STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into as of August 20, 2004, by
and between Island Tribe Inc., a Nevada Corporation, hereinafter sometimes
referred to as "the Company" or "Island Tribe", Xxxxxxx Xxxxxxxx, hereinafter
referred to as "Clemente", an individual and CEO of Island Tribe; and the Island
Tribe shareholders listed in Schedule A attached hereto and incorporated herein
by reference, are hereinafter referred to as the "Sellers", and
Bluetorch Inc, a Nevada corporation (the "Purchaser").
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W I T N E S S E T H:
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WHEREAS, the Sellers own an aggregate of 16,224,990 shares of the common
stock of Island Tribe, Inc., a Nevada corporation (the "Company"), of which
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8,274,747 shares constitute 51% of the issued and outstanding shares of the
Company's capital stock; and
WHEREAS, the Sellers wish to sell to the Purchaser 51% of such common shares
(the "Shares") of the Company pursuant to the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements and
covenants hereinafter set forth, the Purchaser and the Sellers hereby agree as
follows:
ARTICLE I.
PURCHASE AND SALE OF STOCK
Section 1.01 Purchase and Sale of the Shares. Subject to the terms and
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conditions hereof, on the Closing Date (as defined below) the Sellers agree to
sell to the Purchaser, and the Purchaser agrees to purchase from the Sellers,
the Shares:
(a) In exchange for 8,247,747 shares of the Company's Common Stock, par
value $0.001 per share (the "Shares"), which Common Stock shall be delivered by
the Sellers pro rata, in proportion to the Seller's current ownership of Company
common stock, Purchaser shall deliver to Sellers an aggregate of $372,000 worth
of Purchaser's restricted common stock. The exact number of shares shall be
determined by dividing $372,000 by the average closing bid price of such shares
during the 20 day period, ending 10 days after the Closing Date. The stock
certificates evidencing the Shares shall be accompanied by a stock power
executed in blank by each of the Sellers, or by the Sellers' attorney-in-fact.
From and after the Closing Date, no additional shares of the Company's common
stock will be authorized to be issued or issued without the prior written
consent of all of the members of the Company's Board of Directors.
(b) In addition, as part of the purchase price of the Shares, Purchaser
shall pay to Clemente, on a semi-annual basis each February 15 and August 15 a
percentage of the Company's net sales (as hereinafter defined) pursuant to the
following schedule. Payments made each February will cover the preceding months
of July through December; payments made each August will cover the preceding
months of January through June. The first payment will commence February 15,
2005 and will continue through February 2007.
2004 & 2005 - 8% of net sales over and above $372,000
2006 & 2007 - 6% of net sales over and above $372,000
2008 & 2009 - 4% of net sales over and above $372,000
2010 thru 2013 - 3% of net sales over and above $372,000
2014 thru 2016 - 2% of net sales over and above $372,000
As used herein, the term "Net Sales" mean the total gross invoice amount of
products manufactured by or for the Company and sold or otherwise disposed
("Gross Sales") after deducting credits for returns and allowances, trade
discounts, and volume rebates, and any freight charges stated separately and
included in the invoice. No deduction shall be allowed for costs incurred in
the manufacture, sale, advertisement (including cooperative and promotional
allowances) or distribution of products, nor shall any deductions be allowed for
uncollectible accounts or cash discounts.
As part of the purchase price, the payment of the percentage of net sales
outlined here in 1.01(b) shall be paid regardless of the employment status of
Clemente with the Company or any other Purchaser portfolio company.
(c) Both the Company and the Purchaser agree that the Purchaser's
primary objective is to help the Company launch and grow the wholesale side of
the Company's business. To that end, the Company agrees that to a large degree
that their "direct to consumer" operation which has the Company selling direct
to consumers at various events is self-funding. The Purchaser agrees to provide
the working capital, management expertise and all operational functions such as
credit/collections, legal/accounting, distribution/warehousing, customer
service/order entry, etc., to grow the wholesale side of the Company's business.
The Purchaser also agrees to fund any shortfall that the Sellers have in paying
for the salary of Clemente should the "direct to consumer" operations not fully
cover such salaries or other miscellaneous items. The amount of working capital
to be provided for each year to be agreed upon in conjunction with the annual
forecasting (both revenue and expenses) process by the Purchaser and the Company
to be done in the third quarter of the previous year. Actual working capital
needs will be adjusted throughout the year as necessary based on actual results.
