANSFER IS MADE
PURSUANT TO RULES 144 OR 144A OF THE ACT OR AN EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF THE ACT."
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(B) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE CORPORATION RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT."
(C) Any legend required by the laws of any applicable
state or other jurisdiction governing the Aden Shares.
2. Exchange of Stock.
a. On the Closing Date, as hereinafter fixed, MercExchange shall
deliver to Aden certificates representing all of the issued
and outstanding shares of common stock of MercTravel, as the
same shall be constituted on the Closing Date, duly endorsed
in blank by the owner of record, or accompanied by duly
executed stock powers in blank, and accompanied by requisite
revenue stamps evidencing the payment of the transfer tax, if
any.
b. On the Closing Date, as hereinafter fixed, Aden shall deliver
to MercExchange fifty-eight million (58,000,000) shares of
restricted common stock in Aden Enterprises, Inc. (the "Aden
Shares").
3. Closing. The consummation of the transactions contemplated herein
(the "Closing") shall take place at the offices of Xxxxxxxx &
Xxxxxxxxxx, P.C. at 00000 Xxxxxxx Xxxxxxx Xxxxx, Xxxxx, Xxxxxxxx
00000, at 10:00 a.m. (local time) on February 25, 2000 (the "Closing
Date"), or at such other time and place as the parties may agree.
4. Indemnity for Damages. MercExchange shall indemnify, fully defend
and save and hold harmless Aden at all times from and against all
demands, claims, actions, causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without
limitation, interest, penalties and reasonable attorneys' fees and
expenses, but net of any tax savings and insurance proceeds actually
received by the indemnitee as a result of the matter giving rise to
the indemnification, asserted against, resulting to, imposed upon or
incurred by Aden, by reason of or resulting from any inaccurate
representation made by MercExchange in this Agreement, breach of any
of the warranties made by MercExchange in this Agreement and breach
or default in performance by MercExchange of any of the covenants
which it is to perform hereunder.
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5. Conditions to Obligations of Aden. The obligations of Aden hereunder
are, except as may be waived in writing by Aden, subject to the
conditions that:
a. Certificates representing 100% of the issued and outstanding
shares of common stock of MercTravel, as such stock shall then
be constituted, shall be tendered for exchange at the Closing
by MercExchange.
b. The representations contained in Sections 1 and 7 hereof shall
be true on and as of the Closing Date with the same effect as
though such representations had been made on and as of the
Closing Date, and there shall be delivered to Aden at the
Closing, if requested, a certificate, in form and substance
satisfactory to Aden and its counsel, duly signed by
MercExchange to that effect.
6. Conditions to Obligations of MercExchange. The obligation of
MercExchange hereunder to deliver to Aden shares of common stock of
MercTravel is, except as may be waived in writing by MercExchange,
subject to the conditions that:
x. Xxxx is a duly organized and existing corporation in good
standing under the laws of the State of California;
b. A certificate or certificates representing the Aden Shares are
delivered to MercExchange according to the provisions of
Section 2;
c. A duly executed Registration Rights Agreement in substantially
the form of Exhibit "A" hereto is delivered at the Closing;
and
d. This Agreement has been duly executed and delivered by Aden,
and constitutes the legal, valid, and binding obligation of
Aden, enforceable in accordance with its terms.
7. Survival of Representations. The representations and warranties of
the parties hereto shall survive the making of this agreement, any
examination on behalf of such parties, and the Closing hereunder.
Any waiver of any term or condition of this agreement shall not
operate as a waiver of any other breach of such term or condition,
or of any other term or condition, nor shall any failure to enforce
any provision hereof operate as a waiver of such provision or of any
other provision hereof.
8. Notices. All communications hereunder shall be in writing and
delivered or mailed to Xxxx, Xxxx Enterprises, Inc., Attn: Xxxxxxx
Xxxxxx, and to MercExchange, MercExchange, LLC, Attn: Xxxxxx
Xxxxxxxx, or at such other address as each party may specify in
writing.
9. Broker. Aden and MercExchange represent to each other that no broker
has been employed in connection with any transaction or transactions
involved in this Agreement.
10. Entire Agreement. This Agreement constitutes the entire contract
between the parties hereto and no party shall be liable or bound to
another in any manner by any warranties, representations or
guarantees except as specifically set forth herein.
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11. Modification. This Agreement may not be changed or modified except
by an agreement in writing by Aden and by MercExchange or by any
person authorized to act on their behalf.
12. Benefit. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective legal
representatives, successors, and assigns of the parties hereto.
13. Governing Law. This Agreement is made pursuant to and shall be
construed under the laws of the State of Nebraska, without regard to
any applicable conflicts of law provisions.
14. Counterparts. This Agreement may be executed and endorsed in one or
more counterparts, and each of such counter parts shall, for all
purposes, be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF the parties hereto have duly caused this Agreement
to be executed as of the day and year first above written.
Aden: MercExchange:
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxx Xxxxxxxx
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