Exhibit No. 11
Form 10-SB
Transform Pack International, Inc.
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as the
"Agreement"), by and between Cybernetics, Inc., a Minnesota
Corporation (hereinafter referred to as "Cybernetics"), Transform
Pack, Inc., a New Brunswick corporation (hereinafter referred to
as "TPI") and the shareholders of TPI (hereinafter referred to as
"Shareholders"), entered into on this 28th day of January, 2000.
WITNESSETH
WHEREAS, Shareholders are the owners of all of the issued and
outstanding shares of the capital stock of TPI, and
WHEREAS, pursuant to this Agreement, Cybernetics desires to
exchange and acquire from Shareholders, and Shareholders desire to
exchange and convey to Cybernetics, all of the issued and
outstanding shares of the no par value Common Stock of TPI
(hereinafter referred to as the "Stock") upon the terms and
conditions and for the consideration hereinafter set forth:
NOW, THEREFORE, in consideration of the premises and the
mutual agreements, representations, warranties and covenants
herein contained, the parties do hereby agree as follows:
ARTICLE I
EXCHANGE
1.1 Exchange of Stock of TPI. At the Closing Date (as defined
in Article X hereof) in accordance with the provisions of this
Agreement and applicable law, Shareholders shall exchange, assign
and transfer, and Cybernetics shall acquire, all of the Stock of
TPI owned by Shareholders.
ARTICLE II
CONSIDERATION FOR EXCHANGE
2.1 Original Issuance. Cybernetics shall issue for the Stock
to be acquired by exchange hereunder a total of 7,000,000 shares
of its Common Stock. That is, holders of the 2,000,000 currently
issued and outstanding shares of no par Common Stock of TPI will
receive three and one third shares of Cybernetics for each share
of TPI surrendered for exchange. Cybernetics shall also issue
1,000,000 to 1,200,000 shares to new investors who will purchase
shares of Cybernetics in a private placement as described in
paragraph IX below. (see Exhibit "A")
2.2 Investment Representations. Shareholders shall cause to
be delivered on the Closing Date investment letters representing
compliance with the Securities Act of 1933, as amended (see
Exhibit "B").
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2.3 Corporate Structure Following Acquisition. Following
closing, TPI shall become subsidiary of Cybernetics, which will
own 100% of the Common Stock of TPI and will conduct all of its
business operations through TPI. The 45,366 shares of $10.00 par
value Class "A" Preferred Stock currently issued and outstanding
in TPI shall remain issued and outstanding.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND TPI
Shareholders and TPI represent and warrant to Cybernetics as
follows:
3.1 Organization. TPI is a corporation duly incorporated,
validly existing and in good standing under the laws of the
Province of New Brunswick, has the corporate power and authority
to own or lease its properties and to carry on its business as now
being conducted.
3.2 Capitalization. The authorized capital stock of TPI, as
of the date hereof, consists of two classes of shares of capital
stock: Common Stock without par value, of which 2,000,000 shares
will be validly issued and outstanding, fully paid and non-
assessable, at closing; and class "A" Preferred Stock with a par
value of $10.00 and a non-cumulative annual dividend rate of 10%,
of which 45,366 shares will be validly issued and outstanding,
fully paid and non-assessable, at closing. The Class "A" Preferred
Shares are not convertible into shares of the Common Stock of TPI.
There shall be no options to purchase, warrants, calls or
commitments on the part of TPI, of any character, relating to
shares of capital stock of TPI at closing.
3.3 Financial Statements. Shareholders and TPI have furnished
to Cybernetics the audited financial statements of TPI as of May
31, 1999, and unaudited statements as of December 31, 1999, see
Exhibit "C". All of said financial statements (i) are in
accordance with TPI's books and records, (ii) present fairly the
financial position of TPI as of such date, and its results of
operations for the period indicated, (iii) have been prepared in
conformity with generally accepted accounting principles applied
on a consistent basis, and (iv) are consistent with prior business
practice.
3.4 Authorization. Shareholders and TPI have the power to
enter into this Agreement, and this Agreement, when duly executed
and delivered, will constitute the valid and binding obligation of
Shareholders and TPI.
