EXHIBIT 10.1
SHARE EXCHANGE AND PLAN OF MERGER
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EXHIBIT 10.1
SHARE EXCHANGE AND PLAN OF MERGER
BY AND BETWEEN
Y-TEL INTERNATIONAL, INC.,
SUNRISE BROADBAND GROUP, INC.
SUNRISE TELEVISION NETWORKS, INC.,
and
SUNRISE ACQUISITIONS, INC.
October 1, 2006
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TABLE OF CONTENTS
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ARTICLE I
Definitions...................................................................1
ARTICLE II
Transactions; Terms of Merger; Manner of Converting
Shares....................5
2.1
Merger........................................................................5
2.2 Time and
Place of
Closing.....................................................5
2.3 Effective
Time................................................................5
2.4
Charter.......................................................................5
2.5
Bylaws........................................................................5
2.6 Directors
and
Officers........................................................5
2.7 Conversion
of
Shares..........................................................5
2.8 Exchange
of
Shares............................................................6
2.9 Rights of
Former STN
Stockholders.............................................6
2.10
Legending of
Shares...........................................................7
2.11
Fractional
Shares.............................................................7
2.12
Lost, Stolen or Destroyed
Certificates........................................7
ARTICLE III
Representations and Warranties of YTI AND
PURCHASER.......................7
3.1
Organization; Standing and
Power..............................................7
3.2
Authorization;
Enforceability.................................................8
3.3 No
Violation or
Conflict......................................................8
3.4 Consents
of Governmental Authorities and
Others...............................8
3.5 Conduct of
Business...........................................................8
3.6
Litigation....................................................................9
3.7
Brokers.......................................................................9
3.8
Compliance....................................................................9
3.9 Charter,
Bylaws and Corporate
Records........................................10
3.10
Subsidiaries and
Investments.................................................10
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3.11
Capitalization...............................................................10
3.12
Rights, Warrants,
Options....................................................10
3.13
Commission Filings and Financial
Statements..................................11
3.14
Absence of Undisclosed
Liabilities...........................................11
3.15
Real
Property................................................................11
3.16
List of Accounts and
Proxies.................................................11
3.17
Personnel....................................................................11
3.18
Employment Agreements and Employee Benefit
Plans.............................12
3.19
Tax
Matters..................................................................12
3.20
Material
Agreements..........................................................14
3.21
Guaranties...................................................................15
3.22
Absence of Certain Business
Practices........................................15
3.23
Disclosure...................................................................15
ARTICLE IV
Representations and Warranties of
STN....................................15
4.1
Organization.................................................................15
4.2
Authorization;
Enforceability................................................16
4.3 No
Violation or
Conflict.....................................................16
4.4 Consents
of Governmental Authorities and
Others..............................16
4.5
Brokers......................................................................16
4.6 Charter,
Bylaws and Corporate
Records........................................16
4.7
Subsidiaries and
Investments.................................................16
4.8
Capitalization...............................................................17
4.9 Rights,
Warrants,
Options....................................................17
ARTICLE V
Additional
Agreements....................................................17
5.1 Survival
of the Representations and
Warranties...............................17
5.2
Investigation................................................................17
5.3
Indemnification..............................................................18
5.4 Indemnity
Procedure..........................................................18
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ARTICLE VI
Closing; Deliveries; Conditions
Precedent................................19
6.1 Closing;
Effective
Date......................................................19
6.2
Deliveries...................................................................19
6.3 Conditions
Precedent to the Obligations of
STN...............................21
6.4 Conditions
Precedent to the Obligations of
YTI...............................22
6.5 Best
Efforts.................................................................22
6.6
Termination..................................................................22
ARTICLE VII
Covenants................................................................23
7.1 General
Confidentiality......................................................23
7.2 Continuing
Obligations.......................................................24
7.3
Satisfaction of Certain Outstanding
Payables.................................24
7.4 Tax
Matters..................................................................24
ARTICLE VIII
Miscellaneous............................................................25
8.1
Notices......................................................................25
8.2 Entire
Agreement;
Incorporation..............................................25
8.3 Binding
Effect...............................................................25
8.4
Assignment...................................................................26
8.5 Waiver and
Amendment.........................................................26
8.6 No Third
Party
Beneficiary...................................................26
8.7
Severability.................................................................26
8.8
Expenses.....................................................................26
8.9
Headings.....................................................................26
8.10
Other Remedies; Injunctive
Relief............................................27
8.11
Counterparts.................................................................27
8.12
Remedies
Exclusive...........................................................27
8.13
Jurisdiction and
Venue.......................................................27
8.14
Participation of
Parties.....................................................27
8.15
Further
Assurances...........................................................28
8.16
Publicity....................................................................28
8.17.................................................................................
