EXHIBIT 10.3
PLAN OF EXCHANGE
THIS PLAN OF EXCHANGE is made and entered into as of August ___, 2003
(this "Plan of Exchange") by and between iSecureTrac Corp., a Delaware
corporation (the "Buyer"), and Tracking Systems Corporation, a
Pennsylvania corporation (the "Company"). Buyer and the Company are
collectively referred to as the "Parties."
WHEREAS, the Parties hereto desire to enter into a plan of exchange
pursuant to which the Buyer shall acquire all of the issued and
outstanding capital stock of the Company (the "Exchange").
WHEREAS, the Board of Directors of the Company has adopted
resolutions approving this Plan of Exchange in accordance with the
Pennsylvania Business Corporation Law of 1988 and directing that it be
submitted to the shareholders of the Company for approval.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties do hereby
covenant and agree as follows:
1.0 THE EXCHANGE
1.1 Conversion. At the Effective Time of the Exchange (as such term
is hereinafter defined), in accordance with the provisions of applicable
law and the terms of this Plan of Exchange, each share of capital stock of
the Company issued and outstanding immediately prior thereto shall
automatically be converted into and shall be exchanged for that number of
shares of Buyer's common stock, par value $0.001 per share (the "Buyer's
Shares"), as listed, by Company stockholder, on the schedule attached
hereto as Exhibit "A".
1.2 Buyer's Share Value. The total number of Buyer's Shares shall be
based on $2,300,000 worth of Buyer's common stock at a per share price of
$0.52 ("Share Value"), or 4,423,077 shares. In the event the average
closing price of Buyer's common stock for the twenty trading days
preceding the Effective Time of Exchange ("Average Closing Price") exceeds
$0.62 or becomes less than $0.42, the parties shall determine a new Share
Value based on such Average Closing Price. Provided that the Share Value
remains at $0.52 accordingly, each share of the Company's common stock,
after conversion of all preferred stock at the conversion ratios described
on Exhibit "A", shall convert to 5.8645865 Buyer's Shares (the "Exchange
Ratio").
1.3 No Other Stock Issued. Buyer hereby represents and warrants that
the Buyer's Shares listed on Exhibit "A" hereto are the only shares of
Buyer's stock it will issue in exchange for the capital stock of the
Company and Buyer shall not issue further stock or any
options, warrants, subscriptions or any other rights to its stock in
exchange for any shares of the capital stock of the Company.
1.4 Effective Time of the Exchange. The Exchange shall not become
effective until, subject to the terms and conditions of this Plan of
Exchange, 5:00 o'clock p.m. Eastern Daylight Savings Time on the day on
which the following actions shall have in all respects been completed:
1. This Plan of Exchange shall have been approved by the
respective board of directors of each of the Parties in accordance
with the requirements of the laws of the states under which each
Party is organized;
2. This Plan of Exchange shall have been approved by the
requisite holders of each class of the Company's capital stock in
accordance with the Company's bylaws and the Pennsylvania Business
Corporation Law;
3. Holders of more than 5% of the outstanding shares of the
Company's capital stock (on an as-if-converted basis) shall not have
exercised, nor shall they have any continued right to exercise,
appraisal, dissenters' or similar rights under Pennsylvania law with
respect to their shares by virtue of the Exchange;
4. Articles of Exchange (which shall be satisfactory in form
to counsel for the Parties) shall have been executed and filed with
the Department of State of the Commonwealth of Pennsylvania.
The date and time when the Exchange shall become effective as aforesaid is
herein referred to as "Effective Time of the Exchange."
1.5 Shareholders Release. It shall be a condition of each
shareholder of record of the Company who elects to exchange his or her
Tracking Systems Corporation share certificates for shares of Buyer
pursuant to this Plan of Exchange, that each shareholder execute a General
Release (in the form attached hereto as Annex A) whereby such shareholder
will relinquish all claims against the Company and the Controlling
Shareholders.