3.5 Effect of Agreement. The execution and delivery of this
Agreement by Shareholders and TPI and the consummation of the
transactions herein contemplated, to the best knowledge and belief
of Shareholders and TPI (i) will not conflict with or result in a
breach of the terms of, or constitute a default under or violation
of, any law or regulation of any governmental authority having
jurisdiction over TPI, the Articles of Incorporation or By-laws of
TPI, or any material agreement or instrument to which TPI or
Shareholders are a party or by which it or either of them is bound
or to which it or either of them is subject, (ii) nor will it give
to others any interests or rights, including rights of
termination, acceleration or cancellation, in or with respect to
any of the properties, assets, leases, agreements, or business of
TPI .
3.6 Properties and Leases. TPI occupies 5,500 feet of office
and manufacturing space in Moncton, New Brunswick, pursuant to a
lease agreement that expires on March 31, 2004.
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3.7 Absence of Undisclosed Liabilities. TPI has no material
liability or obligation, either accrued, absolute, contingent or
otherwise, including, without limitation, liabilities for federal,
state and local taxes, except (i) as reflected on the Balance
Sheet, or (ii) liabilities in amounts usual and normal for TPI or
(iii) agreements (of kinds not reflected on corporate balance
sheets prepared in accordance with generally accepted accounting
principles) incurred in, or as a result of, the ordinary course of
business.
3.8 Minute Book. The records of meetings and other corporate
actions of Shareholders and the Board of Directors (including any
committees of the Board) of TPI which are contained in the Minute
Books of TPI contain complete and accurate records of the matters
reflected in such Minutes.
3.9 Litigation Claims. TPI is not a party to and there are no
claims, actions, suits, investigations or proceedings pending or,
to the best knowledge and belief of TPI and Shareholders,
threatened against or affecting TPI or it business at law or in
equity or before or by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
which if determined adversely would have a material adverse effect
on the business or financial condition of TPI or the ability of
TPI to carry on its business as presently conducted. The
consummation of the transaction herein contemplated will not
conflict with or result in the breach or violation of any
judgment, order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
3.10 Taxes and Reports. TPI (i) has filed all tax returns
required to be filed by any jurisdiction, domestic or foreign, to
which it is or has been subject. (ii) has either paid in full all
taxes due and taxes claimed to be due by each such jurisdiction,
and any interest and penalties with respect thereto, or (iii) has
adequately reflected as liabilities on its books, all taxes that
have accrued.
3.11 Absence of Certain Changes. TPI has not (i) issued,
delivered or agreed to issue or deliver to any person any shares
of stock, bonds or other corporate securities, (whether authorized
but unissued or held in treasury) or granted to any person any
options, warrants or other rights calling for the issuance
thereof, that are not disclosed herein, (ii) incurred any
obligation or liability (absolute or contingent), except
obligation or liability incurred in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance,
or paid any obligation or liability (absolute or contingent) other
than current liabilities and the current portion of long-term
liabilities incurred since the date of the Balance Sheet in the
ordinary course of business, (iv) declared or made any payment or
distribution to Shareholders, or purchased or redeemed any shares
of stock, (v) made any wage or salary or commission increases to
any employee, (vi) mortgaged or pledged any assets (tangible or
intangible) or subjected any assets to lien or other encumbrance,
(vii) sold or transferred any tangible assets or canceled any
debts or claims, except in the ordinary course of business or in
any event not in an aggregate amount which is material, or (viii)
agreed to any of the foregoing. Except as otherwise contemplated
by this Agreement, since December 31, 1999, there has been no
material adverse change in the business or financial condition of
TPI.
3.12 Compliance with Laws and Regulations. To the best of the
knowledge and belief of the Shareholders and TPI, TPI has complied
with and is not in violation of any statute, law, rule or
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regulation under any jurisdiction to which it is subject
(including, but not limited to, compliance with applicable
copyright laws) with respect to the conduct of its business, which
violation might have a material adverse effect on the business,
financial condition, or earnings of TPI.
3.13 Ownership of the Stock. Shareholders represent and
warrant that on the Closing Date they will be the beneficial and
record owners, free and clear of any encumbrances, of all of the
shares of TPI 's stock sold and to be delivered by them hereunder.
3.14 Employment Agreements. TPI has entered into no
employment agreements with any of its employees.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CYBERNETICS
Cybernetics represents and warrants to Shareholders and TPI
as follows:
4.1 Organization. Cybernetics is a corporation duly
incorporated, validly existing and in good standing under the laws
of the State of Minnesota. Cybernetics has the corporate power and
authority to own or lease its properties and to carry on its
business as now being conducted.