28
8.18
................................................................................
28
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SHARE EXCHANGE AND PLAN OF MERGER
SHARE EXCHANGE AND PLAN OF MERGER (the "Agreement"), dated as of
October 1,
2006, by and among SUNRISE BROADBAND GROUP, INC. ("SBG") SUNRISE TELEVISION
NETWORKS, INC.,
("STN") a Colorado
corporation; Y-TEL
INTERNATIONAL, INC.,
a
Delaware corporation
("YTI"); and SUNRISE ACQUISITIONS, INC., a Colorado
corporation (the "Purchaser").
W I T N E S S E T H:
Preamble
The respective
Boards of Directors of
YTI, SBG and Purchaser
and STN
are of the opinion
that the transactions described herein are in the best
interests of the parties to this Agreement and their respective shareholders.
This Agreement provides for the acquisition of STN by YTI pursuant
to the merger
of Purchaser with STN.
At the effective time
of such merger, the
outstanding
shares of the capital stock of STN shall be converted into the right to receive
shares of YTI as set forth herein. As a result, the shareholder of STN, SBG,
shall become
a shareholder of YTI and STN shall merge its business and
operations with
the wholly owned subsidiary of YTI, the Purchaser. The
transactions described
in this Agreement
are subject to the
satisfaction
of
certain other conditions described in this Agreement.
NOW, THEREFORE,
in consideration of the above and the mutual
warranties,
representations,
covenants, and
agreements set forth herein, the
parties agree as follows:
ARTICLE I
Definitions
In addition to terms defined elsewhere in this Agreement, the
following
terms when used in this Agreement shall have the meanings indicated
below:
"Affiliate" shall mean
with respect to a specified Person, any other
Person which,
directly or indirectly through one or more intermediaries,
controls or is
controlled by or is under common control with such Person,
and
without limiting the
generality of the foregoing, includes, with respect to a
Person (a) any other Person which beneficially owns or holds ten percent
(10%)
or more of any Series of voting securities or other securities
convertible into
voting securities of such Person or beneficially owns or holds ten
percent (10%)
or more of any other equity interests in such Person, (b) any other Person with
respect to which such Person beneficially owns or holds ten percent (10%) or
more of any Series of voting securities or other securities convertible into
voting securities of
such Person, or owns or holds ten percent (10%) or more of
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the equity interests of the other Person, and (c) any director or
senior officer
of such Person. For purposes of this definition, the term "control" (including,
with correlative
meanings, the terms
"controlled by" and "under common control
with"), as used with
respect to any Person,
means the possession,
directly or
indirectly, of the
power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of
voting securities
or
by contract or otherwise.
"Agreement" shall mean
this SHARE EXCHANGE AND PLAN OF MERGER together
with all exhibits and schedules referred to herein, which exhibits
and schedules
are incorporated herein and made a part hereof.
"Certificates" shall have the meaning set forth in Section 2.8.
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall mean the date that the Closing takes
place.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the United States Securities and
Exchange
Commission.
"Consideration Shares"
shall have the meaning set forth in Section
2.7(c).
"Effective Time" shall have the meaning set forth in Section
2.3.