(d) In consideration for 1.01 (c), the Sellers further agree that on
the one year anniversary of the Closing Date and each anniversary date of the
Closing Date through 2008, Sellers shall deliver to Purchaser shares of the
Company, equal to 6% of the Company's common stock (such number to be determined
in accordance with the formula set forth above in Section 1.01(a), for no
further consideration whatsoever.
(e) On the Closing Date, the Purchaser and Clemente shall enter into an
exclusive license agreement ("License Agreement") in the form of Schedule A-2
attached hereto with respect to the intellectual property listed on Exhibit I to
the License Agreement. So long as Purchaser is not in default under Section
1.01(a), 1.01(b) or 1.01(c) hereof, or this Agreement has otherwise been
terminated, on December 31, 2009, title to the intellectual property described
in Exhibit I to the License Agreement shall be transferred to Purchaser, free
and clear of all liens and encumbrances whatsoever. If Purchaser is in default
with respect to payments due Clemente for the periods beginning January 1, 2010
through December 31, 2016, the title to such intellectual property shall revert
to Clemente if any such default is not cured within 30 days of the due date.
(f) Clemente agrees to serve as the President & Creative Director of the
Company at an annual initial salary of $70,000. Clemente will be appointed an
officer of Purchaser by Purchaser's Board of Directors and may only be
terminated for cause. Clemente will participate in all benefits offered to
employees of Purchaser and its subsidiaries, including but not limited to
medical and similar plans, and stock option plan(s) approved by Purchaser's
stockholders.
Section 1.02 Closing Date. The consummation of the purchase and sale
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of the Shares hereunder (the "Closing") shall be held at Purchaser's offices
located at 00000 Xxxxxx Xxxxx Xxx, Xxxxx X, Xxxxxxxx, Xxxxxxxxxx at 10:00 AM
(Local Time) on August 20, 2004, or at such other time and place as the Sellers
and the Purchaser may mutually agree (the "Closing Date"). The parties hereto
agree that the effective date for the consummation of the transactions described
herein will be August 20, 2004.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 2.01 Representations of Each of the Sellers. Each of the
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Sellers represent and warrant to the Purchaser that the following is true and
correct as of the date hereof and shall be true and correct as of the Closing
Date. The representations and warranties of the Sellers set forth in this
Section 2.01 are several obligations, meaning that the particular Seller making
the representation and warranty will be solely responsible therefore to the
extent provided in Section 6.02 hereof for loss, etc. the Purchaser may suffer
as a result of any breach thereof:
(a) Existence. The Company is a corporation duly organized and validly
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existing under the laws of Nevada.
(b) Authorization; No Violation. The execution, delivery and
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performance by each Seller of this Agreement are within such Seller's powers,
have been duly authorized by all necessary action, and do not contravene in any
material respect any Requirement of Law or Contractual Obligation of Sellers.
As used herein, "Requirement of Law" shall mean, as to any Person, the
certificate of incorporation and bylaws or other organizational or governing
documents of such Person, if applicable, and any law, treaty, rule or
regulation, or determination of an arbitrator or any court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject. As used
herein, "Contractual Obligation" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound. As used herein, "Person" shall mean an individual or any
corporation, association, partnership, joint venture, estate, trust or other
legal entity, including any Governmental Authority. As used herein,
"Governmental Authority" shall mean any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
(c) Government and Other Consents. No authorization or approval or
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other action by, and no notice to or filing with, any Governmental Authority is
required to be obtained or made, and no consent of any third party is required
to be obtained by, each Seller for the due execution, delivery and performance
by each Seller of this Agreement.
(d) Enforceable Obligations. This Agreement has been duly executed and
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delivered on behalf of each Seller and constitutes the legal, valid and binding
obligation of each of the Sellers enforceable against each Seller in accordance
with its terms and conditions, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity.
(e) No Litigation. No claim, action, suit, investigation or proceeding
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of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of each Seller, threatened by or against each Seller with respect to
the Company, this Agreement or any of the transactions contemplated hereby. To
the best of Sellers' knowledge, no judgment, order, writ, injunction, decree or
award issued by any Governmental Authority is applicable to any Seller which
affects any of the Shares, the Company, this Agreement or any of the
transactions contemplated hereby.
