SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
September 20, 2002 (September 5, 2002)
eResource Capital Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-8662
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(State or other jurisdiction (Commission File Number)
of incorporation)
23-226039
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(IRS Employer Identification Number)
5935 Carnegie Boulevard, Suite 101, Charlotte, NC 28209
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 553-9330
ITEM 2. Acquisition or Disposition of Assets
Effective September 5, 2002, pursuant to an Agreement and Plan of Merger (the
"Merger Agreement") dated August 30, 2002, eResource Capital Group, Inc.,
("RCG"), a Delaware Corporation, completed the merger of its wholly-owned
subsidiary LST, Inc., Delaware Corporation ("LST"), with Lifestyle Innovations,
Inc., a Nevada corporation ("LFSI" or the "Company"). As a result of this
transaction LFSI issued 16,000,000 shares, par value $.001 per share, of its
common stock to RCG, which represent 79.47% of the outstanding shares of capital
stock of LFSI on the closing date. Prior to closing LFSI had 4,134,520 shares,
par value $.001, of capital stock outstanding. As a result of this transaction,
LST became a wholly-owned subsidiary of Lifestyle.
Prior to the closing of the LST Acquisition, LFSI provided a $320,000 bridge
loan to LST. The loan from LFSI to LST was forgiven at closing. LFSI raised an
additional $300,000 shortly after the LST Acquisition and currently plans to
continue to seek additional funding to support the growth of the business.
As a result of merger, LFSI will focus its efforts on the activities of the 14
franchise locations and two company-owned locations in Charlotte, NC and
Atlanta, GA. LFSI provides homebuilders and homeowners with a "one-stop shop" to
a assist in fully customizing "Smart Homes", as well as providing technology
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applications such as high speed internet access, satellite services, security,
data, video and voice entertainment systems; and customized wiring and hardware
to both individual homeowners and many of the southeast regions leading
homebuilder organizations. Utilizing trained professionals and national alliance
partners, this one-stop servicing model allows both the builder and the
homeowner the flexibility to customize their homes to take advantage of the
latest technology applications for today's homes.
LFSI's long-term business plan includes increasing the number of franchise
locations, as well as continuing to strengthen the Lifestyle brand name with
national builders and local, custom builders, and the commercial construction
market.
Pursuant to the terms of the Merger Agreement, LFSI elected Mr. Paul Johnson to
the LFSI's Board of Directors, increasing the LFSI Board from one member to two.
As a result of Mr. Johnson's appointment as a director, LFSI board currently
consists of Mr. Randy Howell and Mr. Paul Johnson.
Pursuant to the terms of the Merger Agreement, each outstanding option or
warrant issued to LST employees in connection with RCG's acquisition of LST will
either be converted with the appropriate adjustment into an option or warrant to
purchase LFSI common stock or will be terminated pursuant to their terms. If
options or warrants are terminated pursuant to the terms of outstanding warrants
or stock options agreements, or RCG's stock option plan, LFSI will grant
warrants or options to holders of these securities. Newly granted options or
warrants will be proportionate to the terminated amount and will have a exercise
price equal to the market price of LFSI stock.
LFSI owns two condominium units in Dallas, Texas, which are currently leased. In
July of 2002, existing LFSI shareholders voted to amend Lifestyles Certificate
of Incorporation to increase the authorized shares to 250 million.
RCG will record the value of the net increase in assets of LFSI, approximately
$620,000 including the capital raised post-closing, in its consolidated
finacial statements and will record minority interest of the same amount.
The foregoing description is not a description of all of the material terms of
the transaction. You should read the documents that are attached as exhibits to
this report for a more complete understanding of the transaction.
Statements in this filing about anticipated or expected future revenue or growth
or expressions of future goals or objectives, including statements regarding
whether current plans to grow and strengthen the company's existing network will
be implemented or accomplished, are forward- looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All
forward-looking statements in this filing are based upon information available
to the Company on the date of this release. Any forward-looking statements
involve risks and uncertainties, including the risk that the Company will be
unable to grow or strengthen its business due to a lack of capital or an
inability to expand direct sales operations, to establish new or maintain
relationships with homebuilders, to adapt to rapidly changing technologies and
developing markets, to establish LFSI's brand name, or to execute a national
franchise strategy, as well as those risks and uncertainties described in the
Company's other filings with the Securities and Exchange Commission, that could
cause actual events or results to differ materially from the events or results
described in the forward-looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned not to place
undue reliance on these forward-looking statements.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits included herewith:
2.1 Agreement and Plan of Merger dated August 30, 2002 among eResource Capital
Group, Inc., LST, Inc., Lifestyle Innovations, Inc., and LFSI Merger
Corporation.
2.2 Press release dated September 5, 2002 by eResource Capital Group, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
eResource Capital Group, Inc.
Date: September 20, 2002 By: /s/ JOHN W. VAN HEEL
------------------------
John W. Van Heel
Vice President of Finance
EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated August 30, 2002 among eResource Capital
Group, Inc., LST, Inc., Lifestyle Innovations, Inc., and LFSI Merger
Corporation.
2.2 Press release dated September 5, 2002 by eResource Capital Group, Inc.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
eRESOURCE CAPITAL GROUP, INC.,
LST, INC.,
LIFESTYLE INNOVATIONS, INC.
and
LFSI MERGER CORP.
Dated as of August 30, 2002
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of August 30, 2002, by and among eResource Capital Group, Inc.,
a Delaware corporation (the "RCG"), LST, Inc., a Delaware Corporation
("Lifestyle"), Lifestyle Innovations, Inc., a Nevada corporation ("Parent") and
LFSI Merger Corp., a Nevada corporation and wholly-owned subsidiary of Parent
("Merger Sub").
RECITALS
WHEREAS, Parent owns all the issued and outstanding common stock, par
value $.01 per share, of Merger Sub;
WHEREAS, RCG currently owns all the issued and outstanding common stock
("Lifestyle Common Stock"), par value $.001, of Lifestyle;
WHEREAS, RCG desires for Parent to acquire Lifestyle via a merger of
Merger Sub with and into Lifestyle (the "Merger"), with Lifestyle as the
Surviving Corporation (as defined herein) in the Merger in accordance with the
terms and conditions of this Agreement and the plan of merger attached hereto as
Exhibit A (the "Plan of Merger");
WHEREAS, as a result of the Merger, Lifestyle, as the surviving
corporation, would become a direct wholly owned subsidiary of Parent, and the
separate corporate existence of Merger Sub would cease;
WHEREAS, as a result of the Merger, RCG would receive shares of common
stock, par value $.001 per share, of Parent (the "Parent Common Stock") in
exchange for the shares of Lifestyle Common Stock held by it;
WHEREAS, the issuance of Parent Common Stock to RCG will be made in
reliance on an exemption from registration under federal and state securities
laws; and
WHEREAS, the parties hereto intend that the Merger qualify as a
tax-free reorganization within the meaning of Section 368(a) of the Code (as
hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows: I.
DEFINITIONS
A. Definitions.
"Affiliate" means, as to a specified Person, any other Person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the specified Person.
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"Bylaws" means, with respect to a Person other than a natural
person, the bylaws or other comparable document adopted by such Person, under
the laws of the jurisdiction in which such Person is organized, to govern the
operation of such Person with respect to matters not specifically addressed in
such Person's Certificate of Incorporation, as such documents may be amended
from time to time.
"Certificate of Incorporation" means, with respect to a Person
other than a natural person, the certificate or articles of incorporation or
other comparable document required to establish the existence, and to evidence
the continued existence, of such Person under the laws of the jurisdiction in
which such Person is organized, as such documents may be amended from time to
time.
"Code" means the Internal Revenue Code of 1986, as amended
(including any successor code), and the rules and regulations promulgated
thereunder.
"Employees" means those current and former employees of
Lifestyle and the Subsidiaries, and any other employees of Lifestyle or the
Subsidiaries performing services primarily for Lifestyle or the Subsidiaries who
are hired between the date hereof and the Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory, self-regulatory or administrative
functions of or pertaining to government.
"Lifestyle Disclosure Schedule" means the Lifestyle
Disclosure Schedule delivered simultaneously herewith.
"Lifestyle Material Adverse Effect" means a materially adverse
effect on the business, results of operations or financial condition of
Lifestyle and the Subsidiaries, taken as a whole.
"Merger Consideration" means 16,000,000 shares of Parent
Common Stock, subject to adjustment as set forth in Section 2.8(c) and 2.10 (d).
"Parent Disclosure Materials" shall mean the following
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materials provided by Parent to RCG: (i) Parent's current report on Form 8-K
filed with the SEC on September 12, 2001; (ii) Parent's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2001; (iii) Parent's quarterly
report on Form 10-QSB for the quarter ended March 31, 2002; (iv) Parent's proxy
statement filed June 4, 2002 for its annual meeting of stockholders; and (v)
Parent's Confidential Private Placement Memorandum dated July 16, 2002.
"Parent Disclosure Schedule" means the Parent Disclosure
Schedule delivered simultaneously herewith.
"Parent Material Adverse Effect" means a materially adverse
effect on the business, results of operations, prospects or financial condition
of Parent and its subsidiaries, taken as a whole.
"Person" means an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or, as applicable, any other entity.
"Securities Act" means the Securities Act of 1933, as
amended.
"Straddle Period" means any tax period beginning before and
ending after the Closing Date.
"Subsidiary" or "Subsidiaries" means, as to Lifestyle, any
Person of which at least a majority of the outstanding shares or other equity
interests having ordinary voting power for the election of directors or
comparable managers of such Person is owned, directly or indirectly, by
Lifestyle.
II.
THE MERGER
B. The Merger. Upon the terms and subject to the conditions of this Agreement,
at the Effective Time (as defined in Section 2.3), Merger Sub shall merge with
and into Lifestyle in accordance with General Corporation Law of the State of
Delaware ("DGCL"). Also at the Effective Time, the separate corporate existence
of Merger Sub shall cease and Lifestyle shall continue as the surviving
corporation in the Merger (the "Surviving Corporation") in accordance with DGCL
and with all the rights, privileges, properties, immunities and powers, and
subject to all the duties and liabilities, of a corporation organized under
DGCL. C. Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
10.1, and subject to the satisfaction or waiver of the conditions set forth in
Article IX, the closing of the Merger (the "Closing") will take place at 10:00
a.m., local time, on the second business day following the date on which the
last to be fulfilled or waived of the conditions set forth in Article IX shall
be fulfilled or waived in accordance with this Agreement, unless another date,
time or place is agreed to by the parties hereto (the "Closing Date"), at the
offices of RCG, 5935 Carnegie Boulevard, Suite 101, Charlotte, NC 28209.
