Exhibit 1
EXECUTION COPY
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU") reflects the
binding mutual understandings and agreements pertaining to the
subject matter contained herein by and among The Shaar Fund Ltd.
("Shaar"), Hestian Pty Limited ("Hestian") and VB Family Trust
("VB" and, together with Hestian, "Hestian/VB").
RECITALS
WHEREAS, Shaar and Hestian/VB (each a "Party" and together
the "Parties") desire to enter into a joint venture for the purpose
of maximizing the value of certain assets to be contributed to the
venture;
WHEREAS, the Parties wish to enter into this binding MOU to
establish a limited liability company for this purpose;
NOW THEREFORE, in consideration of the mutual covenants and
promises set forth herein, and intending to be bound, the Parties
hereto agree as follows:
1. Essence of Cooperation. The Parties shall each participate in the joint
venture through a limited liability company to be established pursuant
to Section 3 ("Newco"), which shall be formed solely for the purpose of
maximizing the value of the assets contributed to it by the Parties, and
for such other purposes as may be mutually agreed by the Parties.
2. Loans to IFSH. Shaar shall make a loan of $25,000 to IFS International
Holdings, Inc. ("IFSH"), and Hestian/VB shall make a loan of $25,000 to
IFSH (each such loan, a "Loan") to fund certain costs incurred by IFSH
in connection with the venture, including severance payments. Each Loan
shall be evidenced by a demand note executed by IFSH and payable to
Shaar and Hestian/VB, respectively, at rates of interest and on other
terms (including any security interests) to be determined (each, a "Loan
Note").
3. The Limited Liability Company.
(a) Formation. The Parties shall, as soon as practicable after the date
of this MOU, form a limited liability company under the name SHVB
Holdings LLC ("Newco"), by filing all necessary organizational
documents and obtaining all necessary approvals in the State of
Delaware. Newco shall issue no more than 100 membership interests,
and the Parties shall initially subscribe for those membership
interests for a nominal consideration, such that (i) Shaar holds
exactly 50% of the total membership interests of Newco
and (ii) Hestian/VB holds exactly 50% of the total membership
interests of Newco.
(b) Voting of Membership Interests. Each of the Parties shall vote its
membership interests and take all other actions necessary to ensure
that all organizational documents of Newco (including the
certificate of formation and the limited liability company
agreement) shall, subject to the law, give effect to, and shall not
conflict with, the provisions of this MOU.
(c) Allocation of Costs. Subject to the terms of this MOU, each Party
shall bear its own costs of establishing and organizing Newco.
(d) Share of Assets and Profits. Subject to Section 4(e), any dividends
paid or distributions made by Newco, including, without limitation,
in connection with the winding-up, liquidation, termination or
dissolution of Newco (in each case, voluntary or otherwise), shall
be made to the Parties in proportion to their relative membership
interests.
(e) Board of Managers. Subject to the terms of this MOU and the laws of
the State of Delaware, the conduct of the affairs of Newco shall be
controlled by and shall be the responsibility of the board of
managers of Newco ("Board"). All actions of Newco shall require
approval of all managers. The Board shall comprise 2 managers or
such other number agreed by the Parties. Shaar shall be entitled to
nominate 1 manager or such other number agreed by the Parties and
Hestian/VB shall be entitled to nominate 1 manager or such other
number agreed by the Parties.
(f) Manager Conflict Resolution. In the event that managers appointed
by each of Shaar and Hestian/VB cannot agree on any material
business or management issue relating to the formation,
capitalization or operation of Newco (a "Deadlock"), the managers
shall refer the matter to Xxx Xxxxxxxx and Xxxxxxxxxxx xxx Xxxxxx
for resolution of the conflict.
(g) Removal of Managers. Only the appointing Party may cause the
removal of any manager appointed by it. Any manager jointly
nominated by the Parties may be removed only by agreement among the
Parties.
(h) Issuance of Additional Membership Interests. Apart from the
membership interests issued to each of Shaar and Hestian/VB
pursuant to this MOU, no further membership interests in Newco,
options in respect of unissued membership interests or other
securities may be issued by Newco without the prior written consent
of each Party.
(i) Restriction on Transferring Membership Interests. No Party shall,
other than in favor of a Related Party (as defined below): (a)
transfer or otherwise deal with its membership interests in or any
beneficial interest in its membership interests, or (b) create any
security interest, mortgage or encumbrance
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whatsoever over the membership interests held by it, in each case
without the prior written consent of each other Party.