(f) Ownership of the Shares. Each Seller is the owner of record and
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beneficially of the number of issued and outstanding shares listed in Schedule
A. All of the Shares are free and clear of any liens, claims and encumbrances
(collectively, "Encumbrances"). Each Seller has the right to transfer title to
the Shares to the Purchaser. There are no commitments, agreements or rights
relating to the purchase, sale or other disposition of the Shares or any
interest therein (including, without limitation, any subscription agreement,
preemptive right or right of first refusal). None of the Shares are subject to
any voting trust, voting agreement, or other similar agreement or understanding
with respect to the voting or control thereof, nor is any proxy in existence
with respect to any of the Shares. Upon the sale of the Shares to the
Purchaser pursuant to this Agreement, the Purchaser will own the Shares free and
clear of all Encumbrances.
(g) Disclosure. No representation or warranty made by Sellers in this
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Agreement and in any schedule or exhibit hereto, to the best knowledge of
Sellers, contains any untrue statement of material fact or omits any material
fact in order to make the statements made and information contained therein as
of the date hereof not misleading.
(h) Brokers, Finders. None of the Sellers have any liability or
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obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which Purchaser
could become liable or obligated.
Section 2.02 Representations of Clemente as to the Company. The
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Company and Clemente represent and warrant to the Purchaser that the following
is true and correct with respect to the Company as of the date hereof and shall
be true and correct as of the Closing Date.
(a) Organization, Standing and Qualification of the Company.
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The Company is a corporation duly organized, validly existing and in good
standing under the laws of Nevada and the Company has all necessary corporate
power and authority to engage in the business in which it is presently engaged.
The Company has not qualified to do business as a foreign corporation in any
state. The Company has delivered to the Purchaser true, correct and complete
copies of the certificate of incorporation and bylaws of the Company, and all
amendments thereto.
(b) Capital Structure of the Company. The authorized capital stock of
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the Company consists of 75,000,000 shares of $0.001 par value common stock, of
which 16,224,994 shares are issued and outstanding. No other class or series of
capital stock of the Company is or has been authorized, nor has the Company
authorized or issued, nor does it have outstanding, any other securities
(including, without limitation, options, warrants, conversion privileges or
other rights, contingent or otherwise, to purchase any capital stock or other
securities of the Company). All of the Shares are duly authorized, validly
issued, fully paid and non-assessable. All of the Shares were issued in
compliance with all applicable Requirements of Law (including securities laws)
and in compliance with the certificate of incorporation and bylaws of the
Company. There are no outstanding subscriptions for any securities to be issued
by the Company.
(c) No Violation of Statute or Breach of Contract. To the best
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knowledge of the Clemente, the Company is not in default under, or in violation
of, (a) any material applicable Requirement of Law, or (b) any material
Contractual Obligation. The Company has not received notice that any Person
claims that the Company has committed such a default or violation.
(d) Government and Other Consents. No consent, authorization, license,
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exemption or other action by, any Governmental Authority is required to be
obtained or made, and no consent of any third party is required to be obtained
by the Company in connection with the execution and delivery of this Agreement
or with the consummation of the transactions contemplated hereby.
(e) Effect of Agreement. The execution and delivery of this Agreement
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by the Company, Clemente, performance of the obligations of the Sellers
hereunder and consummation of the transactions contemplated hereby will not (i)
result in a breach or violation of any Requirement of Law applicable to the
Company; (ii) result in the breach of, or be in conflict with, any term,
covenant, condition or provision of, any Contractual Obligation of the Company;
or (iii) result in the creation or imposition of any Encumbrance upon any assets
of the Company.
(f) Financial Statements. Purchaser acknowledges that the Company only
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initiated corporate operations in 2004 and prior to that time operated as a sole
proprietorship. As such the Company and Clemente shall provide bank statements,
tax returns and supporting worksheets for the years 2001, 2002, and 2003 and
year to date financials for 2004 including balance sheets and income statements
of the Company (collectively, the "Financial Statements"). The Company and
Clemente represent that the Financial Statements are true, complete and,
accurate and fairly present the assets and liabilities of the Company as of the
dates and for the periods therein specified.
(g) Assets and Business. The Company owns all of the assets listed on
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Schedule B-1.