2.0 DIRECTORS AND OFFICERS
The directors and officers of the Company from and after the
Effective Time of the Exchange shall be as set forth below, and each shall
hold his or her respective office or offices from and after the Effective
Time of the Exchange until his or her successor shall have been elected
and qualified or as otherwise provided in the bylaws of the Company.
Directors: Xxxx Xxxxxxxxx
Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxxxx Xxx
Xxxxx Xxxxx
Xxxx Xxxxx
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Officers: Xxxx Xxxxxxxxx President
Xxxxx Xxxxx Treasurer
Xxxx Xxxxx Secretary
3.0 CONVERSION METHOD
3.1 At the Exchange. At the Effective Time of the Exchange:
a. All shares of capital stock of the Company (except
Dissenting Shares, as defined below) that shall be
issued and outstanding immediately prior to the
Effective Time of the Exchange shall, by virtue of the
Exchange, be converted and exchanged for the right of
the shareholders of the Company to receive Buyer's
Shares in accordance with Exhibit "A" hereto.
b. Any shares of capital stock of the Company held in the
treasury of the Company prior to the Effective Time of
the Exchange shall be canceled.
c. The Buyer shall automatically become the holder of all
shares of capital stock of the Company issued and
outstanding immediately prior to the Effective Time of
the Exchange.
d. All options, warrants, rights, subscriptions and similar
agreements to purchase shares of the Company's capital
stock (or securities convertible into or exchangeable
for shares of the Company's capital stock) shall be
canceled and extinguished.
3.2 Rights. From and after the Effective Time of the Exchange, the
holders of certificates representing shares of capital stock of the
Company shall cease to have any rights with respect to such
certificates except as provided in this Plan of Exchange.
3.3 Fractions. No fraction of a share of Buyer's Shares will be
issued, but in lieu thereof, each holder of shares of the Company's
capital stock who would otherwise be entitled to a fraction of a
share of Buyer's Shares (after aggregating all fractional shares of
Buyer's Shares to be received by such holder) shall be entitled to
receive from Buyer a rounded-up whole share.
4.0 DISSENTING SHARES
4.1 No Conversion. Notwithstanding any provision of this Plan of
Exchange to the contrary, any shares of Company capital stock held by a
holder who has demanded and perfected appraisal or dissenters' rights for
such shares in accordance with Pennsylvania law and who, as of the
Effective Time of the Exchange, has not effectively withdrawn or lost such
appraisal or dissenters' rights ("Dissenting Shares") shall not be
converted into or represent a right to receive Buyer Shares pursuant to
Paragraph D, but the holder thereof shall only be entitled to such rights
as are granted by Pennsylvania law.
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4.2 Automatic Conversion. Notwithstanding the provisions of the
above, if any holder of shares of Company capital stock who demands
appraisal of such shares under Pennsylvania law shall effectively withdraw
or lose (through failure to perfect or otherwise) the right to appraisal,
then, as of the later of the Effective Time of the Exchange and the
occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Buyer Shares upon
surrender of the certificate representing such shares.
4.3 Notice to Buyer. Company shall give Buyer (i) prompt notice of
any written demands for appraisal of any shares of Company capital stock,
withdrawals of such demands, and any other instruments served pursuant to
Pennsylvania law and received by Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands
for appraisal under Pennsylvania law. Company shall not, except with the
prior written consent of Buyer, voluntarily make any payment with respect
to any demands for appraisal of capital stock of Company or offer to
settle or settle any such demands.
5.0 CERTIFICATE EXCHANGE
5.1 Buyer's Shares Certificates. As soon as practicable after the
Effective Time of the Exchange and after the surrender to Buyer, at the
principal place of business of Buyer, or such other place as Buyer may
designate, of all certificates that immediately prior to the Effective
Time of the Exchange represented issued and outstanding shares of the
capital stock of the Company (the "Closing"), Buyer shall issue to the
person or entity in whose name such certificates shall have been
registered the appropriate number of Buyer's Shares.