A "Related Party" of any Party shall be (i) the spouse, the
parents, any immediate family member or lineal descendants of such
Party; (ii) a trust under which the distribution of the membership
interests may be made only to beneficiaries who are such Party or
persons described in (i); (iii) a corporation, the stockholders of
which are only such Party or persons described in (i) or (ii); (iv)
a partnership or limited liability company, the partners or members
of which are only such Party or persons described in (i), (ii) or
(iii); (v) in the case of Hestian, VB; (vi) in the case of VB,
Hestian or (vii) any direct or indirect beneficial owner of
interests in Shaar or the spouse, the parents, any immediate family
member or lineal descendants of such beneficial owner, provided
that in the case of any transfer to a person described in this
Section 3(i), the transferring Party shall retain all voting rights
associated with the transferred membership interest.
(j) Limitation on Liability. Each Party agrees that it shall not,
directly or indirectly, bring any suit or claim against any manager
appointed by the other Party (whether in contract, by statute,
common law or otherwise) arising out of or in connection with the
venture, except for claims arising from such manager's fraud or
willful misconduct.
(k) Indemnification of Managers. Newco shall agree to exculpate and
indemnify each manager to the fullest extent permitted by law and
to hold such manager harmless from and against any losses, claims,
damages or liabilities incurred or sustained in connection with
this venture (other than as a result of such manager's fraud or
willful misconduct).
4. Ownership and Capitalization of Newco.
(a) Newco Capitalization. Shaar shall initially make a capital
contribution to Newco in an amount equal to $50,000 (the "Shaar
Initial Contribution") and Hestian/VB shall make a capital
contribution to Newco in an amount equal to $50,000 (the
"Hestian/VB Initial Contribution" and, together with the Shaar
Initial Contribution, the "Initial Contributions"). Shaar and
Hestian/VB shall each contribute to Newco its Loan Note, and such
contribution shall be deemed, to the extent of the face amount of
each such Loan Note, to be in partial satisfaction of the
obligation of each Party to make capital contributions pursuant to
this Section 4. After the Initial Contributions, no Party shall be
permitted to effect an additional capitalization of Newco in a
manner that will have a dilutive effect on holdings of each
non-contributing Party, without the consent of all non-contributing
Parties.
(b) Shaar Contribution Commitment. Shaar shall contribute to Newco all
of its interests in IFSH, including without limitation (i) all of
its shares of Series
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2002 Voting Preferred Stock (the "Shaar Voting Preferred Stock") to
be issued by IFSH to Shaar pursuant to an amendment agreement
substantially in the form of Exhibit A (the "Amendment Agreement"),
(ii) all of its shares of IFSH common stock, including all shares
of common stock received by Shaar upon conversion (the
"Conversion") of Shaar's shares of IFSH Series B 5% Convertible
Preferred Stock (the "IFSH Preferred Stock") or Shaar Voting
Preferred Stock into shares of common stock of IFSH; (iii) all of
Shaar's interests in the Amendment Agreement; (iv) all of its
Common Stock Purchase Warrants (the "IFSH Warrants"); (v) to the
extent not relinquished by Shaar pursuant to the Amendment
Agreement, any and all interests in accrued dividends on IFSH
Preferred Stock; (vi) to the extent not relinquished by Shaar
pursuant to the Amendment Agreement, any and all interests in late
penalties (if any) accruing on IFSH Preferred Stock and (vii) all
of its other interests, legal or beneficial, in IFSH ((i) through
(vii), together, the "Shaar Contribution Commitment").
(c) Hestian/VB Contribution Commitment. Each of Hestian/VB and
Xxxxxxxxxxx xxx Xxxxxx shall contribute, or cause to be
contributed, to Newco all of their interests in IFSH, including
without limitation (i) all of their shares of IFSH common stock;
(ii) all of their common stock purchase warrants and (iii) all
right, title and interest held by Hestian/VB and Sonic
Communications Pty Limited ("Sonic") in that certain letter
agreement dated as of May 23, 2001, among Sonic, IFSH and IFS
International, Inc. ("IFSI") (the "Sonic Letter Agreement") ((i)
through (iii), together, the "Hestian/VB Contribution Commitment").