"Employee
Benefit Plans" shall have the meaning set forth
in Section
3.18.
"Environmental Laws" shall have the meaning set forth in Section
3.22.
"ERISA" shall have the meaning set forth in Section 3.18.
"Financial Statements
of YTI" shall mean (i)
the unaudited
balance
sheet and the unaudited statements of income, cash flow and
retained earnings of
YTI for the six (6) month period ended June 30, 2006, and (ii) the audited
balance sheet and the
audited statements of income, cash flow and retained
earnings of YTI for the fiscal year ended December 31, 2005, including in each
such case any related
notes, each prepared according to GAAP consistently
applied with prior periods, except as set forth on Schedule
3.13.
"GAAP" shall have the meaning set forth in Section 3.13.
"Guaranty" shall mean, as to any Person, all liabilities or
obligations
of such Person, with
respect to any
indebtedness or other
obligations of any
other Person, which have been guaranteed, directly or indirectly, in any
manner
by such Person, through an agreement, contingent or otherwise, to
purchase such
indebtedness or
obligation,
or to purchase or sell property or services,
primarily for the
purpose of enabling the debtor to make payment of such
indebtedness or
obligation
or to guarantee the payment to the owner of
such
indebtedness or obligation against loss, or to supply funds
to or in any manner
invest in the debtor.
"Indemnified Party" shall have the meaning set forth in Section
5.4.
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"Intellectual Property" shall mean the rights to any patent,
trademark,
copyright, service
mark, invention,
software, software code, trade secret,
technology, product, composition, formula, method or process.
"Investments" shall
mean, with respect to
any Person, all
advances,
loans or extensions
of credit to any other
Person (except for
extensions
of
credit to customers
in the ordinary course of business), all purchases or
commitments to purchase any stock, bonds, notes, debentures or other securities
of any other Person,
and any other
investment in any
other Person,
including
partnerships or joint ventures (whether by capital contribution or
otherwise) or
other similar arrangement (whether written or oral) with any
Person, including,
but not limited to,
arrangements in which
(i) the first Person shares profits
and losses of the
other Person,
(ii) any such
other Person has the right to
obligate or bind the first Person to any third party, or (iii) the first Person
may be wholly
or partially liable for the debts or obligations of such
partnership, joint venture or other entity.
"Knowledge" shall mean, in the case of any Person who is an
individual,
knowledge that a reasonable individual under similar
circumstances
would have
after such
investigation and inquiry as such reasonable individual would under
such similar
circumstances
make, and in the case of a Person
other than an
individual, the
knowledge that a senior officer or director of such Person,
or
any other Person having responsibility for the particular subject matter at
issue of such Person,
would have after such
investigation and
inquiry as such
senior officer,
director or responsible Person would under such similar
circumstances make.
"Law" and "Laws" shall have the meaning set forth in Section
3.19.
"Liabilities" shall have the meaning set forth in Section 3.14.
"Litigation" shall have the meaning set forth in Section 3.6.
"Material Adverse
Effect" shall mean any event or
condition of any
character which has
had or could
reasonably be
expected to have a material
adverse effect on the condition (financial or otherwise), results
of operations,
assets, liabilities,
properties,
business or prospects of YTI or STN, as
applicable.
"Material YTI
Agreements" shall have
the meaning set forth in Section
3.20.
"Merger" shall have the meaning set forth in Section 2.1.
"Merger Consideration"
shall have the meaning set forth in Section
2.7(c).
"Outstanding YTI
Shares" shall have the meaning set forth
in Section
3.11.
"Outstanding STN
Shares" shall have the meaning set forth
in Section
4.8.
"Periodic Reports" shall have the meaning set forth in Section
3.13.
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"Person" shall mean
any natural person,
corporation,
unincorporated
organization,
partnership,
association, limited liability company, joint stock
company, joint
venture, trust or government, or any agency or political
subdivision of any government or any other entity.