4.2 Capitalization. The authorized stock of Cybernetics as of
the date closing will consist of 40,000,000 shares of Common
Stock, of which 2,920,000 shares will be validly issued and
outstanding, fully paid and non-assessable at closing, and
5,000,000 shares of Preferred Stock, of which no shares will be
outstanding at closing. There will be outstanding at closing, no
warrants or options to purchase shares of Cybernetics Common
Stock.
4.3 Financial Condition. Cybernetics has furnished to TPI the
financial statements of Cybernetics as of December 31,1999, see
Exhibit "D". All of said financial statements (i) are in
accordance with Cybernetics' books and records, (ii) present
fairly the financial position of Cybernetics as of such date, and
its results of operations for the period indicated, (iii) have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis, and (iv) are consistent
with prior business practice.
4.6 Authorization. Cybernetics has the power to enter into
this Agreement, and this Agreement, when duly executed and
delivered, will constitute the valid and binding obligation of
Cybernetics, subject to the approval of a majority of its
shareholders. Cybernetics represents that shareholders holding a
majority of Cybernetics' shares have indicated their intent to
vote in favor of the proposed exchange.
4.7 Absence of Undisclosed Liabilities. Cybernetics has no
undisclosed material liability or obligation, either accrued,
absolute, contingent or otherwise, including, without limitation,
liabilities for federal, state and local taxes.
4.8 Minute Book. The records of meetings and other corporate
actions of Shareholders and the Board of Directors (including any
committees of the Board) of Cybernetics which are contained
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in the Minute books of Cybernetics contain complete and accurate
records of the matters reflected in such minutes.
4.9 Litigation Claims. Cybernetics is not a party to and
there are no claims, actions, suits, investigations or proceeding
pending or, to the best knowledge and belief of Cybernetics,
threatened against or affecting Cybernetics at law or in equity or
before or by any governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which if
determined adversely would have a material adverse effect in the
business or financial condition of Cybernetics or the ability of
Cybernetics to carry on its business as presently conducted. The
consummation of the transaction herein contemplated will not
conflict with or result in the breach or violation of any
judgment, order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
ARTICLE V
ACCESS TO INFORMATION
5.1 Access to Information. The parties hereto shall afford
each others' representatives reasonable access to such of the
financial, contractual and corporate records as shall be
reasonably necessary.
5.2 Effect of Investigation. Any such investigation shall not
affect any of the representations and warranties hereunder and
shall not be conducted in such manner as to interfere unreasonably
with the operation of business.
ARTICLE VI
CONDUCT OF PARTIES PRIOR TO THE CLOSING
Shareholders agree to exchange, and Cybernetics agrees to
acquire, all outstanding shares of Stock of TPI in accordance with
this Agreement, and the parties hereto further covenant and agree
as follows:
6.1 Notice of Defaults. Any party hereto shall give prompt
notice to the other parties of any default, subsequent to the date
of this Agreement and prior to the Closing Date, under any
instrument or agreement to which it is a party or by which it is
bound, or of the assertion of any claims, which, if upheld, would
render inaccurate any representations herein.
6.2 Action Needing Consent. Except as otherwise contemplated
or permitted by this Agreement, between the date hereof and the
Closing Date or termination of this Agreement, whichever shall
first occur, TPI will not, in contravention of this Agreement, (i)
make any changes in its authorized capital stock, (ii) issue stock
options or warrants or similar rights, (iii) declare or pay any
stock dividend or make any reclassification in respect of its
outstanding shares of capital stock, (iv) issue or sell shares of
its capital stock (or securities convertible into or exchange for,
with or without additional consideration, such capital stock), (v)
purchase or otherwise acquire for a consideration any outstanding
shares of their capital stock, (vi) declare, pay or set apart in
respect of their capital stock any cash dividend or their
distribution or payment, (vii) enter into any merger or
consolidation except for the issuance of shares, except as
consented to in writing by Cybernetics.
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6.3 Implementation of Representations and Warranties.