(h) Absence of Undisclosed Liabilities. Except as included in the
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Financial Statements and except for liabilities which arise after the date of
the Financial Statements in the ordinary course of business, to the best of
Sellers' knowledge, the Company will not have any debt, liability, or obligation
as of the Closing Date of any nature, accrued, absolute or contingent, due or to
become due, liquidated or unliquidated (each, "Undisclosed Liability"), except
the debt listed on Schedule B-2. All such debt shall remain the obligation of
the Company.
(i) Tax Returns and Payments. Since the Company has operated as a sole
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proprietorship prior to 2004, Island Tribe, Inc. has filed no prior year tax
returns. To that extent Clemente represents and warrants that there are no prior
year outstanding tax liabilities and that all income tax returns, federal,
state, local, foreign and other, including, without limitation, all federal
income tax returns and reports required to be filed by and/or on behalf of the
sole proprietorship in respect of any income taxes (including without limitation
all foreign, federal, state, county and local income taxes) have been filed, and
paid if applicable. There are no deficiency assessments against the Company with
respect to any foreign, federal, state, local or other taxes. There are no
outstanding agreements or waivers extending the period of limitation applicable
for assessment or collection for any federal, state, local or foreign tax, or
for the filing of any tax return, in respect of the Company.
(j) Contracts. Attached hereto as Schedule C is a list of all written
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agreements and contracts to which the Company is a party or by which it is bound
(the "Contracts"). Neither, the Company nor Clemente have any reason to believe
the Contracts are not valid, legally binding and enforceable in accordance with
their terms and are in full force and effect. Copies of the Contracts have been
delivered to the Purchaser.
(k) Litigation. Except as set forth on Schedule D, no claim, action,
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suit, or other proceeding against the Company is pending or, to the knowledge of
Sellers, is threatened before or by any court, administrative or regulatory
body, or other Governmental Authority. The Sellers know of no investigation of
the Company by any administrative agency of any federal, state or local
government. No judgment, order, writ, injunction, decree or award issued by any
Governmental Authority is applicable to the Company.
(l) Accounts, Powers of Attorney. There are no persons holding a power
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of attorney on behalf of the Company or otherwise holding the right to act as an
agent on behalf of the Company. Schedule E lists the names and addresses of
each bank or other financial institution in which on the date hereof the Company
has an account, deposit or safe-deposit box, including the number of each such
account, deposit and safe-deposit box.
(m) Insurance. Except as set forth in Schedule F, there are no
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insurance policies maintained by or on behalf of the Company in effect on the
Closing Date.
(n) No Subsidiaries or Joint Ventures. The Company does not own,
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directly or indirectly, beneficially or of record, or have any obligation to
acquire, any stock of, or other equity or ownership interest in, any Person. The
Company is not a party to or involved in any joint venture.
(o) Accounts Receivable. Schedule G shall be completed by the Company
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on the Closing date to include a complete and accurate list of all accounts
receivable of the Company as of the Closing Date.
(p) Minute Books. All stock books, stock ledgers and minute books of
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the Company have been made available to Purchaser for review.
(q) Employees. The Company has no employees and except as set forth on
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Schedule H, no employee benefit plans or pension plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA") or any
incentive, bonus, stock option, stock appreciation or parachute program or any
other type of employee compensation arrangement or program. Neither the Company
nor any employee benefit or pension plan previously maintained by the Company
has any unsatisfied liability or obligation to any former employee of the
Company or in connection with any employee benefit or pension plan or any
incentive, bonus, stock option, stock appreciation or parachute program.
(r) Toxic Wastes; Employee Safety, etc.
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(i) Definitions. For purposes of this Agreement, the following capitalized
terms shall have the meanings set forth below:
a) "Hazardous Substances" shall mean any chemical, compound, material,
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mixture, living organism or substance that is now or hereafter defined or listed
in, or otherwise classified or regulated in any way pursuant to, any
Environmental Laws as a "hazardous waste," "hazardous substance," "hazardous
material," "extremely hazardous waste," "infectious waste," "toxic substance,"
"toxic pollutant" or any other formulation intended to define, list, or classify
substances by reason of deleterious properties, including without limitation,
ignitability, corrosivity, reactivity, carcinogenicity or toxicity, such
materials to include without limitation, oil, waste oil, petroleum waste
petroleum, polychlorinated biphenyls (PCBs), asbestos, radon, natural gas,
natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or
mixtures of natural gas and such synthetic gas).
b) "Environmental Laws" shall mean applicable federal, state, or local
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laws, including without limitation, common law, statutes, rules, regulations,
codes or ordinances, requirements under licenses, permits, franchises, approvals
or contracts, orders, demands, decrees, judgments, directives, injunctions and
requirements of any other governmental authority, relating to the protection of
health, safety or the environment.