"Purchaser" shall mean SUNRISE ACQUISITIONS, INC, a Colorado
corpora-
tion
"Purchaser Documents" SUNRISE ACQUISITIONS, INC. shall have the
meaning
set forth in Section 3.2.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"SBG" shall mean SUNRISE BROADBAND GROUP, INC., a Nevada
corporation.
"STN" shall mean SUNRISE TELEVISION NETWORKS, INC. a Colorado
corpora-
tion
"Subsidiary" of any
Person shall mean any Person, whether or not
capitalized, in which
such Person owns, directly or indirectly, an equity share
of more than fifty
percent (50%), or which may effectively be controlled,
directly or indirectly, by such Person.
"Surviving
Corporation"
shall mean
Purchaser
as the surviving
corporation resulting from the Merger with Purchaser
"Tax" and "Taxes" shall have the meaning set forth in Section
3.19.
"Tax Returns" shall have the meaning set forth in Section 3.19.
"Transaction" shall have the meaning set forth in Section 2.1.
"YTI"
shall mean Y-TEL INTERNATIONAL, INC., a Delaware corporation.
"YTI Shares" shall mean the shares of shares, $.0001 par value, of
YTI,
as further described in Section 3.11.
The words "hereof,"
"herein" and
"hereunder" and the words of similar
import shall
refer to this Agreement as a whole and not to any particular
provision of this
Agreement. The terms
defined in the
singular shall have a
comparable meaning when used in the plural and vice versa.
<PAGE>
ARTICLE II
Transactions; Terms of Merger; Manner of Converting Shares
2.1 Merger. Subject to
the terms and conditions of this Agreement, at
the Effective
Time, Purchaser shall merge with STN in accordance with the
provisions of the Laws of the State of Colorado and with the effect
provided for
therein (the
"Merger").
As a result of the
Merger, the separate corporate
existence of Purchaser and STN shall cease and SUNRISE TELEVISION
NETWORKS, INC.
shall be the Surviving
Corporation
resulting from the Merger and shall and
remain a wholly owned Subsidiary of YTI and shall continue to be
governed by the
laws of the State of Colorado,. The Merger shall be consummated
pursuant to the
terms of this
Agreement, which has
been approved and adopted by the respective
Boards of Directors of Purchaser and STN and, by YTI, as the sole
shareholder of
Purchaser, and by the
shareholders
of STN. After merger SUNRISE TELEVISION
NETWORKS, Inc. (Purchaser) shall be a wholly-owned subsidiary of
YTI.
2.2 Time and Place of Closing. The closing of the transactions
contemplated hereby
(the "Closing")
will take place at
10:00 A.M. on the date
that the Effective
Time occurs or at such other time as
the parties,
acting
through their authorized officers, may mutually agree. The Closing
shall be held
at the offices of Michael A. Littman, 7609 Ralston Road, Arvada, CO
80002, or at
such other location as may be mutually agreed upon by the parties.
Closing will
occur through exchange
of documents by Federal Express, disbursement of cash
delivery of certificates and filing of a Certificate of Merger in
Colorado, with
Secretary of State.
2.3 Merger Effective
Time. The Merger
contemplated by this
Agreement
shall become
effective on the date
and at the time the
Certificate of
Merger
reflecting the Merger shall become effective with the Secretary of
State of the
State of Colorado (the "Effective Time"). The other transactions contemplated
herein shall be effective as soon as the consideration required hereby has been
delivered.
2.4 Charter.
The Certificate of Incorporation of STN in effect
immediately
prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended or
repealed.
2.5 Bylaws.
The Bylaws of STN in effect immediately prior to the
Effective Time
shall be the
Bylaws of the
Surviving Corporation until duly
amended or repealed.
2.6 Directors and Officers. The officers of STN in office
immediately
prior to the Effective
Time, together with such additional Persons as may
thereafter be
appointed,
shall serve as the
officers and directors of the
Surviving Corporation
(Sunrise Television
Networks, Inc.) from and after the
Effective Time in accordance with the Bylaws of the Surviving
Corporation.