Shareholders and TPI will take all action to render accurate as of
the Closing Date their representations and warranties contained in
this Agreement, and TPI and Shareholders will refrain from taking
any action which would render inaccurate as of the Closing Date
any such representations and warranties. Cybernetics will take all
action to render accurate as of the Closing Date its
representations and warranties contained in this Agreement, and
Cybernetics will refrain from taking any action which would render
inaccurate as of the Closing Date any such representations and
warranties.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF CYBERNETICS
The obligations of Cybernetics under this Agreement are, at the
option of Cybernetics, subject to the satisfaction, at and prior
to the Closing Date, of the following conditions:
7.1 Approval of Agreement. The transaction contemplated by
this Agreement shall have had all corporate action required by law
taken by TPI and all other statutory requirements for the valid
consummation of the transaction contemplated by this Agreement
fulfilled.
7.2 No Litigation. There shall be no action, proceeding,
investigation or pending or actual litigation the purpose of which
is to enjoin or may be to enjoin the transactions contemplated by
this Agreement or which would have the effect, if successful, of
imposing a material liability upon Cybernetics or any of the
officers or directors thereof, because of the consummation of the
transactions contemplated by this Agreement.
7.3 Fulfillment of Covenants. All the terms, covenants, and
conditions of this Agreement to be complied with and performed by
Shareholders and TPI at or before the Closing Date shall have been
duly complied with and performed,
7.4 Accuracy of Representations and Warranties: Other
Documents. All of the representations and warranties made by TPI
and Shareholders shall be true as of the Closing Date.
7.5 Completion of Private Placement, The $500,000 to
$600,000 USD placement of additional Cybernetics shares described
in paragraph 9 shall have been completed.
7.6 No Adverse Changes. Since the date hereof the business,
properties or operations of TPI shall not have been adversely
affected in any material way as a result of any fire, accident, or
other casualty, labor disturbance or act of God. There shall not
have occurred any material adverse change since the date hereof,
in the business, properties, results of operations, or financial
condition of TPI, except for those transactions contemplated or
permitted by this Agreement.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS AND TPI
The obligations of Shareholders and TPI under this Agreement are,
at their option, subject to the satisfaction at and prior to the
Closing Date of the following conditions:
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8.1 Approval of Agreement. The transaction contemplated by
this Agreement shall have had all corporate action required by law
taken by Cybernetics and all other statutory requirements for the
valid consummation of the transaction contemplated by this
Agreement fulfilled.
8.2 No Litigation. There shall be no litigation pending which
has been brought with the purpose of enjoining the transactions
contemplated by this Agreement or which would have the effect, if
successful, of imposing a material liability upon Shareholders
because of the transactions contemplated by this Agreement.
8.3 Fulfillment of Covenants. All the terms, covenants, and
conditions of this Agreement are to be complied with and performed
by Cybernetics at or before the Closing Date shall have been duly
complied with and performed.
8.4 Accuracy of Representations and Warranties: Other
Documents. All of the representations and warranties made by
Cybernetics shall be true as of the Closing Date.
ARTICLE IX
ISSUANCE OF ADDITIONAL SHARES TO NEW INVESTORS
In addition to the 7,000,000 shares to be exchanged to the
Shareholders in consideration of the shares to be acquired from
them, and to the 2,920,000 shares of Cybernetics to be outstanding
prior to closing, Cybernetics will issue an additional 1,000,000
to 1,200,000 shares of its Common Stock at closing to new
investors who will invest $500,000 to $600,000 USD in a private
placement of Cybernetics shares.
ARTICLE X
CLOSING
10.1 Closing Date. The consummation of the exchange of the
Stock by Shareholders to Cybernetics (the "Closing") shall take
place on or after January 30, 2000, on such time or place as shall
be mutually agreed upon by the parties to this Agreement. In the
event that closing shall not have occurred by February 30, 2000,
this Agreement shall become null and void unless extended by
written agreement of the parties.
10.2 Actions To Be Taken By Parties on the Closing Date. On
the Closing Date, each party shall deliver to the other all
documents or agreements provided for herein to be delivered on the
Closing Date.
10.3 New Directors and Officers of Cybernetics. At closing
the officers and directors of Cybernetics shall deliver their
signed resignations to TPI and new directors acceptable to
Cybernetics and TPI shall take office.
10.4 Change of Cybernetics Name. At closing the name of
Cybernetics shall be changed to Transform Pack Holdings, Inc. or
another name acceptable to the parties which reflects the business
of its newly acquired subsidiary.