D. Effective Time. The parties hereto shall file with the Secretary of State of
the State of Delaware (the "Delaware Secretary of State") on the Closing Date
(or on such other date as the parties may agree) articles and a certificate of
merger or other appropriate documents, executed in accordance with the relevant
provisions of the DGCL, and make all other filings or recordings required under
the DGCL in connection with the Merger. The Merger shall become effective upon
the filing of the articles of merger with the Delaware Secretary of State, or at
such later time specified in such articles of merger (the "Effective Time"). E.
Certificate of Incorporation. The Certificate of Incorporation of Lifestyle in
effect immediately prior to the Effective Time shall, from and after the
Effective Time, be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended in accordance with their terms and as provided by the
DGCL.
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F. Bylaws. The Bylaws of Lifestyle in effect immediately prior to the
Effective Time shall, from and after the Effective Time, be the bylaws of
the Surviving Corporation after the Effective Time until thereafter amended
in accordance with their terms and as
provided by the DGCL.
G. Directors. The directors of Merger Sub immediately prior to the Effective
Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation until their successors shall have been duly elected
or appointed or qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws, as in effect following the Effective Time.
H. Officers. The officers of Merger Sub immediately prior to the Effective
Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation until their successors shall have been duly elected
or appointed or qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws, as in effect following the Effective Time.
I. Effect on Lifestyle Common Stock.
1. Outstanding Lifestyle Common Stock. Each share of Lifestyle Common Stock
issued (and not cancelled or retired) immediately prior to the Effective Time
(other than shares of Lifestyle Common Stock cancelled in accordance with
Section 2.8(b) below) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive from
Parent the Merger Consideration. The Merger Consideration shall be issued to RCG
without registration under the Securities Act, as amended, or any state
securities laws, in reliance on exemptions from registration for transactions
not involving a public offering or, in the case of certain state securities
laws, in reliance on other exemptions; provided, however, RCG shall be entitled
to registration rights with respect to the Merger Consideration within six (6)
months of the Closing, as set forth in Section 7.9 below. 2. Treasury Shares.
Each share of Lifestyle Common Stock that is held as a treasury share by
Lifestyle at the Effective Time (collectively, the "Treasury Shares"), shall, by
virtue of the Merger and without any action on the part of Lifestyle or Parent,
be cancelled and retired and cease to exist, without any conversion thereof.
3. Impact of Stock Splits, etc. In the event of any change in Parent Common
Stock between the date of this Agreement and the Effective Time by reason of any
stock split, stock dividend, subdivision, reclassification, recapitalization,
combination, exchange of shares or the like, the aggregate Merger Consideration,
as provided in this Agreement, shall be appropriately adjusted to take into
account such change in Parent Common Stock.
J. Effect on Capital Stock of Merger Sub. Each share of common stock, no par
value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into one (1) share of common
stock, par value $.001, of the Surviving Corporation, and such shares
shall, collectively, represent all of the issued and outstanding capital
stock of the Surviving Corporation, following the Effective Time.
K. Surrender of Shares; Payment of Merger Consideration. 4. At the Closing,
RCG shall surrender to Parent the certificate(s) representing the issued
and outstanding shares of Lifestyle Common Stock held by RCG duly endorsed
to Parent in blank or together with separate stock transfer powers duly
endorsed by RCG for surrender of such shares of Lifestyle Common Stock to
Parent pursuant to the Merger and having the signature of a duly authorized
representative of RCG on such stock transfer power guaranteed by a national
bank or member firm of a registered national securities exchange or with
such other guarantee as may be required by Parent's transfer agent. 5. At
the Closing, and upon surrender of the certificate(s) representing
Lifestyle Common Stock in accordance with Section 2.10(a), Parent shall
deliver to RCG a certificate or certificates evidencing the Merger
Consideration. Each certificate delivered by Parent in accordance with this
Section 2.10(b) shall bear the legend set forth in Section 7.10 hereof. 6.
The Merger Consideration paid upon the surrender for exchange of the
certificate representing the shares of Lifestyle Common Stock (other than
Treasury Shares) in accordance with the terms of this Article II shall be
deemed to have been paid in full satisfaction of all rights pertaining to
the shares of Lifestyle Common Stock theretofore represented by such
certificate.
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(d) The Merger Consideration shall be adjusted to the extent
necessary to prevent the product of (i) the number of shares of Parent Common
Stock issued to RCG and (ii) the average closing stock price of Parent's Common
Stock over the twenty (20) days immediately preceding the Closing, from being
less than Sixteen Million Dollars ($16,000,000). III.
REPRESENTATIONS AND WARRANTIES REGARDING LIFESTYLE
Lifestyle hereby represents and warrants to Parent and Merger Sub as
follows:
L. Organization and Qualification. Lifestyle is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, with all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as it is now
being conducted. Lifestyle has delivered or made available to Parent a true
and complete copy of its Certificate of Incorporation and Bylaws (or
similar organizational documents).
M. Authorization. Lifestyle has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Lifestyle and the
performance by Lifestyle of its obligations hereunder and the consummation
by Lifestyle of the transactions contemplated hereby, have been duly
authorized by the board of directors of Lifestyle (the "Lifestyle Board")
and no other corporate action on the part of Lifestyle is necessary to
authorize the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Lifestyle and constitutes a valid and
binding obligation of Lifestyle, enforceable against Lifestyle in
accordance with its terms, subject (a) to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally, and (b) as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).
N. No Violation. None of the execution and delivery of this Agreement by
Lifestyle, the performance by Lifestyle of its obligations hereunder, nor
the consummation by Lifestyle of the transactions contemplated hereby will
(a) violate, conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws (or similar organizational
documents) of Lifestyle or (b) violate any order, writ, judgment,
injunction, decree, statute, rule or regulation of any Governmental
Authority applicable to Lifestyle or any of the Subsidiaries or any of
their respective assets, except in each case as would not have a Lifestyle
Material Adverse Effect.
O. Capitalization.
7. The authorized capital stock of Lifestyle consists of 20,000,000 shares of
common stock, $.001 par value. As of the date hereof, one (1) share of Lifestyle
Common Stock is issued and outstanding to RCG. The issued and outstanding share
of Lifestyle Common Stock has been validly issued, fully paid, and
non-assessable.
8. Except as set forth in Section 3.4(b) of the Lifestyle Disclosure
Schedule, there are no (i) options, warrants, calls, subscriptions, conversion
or other rights, agreements or commitments obligating Lifestyle to issue any
additional shares of capital stock or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of capital
stock of Lifestyle, or (ii) restrictions on transfer of any shares of capital
stock of Lifestyle (other than pursuant to this Agreement).
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P. Subsidiaries.
9. Section 3.5 of the Lifestyle Disclosure Schedule sets forth (i) the names of
all Subsidiaries and their respective jurisdictions of incorporation and (ii)
the name and number of all authorized, issued and outstanding shares of capital
stock of each Subsidiary.
10. All of the outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued, are fully paid, and non-assessable and are
owned of record and beneficially by Lifestyle, free and clear of any Liens. 11.
There are no (i) options, warrants, calls, subscriptions, conversion or other
rights, agreements or commitments obligating any of the Subsidiaries to issue
any additional shares of capital stock of such Subsidiary or any other
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of such capital stock, or (ii) restrictions on the
transfer of any shares of capital stock of any such Subsidiary (other than
pursuant to this Agreement).
Q. Financial Statements.
12. Lifestyle has made available to Parent true and complete copies of the
following (the "Financial Statements"): a. Financial statements used in RCG's
audited consolidated financial statements for the year ended June 30, 2001; and
(ii) Financial statements used in RCG's unaudited interim consolidated financial
statements for the quarter ended March 31, 2002 (the "Balance Sheet"). (b) The
Financial Statements were, prepared from and are in accordance with, the books
and records of Lifestyle and the Subsidiaries. The
Financial Statements were prepared in all material respects in accordance with
generally accepted accounting principles applied on a consistent basis ("GAAP")
and fairly present the combined financial position and the combined results of
operations of Lifestyle and the Subsidiaries as of the times and for the periods
referred to therein, except that any such Financial Statements are subject to
normal and recurring year-end adjustments.
R. Absence of Undisclosed Liabilities.
There are no liabilities or obligations of Lifestyle or the Subsidiaries
(including, without limitation, any Liens) that are required to be reflected or
reserved against on a balance sheet prepared in accordance with GAAP other than
(a) liabilities and obligations reflected or reserved against in the most recent
Financial Statements for the quarter ended March 31, 2002 and not heretofore
discharged, (b) liabilities and obligations incurred since March 31, 2002 in the
ordinary course of business as the Lifestyle business has been conducted during
the previous year and that are not material (provided that any liability in
excess of $100,000 shall be deemed material for this purpose), or (c)
liabilities and obligations disclosed in Section 3.7 of the Lifestyle Disclosure
Schedule.
S. Absence of Certain Changes.
Except as set forth in the Lifestyle Disclosure Materials, disclosed in Section
3.8 of the Lifestyle Disclosure Schedule or as permitted or contemplated by this
Agreement, since March 31, 2002, neither Lifestyle nor any Subsidiary has (a)
conducted its business in any material respect other than in the ordinary
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course, (b) assumed, guaranteed or endorsed the obligations of any other Person,
(c) other than immaterial sales or dispositions of assets in the ordinary course
of business (i) sold, transferred or otherwise disposed of any of its property
or assets or (ii) mortgaged any of its property, (d) suffered any material
casualty losses not covered by insurance, (e) amended its Certificate of
Incorporation or Bylaws (or similar organizational documents), or (f) entered
into any contract or other agreements to do any of the foregoing.