2.7 Conversion Shares. Subject to the provisions of this Article
II, at
the Effective
Time, by virtue of the
Merger and without any action on the part
of YTI, STN or
Purchaser or Shareholder or the shareholders of any of the
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foregoing, the
interests and shares of the constituent entities shall be
converted or exchanged as follows:
(a) Each share of capital stock of YTI issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding from
and after the Effective Time. Calvin D. Smiley, Sr. and Daniel M. Smith shall
purchase for $100 and
YTI shall issue
2,550,000 shares of Series A Preferred
Convertible Stock with
a super majority
common voting right convertible to
common on a post reverse split basis, according to the Designation of Rights &
Privileges for Series A Preferred subject to registration rights to Dan Smith
and Calvin Smiley, 1,800,000 shares of Series B Preferred Stock to
a trustee for
shareholders of SURNRISE BROADBAND GROUP, INC. and 650,000 shares of Series
C
Preferred Stock of YTI
shall be sold and
issued to John Conroy in order to
effectuate the transactions contemplated herein.
(b) All of Purchaser's Shares issued and outstanding immediate
-ly prior to the Effective Time shall be converted into shares of the
Surviving
Corporation, SUNRISE
TELEVISION NETWORKS, INC., by virtue of the merger with
SUNRISE ACQUISITIONS, INC. (Purchaser).
(c) YTI and Purchaser
hereby agree that at the time of the
Merger of STN and
Purchaser,
YTI shall issue 1,800,000 shares of Series B
Preferred Convertible Stock to SUNRISE BROADBAND GROUP, INC. in
consideration of
the delivery of 100% of STN shares to Purchaser with the rights and privileges
for Series B Preferred Convertible Stock as agreed by the
parties.
(d) 100% of STN's shares issued and outstanding immediately
prior to the Effective
Time shall be
exchanged for the right to receive
the
shares of stock of YTI in the aggregate as set forth in (c) above, (the
"Exchange Ratio")
(hereinafter
such YTI shares
shall be referred to as the
"Consideration Shares" or the "Merger Consideration"). The Consideration Shares
shall, be issued and delivered at closing, ratably based upon the
shareholders
proportionate
ownership of STN prior to the merger, to the shareholders of STN
in accordance with the terms hereof, and will be fully paid, validly
issued and
non-assessable, but
shall not be registered securities under the Securities Act
of 1933, as amended,
(the "Securities Act") pursuant to a valid exemption
thereunder.
(e) YTI shall own, after completion of the transactions contem
-plated herein, 100% of the issued and outstanding shares
of surviving
corpora-
tion. (SUNRISE
ACQUISITIONS,
INC. or Purchaser) with which STN shall have
merged.
(f) Series B Preferred
shares of YTI issued in exchange shall
be restricted and held in trust by an independent trustee pending Registration
on form SB-2 of the conversion shares of common for Series B
Preferred, with the
Securities & Exchange Commission, after effectiveness of which the
shares shall
be distributed pro rata to shareholders of record of Sunrise
Broadband, Inc. as
of October 30, 2006, as a dividend.
2.8 Exchange of Shares. At the Closing, the shareholder of STN shall
surrender each
certificate
or certificates which represented STN's shares
immediately prior to the Effective Time (the "Certificates") and shall
promptly
<PAGE>
upon surrender
thereof receive in exchange therefore the number of whole
Consideration Shares
issuable in respect of
all shares of STN's shares held by
such STN shareholder
as set forth in 2.7 (d) above. YTI shall not be obligated
to deliver the
consideration to which a STN shareholder is entitled as a
result
of the Merger until such Person surrenders its Certificate or
Certificates for
exchange as provided in this Section 2.8. Any other provision of this Agreement
notwithstanding,
neither YTI nor the Surviving Corporation shall be liable to
any shareholder of STN for any amounts paid or property
delivered in good
faith
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
2.9 Rights of Former STN Shareholders. At the Effective Time, the
share
transfer books of STN
shall be closed as to holders of STN Shares immediately
prior to the Effective
Time and no
transfer of STN Shares by any such
holder
shall thereafter
be made or
recognized.