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ARTICLE XI
INDEMNIFICATION AND ARBITRATION
11.1 Indemnification. Each of the parties agree to indemnify
and hold harmless the other against any and all damages, claims,
losses, expenses, obligations and liabilities (including
reasonable attorney's fees) (hereinafter collectively referred to
as "Claims") resulting from or relating to any breach of, or
failure by each of the parties to perform any of their
representations, warranties, covenants, conditions or agreements
in this Agreement or in any schedule, certificate, exhibit, or
other document furnished or to be furnished under this Agreement.
ARTICLE XII
PAYMENT OF EXPENSES
Cybernetics shall pay the expenses of preparing, assembling,
printing and mailing the proxy forms for a special meeting of its
shareholders to approve this agreement and for all other of its
own expenses related to the transaction contemplated herein such
as, but not limited to legal and accounting fees.
TPI shall pay the expenses of preparing, assembling, printing
and mailing the proxy forms for a special meeting of its
shareholders to approve this agreement and for all other of its
own expenses related to the transaction contemplated herein such
as, but not limited to legal and accounting fees.
ARTICLE XIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All statements contained in any Schedules, Exhibits, or other
instrument delivered by or on behalf of the parties to this
Agreement, or in connection with the transactions contemplated by
this Agreement, shall be deemed to be representations and
warranties hereunder. Not withstanding any investigations made by
or on behalf of the parties to this Agreement, all
representations, warranties and agreements made by the parties to
this Agreement or pursuant hereto shall survive for two years
after closing.
ARTICLE XIV
GENERAL
14.1 Notice. Any notice, request, instruction or other
document to be given and received hereunder by any party to
another shall be in writing, and, in the case of required notices,
shall be considered given when either delivered personally or five
days after being placed in the mails, certified, postage prepaid,
and addressed as follows:
To Shareholders: Transform Pack, Inc.
3 10 Baig Blvd., P.O. Box 13 54
Moncton, NB. Canada ErC 8T6
To Cybernetics: Cybernetics, Inc.
11900 Wayzata Blvd., Suite 100
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Hopkins, MN. 55343
To TPI: Transform Pack, Inc.
310 Baig Blvd., P.O. Box 1354
Moncton, NB. Canada ErC 8T6
or to such other addresses as may be subsequently designated in
writing by the parties hereto by a notice given as described
above.
14.2 Headings.. The headings of the several sections of this
Agreement are inserted for convenience of reference only and are
not intended to affect the meaning or interpretation of this
Agreement.
14.3 Counterparts. This Agreement may be executed in counter
parts, and, when so executed, each counterpart shall be deemed to
be an original and said counterparts together shall constitute one
and the same instrument.
14.4 Binding Nature. This Agreement shall be binding upon and
inure to the benefit of the parties hereto. Neither Cybernetics,
TPI nor Shareholders may assign or transfer any rights under this
Agreement.
14.5 Waiver. Any party to this Agreement may, by written
notice to the others, (i) waive any of the conditions to its
obligations hereunder or extend the time for the performance of
any of the obligations or actions of the other, (ii) waive any
inaccuracies in the representations of the other contained in this
Agreement or in any documents delivered pursuant to this
Agreement, (iii) waive compliance with any of the covenants of the
other contained in this Agreement, and (iv) waive or modify
performance of any of the obligations of the other. No action
taken pursuant to this Agreement, including without limitation any
investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action or compliance
with respect to any representation, warranty, condition or
agreement shall not be deemed or construed to be a waiver of other
breaches or subsequent breaches of the same provisions.
14.6 Entire Agreement. This agreement represents the entire
understanding between the parties.
14.7 Good Faith. Each of the parties hereto agrees that it
shall act in good faith in an attempt to cause all the conditions
precedent to their respective obligations to be satisfied.
14.8 Amendment or Modification. The parties hereto may amend
or modify this Agreement by a written instrument executed by such
parties.
14.9 Applicable Law. This Agreement shall be governed by the
laws of the State of Minnesota.
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Witness the due execution of this Agreement by the parties
hereto as of the date first above written.
CYBERNETICS, INC. TRANSFORM PACK, INC.
By: /s/ By: /s/
Its: President & Secretary Its: President
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