T. Litigation.
Except as set forth in Section 3.9 of the Lifestyle Disclosure Schedule, there
are no actions, suits, arbitrations, investigations or proceedings
("Litigation") pending against Lifestyle or any of its Subsidiaries before any
Governmental Authority or arbitrator involving Lifestyle, any of the
Subsidiaries, or any of their respective assets. Except as set forth in Section
3.9 of the Lifestyle Disclosure Schedule, neither Lifestyle nor any Subsidiary
is in default under any outstanding judgment, decree, injunction or order of any
Governmental Authority or arbitrator.
U. Property; Liens and Encumbrances.
13. Section 3.10 of the Lifestyle Disclosure Schedule contains a complete and
accurate list of all real property owned or leased by either Lifestyle or any
Subsidiary as of the date hereof. 14. Lifestyle and the Subsidiaries have good
and valid leasehold interests in the Leased Properties and there are no pending
condemnation proceedings affecting any of the Leased Properties.
V. Certain Agreements.
Except as disclosed in Section 3.11 of the Lifestyle Disclosure Schedule or in
the Financial Statements, neither Lifestyle nor any Subsidiary is a party to any
written (i) agreement, contract, indenture or other instrument relating to the
guarantee of any obligation for the borrowing of money; or (ii) any contract
that (A) is material to the businesses of Lifestyle, and (B) requires annual
expenditures of $200,000 or more and has a remaining term of 12 months or more
(each of the foregoing a "Material Contract"). Each Material Contract is in full
force and effect and has been complied with in all material respects by
Lifestyle and/or the applicable Subsidiary and, to the knowledge of Lifestyle,
has been complied with in all material respects by all other parties thereto.
Except as set forth in Section 3.11 of the Lifestyle Disclosure Schedule, no
consent is required under any Material Contract in connection with the
consummation of the transactions contemplated by this Agreement. W. Claims for
Indemnification. Section 3.12 of the Lifestyle Disclosure Schedule contains (a)
a description of any claims made by Lifestyle or any Subsidiary, or contemplated
to be made by Lifestyle or an Subsidiary, for indemnification or reimbursement
of amounts with respect to assets or subsidiaries owned, previously owned or
acquired by Lifestyle or any Subsidiary, and (b) a description of any claims
made against Lifestyle or any Subsidiary for indemnification or reimbursement of
amounts with respect to assets or subsidiaries owned, previously owned or
acquired by Lifestyle or any Subsidiary.
X. Labor Matters.
15. Neither Lifestyle nor any Subsidiary is a party to any labor or collective
bargaining agreement. 16. No Employees are represented by any labor organization
that is certified to represent such employees under the National Labor Relations
Act or other applicable law. No labor organization or group of Employees has
made a pending demand for recognition, certification, successor rights or a
related employer declaration, and there are no representation, certification,
successor rights or related employer proceedings or petitions or applications
for certification seeking a representation proceeding presently pending with the
National Labor Relations Board or any other labor relations tribunal or
authority.
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17. There are no strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances or other material labor disputes pending
against or involving Lifestyle or any Subsidiary, to the extent applicable to
the Employees. 18. As of the date hereof, there are no pending complaints,
charges or claims against Lifestyle or any Subsidiary brought or filed with any
Governmental Authority, arbitrator or court based on, arising out of, in
connection with or otherwise relating to the employment or termination of
employment by Lifestyle or any Subsidiary or, relating to the Employees or other
Persons providing services to or on behalf of Lifestyle or any Subsidiary.
Y. Bonuses.
No officer, director, employee or agent of Lifestyle or any Subsidiary, or any
other Person, is a party to or beneficiary of any written contract pursuant to
which such Person shall receive or is entitled to receive any retention or other
transaction bonus or other payment (a "Transaction Bonus") from either Lifestyle
or any Subsidiary in connection with the transactions contemplated hereby.
Z. Brokers.
None of Lifestyle, the Subsidiaries or their respective directors, officers,
employees or agents has employed any investment banker, broker or finder in
connection with the transactions contemplated hereby.
IV. REPRESENTATIONS AND WARRANTIES OF RCG
RCG represents and warrants to Parent and Merger Sub as follows:
AA. Authorization. RCG has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by RCG, the performance by it of its respective
obligations hereunder, and the consummation by RCG of the transactions
contemplated hereby, have been duly authorized. No other action on the part of
RCG is necessary to authorize the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by RCG and constitutes the valid
and binding obligation of the RCG, enforceable against it in accordance with its
terms, subject (a) to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and (b) as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
BB. No Violation.
Neither the execution and delivery by RCG of this Agreement, the performance by
RCG of the obligations hereunder nor the consummation by RCG of the transactions
contemplated hereby will (a) violate, conflict with or result in any breach of
any provision of the Certificate of Incorporation or Bylaws of RCG or (b)
violate any order, writ, judgment, injunction, decree, statute, rule or
regulation of any Governmental Authority applicable to RCG or any of RCG's
assets, except in each case as would not have a Lifestyle Material Adverse
Effect or a material adverse effect on the transactions contemplated hereby.
CC. Brokers.
RCG, nor any director, officer, employee or agent of RCG, has employed any
investment banker, broker or finder in connection with the transactions
contemplated hereby.
DD. Ownership of Lifestyle Common Stock. The issued and outstanding shares of
Lifestyle Common Stock are owned beneficially and of record by RCG. RCG has the
full and unrestricted power to sell, assign, transfer and deliver the shares of
Lifestyle Common Stock to Parent in accordance with the terms of this Agreement,
free and clear of liens or encumbrances.
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EE. Investment Representations.
RCG hereby makes the following representations and warranties to Parent, and RCG
understands that Parent is materially relying upon such representations and
warranties: 19. RCG hereby acknowledges that the issuance of Parent Common Stock
to RCG pursuant to this Agreement will not initially be registered under the
Securities Act or under the securities laws of the States of North Carolina,
Delaware, or any other state, and that the Parent Common Stock so issued may not
be resold or otherwise transferred until such transaction is registered under
the Securities Act or an exemption from the registration requirements of the
Securities Act and applicable state securities laws are available. Furthermore,
RCG is aware of the restrictions which may be imposed by the Parent or the
federal or state securities laws on the distribution of the securities,
including, but not limited to, restrictive legends on the stock certificates.
20. RCG acknowledges having reviewed the Parent Disclosure Materials. RCG
understands and acknowledges that an investment in the securities is highly
speculative and includes a high degree of risk.
21. RCG agrees to execute and deliver to Parent an investor questionnaire in
such form as Parent shall reasonably require.
22. RCG understands that the stock certificate(s) which will be issued will
initially bear a legend as provided in Section
7.9(e).
23. RCG represents and warrants that it has such knowledge and experience in
business and financial matters to enable RCG to utilize the information given to
RCG in connection with this investment in order for RCG to evaluate the merits
and risks of the investment and to make an informed investment decision.
24. RCG acknowledges and agrees that:
b. no federal or state agency has passed upon the securities or made any finding
or determination as to the fairness of an investment in the securities; and c.
the representations, warranties, agreements, undertakings and acknowledgements
made by RCG in this Agreement are made with the intent that they be relied upon
by the Parent in determining the suitability of RCG as a purchaser of the
securities, and RCG undertakes to notify the Parent of any change in any
representation, warranty or other information relating to RCG set forth herein.
V. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to RCG and Lifestyle as follows:
FF. Organization, Qualifications and Operations. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, with all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as it is now being conducted.
Parent has delivered or made available to RCG and Lifestyle a true and complete
copy of its Certificate of Incorporation and Bylaws (or similar organizational
documents). GG. Authorization. Parent has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent, the
performance by Parent of its obligations hereunder, and the consummation by
Parent of the transactions contemplated hereby, have been duly authorized by the
board of directors of Parent and, if applicable, the stockholders of Parent. No
other corporate action on the part of Parent is necessary to authorize the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. When issued in accordance with this Agreement, the shares
of Parent Common Stock comprising the Merger Consideration will be duly
authorized, validly issued, fully paid and non-assessable and not issued in
violation of any preemptive rights. This Agreement has been duly and validly
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executed and delivered by Parent and constitutes the valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms,
subject (a) to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and (b) as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
HH. No Violation.
None of the execution and delivery by Parent of this Agreement, the performance
by Parent of its obligations hereunder nor the consummation by Parent of the
transactions contemplated hereby will (a) violate, conflict with or result in
any breach of any provision of the Certificate of Incorporation or Bylaws (or
similar organizational documents) of Parent, (b) violate or conflict with or
result in a violation or breach of, or constitute a default (with or without due
notice or lapse of time or both) under the terms, conditions or provisions of
any agreement to which Parent is a party or (c) violate any order, writ,
judgment, injunction, decree, statute, rule or regulation of any Governmental
Authority applicable to Parent or any of its assets, except in each case as
would not have a Parent Material Adverse Effect.
II. Consents and Approvals. Except as set forth in Section 5.4 of the Parent
Disclosure Schedule, no filing or registration with, no notice to and no permit,
authorization, consent or approval of any third party or any Governmental
Authority is necessary for Parent to enter into this Agreement or for the
consummation by Parent of the transactions contemplated by this Agreement
(collectively, the "Parent Approvals").
JJ. Brokers. Neither Parent nor any of its directors, officers, employees or
agents has employed any investment banker, broker or finder in connection with
the transactions contemplated hereby. KK. Parent Disclosure Materials. Except as
disclosed on Schedule 5.6, as of their respective dates none of the Parent
Disclosure Materials together with the Parent Disclosure Schedule (including all
exhibits and schedules thereto and documents incorporated by reference therein)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the Parent Disclosure Materials at the time of filing complied in all material
respects with the Securities Act and the Exchange Act. As of the date hereof,
there are no claims, actions, proceedings or investigations pending or, to the
best knowledge of Parent, threatened against Parent or any subsidiary of Parent,
or any properties or rights of Parent or of any of the subsidiaries of Parent,
before any court, administrative, governmental or regulatory authority or body
which is or will be required to be described in any Parent Disclosure Materials
that is not so described.
LL. Absence of Certain Changes or Events. Except as set forth in the Parent
Disclosure Materials or in Section 5.7 of the Parent Disclosure Schedule, since
December 31, 2001, there has not been any event that has had, or that Parent
reasonably expects to have, a Parent Material Adverse Effect and Parent has not
(a) incurred any indebtedness for borrowed money or assumed, guaranteed or
endorsed the obligations of any other Person, (b) amended its Certificate of
Incorporation or Bylaws (or similar organizational documents), (c) entered into
any contract or other agreements to do any of the foregoing.