(d) Contribution Timing. The Initial Contributions, the Shaar
Contribution Commitment and the Hestian/VB Contribution Commitment
shall be contributed to Newco simultaneously and as promptly as
reasonably possible after the formation of Newco.
(e) Certain Distributions. In the event that Sonic and/or Pulse
International Pty Ltd. ("Pulse") initiates a suit or similar
proceeding, whether in a court of law or binding arbitration,
against IFSH, any subsidiary of IFSH or Newco, then (i) Newco shall
be dissolved, (ii) the Shaar Initial Contribution shall be returned
to Shaar; (iii) the Hestian/VB Initial Contribution shall be
returned to Hestian/VB; (iv) the Shaar Commitment Contribution
shall be returned to Shaar; (v) the Hestian/VB Commitment
Contribution shall be returned to Hestian/VB and (vi) any remaining
assets of Newco shall be distributed to the Parties in proportion
to their relative membership interests. As of the date hereof,
other than the contractual relationships between Sonic and IFS
International, Inc. and Pulse and IFS International, Inc., no
affiliate of Sonic or Pulse has a contractual relationship with
IFSH or any of its affiliates.
(f) Restriction on Interests in IFSH Each of Shaar and Hestian/VB
agrees that, prior to the contribution to Newco of the Shaar
Contribution Commitment and the Hestian/VB Contribution Commitment,
respectively, it will not (a)
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transfer, vote or otherwise deal with its equity interests in IFSH,
or (b) create any security interest, mortgage or encumbrance
whatsoever over its equity interests in IFSH, in each case without
the prior written consent of each other Party; provided nothing in
this Section 4(f) shall restrict the ability of Shaar to consummate
the Conversion and/or an exchange of the IFSH Preferred Stock for
other shares of IFSH preferred stock and/or shares of IFSH common
stock pursuant to the Amendment Agreement.
(g) Certain Assurances. The managers and Newco shall use their best
efforts to cause IFSH to comply with its contractual obligations,
including, without limitation, those in favor of Pulse.
(h) Certain Consulting Arrangements. Newco shall use its best efforts
to enter in to an agreement with Xxxx Post to provide consulting
services to Newco with respect to IFSH.
5. Confidentiality.
(a) The Parties shall, as soon as practicable after the date of this
MOU, cooperate in the preparation and filing of any filings
required by the securities laws of the United States.
(b) Except (i) for filings made pursuant to Section 5(a) hereunder or
(ii) as required by any applicable law or regulation or the rules
of any recognized national stock exchange, neither party shall
cause any public announcement to be made regarding the formation,
capitalization and operation of Newco or this MOU without the prior
written consent of each other Party. In the event that any Party
shall be required to cause such a public announcement to be made
pursuant to any applicable law or regulation or the rules of any
recognized national securities exchange, such Party shall provide
each other Party prior written notice of such announcement as far
in advance of such announcement as may be reasonably practical.
6. Representations and Warranties.
(a) Each Party warrants to each other Party that it is duly organized
and validly existing under the laws of the jurisdiction and/or
state of its organization and has full corporate and/or
organizational power and authority to do all things required by it
under this MOU.
(b) Each Party warrants to each other Party that:
(i) it has the legal right and power to enter into this MOU and
to carry out its obligations in accordance with the terms
of this MOU;
(ii) the execution, delivery and performance of this MOU has
been duly and validly authorized by all necessary action on
its part;
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(iii) this MOU is a valid and binding agreement on it,
enforceable in accordance with its terms; and
(iv) the execution and performance of this MOU by it and the
other transactions contemplated by this MOU does not
violate or conflict with or result in a breach of or
constitute a default under its organizational documents.
(c) Each Party warrants that it has not entered into any agreement or
arrangement with a third party that would restrain it from acting
in accordance with this MOU.
7. Mutual Understandings.
(a) If any Party (the "First Party") commits a material breach of this
MOU, each other Party shall serve a written notice on the First
Party requiring it to remedy the breach within 14 calendar days. If
such breach is not remedied the non-breaching Parties shall have
the right (but not the obligation) to terminate this MOU.
(b) The Parties acknowledge that supplemental documentation, filings
and registrations shall be required to effectively complete the
contemplated transaction. The Parties agree, represent and warrant
that they shall make best efforts to comply with any and all
reasonable requests and requirements of each other and any and all
government and industry regulatory agencies in the execution and
submission of all such required and requested documentation.