Until surrendered for exchange in
accordance with the
provisions
of Section 2.8, each
Certificate
theretofore
representing shares of
STN Shares
shall from and after the Effective Time
represent for all purposes only the right to receive the
consideration
provided
in Section
2.7 (d) in exchange therefore. Whenever a dividend or other
distribution is
declared by YTI on the YTI stock, the record date for which is
at or after the Effective Time, the declaration shall include
dividends or other
distributions on all
shares of YTI stock issuable pursuant to this Agreement,
but no dividend or
other distribution
payable to the holders
of record of YTI
shares as of any time subsequent to the Effective Time shall be
delivered to the
holder of any
Certificate until such
holder surrenders
such Certificate for
exchange as
provided in Section 2.8. However, upon surrender of such
Certificate, both the
YTI stock certificate (together with all such undelivered
dividends or other distributions without shares) and any
undelivered
dividends
payable in respect
thereof (without
shares) shall be delivered and paid
with
respect to each share represented by such Certificate.
2.10 Legending of
Securities. Each
certificate
for YTI shares to
be
issued to the STN
shareholders
in trust as part of
the Merger
Consideration
shall bear substantially the following legend:
"THE SHARES
REPRESENTED BY THIS
CERTIFICATE HAVE NOT
BEEN REGISTERED
UNDER THE SECURITIES
ACT OF 1933, OR ANY STATE SECURITIES LAWS. THESE SHARES
HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED,
PLEDGED. OR
HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT
UNDER SAID ACT OR LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT, IN THE
CIRCUMSTANCES,
REQUIRED UNDER SAID ACT."
2.11 Fractional
Shares. Notwithstanding any other provision of this
Agreement, if the
Sellers would otherwise have been entitled to receive a
fraction of a share of YTI shares (after taking into account all
certificates
delivered by the STN
shareholders),
the number of shares
issuable to the
STN
shareholder shall be rounded up to the next whole number.
2.12 Lost,
Stolen or Destroyed Certificates. In the event that any
Certificates shall
have been lost, stolen
or destroyed, upon the
making of an
<PAGE>
affidavit of that fact
by such STN
shareholder (setting
forth the STN
shares
represented by such lost, stolen or destroyed Certificates),
YTI shall issue to
such STN shareholder the Consideration Shares to which such STN
shareholder is
entitled.
ARTICLE III
Representations and Warranties of YTI, and Purchaser
In order to induce STN to enter into this Agreement and to consummate
the transactions
contemplated hereby,
YTI, Purchaser (as
defined in Article I
above), jointly and severally, make the representations and
warranties set forth
below to STN.
3.1 Organization;
Standing and Power. YTI is a corporation duly
organized, validly
existing and in good standing under the laws of the State of
Delaware. Purchaser is
a corporation duly
organized, validly
existing and in
good standing under
the laws of the State of Colorado. YTI and Purchaser have
all requisite right,
power and authority to
execute, deliver and
perform this
Agreement and to
consummate
the transactions contemplated hereby. YTI and
Purchaser have all
corporate right, power and authority to own or lease and
operate their assets, and to conduct their business as presently
conducted. YTI
and Purchaser are duly qualified to transact business as a foreign corporation
in all jurisdictions
where the ownership or
leasing of their properties or the
conduct of its business requires such qualification.
3.2 Authorization;
Enforceability.