MM. Capitalization.
25. The authorized capital stock of the Parent consists of 249,000,000 shares of
common stock, $.001 par value. As of the date hereof, 3,953,878 shares of Parent
Common Stock are issued and outstanding. All of the issued and outstanding
shares of Parent Common Stock have been validly issued, are fully paid, and
non-assessable and were not issued in violation of any preemptive rights. All of
the issued and outstanding shares of Parent Common Stock were issued in
compliance with all applicable state and federal securities laws and with
disclosure of the transactions contemplated by this Agreement.
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26. Except as set forth in Section 5.8(b) of the Parent Disclosure Schedule,
there are no (i) options, warrants, calls, subscriptions, conversion or other
rights, agreements or commitments obligating the Parent to issue any additional
shares of capital stock or any other securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of capital stock of the
Parent, (ii) agreements or commitments obligating the Parent to repurchase,
redeem or otherwise acquire any shares of its capital stock, (iii) restrictions
on transfer of any shares of capital stock of the Parent (other than pursuant to
this Agreement) or (iv) voting or similar stockholder agreements relating to any
shares of capital stock of the Parent. 27. Except as set forth in Section 5.8(c)
of the Company Disclosure Schedule, the Company does not own, directly or
indirectly, five percent (5%) or more of the outstanding voting securities of,
or otherwise possess, directly or indirectly, the power to direct or cause the
direction of the management or policies, of any Person.
NN. Taxes.28. Except as set forth in Section 5.9 of the Parent Disclosure
Schedule, Parent has filed or caused to be filed on a timely basis, or will file
or cause to be filed on a timely basis, all tax returns that are required to be
filed by Parent and each subsidiary prior to or on the Closing Date, pursuant to
the law of each Governmental Authority with taxing power over Parent and its
subsidiaries. All such tax returns were or will be, as the case may be, correct
and complete. Parent has paid or will timely pay all taxes that have or will
become due prior to or on the Closing Date, as shown on such tax returns or
pursuant to any assessment received as an adjustment to such tax returns, except
such taxes, if any, as are being contested in good faith and disclosed on
Schedule 5.9. Parent has not requested and is not currently the beneficiary of
any extension of time within which to file any tax return. No claim has been
made by a taxing authority (i) that is pending or, to the best knowledge of
Parent, threatened with respect to any taxes due from or with respect to Parent
or any subsidiary and (ii) of a jurisdiction where Parent does not file a tax
return that it is or may be subject to taxation in that jurisdiction. There are
no liens for taxes upon the assets or properties of Parent or any subsidiary,
except for statutory liens for current taxes not yet due. No deficiency for any
tax has been proposed, asserted or assessed against Parent that has not been
resolved or paid in full. No power of attorney has been granted by Parent with
respect to any matters related to taxes that is currently in force. No special
elections regarding taxes have been filed by Parent with any taxing authority.
Neither Parent nor any subsidiary is a party to, or has any liability or
obligation with respect to, any agreement relating to the sharing or allocation
of taxes, any indemnification agreement with respect to, taxes, or any similar
contract or arrangement. Neither Parent nor any subsidiary is or has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Parent has not waived or been requested to waive
any statute of limitations in respect of taxes. Parent and each subsidiary have
tax years ending on December 31 for federal income tax purposes. Neither Parent
nor any subsidiary is or has been doing business in, is or has been engaged in a
trade or business in, or has business in force in any jurisdiction in which it
has not filed all required tax returns. Neither Parent nor any subsidiary has
been a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (A) in the two
years prior to the date of this Agreement or (B) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transaction to be undertaken pursuant to this Agreement. Neither Parent nor any
subsidiary has ever been a member of any affiliated, consolidated, combined, or
unitary group of corporations filing tax returns. Without limiting the
foregoing, Parent does not have any liability for any tax (relating to Parent or
any interest therein) except (x) taxes disclosed on Schedule 5.9, and (y) taxes
fully reserved on Parent's financial statements. Parent has withheld and paid
all taxes required to have been withheld in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
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OO. Litigation.
There are no actions, suits, arbitrations, investigations or proceedings pending
or, to the knowledge of Parent, threatened against Parent or any of its
affiliates before any Governmental Authority or arbitrator involving Parent, any
of its subsidiaries, or any of their respective assets. Neither Parent nor any
of its subsidiaries is in default under any outstanding judgment, decree,
injunction or order of any Governmental Authority or arbitrator.
PP. Environmental Matters.
Except as disclosed on Section 5.11 of the Parent Disclosure Schedule:
(a) the operations of Parent and its subsidiaries and the real property
currently owned, leased or operated by Parent or any subsidiary are in
compliance and, during the period of the ownership or tenancy of Parent or the
subsidiary have materially been in compliance, with all applicable federal,
state, provincial or local laws relating to the environment, natural resources,
and pollution ("Environmental Laws"). (b) no judicial or administrative
proceedings or investigations are pending or, to the knowledge of Parent,
threatened against Parent or any subsidiary, pursuant to any applicable
Environmental Laws; and (c) no condition exists on any real property currently
(or to the knowledge of Parent, formerly) owned, operated or leased by Parent or
any subsidiary arising out of or resulting from any release, emission, spill or
leak of any hazardous material that could reasonably be expected to result in
Parent or any subsidiary incurring any liability under Environmental Laws and no
such property is listed or has been proposed for listing on the National
Priorities List or the Comprehensive Environmental Response Compensation and
Liability and Information System (CERCLIS).
VI.
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Parent and Merger Sub represent and warrant to RCG and Lifestyle as
follows:
QQ. Organization, Qualifications and Operations. Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada, with all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as it is now being
conducted. Merger Sub has delivered or made available to RCG and Lifestyle a
true and complete copy of its Certificate of Incorporation and Bylaws (or
similar organizational documents).
RR. Capital Structure.
The authorized capital stock of Merger Sub consists of 10,000 shares of common
stock, $.01 par value, all of which are issued and outstanding and owned of
record and beneficially by Parent, free and clear of all Liens. All outstanding
shares of capital stock of Merger Sub are duly authorized, validly issued, fully
paid, and non-assessable. Merger Sub has no outstanding options, warrants,
subscriptions or other rights, agreements or commitments that obligates it to
issue, sell or transfer, repurchase, redeem or otherwise acquire or vote any
shares of the capital stock of Merger Sub.
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SS. Authorization. Merger Sub has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Merger Sub, the
performance by Merger Sub of its respective obligations hereunder, and the
consummation by Merger Sub of the transactions contemplated hereby, have been
duly authorized by the board of directors and sole stockholder of Merger Sub. No
other corporate action on the part of Merger Sub is necessary to authorize the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Merger Sub and constitutes the valid and binding obligation of
Merger Sub, enforceable against Merger Sub in accordance with its terms, subject
(a) to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and (b) as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
TT. No Violation.
None the execution and delivery by Merger Sub of this Agreement, the performance
by Merger Sub of the obligations hereunder nor the consummation by Merger Sub of
the transactions contemplated hereby will (a) violate, conflict with or result
in any breach of any provision of the Certificate of Incorporation or Bylaws (or
similar organizational documents) of Merger Sub, or (b) violate any order, writ,
judgment, injunction, decree, statute, rule or regulation of any Governmental
Authority applicable to Merger Sub or any of its assets, except in each case as
would not have a Parent Material Adverse Effect. UU. Consents and Approvals.
Except as set forth in Section 6.5 of the Parent Disclosure Schedule, no filing
or registration with, no notice to and no permit, authorization, consent or
approval of any third party or any Governmental Authority is necessary for
Merger Sub to enter into this Agreement or for the consummation by Merger Sub of
the transactions contemplated by this Agreement (collectively, the "Merger Sub
Approvals").
VV. Brokers.
Neither Merger Sub nor any of its directors, officers, employees or agents has
employed any investment banker, broker or finder in connection with the
transactions contemplated hereby.
WW. No Prior Activities.
Except for this Agreement, Merger Sub (i) was recently formed, (ii) has not
entered into any agreements or arrangements with any person and (iii) is not
subject to or bound by any obligation or undertaking. Except as contemplated by
this Agreement, Merger Sub has not engaged, directly or indirectly, in any
business activities of any type or kind.
VII. ADDITIONAL AGREEMENTS
XX. Lifestyle Shares.
During the period from the date of this Agreement and continuing through the
Closing Date, and except as otherwise provided herein, RCG shall not, with
respect to shares of Lifestyle Common Stock that RCG is the record or beneficial
owner of, (i) deposit such shares of Lifestyle Common Stock into a voting trust
or enter into a voting agreement or arrangement with respect to such shares of
Lifestyle Common Stock or grant any proxy with respect thereto or (ii) enter
into any contract, option or other arrangement or undertaking with respect to
the direct or indirect acquisition or sale, assignment, pledge, transfer or
other disposition of any of its shares of Lifestyle Common Stock.
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YY. Access to Information;
Confidentiality. Between the date hereof and the Closing Date, Lifestyle shall,
and shall cause the Subsidiaries to, give to Parent and its counsel, accountants
and other authorized representatives and agents, all reasonable access, during
regular business hours to any and all of Lifestyle's and its Subsidiaries'
respective premises, properties, contracts, books and records, and will cause
their respective officers and employees to furnish to Parent and its
representatives, except where prohibited by law, any and all data and
information pertaining, directly or indirectly, to Lifestyle or the Subsidiaries
that Parent shall from time to time reasonably request, and shall permit Parent
and its representatives to make extracts and copies thereof. During such period,
Lifestyle shall furnish promptly to Parent all information and documents
concerning the business, properties and personnel of Lifestyle and the
Subsidiaries as Parent may reasonably request. Except as required by law, each
of Parent and Lifestyle agree that, until the earlier of (i) two (2) years from
the date of this Agreement and (ii) the Effective Time, each of Parent,
Lifestyle, and their respective subsidiaries will not, and Parent and Lifestyle
will cause their respective directors, officers, employees, agents, accountants,
counsel, financial advisors and other representatives and Affiliates
(collectively, "Representatives") not to, disclose any nonpublic information
obtained from Parent or Lifestyle, as the case may be, to any other person, in
whole or in part, other than to its Representatives in connection with an
evaluation of the transactions contemplated by this Agreement, and, in the event
this Agreement is terminated, each of Parent, Lifestyle, and their respective
subsidiaries and Affiliates will not, and Parent and Lifestyle will cause their
respective Representatives not to, use any of such nonpublic information to
directly or indirectly divert or attempt to divert any business, customer,
director, officer or employee of the other.