(c) Newco shall reimburse Shaar the amount of $50,000 for legal fees
and disbursements of Xxxxxxxxx & Xxxxxxx in connection with the
Amendment Agreement and related transactions associated therewith.
8. Assignment. This MOU shall be binding upon and inure to the benefit of
the respective representatives, successors and assigns of the Parties.
No assignment or transfer hereunder shall be made by any Party without
the prior written consent of the other Party (the "Non-Assigning
Party").
9. Termination. This MOU may be terminated:
(a) in accordance with Section 7(a);
(b) by mutual agreement of the Parties; or
(c) by Hestian/VB, on delivery of written notice to Shaar, if Shaar's
contribution to Newco pursuant to Section 4(b) hereof has not
occurred within 30 days of the date hereof.
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10. Governing Law; Jurisdiction. This MOU, and any amendments hereto,
shall be governed by and construed in accordance with the laws of the
State of New York without giving effect to the choice of law provisions
thereof.
11. Amendments. This MOU may not be amended, supplemented or otherwise
modified, and no provision of this MOU may be waived, except by a
written instrument signed by each of the Parties hereto.
12. Severability. If any provision of this MOU or application thereof to
anyone under any circumstances should be determined to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions or applications of this MOU which can be given effect
without the invalid or unenforceable provision or application.
13. No Waiver. No failure on the part of any Party to exercise any right
hereunder, and no delay in exercising any right, privilege, or power
under this MOU, shall operate as waiver or relinquishment; nor shall any
single or partial exercise by any Party preclude any other or further
exercise, or the exercise of any other right, privilege, or power.
14. Entire Agreement. This MOU constitutes the entire agreement and
understanding among the Parties with respect to the subject matter
hereof and supersedes all previous agreements and understandings.
15. Counterparts. This MOU may be executed in multiple counterparts which,
when taken together, shall constitute one and the same instrument.
Delivery of an executed counterpart of this MOU by facsimile shall be
effective as a manual signature.
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In witness whereof, the undersigned Parties have caused this MOU to be
executed and delivered by its duly authorized officer as of the 30th day of
September, 2002.
THE SHAAR FUND LTD.
By: Shaar Advisory Services, N.V.
(the Advisor to The Shaar Fund)
/s/ Hugo Van Neutegem
------------------------------------------
Name: Hugo Van Neutegem
Title: Managing Director of Shaar Advisory Services, N.V.
HESTIAN PTY LIMITED
By
/s/ Xxxxx Xxxxxxx Xxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxx Xxxxxxx
Title: Director
VB FAMILY TRUST
By
/s/ Xxxxx Sechos
------------------------------------------
Name: Xxxxx Sechos, as Attorney-in-fact for
Xxxxxxxxxxx xxx Xxxxxx
Title: Director
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EXHIBIT A
[AMENDMENT AGREEMENT ATTACHED]
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EXECUTION COPY
AGREEMENT TO AMEND TERMS OF SERIES B PREFERRED STOCK
Agreement to Amend Terms of Series B Preferred Stock (this "Agreement"),
dated as of September 30, 2002, between The Shaar Fund, Ltd. ("Shaar") and IFS
International Holdings, Inc. ("IFSH").
RECITALS
WHEREAS, Shaar and IFSH (each a "Party" and together the "Parties") are
each party to that certain Securities Purchase Agreement (the "Purchase
Agreement"), dated as of March 23, 2000, pursuant to which Shaar purchased (1)
200,000 shares of Series B 5% Convertible Preferred Stock of IFSH and (2) a
common stock warrant (the "Warrant") to purchase 200,000 shares of the common
stock of IFSH;
WHEREAS, under its certificate of incorporation, as amended, IFSH has
authorized 50,000,000 shares of common stock, par value $0.001 per share (the
"Common Stock") and 25,000,000 shares of Preferred Stock $0.001 par value (the
"Preferred Stock") and has 8,809,122 shares of Common Stock outstanding and has
695,244 shares of Preferred Stock outstanding, consisting of 161,250 shares of
Series B 5% Convertible Preferred Stock ("Series B Preferred Stock") and 533,994
shares of Series 2000 Preferred Stock ("Series 2000 Preferred Stock");
WHEREAS, Shaar is, as of the date hereof, the holder of all the
outstanding shares of Series B Preferred Stock (the "Shaar Preferred Stock");
WHEREAS, pursuant to the certificate of designation, as amended (the
"Certificate of Designation"), relating to the Series B Preferred Stock, Shaar
believes it has the right to convert the Shaar Preferred Stock into no fewer
than 70,000,000 shares of Common Stock;
WHEREAS, the Parties believe it is in the best interests of IFSH and
Shaar to restructure the capital of IFSH, including certain amendments to the
Certificate of Designation, and to enter into certain agreements to accomplish
this restructuring;
WHEREAS, the Parties acknowledge that the aforesaid amendments to the
Certificate of Designation require shareholder approval; and
WHEREAS, pending such shareholder approval, the Parties wish to take
certain actions in furtherance of the aforesaid capital restructuring.