(ii) Neither, Clemente nor the Company is in actual or alleged violation of
any Environmental Laws, arising from the Company's ownership, operation or use
of any property prior to the Closing Date, or arising from their ownership,
operation or use of any of their other current or former assets or businesses.
(iii) To Clemente's or the Company's knowledge, no property currently or
formerly owned, operated or used by the Company or any property to which the
Company may have transported, treated or disposed or arranged for the transport,
treatment or disposal of Hazardous Substances is listed as a site on the
National Priorities List (as defined in the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended) or comparable federal, state
or local list of sites of environmental concern. In addition, to Clemente's or
the Company's knowledge, none of such sites are or have been the subject of any
remediation, removal, cleanup, investigation, response action, claim, judgment
or enforcement action regarding any actual or alleged presence of Hazardous
Substances.
(iv) To Clemente or the Company's knowledge, the Company has not received
any written notice or report of any releases of Hazardous Substances on, under,
from or into any property formerly owned, operated or used by the Company during
the time of its ownership, operation or use or, to the knowledge of Clemente or
the Company, prior to the Company's ownership, operation or use.
(v) To the best of Clemente's and the Company's knowledge, there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
proceedings or notices pending or, threatened against the Company under any
Environmental Laws, including without limitation, those related to any
allegations of economic loss, personal injury, illness or damage to real or
personal property or the environment. To Clemente's or the Company's knowledge,
there are no facts or circumstances which are reasonably likely to give rise to
such a claim.
(vi) The Company is not a party or a successor in interest to any contract
or agreement, including without limitation, any purchase agreements, leases,
indemnities or guaranties, pursuant to which the Company has assumed or agreed
to be responsible for any current or contingent liabilities with respect to any
Hazardous Substances or any matters under Environmental Laws.
(s) Permits, Licenses, Etc. No franchise, license, permit,
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certificate, authorization, right or other approval issued or granted by any
Governmental Authority to or for the benefit of the Company is in existence or
effect, except for the Company's incorporation in Nevada.
(t) Officers; Directors. Schedule I contains a complete and correct
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list of all of the officers and directors of the Company.
ARTICLE III.
REPRESENTATIONS ANS WARRANTIES OF THE PURCHASER
Section 3.01 The Purchaser hereby represents and warrants to the
Sellers as follows:
(a) Existence. The Purchaser is a corporation duly organized and
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validly existing under the laws of the State of Nevada.
(b) Authorization; No Violation. The execution, delivery and
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performance by the Purchaser of this Agreement are within the Purchaser's
corporate powers and have been duly authorized by all necessary action, and do
not contravene in any material respect any Requirement of Law or Contractual
Obligation of the Purchaser.
(c) Government Authorization. No authorization or approval or other
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action by, and no notice to or filing with, any Governmental Authority is
required to be obtained or made by the Purchaser for the due execution, delivery
and performance by the Purchaser of this Agreement.
(d) Enforceable Obligations. This Agreement when executed has been
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duly executed and delivered on behalf of the Purchaser and constitute the legal,
valid and binding obligations of the Purchaser enforceable against the Purchaser
in accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity.
(e) No Litigation. No claim, action, suit, investigation or other
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proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Purchaser, threatened by or against the Purchaser with
respect to this Agreement or any of the transactions contemplated hereby.
(f) Brokers, Finders. The Purchaser has not retained any person to act
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on its behalf as a broker or finder in connection with the purchase of the
Shares.
(g) Qualifications. All actions and steps necessary to assure
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compliance with applicable federal and state securities laws shall have been
duly obtained and shall be effective on and as of the Closing, except for such
filings as are required or permitted by state or federal securities laws
subsequent to the Closing. These filings include all required filings under the
Sarbanes Oxley Act.
ARTICLE IV
CONDITIONS TO CLOSING
Section 4.01 Conditions to Purchaser's Obligations. The obligation of
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the Purchaser to purchase the Shares at the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties Correct; Performance of Obligations.