The execution, delivery and
performance of this
Agreement by YTI and Purchaser and all other agreements to
be executed,
delivered and performed by YTI and Purchaser pursuant to this
Agreement (collectively, the "Purchaser Documents") and the
consummation by YTI,
Purchaser of the
transactions
contemplated
hereby and thereby
have been duly
authorized by all
requisite corporate or
individual action on
the part of YTI
and Purchaser as
applicable. This
Agreement and the
Purchaser Documents
have
been duly executed and delivered by YTI and Purchaser and
constitute the
legal,
valid and binding obligation of YTI and Purchaser enforceable in
accordance with
their respective
terms, except to the
extent that their enforcement is limited
by bankruptcy, insolvency, reorganization or other laws relating to
or affecting
the enforcement
of creditors'
rights generally and by general
principles of
equity.
3.3 No Violation or Conflict. The execution, delivery and performance
of this Agreement and
the Purchaser
Documents by YTI and
Purchaser,
and the
consummation by YTI, and Purchaser of the transactions contemplated hereby and
thereby: (a) do not
violate or conflict with any provision of law or regulation
(whether federal,
state or local), or any writ, order or decree of any court or
governmental or
regulatory authority,
or any provision of
YTI or Purchaser's
Articles or Certificate of Incorporation or Bylaws; and (b) do not
and will not,
with or without the
passage of time or the giving of notice, result in the
breach of, or
constitute a default
(or an event that with
notice or lapse of
time or both would become a default), cause the acceleration of performance,
give to others any right of termination, amendment, acceleration or
cancellation
<PAGE>
of or require any consent under, or result in the creation of any
lien, charge
or encumbrance upon
any property or assets of YTI or Purchaser pursuant to any
instrument or
agreement to which YTI or Purchaser is a party or by which YTI
or
Purchaser or their respective properties may be bound or
affected.
3.4 Consents
of Governmental Authorities and Others. No consent,
approval, order or authorization of, or registration, declaration,
qualification
or filing with any federal, state or local governmental or
regulatory authority,
or any other Person,
is required to be made by YTI, and Purchaser in connection
with the execution,
delivery or
performance
of this Agreement by YTI, and
Purchaser or the
consummation
by YTI, and of the transactions contemplated
hereby.
3.5 Conduct of
Business. Except as
disclosed on Schedule
3.5 hereto,
since June 30, 2006, YTI has conducted no active businesses in the ordinary and
usual course
consistent
with past practices and there has not occurred any
adverse change in the condition (financial or otherwise), results
of operations,
properties, assets,
liabilities,
business or
prospects of YTI, and no such
change is threatened.
Without limiting the
generality of the foregoing, since
June 30, 2006, except
as provided in this
Agreement, YTI has
not: (a) amended
its Articles of
Incorporation
or Bylaws (b) issued,
sold or authorized for
issuance or sale,
shares of any Series of its securities (including, but not
limited to, by way of stock split or dividend) or any subscriptions, options,
warrants, rights or
convertible
securities or entered
into any agreements
or
commitments of any character obligating it to issue or sell any
such securities;
(c) redeemed,
purchased or otherwise
acquired, directly or indirectly, any
shares of its capital stock or any option, warrant or other right
to purchase or
acquire any such capital stock; (d) suffered any damage,
destruction or
loss,
whether or not
covered by insurance, which has had or could
reasonably
be
expected to have a Material Adverse Effect on any of its properties, assets,
business or prospects;
(e) granted or made
any mortgage or pledge or subjected
itself or any of its properties or assets to any lien, charge or encumbrance of
any kind; (f) made or
committed to make any capital expenditures in excess of
$10,000; (g) become
subject to any
Guaranty; (h) granted any increase in
the
compensation payable
or to become payable
to directors, officers
or employees
(including, without
limitation,
any such increase pursuant to any severance
package, bonus,
pension, profit-sharing or other plan or commitment); (i)
entered into any agreement which would be a Material
Agreement,
or amended or
terminated any
existing Material
Agreement;
(j) been named as a
party in any
Litigation, or
become the focus of any investigation by any government or
regulatory agency or
authority;
(k) declared or paid any dividend or other
distribution with
respect to its capital stock; or (l) experienced any other
event or condition of any character which has had or to YTI's could
reasonably
be expected to have a Material Adverse Effect on YTI.