NOW THEREFORE, in consideration of the mutual covenants and promises set
forth herein, and intending to be bound, the Parties hereto agree as follows:
1. Amendment of the Certificate of Designation. The Certificate of
Designation shall be amended to provide that each share of Series B
Preferred Stock shall (i) have no dividend rights, provided that the
Series B Preferred Stock shall have dividend rights equivalent to
holders of the Common Stock on an as-converted basis, (ii) have voting
rights equivalent to 403 shares of Common Stock; (iii) be convertible
into 403 shares of Common Stock; and (iv) in all other respects retain
the rights and preferences set forth in the Certificate of Designation,
except for those set forth in Sections 6.4, 6.5, 6.6, 6.7, 6.8 and 6.9
therein, or those inconsistent with the foregoing (i), (ii) and (iii)
hereof, prior to amendment. This amendment shall be accomplished in the
manner and in accordance with the terms set forth in this Agreement.
2. Exchange to Facilitate Amendment of the Certificate of Designation. In
order to effectuate the aforesaid amendment of the Certificate of
Designation, the Parties agree to take the following actions:
(a) Shaar shall exchange (i) the Shaar Preferred Stock and (ii) all
Monetary Rights (defined below), to IFSH in exchange for 650,000
shares of Series 2002 Voting Preferred Stock (the "Securities"),
which shall be issued by IFSH pursuant to a certificate of
designation (the "2002 Certificate of Designation") containing
provisions described in the following paragraph (this exchange
being referred to hereinafter as the "Initial Exchange").
(b) Each share of the Securities shall (i) have no dividend rights,
provided that the Securities shall have dividend rights equivalent
to holders of the Common Stock on an as-converted basis, (ii) have
voting rights equivalent to 100 shares of Common Stock; (iii) shall
be convertible into 100 shares of Common Stock, and (iv) other than
as set forth in this paragraph and to the maximum extent
permissible, have rights and preferences no less favorable than the
Series 2000 Preferred Stock.
(c) As used herein "Monetary Rights" shall mean all rights and/or
claims to money from IFSH that Shaar possesses pursuant to the
Purchase Agreement, including any and all rights to dividends,
interest, and/or penalties accrued through the date hereof by
reason or pursuant to Shaar's ownership of the Shaar Preferred
Stock, provided that Monetary Rights shall not include (x) the
Warrant, (y) any rights granted by the Registration Rights
Agreement dated as of March 23, 2000 between IFSH and Shaar (the
"Registration Rights Agreement"), or (z) any rights or claims that
Shaar possesses against IFSH in connection with the Purchase
Agreement (or any document executed in connection with the Purchase
Agreement) that as of the date hereof are unliquidated or cannot be
fully satisfied by the payment of legal tender of the United
States.
3. Timing of the Initial Exchange. On September 30, 2002 (the "Closing
Date"), or such other date as the Parties shall agree, Shaar shall
surrender certificates representing the Shaar Preferred Stock to IFSH,
and IFSH shall issue and deliver to Shaar (or its designee) certificates
representing the Securities, registered in the name of Shaar (or its
designee).
4. Closing of the Initial Exchange. The closing (the "Closing") of the
transactions contemplated hereby shall be held at the offices of Xxxx
Xxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. on
the Closing Date, or at such other time, date or location as may be
agreed by the Parties.
5. Escrow of Shaar Preferred Stock. IFSH agrees to hold the certificates
representing the Shaar Preferred Stock in escrow, to be held on behalf
of Shaar and to be released to Shaar upon the occurrence of (i) receipt
by IFSH of a written request from Shaar following a Shaar Release Event
pursuant to Section 7 hereof or (ii) the Final Exchange (as defined in
Section 8 hereof).