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The representations and warranties made by the Company, Clemente or the Sellers
in Article II hereof shall be true and correct in all material respects when
made, and shall be true and correct in all material respects on the Closing Date
with the same force and effect as if they had been made on and as of the Closing
Date. The Company shall have performed in all material respects all obligations
and conditions herein required to be performed or observed by the Company on or
prior to the Closing Date.
(b) Qualifications. All actions and steps necessary to assure
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compliance with applicable federal and state securities laws shall have been
duly obtained and shall be effective on and as of the Closing, except for such
filings as are required or permitted by state or federal securities laws
subsequent to the Closing.
(c) Dividends. The Company shall not have declared or paid any
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dividend or otherwise changed its capitalization between the date hereof and the
Closing Date.
Section 4.02 Conditions to Obligations of the Sellers. The Sellers'
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obligation to sell the Shares at the Closing is subject to the fulfillment on or
prior to the Closing Date of the following conditions:
(a) Representations and Warranties Correct; Performance of Obligations.
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The representations and warranties of the Purchaser in Article III hereof shall
be true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of the Closing Date, and the Purchaser
shall have performed in all material respects all obligations and conditions
herein required to be performed by it on or prior to the Closing Date.
(b) Incumbency Certificate of the Purchaser. The Sellers shall have
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received a certificate of the Secretary of the Purchaser in its capacity as
Secretary of the Purchaser, certifying the names and signatures of officers of
the Purchaser authorized to sign this Agreement and the other documents to be
delivered hereunder on behalf of the Purchaser.
ARTICLE V
CLOSING DELIVERIES
Section 5.01 Sellers' Deliveries. At the Closing, in addition to any
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other documents or agreements required under this Agreement, the Sellers shall
deliver or cause to be delivered to the Purchaser the following:
(a) Stock certificates evidencing the Shares duly endorsed in blank, or
accompanied by stock powers duly executed in blank, in a form reasonably
satisfactory to the Purchaser.
(b) Copies of all consents and approvals obtained, and all
registrations, qualifications, declarations, filings and notices made, by the
Company pursuant to Section 4.01(b) hereof.
(c) All records, documents and files of the Company including, without
limitation, all minute books, stock records and internal accounting records.
(d) Such other documents, assignments, instruments of conveyance and
certificates as reasonably may be required by the Purchaser to consummate this
Agreement and the transactions contemplated hereby, including but not limited to
the License Agreement. Resignations of all of the Company's Directors, which
shall be undated.
Section 5.02 Purchaser's Deliveries. At the Closing, in addition to
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any other documents or agreements required under this Agreement, the Purchaser
shall deliver to the Sellers the purchase price described in Section 1.01(a)
hereof, together with such other documents as reasonably may be required by the
Sellers to consummate this Agreement.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 6.01 Survival of Representations. The parties agree that,
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notwithstanding any right or ability of the Purchaser fully to investigate the
affairs of the Company, any knowledge of facts determinable by the Purchaser
pursuant to such investigations or right of or ability to investigate, the
Purchaser has the right to rely fully upon the representations, warranties,
covenants and agreements of the Company, Clemente and the Sellers as contained
in this Agreement and on the accuracy of any schedule, exhibit, document or
certificate annexed hereto. All representations and warranties of the parties
contained herein shall survive the Closing until the expiration of the time
periods set forth in Section 6.04.
Section 6.02 Indemnification byClemente, the Sellers and the Company.
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(a) Clemente, the Sellers and the Company will indemnify and hold
harmless the Purchaser against and in respect of claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries, and deficiencies,
including reasonable attorney's fees that the Purchaser incurs which arise, or
relate to any breach of or failure to perform any of their individual
representations, warranties, covenants or agreements set forth in this
Agreement. The Sellers' individual liability under this paragraph, however, will
not exceed the aggregate value of Purchaser's stock received from Purchaser by
Seller as determined by the formula contained in Section 1.01(a) on the date of
closing.
Section 6.03 Indemnification by the Purchaser. The Purchaser shall
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indemnify and hold Sellers harmless from any loss, damage, liability or expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses) in connection with any action, suit or
proceeding brought against Sellers, either jointly or severally, incurred or
suffered by Sellers and arising out of or resulting from (i) any breach of any
representation, warranty, or covenant made by the Purchaser hereunder, or (ii)
any lawsuit or other proceeding or claim brought by a third party after the
Closing against one or more of the Sellers with respect to any acts or omissions
of the Purchaser or the Company after the Closing.