ZZ. Public Announcements.
The parties hereto will consult with each other and will mutually agree (the
agreement of each party not to be unreasonably withheld or delayed) upon the
content and timing of any press release or other public statements with respect
to the transactions contemplated by this Agreement and shall not issue any such
press release or make any such public statement prior to such consultation and
agreement, except as may be required by applicable law or by obligations
pursuant to any listing agreement with any securities exchange or any stock
exchange regulations as advised by counsel; provided, however, that each party
will give prior notice to the other parties of the content and timing of any
such press release or other public statement required by applicable law or by
obligations pursuant to any listing agreement with any securities exchange or
any stock exchange regulations.
AAA. Taxes.
(a) Tax Returns Due on or Before the Closing Date. RCG shall prepare or
cause to be prepared and file or cause to be filed all Tax Returns for Lifestyle
or any Subsidiary due on or before the Closing Date. RCG shall pay, or cause
Lifestyle or any Subsidiary to pay, all Taxes shown as due on such Tax Returns.
All such Tax Returns shall be prepared and filed in a manner that is consistent
with prior practice, except as required by a change in applicable law.
18
(b) Straddle Period Tax Allocation. For purposes of Section 7.4(a), in
the case of any Taxes that are imposed on a periodic basis and are payable for a
Straddle Period, the portion of such Tax that relates to the portion of such Tax
period beginning before and ending on the Closing Date shall (i) in the case of
any Taxes other than income Taxes or Taxes based on gross receipts or capital,
be deemed to be the amount of such Tax for the entire Tax period multiplied by a
fraction, the numerator of which is the number of days in the Tax period ending
on the Closing Date and the denominator of which is the number of days in the
entire Tax period and (ii) in the case of any income Taxes or Taxes based on
gross receipts or capital, be deemed equal to the amount that would be payable
if the relevant Tax period ended on the Closing Date.
BBB. Consents, Approvals and Filings.
Parent will make, and cause its subsidiaries to make, all necessary filings,
including, without limitation, those required under the securities laws in order
to facilitate the prompt consummation of the Merger and the other transactions
contemplated by this Agreement. In addition, Parent, Merger Sub, RCG and
Lifestyle will each use their respective commercially reasonable efforts, and
will cooperate fully and in good faith with each other, (a) to comply as
promptly as practicable with all governmental requirements applicable to the
Merger and the other transactions contemplated by this Agreement, and (b) to
obtain as promptly as practicable all necessary permits, orders or other
consents of Governmental Authorities and consents of all third parties necessary
for the consummation of the Merger and the other transactions contemplated by
this Agreement. Each of Parent, Merger Sub, RCG and Lifestyle shall use their
respective commercially reasonable efforts to promptly provide such information
and communications to Governmental Authorities as such Governmental Authorities
may reasonably request. Each of the parties hereto shall provide to the other
parties copies of all applications in advance of filing or submission of such
applications to Governmental Authorities in connection with this Agreement and
shall make such revisions thereto as reasonably requested by each other party
hereto. Each of the parties hereto shall provide to the other parties the
opportunity to participate in all meetings and material conversations with
Governmental Authorities with respect to the matters contemplated by this
Agreement.
CCC. Third Party Proposals.
Neither Lifestyle nor RCG nor any of their respective Affiliates shall directly
or indirectly solicit, encourage or facilitate inquiries or proposals, or enter
into any definitive agreement, with respect to, or initiate or participate in
any negotiations or discussions with any Person concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or of any equity
interest in, Lifestyle or any merger or business combination with Lifestyle
other than as contemplated by this Agreement (each, an "Acquisition Proposal")
or furnish any information to any such Person. Lifestyle and RCG any of their
respective Affiliates and agents shall notify Parent immediately if any
Acquisition Proposal (including the terms thereof) is received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, any of Lifestyle, RCG any of their respective
Affiliates. Lifestyle and RCG shall cause their respective officers, directors,
agents, advisors and Affiliates to comply with the provisions of this Section
7.6.
DDD. Stock Options.
Each outstanding option or warrant issued to Lifestyle employees, or in
connection with RCG's acquisition of Lifestyle, entitling the holder to purchase
shares of RCG will (i) be terminated pursuant to the terms of the outstanding
warrants or stock option agreements and the RCG stock option plan and Parent
shall grant warrants to such warrant holders or options to the Surviving
Corporation's employees entitling them to purchase shares of Parent Common Stock
in a proportionate amount to the amount of warrants or options the respective
employees or warrant holders had in RCG stock at an exercise price equal to the
market price of Parent Common Stock on the day of grant; or (ii) be converted
into an option or warrant to purchase Parent Common Stock with an appropriate
adjustment to share numbers and a similar adjustment in exercise price. RCG will
not grant any stock options to Lifestyle employees after the date hereof. Upon
consummation of the Merger, Parent and the Surviving Corporation shall negotiate
in good faith to enter into employee stock option agreements with the Surviving
Corporation's and Lifestyle's employees hired on or after the date hereof or who
do not have RCG stock options to be terminated or converted.
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EEE. Post-Signing Financial Information.
Lifestyle and RCG shall, as promptly as practicable, provide to Parent any
internally prepared management reports and any other financial data, projections
and other information for the period from June 30, 2002 forward in time relating
to Lifestyle and the Subsidiaries.
FFF. Registration Statement; Resales of Parent Common Stock.
As soon as reasonably practicable following the date hereof, but in no event
later than ninety (90) days following the Closing Date, Parent shall, and RCG
shall cooperate in taking steps to (i) prepare and file with the Securities
Exchange Commission ("SEC"), a registration statement on the appropriate form to
register resales by RCG of the Merger Consideration (the "Registration
Statement") and (ii) use commercially reasonable efforts to cause such
registration statement to be declared effective, and to maintain its
effectiveness until such time as RCG has disposed of all of the Merger
Consideration. Parent hereby grants to RCG a ten (10) year option to purchase up
to One Million (1,000,000) shares of Parent Common Stock at a price per share
equal to two-tenths (.2) times the last bid price of Parent Common Stock on the
"Triggering Date" (hereinafter defined)(the "Stock Option"). The Stock Option
will become exercisable if the Registration Statement is not filed within 90
days following the Closing Date (the "Triggering Date"). 29. All expenses
incurred in connection with the registration pursuant to this Section 7.9
(excluding underwriters' and brokers' discounts and commissions), including,
without limitation, all federal and "blue sky" registration, qualification and
filing fees, printers' and accounting fees, fees and disbursements of counsel
for RCG, shall be borne by the Parent. 30. In connection with the registration
under this Section 7.9, Parent shall, as expeditiously as commercially
reasonable: d. Furnish to RCG such number of copies of the Registration
Statement, prospectus, and preliminary prospectus, in conformity with the
requirements of the Securities Act and the Exchange Act, and such other
documents as RCG may reasonably request in writing in order to facilitate the
disposition of the Merger Consideration owned by it that are included in such
Registration Statement. e. Use commercially reasonable efforts to register and
qualify the securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by RCG, provided that Parent shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions. f.
Notify RCG at any time when a prospectus relating thereto is required to be
delivered under the Securities Act or the Exchange Act of the happening of any
event as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing. g. Use commercially reasonable efforts to cause all the
securities covered by the Registration Statement to be (x) listed on the
American Stock Exchange, if the initial listing of such securities is then
permitted under the rules of such exchange, or (y) authorized for quotation on a
national quotation system.
31. To the extent permitted by law, Parent will indemnify and hold harmless RCG,
20
its officers and directors against any expenses, losses, claims, damages, or
liabilities (joint or several) (or actions in respect thereof) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such expenses, losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"):
h. any untrue statement of a material fact contained in such Registration
Statement, preliminary prospectus, final prospectus, offering circular or other
document contained therein or any amendments or supplements thereto; i. the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading; or
j. any violation or alleged violation by Parent of the Securities Act, the
Exchange Act, any federal or state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any federal or state
securities law in connection with the offering covered by such registration
statement; and Parent will reimburse RCG, its officers and directors for any
legal or other expenses reasonably incurred by them, as incurred, in connection
with investigating, defending or settling any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 7.9(c) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of Parent (which consent shall not be unreasonably withheld), nor
shall Parent be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
RCG or its officers or directors.
32. RCG agrees that it will not sell, assign or transfer any of the Parent
Common Stock received by it pursuant to the Merger except (i) pursuant to the
Registration Statement or another registration statement that has been declared
effective under the Securities Act, or (ii) in a transaction that is not
required to be registered under the Securities Act; provided, however, that all
such sales otherwise comply with restrictions that may be imposed by applicable
law. Parent shall be entitled to condition the registration of transfer of any
such Parent Common Stock not made pursuant to an effective registration
statement upon the receipt of a written opinion of counsel addressed to Parent,
which opinion and counsel shall be reasonably satisfactory to Parent, that such
transfer is not required to be so registered.
33. Each certificate representing shares of Parent Common Stock issued to RCG
at the Closing shall bear the following legend:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 or any state's
securities laws, and such shares may not be resold or
otherwise transferred unless they are subsequently registered
or an exemption from applicable registration requirements is
available.
The foregoing legend will be removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to Parent
from counsel reasonably satisfactory to Parent to the effect that such legend is
no longer required for purposes of the Securities Act.
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GGG. Lifestyle Financial Information.
RCG shall furnish or cause to be furnished to Parent all financial statements
pertaining to the business of Lifestyle and the Subsidiaries, together with
accompanying reports and related consents of RCG's independent accounting firm,
as applicable, which are required in order to satisfy Parent's disclosure
requirements under the United States' securities laws as determined by Parent in
its reasonable judgment. RCG shall also furnish or cause to be furnished to
Parent any additional financial or other information regarding Lifestyle and its
Subsidiaries which is needed, in the reasonable judgment of Parent, to permit
the preparation of any tax returns and support of tax positions or the
compliance with any other regulatory requirements.
HHH. Notice, Efforts to Remedy.