6. Amendment of Certificate of Designation. As soon as practicable after
Closing, IFSH shall use its best efforts (including obtaining
shareholder approval) to amend the Certificate of Designation in
accordance with the provisions of Section 1 of this Agreement.
7. Release Conditions. If:
(a) an event as described in Article 5 of the Certificate of
Designation is threatened or occurs prior to the filing in the
State of Delaware of the Certificate of Designation as amended in
accordance with the terms of Section 1 of this Agreement;
(b) IFSH shareholders fail to approve the amendment to the Certificate
of Designation as set forth in Section 1 of this Agreement on or
before March 31, 2003; or
(c) any legal proceeding, in law or in equity, is brought challenging
in any way this Agreement or any actions taken pursuant to this
Agreement;
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(each, a "Shaar Release Event") then, upon receipt of a written request
from Shaar, IFSH shall (i) promptly return to Shaar (or its designee)
the certificates representing the Shaar Preferred Stock and the
documentation pursuant to which Shaar relinquished the Monetary Rights,
(ii) Shaar shall return the Securities to IFSH, and (iii) IFSH shall be
authorized to retire the Securities. In such event, Shaar's rights and
privileges in the Series B Preferred Stock and the Monetary Rights shall
continue unaltered as if the Initial Exchange did not occur.
8. Final Exchange. Upon the amendment and filing in the State of Delaware
of the Certificate of Designation, amended as provided in this Agreement
(the exchange described below being referred to hereinafter as the
"Final Exchange"):
(d) IFSH shall promptly return the certificates representing the
Shaar Preferred Stock to Shaar (or its designee) (with any
alterations or notations on such certificates necessary to indicate
that they are issued pursuant to the Certificate of Designation as
amended in accordance with the terms of this Agreement),
(e) Shaar shall return the Securities to IFSH, and
(f) IFSH shall be authorized to retire the Securities.
Shaar's rights and privileges in the Series B Preferred Stock shall be
as set forth in the Certificate of Designation as amended in accordance
with the terms of this Agreement, effective as of the date of the filing
of the amended Certificate of Designation in the State of Delaware.
9. Representations and Warranties.
(a) Each Party warrants to each other Party that:
(i) it is duly organized and validly existing under the laws of
the jurisdiction and/or state of its organization;
(ii) it has full corporate and/or organizational power and
authority to enter into this Agreement and to carry out its
obligations in accordance with the terms of this Agreement;
(iii) the execution, delivery and performance of this Agreement
has been duly and validly authorized by all necessary
action on its part;
(iv) this Agreement is a valid and binding agreement on it,
enforceable in accordance with its terms; and
(v) the execution and performance of this Agreement by it and
the other transactions contemplated by this Agreement does
not violate or conflict with or result in a breach of or
constitute a default under any agreement, contract or
instrument to which it is bound.
(b) Shaar represents and warrants to IFSH that:
(i) Shaar is amending, transferring and exchanging the Shaar
Preferred Stock in exchange for the Securities for its own
account, for investment purposes only and not with a view
towards or in connection with the public sale or
distribution thereof in violation of the Securities Act.
(ii) By virtue of a transaction between Shaar and third
parties, Shaar is deemed to be the beneficial owner of at
least ten (10%) percent of IFSH's Common Stock
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within the meaning of the Securities Exchange Act of 1934
and the regulations promulgated thereunder.
(iii) Shaar is (i) an "accredited investor" within the meaning
of Rule 501 of Regulation D under the Securities Act, (ii)
experienced in making investments of the kind contemplated
by this Agreement, (iii) capable, by reason of its business
and financial experience, of evaluating the relative merits
and risks of an investment in the Securities, and (iv) able
to afford the loss of its investment in the Securities.
(iv) Shaar understands that the Securities are being offered
and sold by IFSH in reliance on an exemption from the
registration requirements of the Securities Act and
equivalent state securities and "blue sky" laws, and that
IFSH is relying upon the accuracy of, and Shaar's
compliance with, Shaar's representations, warranties and
covenants set forth in this Agreement to determine the
availability of such exemption and the eligibility of Shaar
to purchase the Securities;
(v) Shaar understands that the Securities have not been
approved or disapproved by the Securities and Exchange
Commission (the "Commission") or any state securities
commission and is not relying on any representation of IFSH
and has conducted its own investigation of the affairs of
IFSH.