5.2 Lost Company Certificates.If any certificate representing shares
of the Company's capital stock shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
certificate to be so lost, stolen or destroyed and, if required by Buyer,
the posting by such person of a bond or other collateral security in such
reasonable amount as Buyer may direct as indemnity against any claim that
may be made against it with respect to such certificate, Buyer will
deliver in exchange for such lost, stolen or destroyed certificate the
applicable number of Buyer's Shares with respect to the shares formerly
represented thereby.
6.0 SECURITIES MATTERS
6.1 Company Shareholder Acknowledgements. The Company hereby
represents and warrants that it has obtained the following
acknowledgements from each of its shareholders who is surrendering and
exchanging certificates representing shares of the Company's capital stock
pursuant to this Plan of Exchange and that each holder of such shares (an
"Exchanging Shareholder") acknowledges and confirms that:
a. Such Exchanging Shareholder has been advised that the
Buyer's Shares have not been registered under the Securities Act of
1933, as amended, or any state securities act in reliance on
exemptions therefrom.
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b. Such Exchanging Shareholder is:
(i) An accredited investor within the meaning of Rule
501(a) under the Securities Act; or,
(ii)If such Exchanging Shareholder is not an accredited
investor, either alone or with such Exchanging
Shareholder's purchaser representative(s) has such
knowledge and experience in financial and business
matters that he, she or it is capable of evaluating the
merits and risks of the prospective investment in the
Buyer's Shares.
c. If such Exchanging Shareholder is a natural person, such
Exchanging Shareholder resides in the state or province identified
in the Company's books and records.
d. If such Exchanging Shareholder is other than a natural
person:
(i) Such Exchanging Shareholder has not been formed,
reformed or recapitalized for the specific purpose of
acquiring the Buyer's Shares;
(ii)The principal executive office or offices of such
Exchanging Shareholder in which its investment decision
was made is located at the address or addresses of such
Exchanging Shareholder set forth in the Company's books
and records; and,
(iii) Such Exchanging Shareholder has been duly formed
and is validly existing in good standing under the laws
of the jurisdiction of its formation, with full power
and authority to enter into the transactions
contemplated in this Plan of Exchange.
6.2 Legend on Stock Certificates. The certificate or certificates
representing the Buyer's Shares to be received by the Exchanging
Shareholder will be inscribed with substantially the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT THEN IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULES 144 AND
145 OF SUCH ACT."
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7.0 FURTHER COMPANY REPRESENTATIONS AND WARRANTIES
7.1 Information Provided Company Shareholders. The Company has
caused each Exchanging Shareholder to be provided with each of the
following documents filed by Buyer with the Securities and Exchange
Commission ("Buyer's SEC Filings"):
a. Buyer's annual report under Form 10-KSB for the period ending
December 31, 2002;
b. Buyer's quarterly report under Form 10-QSB for the period
ending March 31, 2003;
c. Buyer's definitive proxy statement under Schedule 14A with
respect to the annual meeting of Buyer's stockholders held on
May 30, 2003.
d. Buyer's offering memorandum, dated August 11, 2003.
7.2 No Representations by Buyer. The Company acknowledges that no
representation has been made to the Exchanging Shareholder by
representatives of the Buyer regarding its business, assets or prospects
other than that set forth in such filings or this Plan of Exchange.
7.3 Additional Representations. The Company hereby also represents
and warrants that:
a. Each Exchanging Shareholder is and will be at the Effective Time
of the Exchange the record and beneficial owner and holder of the Buyer's
Shares free and clear of all encumbrances.
b. No consents are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Plan of Exchange by such Exchanging Shareholder and its
acquisition of the Buyer's Shares, except such as has been duly and
validly obtained or filed, or with respect to any filings that must be
made after the consummation of the Exchange, as will be filed in a timely
manner.