Section 6.04 Time Periods. The indemnification obligations under this
------------
Article VI shall continue for the periods specified below and shall terminate
with the expiration of such respective periods:
(a) as to representations and warranties set forth in Section 2.01(f)
(the Company's financial statements), such representations and warranties shall
survive the Closing indefinitely;
(b) as to representations and warranties set forth in Section 2.02(i)
(tax returns and payments), until the lapse of the statute of limitations
applicable to the matters described therein;
(c) as to all other representations and warranties and breaches of any
other covenant or undertaking, for two (2) years after the Closing Date.
Any claim or demand against any Sellers or the Purchaser of which notice has
been given pursuant to Section 6.06 at or prior to the expiration of the related
period shall continue to be subject to indemnification hereunder notwithstanding
the expiration of such period.
Section 6.05 Notice Claim. Purchaser, on the one hand, and each of the
------------
Sellers, the Company, and Clemente, on the other hand, shall promptly notify the
other of any claim, suit or demand of which the notifying party has actual
knowledge which entitles it to indemnification under this Article VI, provided,
however, that the delay or failure of any party required to provide such
notification shall not affect the liability of the indemnifying party hereunder
except to the extent the indemnifying party is harmed by such delay or failure.
Section 6.06 Defense. If the liability or claim for which
-------
indemnification under this Article VI is sought is asserted by a third party,
the indemnifying party shall have, at its election, the right to defend any such
matter at its sole cost and expense through counsel chosen by it and reasonably
acceptable to the indemnified party (provided that the indemnifying party shall
have no such right if it is contesting its liability under this Article VI). If
the indemnifying party so undertakes to defend, the indemnifying party shall
promptly notify the indemnified party hereto of its intention to do so. The
indemnifying party shall not, without the indemnified party's written consent,
settle or compromise any claim or consent to an entry of judgment which does not
include as an unconditional term thereof a release of the indemnified party.
Section 6.07 Cooperation and Conflicts. Each party agrees in all cases
-------------------------
to cooperate with the indemnifying party and its counsel in the defense of any
such liabilities or claims. The indemnifying party and the indemnified party or
parties may be represented by the same counsel unless such representation would
be inappropriate due to conflicts of interest between them. In addition, the
indemnified party or parties shall at all times be entitled to monitor and
participate in such defense through the appointment of counsel of its or their
own choosing, at its or their own cost and expense.
ARTICLE VII
DISPUTE RESOLUTION
Section 7.01 Mediation/Arbitration.
---------------------
(a) If a dispute arises out of or relates to this Agreement, or the breach
thereof, and if the dispute cannot be settled through direct discussions, the
parties agree to first endeavor to settle the dispute in an amicable manner by
mediation administered in Orange County, California before resorting to
Arbitration. Thereafter, any remaining unresolved controversy or claim arising
out of or relating to this Agreement, or breach thereof, shall be settled by
binding arbitration in Orange County, California, and administered by the
American Arbitration Association in accordance with its Commercial Arbitration
Rules.
(b) The Arbitrator will have the authority to award only those damages
permitted in law or equity, subject to any disclaimers of damages and liability
limits set forth in this Agreement, and will not have the authority to reform,
modify or materially change this Agreement. Commercial Arbitration Rules of the
AAA and the substantive laws of California will govern the arbitration and this
Agreement.
(c) The final decision of the Arbitrator shall be served on the
Parties, in writing, within twenty (20) days after conclusion of the arbitration
hearing. The Arbitrator's decision shall be binding and conclusive. Neither
Party shall pursue, prosecute or otherwise file any legal action or proceeding
except to confirm the award of the arbitrator. No appeal shall be taken from the
Arbitrator's decision or from any subsequent court order confirming said
decision.
(d) The Parties shall equally advance the costs incurred by mediation
and arbitration. The Arbitrator, however, shall have the discretion to award
such costs as well as attorneys' fees to the Party prevailing in the arbitration
proceedings.
(e) This agreement will be governed by and construed in accordance with
the laws of the State of California, the state in which this agreement is being
executed.