(c) IFSH represents and warrants to Shaar that:
(i) Under its certificate of incorporation, as amended, IFSH
has authorized an capitalization of 50,000,000 shares of
common stock, par value $0.001 per share (the "Common
Stock"), 25,000,000 shares of Preferred Stock $.001 par
value ("Preferred Stock") and has 8,809,122 shares of
Common Stock outstanding and has 695,244 shares of
Preferred Stock outstanding, consisting of 161,250 shares
of Series B Preferred Stock and 533,994 shares of Series
2000 Preferred Stock.
(ii) The Securities have been duly and validly authorized by
IFSH, and when issued by IFSH will be duly and validly
issued, fully paid and nonassessable and will not subject
the holder thereof to personal liability by reason of being
such holder.
(iii) Except as disclosed on Schedule B hereto, there are no
preemptive, subscription, "call," right of first refusal or
other similar rights to acquire any capital stock of IFSH
or any of its subsidiaries or other voting securities of
IFSH that have been issued or granted to any person and no
other obligations of IFSH or any of its subsidiaries to
issue, grant, extend or enter into any security, option,
warrant, "call," right, commitment, agreement, arrangement
or undertaking with respect to any of their respective
capital stock. If any shares of Common Stock are issued and
not reflected in Schedule B or if more than 350,000 shares
of Common Stock are issued in connection with the
Contingent Claim listed in Schedule B (each, an "Additional
Issuance"), then IFSH shall issue to Shaar 850 shares of
Common Stock for every 100 shares of Common Stock IFSH
issues pursuant to any Additional Issuance (the aggregate
of such shares of Common Stock issued to Shaar being
referred to hereinafter collectively as "Dilution Shares").
(iv) IFSH shall reserve 35,000,000 shares of Common Stock for
the sole purpose of complying with its obligations in the
event that Shaar exercises a portion of its conversion
rights pursuant to the Securities or the Shaar Preferred
Stock. All shares of Common Stock outstanding and not
otherwise reserved as of the date
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hereof shall be reserved on and after the date hereof only
for grants to directors and management of IFSH pursuant to
stock option or other compensation awards or other business
purposes approved by Shaar.
(v) As soon as practicable after the Closing, IFSH shall use
its best efforts to amend its certificate of incorporation
in a manner to permit IFSH to comply fully with its
conversion obligations under the Securities or the Shaar
Preferred Stock by either (x) increasing the authorized
number of shares of Common Stock, or (y) effecting a
reverse stock split.
(vi) IFSH has not incurred any liability for any fees or
compensation for services rendered in connection with the
transactions contemplated hereby (except for legal fees and
customary filing fees).
(vii) IFSH acknowledges and understands that Shaar intends to
assign its rights under this Agreement pursuant to its
rights under Section 14 hereof.
10. Press Release/Confidentiality. As soon as practicable following the
execution and delivery of this Agreement, the Parties shall cooperate
and shall prepare and issue a press release describing the terms of this
transaction. Except for the press release described in the preceding
sentence and except as may be required (in the reasonable judgment of
counsel) by any applicable law or regulation or the rules of any
recognized national stock exchange, neither Party shall cause any public
announcement to be made regarding this Agreement or the transactions
contemplated by this Agreement without the prior written consent of each
other Party. In the event that any Party shall be required to cause such
a public announcement to be made pursuant to any applicable law or
regulation or the rules of any recognized national securities exchange,
such Party shall provide the other Party prior written notice of such
announcement as far in advance of such announcement as may be reasonably
practical.
11. Restrictive Legend. The certificates evidencing the Securities to the
extent applicable will bear legends reading substantially as follows
(unless and until such legend is no longer required):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THAT ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR IN
A TRANSACTION WHICH QUALIFIES AS AN EXEMPT TRANSACTION UNDER SUCH
ACT AND THE RULES AND REGULATIONS THEREUNDER."