During the period from the date of this
Agreement to the Effective Time, each party hereto shall promptly give written
notice to the other parties hereto upon becoming aware of the occurrence of any
event which would cause or constitute a breach of any of the representations,
warranties or covenants of such party contained in this Agreement and shall use
commercially reasonable efforts to prevent or promptly remedy the same. During
the period from the date of this Agreement to the Effective Time, Parent shall
promptly notify Lifestyle and RCG of the receipt by Parent of any notice of any
governmental complaints, investigations or hearings (or communications indicting
that the same may be contemplated).
7.12 Parent Board Seats. RCG and Parent shall mutually elect one (1)
member of Parent's Board of Directors and the Surviving Corporation's Board of
Directors as of the Closing. Such Board representatives shall be entitled to
receive the same expense reimbursements granted to outside Board
representatives. The Board of Directors at Closing will elect the new Chief
Executive Officer of Parent.
7.13 Employee Benefits Plans. The Surviving Corporation's employees
shall be eligible under, and Lifestyle employees shall continue under, the
"Benefit Plans" (hereinafter defined) until the earlier of (i) the Surviving
Corporation's election to opt out of the Benefit Plans, (ii) such time as RCG is
required to remove the Surviving Corporation's employees from the Benefit Plans
by the Benefit Plan providers, by law, or otherwise, and (iii) such time as is
mutually agreed between RCG and the Surviving Corporation. At such time, Parent
and the Surviving Corporation will take all actions necessary to withdraw from
participation in the Benefits Plans. "Benefit Plans" shall mean health or other
medical, cafeteria, dependent care, vacation, sick leave, holiday pay, fringe
benefit, reimbursement program, life insurance, disability or other (whether
insured or self-insured) insurance, pension retirement, supplementary
retirement, or other employee plan, program, policy or arrangement, whether
written or unwritten, formal or informal, for the benefit of the employees,
former employees, brokers, agents, or directors of RCG or its subsidiaries, or
leased employees, independent contractors or other Persons performing services
for or on behalf of RCG, its subsidiaries, or any entity required to be
aggregated with RCG or any subsidiary pursuant to Code Section 414 or ERISA
Section 4001(b).
7.14 Debt Conversion.
k. At any time after the Closing, RCG shall have the right, upon notice to
Parent, to elect to satisfy debt, or any portion thereof, owed to it or any of
its subsidiaries by Lifestyle or any of the Subsidiaries by having the right to
receive shares of Parent Common Stock at a conversion ratio equal to a Twenty
22
Percent (20%) discount to the average of the closing prices of the Parent Common
Stock for the ten (10) consecutive trading days prior to the date of conversion.
Parent shall bear at its sole expense, all expenses relating to the issuance of
the shares of Parent Common Stock issued pursuant hereto. The shares of Parent
Common Stock issued pursuant hereto shall be (i) fully paid and non-assessable
and (ii) issued in compliance with the provisions of the Securities Act; and
Parent shall submit an Application with the appropriate stock exchange for the
listing approval of the shares underlying the convertible indebtedness.
(ii) As soon as commercially practicable after the Closing, Parent will
use its best efforts to enter into amendments to promissory notes, or letter
agreements in the case of debt due on demand, permitting debt holders of
Lifestyle and the Subsidiaries (other than RCG) to elect to satisfy such debt by
having the right to receive shares of Parent Common Stock at an agreed upon
conversion ratio and on such other terms as the parties shall agree in good
faith.
7.15 Cooperation. After the Closing, Parent and the Surviving
Corporation covenant to provide assistance to RCG by providing
RCG with financial and other requested information in a timely
manner to allow RCG to accurately and complete its public
reporting requirements on a timely basis.
VIII.
COVENANTS RELATING TO
CONDUCT OF BUSINESS PRIOR TO MERGER
III. Conduct of Businesses of Lifestyle. Except as expressly contemplated by
this Agreement, or with the prior written consent of Parent (not to be
unreasonably withheld or delayed), from the date of this Agreement, Lifestyle
will, and will cause each Subsidiary to, materially conduct its business and
operations according to its ordinary and usual course of business and will use
all reasonable efforts consistent therewith to materially preserve intact and,
as applicable, materially maintain in good repair its properties, assets and
business organizations, to keep available the services of its officers, agents
and employees and to materially maintain satisfactory relationships with its
customers in each case in the ordinary course of business, consistent with the
manner in which Lifestyle and the Subsidiaries have been operated prior to the
date hereof. Without limiting the generality of the foregoing, except with the
prior written consent of Parent (not to be unreasonably withheld or delayed),
prior to the Closing, Lifestyle will not, and will not permit any Subsidiary to:
34. propose or adopt any amendment to its Certificate of Incorporation or
Bylaws (or similar organizational documents);
35. assume, guarantee or endorse the obligations of any other Person;
36. sell, transfer or otherwise dispose of any of its property or assets other
than immaterial sales or other dispositions of
assets in the ordinary course of business;
37. take any action that would intentionally result in a breach of the
representations and warranties contained in Article III of this Agreement;
38. adopt a plan of complete or partial liquidation or resolutions providing
for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization; or
39. agree to take any of the foregoing actions.
23
JJJ. Other Actions. None of Parent, Merger Sub, Lifestyle or RCG shall, and none
of them shall permit any of their respective subsidiaries to, intentionally
take any action that would, or that could reasonably be expected to, result
in any of the conditions of the Merger set forth in Article IX not being
satisfied.
IX. CONDITIONS PRECEDENT
KKK. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions: 40. Governmental and Regulatory Consents. All required consents,
approvals, permits and authorizations to the consummation of the Merger shall be
obtained from any Governmental Authority whose consent, approval, permission or
authorization is required, whether in accordance with currently effective law or
by reason of a change in law after the date of this Agreement. No such consent,
approval, permission or authorization shall contain a materially adverse
prohibition, limitation, condition or restriction imposed by the Governmental
Authority. 41. No Injunctions or Restraints. No action, suit or proceeding shall
have been instituted and be continuing or be threatened by any Governmental
Authority to restrain, modify or prevent the carrying out of the transactions
contemplated hereby; no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or prohibition preventing the consummation of the
Merger or limiting or restricting Parent's conduct or operation of the business
of the Surviving Corporation after the Merger shall have been issued; no action,
suit or proceeding seeking any of the foregoing shall have been instituted by
any third party that has or is reasonably likely to materially impair RCG's or
Parent's ability to consummate the transactions contemplated hereby or have a
Lifestyle Material Adverse Effect or a Parent Material Adverse Effect.
LLL. Conditions to Parent's and Merger Sub's Obligation to Effect the
Merger.
The obligation of Parent and Merger Sub to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions: (a) Representations and Warranties of RCG and Lifestyle. The
representations and warranties of RCG and Lifestyle contained in this Agreement
shall have been true and correct on the date of this Agreement and shall be true
and correct at and as of the Closing Date as though made at and as of such time
(except to the extent that any such representations and warranties expressly
relate only to an earlier time, in which case they shall have been true and
correct at such earlier time); provided, however, that this condition shall be
deemed to have been satisfied unless the individual or aggregate impact of all
inaccuracies of such representations and warranties (without regard to any
materiality or Lifestyle Material Adverse Effect qualifier(s) contained in any
individual representation or warranty) could reasonably be expected to have a
Lifestyle Material Adverse Effect (or, following the Effective Time, a material
adverse effect on the Surviving Corporation) and the Subsidiaries, considered as
a whole.
(b) Performance of Obligations of RCG and Lifestyle. RCG and
Lifestyle shall have performed in all material respects all obligations required
to be performed by them under this Agreement at or prior to the Closing Date.
(c) Consents under Material Contracts. Lifestyle shall have
obtained the consent or approval of each person whose consent or approval
shall be required under any Material Contract, real property lease or other
obligation to which Lifestyle or any Subsidiary is a party, except those for
which the failure to obtain such consents or approvals would not, individually
or in the aggregate, have a Lifestyle Material Adverse Effect.
(d) No Material Adverse Change. There shall not have occurred
24
any change in the business of Lifestyle and its Subsidiaries since the date of
this Agreement or any other event or circumstance that could reasonably be
expected to have a Lifestyle Material Adverse Effect.
MMM. Conditions to RCG's and Lifestyle's Obligation to Effect the Merger.
The obligation of RCG and Lifestyle to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions: 42. Representations and Warranties of Parent and Merger Sub. The
representations and warranties of Parent and Merger Sub contained in this
Agreement shall have been true and correct on the date of this Agreement and
shall be true and correct at and as of the Closing Date as though made at and as
of such time (except to the extent that any such representations and warranties
expressly relate only to an earlier time, in which case they shall have been
true and correct at such earlier time); provided, however, that this condition
shall be deemed to have been satisfied unless the individual or aggregate impact
of all inaccuracies of such representations and warranties (without regard to
any materiality or Parent Material Adverse Effect qualifier(s) contained in any
individual representation or warranty) could reasonably be expected to have a
Parent Material Adverse Effect or a material adverse effect on Merger Sub.
(b) Performance of Obligations of Parent and Merger Sub.
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date.
(c) Consents. Parent and Merger Sub shall have obtained the
consent or approval of each person whose consent or approval shall be required,
except those for which the failure to obtain such consents or approvals would
not, individually or in the aggregate, have a Parent Material Adverse Effect.
(d) Capitalization; Liabilities. Parent shall have, on the
Closing Date, (i) no more than 4,100,000 shares of Parent Common Stock
outstanding as of the Closing on a fully-diluted basis, (ii) at least Fifty
Thousand Dollars ($50,000) in cash short-term liquid investments and Fifty
Thousand Dollars ($50,000) worth of other net tangible assets and (iii) no more
than Forty Thousand Dollars ($40,000) in liabilities.
X.
TERMINATION, AMENDMENT AND WAIVER
NNN. Termination.
This Agreement may be terminated and the Merger abandoned as follows: 43. at any
time prior to the Effective Time by mutual written consent of Parent, Merger
Sub, RCG and Lifestyle; or 44. at any time prior to the Effective Time: l. by
Parent or RCG if the Merger shall not have been consummated on or before
September 15, 2002, unless the failure to consummate the Merger is the result of
a willful and material breach of this Agreement by the party seeking to
terminate this Agreement; or m. by Parent or RCG if any Governmental Authority
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable.