3.6 Litigation. Except
as disclosed on Schedule 3.6 hereto, there are
no actions, suits, investigations, claims or proceedings
("Litigation") pending
or, to the Knowledge of YTI, and Purchaser threatened before any court or by
or
before any governmental or regulatory authority or arbitrator, (a)
affecting YTI
or Purchaser (as
plaintiff or defendant) or (b) against YTI, and
Purchaser
relating to YTI's Shares or the transactions contemplated by this Agreement
and
there exist no facts or circumstances to the Knowledge of YTI, and Purchaser
creating any reasonable basis for the institution of any Litigation
against YTI,
and Purchaser.
3.7 Brokers.
Neither YTI or Purchaser has employed any broker or
finder, and none of them has incurred or will incur, directly or
indirectly, any
<PAGE>
broker's, finder's,
investment banking or similar fees, commissions or expenses
in connection
with the transactions contemplated by this Agreement or the
Purchaser Documents, except for a certain Consulting Agreements
with Bill Young.
3.8 Compliance.
YTI and Purchaser are
in compliance with all federal,
state, local and
foreign laws,
ordinances,
regulations,
judgments,
rulings,
orders and
other requirements applicable to YTI and Purchaser and their
respective assets and properties, including, without limitation,
those relating
to (a) the registration and sale of the YTI Shares, (b) the establishment of a
public trading market for the YTI Shares, and (c) the public trading of the
YTI
Shares. YTI and
Purchaser are not subject to any
judicial, governmental or
administrative inquiry, investigation, order, judgment or
decree.
3.9 Charter, Bylaws and Corporate Records. A true, correct and
complete
copy of (a) the Articles of Incorporation of YTI and Purchaser, as amended and
in effect on the date hereof, (b) the Bylaws of YTI and
Purchaser,
as amended
and in effect on the date hereof, and (c) the minute books of YTI
and Purchaser
(containing all corporate proceedings from the date of
incorporation) have been
furnished to STN. Such minute books contain accurate records of all
meetings and
other corporate
actions of the board
of directors,
committees of the board of
directors,
incorporators and shareholders of YTI and Purchaser from the date
of
its incorporation
to the date hereof
which were
memorialized in
writing. No
actions have been taken since the date of YTI or Purchaser's
incorporation that
are not memorialized in writing.
3.10 Subsidiaries
and Investments. YTI has four Subsidiaries or
Investments. YTI owns
one hundred percent
(100%) of the issued and outstanding
capital stock of all Subsidiaries including SUNRISE ACQUISITIONS,
INC..
3.11 Capitalization.
The authorized
capital stock of YTI
consists of
50,000,000
shares of stock, of which 18,799,791 shares are issued and
outstanding (the "Outstanding YTI Shares"). All shares of
Outstanding YTI common
stock have been duly
authorized, are
validly issued and
outstanding, and
are
fully paid and non-assessable. No securities issued by YTI from
the date of its
incorporation to the
date hereof were
issued in violation
of any statutory,
contractual or common law preemptive rights. There are no dividends which
have
accrued or been
declared but are unpaid on the capital stock of YTI. All taxes
required to be paid in
connection with the
issuance and any transfers of YTI's
capital stock have been paid. The Consideration Shares shall, upon issuance
and
delivery to the STN
shareholders in accordance with the terms hereof, be fully
paid, validly issued and non-assessable, but shall not be registered
securities
under the Securities Act of 1933. There are no registration
rights outstanding
which relate to the
Outstanding YTI shares
and, to the Knowledge of YTI, there
are no voting trusts, proxies or other agreements or understandings
with respect
to any equity
security of any Series of YTI or with respect to any equity
security, partnership shares or similar ownership shares of any
Series of any of
its Subsidiaries, except as provided herein.
3.12 Rights,
Warrants, Options. There are two million five hundred
thousand (2,500,000)
options to purchase
common stock, and One Hundred Four
Thousand (104,000)
warrants issued and outstanding and