12. Release; Agreement Not to Assert Claim; Registration Rights. (a)
Effective upon completion of the Initial Exchange Shaar hereby (i)
releases IFSH, its officers and directors (the "Releasees") from all
liabilities, claims and expenses that Shaar may have against the
Releasees by reason of its ownership of the Shaar Preferred Stock, or
pursuant to the Purchase Agreement (and any document executed in
connection with the Purchase Agreement other than the Registration
Rights Agreement) and (ii) agrees that it shall have no further right to
receive the Monetary Rights in connection therewith; provided such
release shall terminate if the transaction is unwound pursuant to
Section 7 hereof.
(b) Shaar agrees not to assert any claim existing on the Closing Date
and not covered by the release set forth in Section 12(a) of this
Agreement (including without limitation any claim under the Registration
Rights Agreement, the Warrant or any claims excluded from the definition
of Monetary Rights) unless and until one of the following occurs: (i)
the unwinding of the transaction pursuant to Section 7 hereof, (ii)
during any period or periods of time during which enforcement proceeds
are pending in connection with judgments against IFSH aggregating no
less than $100,000, (iii) any actual or threatened liquidation of IFSH
or (iv) any actual or threatened bankruptcy proceeding in which IFSH is
the debtor.
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(c) The Parties acknowledge that no registration statement filed by
IFSH with the Commission covers securities sufficient to enable the
public sale of the Securities or the shares of Common Stock into which
the Securities may be converted, and that additional filings with the
Commission will be required to permit the public sale or certain other
transfers of the Securities or the shares of Common Stock into which the
Securities may be converted. IFSH shall file a new registration
statement within 10 business days following the Final Exchange covering
(i) the Common Stock into which the Shaar Preferred Stock may be
converted and (ii) any Dilution Shares; provided that there shall be no
such obligation prior to December 15, 2002; and provided further that
such registration statement shall be filed in any event no later than
April 10, 2003. IFSH shall make all necessary filings, including
amendments to such registration statement as necessary, until such
registration statement is declared effective by the Securities and
Exchange Commission.
13. Certain Obligations Under Purchase Agreement. Notwithstanding anything
in this Agreement to the contrary, IFSH shall abide by its obligations
set forth in Article V of the Purchase Agreement.
14. Assignment. This Agreement shall be binding upon and inure to the
benefit of the respective representatives, successors and assigns of the
Parties. No assignment or transfer hereunder shall be made by any Party
without the prior written consent of the other Party, such consent not
to be unreasonably withheld; provided that Shaar may assign its rights
under this Agreement to SHVB Holdings LLC, the limited liability company
to be formed in the State of Delaware pursuant to that certain
Memorandum of Understanding, dated as of the date hereof, among Shaar,
Hestian Pty Limited and VB Family Trust and to any party Shaar has
designated pursuant to Sections 3, 7 or 8 hereof.
15. Governing Law; Jurisdiction. This Agreement, and any amendments hereto,
shall be governed by and construed in accordance with the laws of the
State of New York without giving effect to the choice of law provisions
thereof.
16. Amendments. This Agreement may not be amended, supplemented or
otherwise modified, and no provision of this Agreement may be waived,
except by a written instrument signed by each of the Parties hereto.
17. Severability. If any provision of this Agreement or application thereof
to anyone under any circumstances should be determined to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application.
18. No Waiver. No failure on the part of any Party to exercise any right
hereunder, and no delay in exercising any right, privilege, or power
under this Agreement, shall operate as waiver or relinquishment; nor
shall any single or partial exercise by any Party preclude any other or
further exercise, or the exercise of any other right, privilege, or
power.
19. Entire Agreement. This Agreement constitutes the entire agreement and
understanding among the Parties with respect to the subject matter
hereof and supersedes all previous agreements and understandings.
20. Counterparts. This Agreement may be executed in multiple counterparts
which, when taken together, shall constitute one and the same
instrument. Delivery of an executed counterpart of this Agreement by
facsimile shall be effective as a manual signature.
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In witness whereof, the undersigned Parties have caused this Agreement
to be executed and delivered by its duly authorized officer as of the 30th day
of September, 2002.
THE SHAAR FUND LTD.
By: Shaar Advisory Services, N.V.
(the Advisor to The Shaar Fund)
/s/ Hugo Van Neutegem
------------------------------------------
Name: Hugo Van Neutegem
Title: Managing Director of Shaar Advisory Services, N.V.
IFS INTERNATIONAL HOLDINGS, INC.
By
/s/ Per Olof Ezelius
------------------------------------------
Name: Per Olof Ezelius
Title: President
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