OOO. Effect of Termination. In the event that this Agreement is terminated as
provided in Section 10.1, this Agreement shall forthwith become void and have no
effect, without any liability or obligation on the part of Parent, Merger Sub,
RCG or Lifestyle, other than the last sentence of Section 7.2 and Sections 3.15,
4.3, 5.5, 6.6, 7.3, 10.2, 12.1 and Article 13. PPP. Amendment. Subject to the
applicable provisions of the DGCL, at any time prior to the Effective Time, the
parties hereto may modify or amend this Agreement, by written agreement executed
and delivered by duly authorized officers of the respective parties. QQQ.
Extension; Consent; Waiver. At any time prior to the Effective Time, the parties
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to Section 10.3, waive
compliance with any of the agreements or conditions of the other parties
25
contained in this Agreement or consent to any action requiring consent pursuant
to this Agreement. Any agreement on the part of a party to any such extension,
waiver or consent shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights. RRR. Procedure for Termination, Amendment, Extension,
Consent or Waiver. A termination of this Agreement pursuant to Section 10.1, an
amendment of this Agreement pursuant to Section 10.3 or an extension, consent or
waiver pursuant to Section 10.4 shall, in order to be effective, require in the
case of Parent, Merger Sub, RCG or Lifestyle, action by its board of directors
or a duly authorized committee of its board of directors.
XI. INDEMNIFICATION
SSS. Non-Survival of Representations, Warranties and Covenants. All
representations and warranties contained in Articles III, IV, V and VI of this
Agreement, including any schedules made part hereof, and any covenants or other
agreements the performance of which is specified to occur on or prior to the
Closing or the Closing Date, shall terminate at the Effective Time, except for
representations and warranties set forth in Sections 3.4, 4.4, 5.2, 5.6 and 5.8
which shall survive indefinitely. Any covenant or other agreement herein any
portion of the performance of which is specified to occur after the Closing
shall survive the Merger hereunder indefinitely or for such lesser period of
time as may be specified therein.
TTT. Obligations of RCG.
45. From and after the Closing Date, RCG shall indemnify, defend and hold
harmless Parent and its respective employees, officers, directors, and other
Affiliates from and against any and all Losses which any of them may suffer,
incur or sustain arising out of, attributable to, or resulting from, directly or
indirectly: (i) any inaccuracy in or breach of any of the representations or
warranties of RCG made in this Agreement; (ii) any breach or nonperformance of
any of the covenants or other agreements made by RCG in or pursuant to this
Agreement; (iii) any inaccuracy in or breach of any of the representations or
warranties of Lifestyle made in Section 3.4 of this Agreement. RCG shall not
have any other liability or obligation to Parent or its respective employees,
officers, directors, partners or other Affiliates (including Lifestyle) in
respect of any of the other representations, warranties, and covenants set forth
in this Agreement.
(b) RCG shall satisfy any finally determined indemnifiable
claim against it by delivering to the indemnified party, at the option of RCG,
cash or an election to set-off such amount against that number of shares of
Parent Common Stock having an aggregate value equal to the amount of such claim,
each such share to be valued for this purpose at the average of the per share
closing prices for the Parent Common Stock for the five (5) trading days
immediately prior to the relevant date of payment or offset. In the event that
RCG does not own a sufficient number of shares to satisfy such indemnification
obligation, then RCG shall pay any deficiency, at its sole discretion, with cash
or a promissory note.
26
UUU. Obligations of Parent.
From and after the Closing Date, Parent and the Surviving Corporation shall
indemnify, defend and hold harmless RCG and their respective employees,
officers, directors, and other Affiliates from and against any and all Losses
which any of them may suffer, incur, or sustain arising out of, attributable to,
or resulting from, directly or indirectly: (i) any inaccuracy in or breach of
any of the representations or warranties of Parent or Merger Sub made in this
Agreement; and (ii) any breach or nonperformance of any of the covenants or
other agreements made by Parent, Merger Sub or the Surviving Corporation in or
pursuant to this Agreement.
VVV. Notice of Claims.
Any indemnified party seeking indemnification for any Loss or potential Loss
arising from a claim asserted by any party to this Agreement against the
indemnifying party (a "Claim") shall give written notice to the indemnifying
party specifying in detail the source of the Loss or potential Loss under
Section 11.2 or 11.3, as the case may be. Written notice to the indemnifying
party of the existence of a Claim shall be given by the indemnified party
promptly after the indemnified party becomes aware of the potential claim;
provided, however, that the indemnified party shall not be foreclosed from
seeking indemnification pursuant to this Article XI by any failure to provide
such prompt notice of the existence of a Claim to the indemnifying party except
and only to the extent that the indemnifying party actually incurs an
incremental out-of-pocket expense or otherwise has been materially damaged or
prejudiced as a result of such delay.
WWW. Survival of Indemnity. Any matter as to which a Claim has been asserted by
formal notice pursuant to Section 11.4 and within the time limitation applicable
by reason of Section 11.1 that is pending or unresolved at the end of any
applicable limitation period under this Article XI or Applicable Law shall
continue to be covered by this Article XI notwithstanding any applicable statute
of limitations (which the parties hereby waive) or the expiration dates set
forth in Section 11.1 until such matter is finally terminated or otherwise
resolved by the parties under this Agreement or by a court of competent
jurisdiction and any amounts payable hereunder are finally determined and paid.
27
XXX. Limitations.
46. Neither RCG, Parent nor Merger Sub shall have indemnification obligation
under this Agreement until aggregate Losses of such party and its Affiliates and
the successors and assigns of such party and its Affiliates exceed $100,000,
after which time such party shall be liable for the entire amount of Losses in
accordance with the terms hereof, subject to the limitations in Sections 11.6(b)
of this Agreement.
47. The obligations of RCG under Section 11.2 shall be limited to $1,000,000;
provided, however that such limitation shall not apply to any Loss suffered by
RCG as a result of a breach of the representation in Section 5.2, Section 5.6,
Section 5.8 or intentional misconduct. The obligations of the Parent and Merger
Sub under Section 11.3 shall be limited to an aggregate of $1,000,000; provided,
however that such limitation shall not apply to any Loss suffered by Parent as a
result of a breach of the representation in Section 3.4, Section 4.4, or
intentional misconduct.
YYY. Subrogation. Any indemnifying party shall be subrogated to any right of
action which the indemnified party may have against any other person with
respect to any matter giving rise to a claim for indemnification hereunder. ZZZ.
Adjustments to Indemnification Obligations. The amount which any indemnifying
party is or may be required to pay any indemnified party pursuant to this
Article XI shall be reduced (including, without limitation, retroactively) by
any insurance proceeds or other amounts actually recovered by or on behalf of
such indemnified party in reduction of the related Loss. If an indemnified party
shall have received the payment required by this Agreement from an indemnifying
party in respect of a Loss and shall subsequently actually receive insurance
proceeds or other amounts in respect of such Loss, then such indemnified party
shall pay to such indemnifying party a sum equal to the amount of such insurance
proceeds or other amounts actually received (net of any expenses in obtaining
the same).
AAAA. Remedies. The indemnification provided for in this Article XI shall be the
exclusive remedy of any indemnified person for any breach of or inaccuracy in
any of the representations, warranties and covenants made in this Agreement or
in any certificate, document or instrument delivered pursuant hereto.
Notwithstanding the foregoing, this Article XI shall not restrict the ability of
any party to seek specific performance of this Agreement or any provision
hereof.
XII.
NOTICES
BBBB. Notices.
All notices and other communications under this Agreement must be in writing and
will be deemed to have been duly given if personally delivered, by confirmed
facsimile transmission, by receipted overnight or express courier (such as
Federal Express) or mailed, by certified mail, return receipt requested,
first-class postage prepaid, to the parties at the following addresses:
If to Parent or Merger Sub, to:
Lifestyle Innovations, Inc.
3801 William D. Tate Avenue
Suite 100
Grapevine, TX 76051
28
If to RCG or Lifestyle, to:
eResource Capital Group, Inc.
5935 Carnegie Boulevard
Suite 101
Charlotte, North Carolina 28209
Attention: Michael D. Pruitt
Chief Executive Officer
Facsimile: (704) 553-7136
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Article XII if delivered personally will
be deemed given upon delivery, if delivered by facsimile transmission will be
deemed delivered when confirmed, if sent via overnight or express courier will
be deemed delivered as of the next succeeding business day after the date
actually and if delivered by certified mail in the manner described above will
be deemed given on the third (3rd) business day after the day it is deposited in
a regular depository of the United States mail. Any party from time to time may
change its address for the purpose of notices to that party by giving a similar
notice specifying a new address, but no such notice will be deemed to have been
given until it is actually received by the party sought to be charged with the
contents thereof. XIII.
MISCELLANEOUS
CCCC. Entire Agreement. Except for the documents executed by Parent, Merger Sub
RCG and Lifestyle pursuant hereto, this Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter of this Agreement, and this Agreement (including the exhibits hereto and
other documents delivered in connection herewith) contains the sole and entire
agreement between the parties hereto with respect to the subject matter hereof.
DDDD. Expenses. Whether or not the Merger is consummated, each of Parent, Merger
Sub, RCG and Lifestyle will pay its own costs and expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby. In the event of any lawsuit or other judicial
proceeding brought by either party to enforce any of the provisions of this
Agreement, the losing party in such proceeding shall reimburse the prevailing
party's fees and expenses incurred in connection therewith, including the
reasonable fees and expenses of its attorneys.
29
EEEE. Counterparts/Facsimile Signatures. This Agreement may be executed in two
(2) or more counterparts, each of which will be deemed an original, but all of
which will constitute one and the same instrument and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties. Any party may deliver an executed copy of this
Agreement and any documents contemplated hereby by facsimile transmission to
another party, and such delivery shall have the same force and effect as any
other delivery of a manually signed copy of this Agreement or of such other
documents. FFFF. No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of the parties hereto, and their
respective successors or assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other person.
GGGG. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
HHHH. Assignment; Binding Effect. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, and any such assignment that is not
consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns.