c. Each such Exchanging Shareholder is not, and will not by virtue
of performing the transactions contemplated hereunder be, in conflict with
or in violation or default of any term of its charter documents (if
applicable), or of any provision of any material mortgage, indenture,
contract, agreement, instrument, contract judgment or decree to which it
is party or by which it is bound, and is not, and will not by virtue of
performing the transactions contemplated hereunder be, in violation of any
order addressed specifically to such Exchanging Shareholder, nor, to the
best of such Exchanging Shareholder's knowledge, any material order,
statute, rule or regulation applicable to such Exchanging Shareholder
other than any violations that would not, considered individually or in
the aggregate, have a material adverse effect on such Exchanging
Shareholder's ability to perform its obligations under this Plan of
Exchange.
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8.0 THE COMPANY'S STOCK REGISTER
The stock transfer books of the Company shall be closed as of the
Effective Time of the Exchange and thereafter no transfer of shares of the
Company's capital stock will be made.
9.0 REGISTRATION RIGHTS.
8.1 Application for Registration. The Buyer shall prepare, and, as
soon as practicable, but in no event later than the date which is 30 days
after the Effective Time of the Exchange, file with the Securities and
Exchange Commission (the "SEC") a Registration Statement or Registration
Statements (as necessary) on Form S-4, or other appropriate form, covering
the resale of all of the Buyer's Shares delivered to the Exchanging
Shareholders (the "Registrable Securities").
8.2 Exchanging Shareholder Cooperation.The Company shall use its
best efforts to elicit the cooperation of each Exchanging Shareholder in
providing the Buyer with information necessary to complete the
Registration Statement in a timely manner.
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IN WITNESS WHEREOF, each of the Parties has caused this Plan of
Exchange to be executed as of the date first written above.
ISECURETRAC CORP. TRACKING SYSTEMS CORPORATION
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxxxx
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ANNEX A
GENERAL RELEASE
In consideration of the terms and conditions of the Plan of Exchange by
and between iSecureTrac Corp. and Tracking Systems Corporation dated as of
August __, 2003, I, a shareholder of Tracking Systems Corporation owning
__________ shares, hereby fully and forever release and discharge each of
Tracking Systems Corporation and the Controlling Shareholders, and each of their
directors, officers, employees, spouses, shareholders, members, partners,
attorneys, accountants, agents, successors, assigns, heirs, legatees and
representatives (the "Released Parties"), and each of them, of and from all
manner of actions, causes of action, claims, demands, costs, damages,
liabilities, losses, obligations, expenses and compensation of any nature
whatsoever in law or in equity, known and unknown, including, but not limited
to, those asserted or which could have been asserted against each other with
respect to all claims, disputes and differences between them, including, but not
limited to, those asserted or which could have been asserted in connection with
the Tracking Systems Corporation shares or otherwise (the "Released Claims").
This General Release is and shall be, a release of all claims, whether
known or unknown. I acknowledge that I may hereafter discover facts in addition
to or different from those which I now believe to be true with respect to the
subject matter of the disputes and other matters herein released, but agree that
the releases herein given shall be and remain in effect as full and complete
general releases notwithstanding the discovery or existence of any such
additional or different facts, of which I expressly assume the risk.
It is understood and agreed that this General Release constitutes a
compromise of disputed claims, and that neither this General Release nor any
consideration given hereunder, concurrently herewith, or pursuant hereto, is to
be advocated or construed as an admission of any liability on the part of any
party hereto.
I hereto acknowledge and represent that I: (i) have fully and carefully
read this General Release prior to its execution, (ii) have been, or have had
the opportunity to be, fully appraised by my attorney of the legal effect and
meaning of this document and all the terms and conditions hereof, (iii) have had
the opportunity to make whatever investigation or inquiry deemed necessary or
appropriate in connection with the subject matter of this General Release, (iv)
have been afforded the opportunity to negotiate as to any and all terms hereof,
and (v) am executing this General Release as a free and voluntary act.
Date
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Signature
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Signature
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Print Name(s)
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Print Name(s)
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