IIII. Headings, Gender, Etc. The headings used in this Agreement have been
inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words of any gender are deemed to include each
other gender; (b) words using the singular or plural number also include the
plural or singular number, respectively; (c) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (d) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (e) all references to "dollars" or "$" refer to
currency of the United States of America; (f) the term "person" shall include
any natural person, corporation, limited liability company, general partnership,
limited partnership, or other entity, enterprise, authority or business
organization; and (g) the term "or" is not exclusive.
JJJJ. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if the
rights or obligations of Parent, Merger Sub, RCG or Lifestyle under this
Agreement will not be materially and adversely affected thereby, (a) such
provision will be fully severable; (b) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom.
KKKK. No Recourse Against Others. No past, present or future director, officer,
employee, stockholder or incorporator, as such, of Parent, Merger Sub, RCG,
Lifestyle or the Surviving Corporation shall have any liability for any
obligations of the parties hereto under this Agreement or for any claim based
on, in respect of or by reason of such obligations or their creation.
30
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31
IN WITNESS WHEREOF, this Agreement has been duly executed and deliver
by the duly authorized officers of RCG, Lifestyle, Parent and Merger Sub,
effective as of the date first written above.
eRESOURCE CAPITAL GROUP, INC.
By: ____________________________
Name: Michael D. Pruitt
Title: Chief Executive Officer
LST, INC.
By: ____________________________
Name: Michael D. Pruitt
Title: President
LIFESTYLE INNOVATIONS, INC.
By: ____________________________
Name:
Title: President
LFSI MERGER CORP.
By: ____________________________
Name:
Title: President
32
EXHIBIT A
Plan of Merger
CERTIFICATE OF MERGER
OF LFSI MERGER CORP.
WITH AND INTO
LST, INC.
Under Section 252 of the General Corporation Law of the
State of Delaware ("DGCL")
LST, Inc. herby certifies that:
1. The name and state of incorporation of each of the constituent
corporations is as follows:
(i) LST, Inc., a Delaware corporation; and
(ii) LFSI Merger Corp., a Nevada corporation
2. An Agreement and Plan of Merger has been adopted, approved, certified,
executed and acknowledged by each of LFSI Merger Corp. and by LST, Inc. in
accordance with the provisions of subsection (c) of Section 252 of the DGCL.
3. The name of the surviving corporation is LST, Inc.
4. The date when the Articles of Incorporation of LST, Inc. was filed by
the Secretary of State of Delaware is July 17, 2000. The Articles of
Incorporation of LST, Inc. shall be the Articles of Incorporation of the
surviving corporation.
5. The executed Agreement and Plan of Merger is on file at the principal
place of business of LST, Inc. at 8809 Lenox Pointe Drive, Suite G Charlotte, NC
28273.
6. A copy of the Agreement and Plan of Merger will be furnished by LST,
Inc., on request and without cost, to any stockholder of any constituent
corporation.
33
7. As to the constituent corporations, the designation and number of
outstanding shares of each class and series and the voting rights thereof are as
follows:
Name of Corporation Authorized Designation and Class or series of Shares entitled to
------------------- ----------- ---------------- ------------------- ------------------
Shares and Par number of shares in shares entitled to vote as a separate
--------------- -------------------- ------------------- ------------------
Value each class of vote class or series
----- -------------- ---- ---------------
Series outstanding
LST, Inc. 20,000,000 1 share of Common Stock Not applicable
($.001) Common Stock
LFSI Merger Corp. 10,000 ($.01) 10,000 shares of Common Stock Not Applicable
Common Stock
8. The merger was adopted by the constituent corporations by the
affirmative vote of the holder of all outstanding shares entitled to vote
thereon.
9. The merger shall be effective on September 5, 2002.
IN WITNESS WHEREOF, this Certificate of Merger has been executed on the
3rd day of September.
LST, Inc.
By:
-----------------------------------------
Print Name: Michael D. Pruitt
Title: President
34
ARTICLES OF MERGER
OF LFSI MERGER CORP.
WITH AND INTO
LST, INC.
Under Section 92A.200 of the Nevada Revised Statutes
LST, Inc., a corporation organized under the laws of the State of Delaware (the
"Surviving Corporation"), hereby submits these Articles of Merger for the
purpose of merging LFSI Merger Corp., a corporation organized under the laws of
the State of Nevada (the "Merger"), with and into the Surviving Corporation.
The Surviving Corporation hereby certifies that:
1. An Agreement and Plan of Merger has been adopted, approved, certified,
executed and acknowledged by each of LFSI Merger Corp. and by LST, Inc.
2. The Merger was approved by each of LFSI Merger Corp. and by LST, Inc. by
the required consent of all outstanding shares entitled to vote thereon.
3. The date when the Articles of Incorporation of LST, Inc. was filed by the
Secretary of State of Delaware is July 17, 2000. The Articles of
Incorporation and Bylaws of LST, Inc. as existing prior to the effective
date of the Merger shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation.
4. The complete, executed Agreement and Plan of Merger dated as of August 30,
2002 is on file at the principal place of business of LST, Inc. at 8809
Lenox Pointe Drive, Suite G, Charlotte, NC 28273.
5. A copy of the Agreement and Plan of Merger will be furnished by LST, Inc.,
on request and without cost, to any stockholder of any constituent
corporation.
6. The Merger shall be effective on September 5, 2002.
7. The Surviving Corporation may be served with process in the State of Nevada
in any proceeding for enforcement of any obligations of the Surviving
Corporation arising from the Merger and appoints State Agent and Transfer
Syndicate, Inc. as its resident agent to accept service of process in any
suit or other proceeding. The address where copies of process may be sent
is: 202 North Curry Street, Suite 100, Carson City, NV 89703-4121.
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IN WITNESS WHEREOF, these Articles of Merger have been executed on the
3rd day of September.
LST, Inc., a Delaware corporation
By:
-----------------------------------------
Print Name: Michael D. Pruitt
Title: President
LFSI Merger Corp., a Nevada corporation
By:
-----------------------------------------
Print Name:
Title: President
36
EXHIBIT 99.1
[EResource Capital Group letterhead]
RCG Completes Lifestyle Technologies Merger with LFSI
Charlotte, NC - - September 5, 2002 - - eResource Capital Group, Inc. (AMEX:
RCG), today announced that its wholly-owned subsidiary, LST Inc. ("Lifestyle")
became wholly-owned subsidiary of Lifestyle Innovations, Inc. (OTC BB: LFSI).
At closing, LFSI had approximately $410,000 in assets and approximately 4.1
million in common shares outstanding. The total assets and common shares
outstanding represent a modification of the original letter of intent between
the two parties, which stipulated that LFSI would have $1.3 million in cash,
other assets of approximately $3.05 million, and 5.5 million common shares
outstanding. As previously agreed, RCG received 16 million shares of LFSI at
closing, therefore, its percentage of ownership today (79.6%) is higher than
previously anticipated.
"We completed the merger," said Mike Pruitt, RCG's CEO, "because we are
convinced that the most effective way to grow the Lifestyle concept, and to
finance a national franchise organization, is as a standalone public company."
"Looking forward, we believe the completion of the merger will allow us to
generate additional interest from the investment community, as well as provide
potential franchisee's with a clear picture of the opportunity inherent in a
franchise," stated Paul Johnson, CEO of Lifestyle.
Lifestyle Innovations, Inc., which will establish its headquarters in Dallas,
Texas, is a home entertainment and technology company that provides builders and
homeowners with a single source for their audio/video, home theater, security,
and home automation needs. Lifestyle Innovations works with owners of existing
homes, as well as with new homebuilders and buyers, to design and install the
necessary home technology products that fit their lifestyle and budget.
RCG acquired Lifestyle in May 2001, and has grown the company in just 15 months
from a single location in Charlotte to a 15-location franchise network with over
100 employees. The Company's Charlotte, NC and Atlanta, GA, locations generated
approximately $2.9 million in sales during fiscal 2002. Total sales for the 13
franchise locations have been increasing rapidly, as evidenced by total revenues
of over $687,000 for the month ending June 30, 2002.
For more information or to contact Lifestyle Innovations directly, visit us at
http://www.lifestech.com or call toll free, at 1-866-543-3789.
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About eResource Capital Group (RCG)
eResource Capital is listed on the American Stock Exchange and trades under the
symbol RCG. RCG is focused on delivering to shareholders rapidly growing,
relatively low risk revenues, along with steadily increasing profitability. The
majority of RCG's revenues are derived from a highly specialized travel
organization that delivers a unique turnkey air service. In addition to
long-term contracts with affiliates of the largest air inclusive tour operator
in the world, the Company provides cost effective charter services to tour
operators, corporate travel departments, sports teams and casinos on an ad hoc
basis. RCG also has two business focused on the technology services sector,
which consist of a wholly-owned software and IT services firm, Logisoft
Corporation, Inc., and home technology services from Lifestyle Innovations Inc.
(LFSI), which is a separately traded public company. RCG owns approximately
79.6% of the outstanding common shares of LFSI. More information is available on
RCG at www.eresourcecapital.com. For investor information, contact Andrew Lauman
at 704-553-9330 ext. 27 or adl@eresourcecapital.
38
About Lifestyle Innovations (LFSI)
Lifestyle Innovations, inc., is a home entertainment and technology company that
provides builders and homeowners with a single source for their audio/video,
home theater, security, and home automation needs. Through its 15 franchise
locations and company-owned locations in Charlotte, NC and Atlanta, GA,
Lifestyle works with owners of existing homes, as well as with new home builders
and buyers, to design and install the necessary entertainment, home automation
and security products that fit their lifestyle and budget. For more information
or to contact Lifestyle Innovations directly, visit us at
http://www.lifestech.com or call, toll free, at 1-866-543-3789.
Statements in this news release about anticipated or expected future revenue or
growth or expressions of future goals or objectives, including statements
regarding whether current plans to grow and strengthen the company's existing
network will be implemented or accomplished, are forward- looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. All forward-looking statements in this release are based upon
information available to the Company on the date of this release. Any
forward-looking statements involve risks and uncertainties, including the risk
that the Company will be unable to grow or strengthen its network due to a lack
of capital or an inability to identify acquisition candidates, as well as those
risks and uncertainties described in the Company's filings with the Securities
and Exchange Commission, that could cause actual events or results to differ
materially from the events or results described in the forward-looking
statements, whether as a result of new information, future events or otherwise.
Readers are cautioned not to place undue reliance on these forward-looking
statements.
39