(f) Any arbitration or suit shall be commenced within 24 months
following the occurrence or claim which gives rise to the initiation of such
proceeding.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Waiver. Any extension or waiver with respect to any
------
agreement or condition contained herein or the breach thereof shall be valid
only if set forth in a separate instrument in writing signed by the party to be
bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any such rights.
Section 8.02 Further Assurances. The Company, Clemente, and the
-------------------
Sellers jointly and severally agree, without further consideration, to execute
and deliver following the Closing such other instruments of transfer and take
such other action as the Purchaser may reasonably request in order to put the
Purchaser in possession of, and to vest in the Purchaser, good and valid title
to the Shares free and clear of any Encumbrances in accordance with this
Agreement and to otherwise consummate the transactions contemplated by this
Agreement.
Section 8.03 Entire Agreement; Amendment. This Agreement and the other
---------------------------
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties and supersede all prior and contemporaneous
agreements and understandings, oral or written, among the parties hereto with
respect to such subject matter. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of the parties hereto.
Section 8.04 Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any law, rule or
regulation or public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
Section 8.05 Notices, etc. All notices and other communications
-------------
required or permitted hereunder shall be in writing and shall be delivered
personally, mailed by first-class mail, postage prepaid, or sent by reputable
overnight courier service addressed (a) if to the Purchaser, at the Purchaser's
address set forth on Section 1.02 hereto or at such other address as such
Purchaser shall have furnished to the Sellers by 10 days' notice in writing,
with a copy to (b) if to any Sellers, at the addresses set forth on Exhibit A
hereto, or such other address as such Sellers shall have furnished to the
Purchaser by 10 days' notice in writing.
Section 8.06 Expenses. All costs and expenses, including, without
--------
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with the negotiation, preparation, execution
and delivery of this Agreement and consummation of the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
Section 8.07 Benefit of Agreement; Assignment. This Agreement will
-----------------------------------
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. This Agreement may not be
assigned by operation of law or otherwise by the Purchaser without the express
written consent of the Company and the Sellers (which consent may be granted or
withheld in the sole discretion of the Company or the Sellers). Notwithstanding
the foregoing, this Agreement and the rights hereunder may be (i) assigned as
collateral security to any lender of funds to the Company, and (ii) assigned by
the Purchaser after the Closing to the beneficial owners of the Purchaser or to
any subsequent purchaser or other holder of all or a portion of the Shares,
provided that in no event shall the Purchaser be relieved from its obligations
hereunder in connection with any such assignment.
Section 8.08 Titles and Subtitles. The titles of the Sections of this
--------------------
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
Section 8.09 Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
Section 8.10 Representation Disclaimer. The Company, Clemente and the
--------------------------
Sellers shall not be deemed to have made to Purchaser any representation or
warranty other than as expressly made by them in Article II. Without limiting
the generality of the foregoing, and notwithstanding any otherwise express
representations and warranties made by the Company, Clemente and the Sellers in
Article II hereof, the Company, Clemente and the Sellers makes no representation
or warranty to Purchaser with respect to:
(a) any projections, estimates or budgets heretofore delivered to or
made available to Purchaser of future revenues, expenses or expenditures or
future results of operations; or
(b) except as expressly covered by a representation and warranty
contained in Article II, any other information or documents (financial or
otherwise) made available to Purchaser or its counsel, accountants or advisers
with respect to the Company.
Section 8.11 Purchaser's Due Diligence Investigation. Purchaser has
-----------------------------------------
had over 30 days (such period, "Purchaser's Due Diligence Period") in which to
conduct its confirmatory due diligence. During such Purchaser's Due Diligence
Period, Purchaser and its accountants, consultants, and advisers have been
permitted to review the premises, facilities, books and records and contracts of
the Company, and to conduct interviews with the Company's senior management
regarding the business, operations, financial condition and results of
operations of the Company, for the purpose of confirming the accuracy of the
representations and warranties contained herein. Purchaser had the right, at
any time during the Purchaser's Due Diligence Period, at Purchaser's sole
discretion and without any liability or obligation, to terminate all
negotiations with the Company, Clemente and the Sellers.
Section 8.12 Sellers' Due Diligence Investigation. The Company,
---------------------------------------
Clemente as an individual and as a representative of the remaining Sellers have
had over 30 days (such period, "the Company's' Due Diligence Period") in which
to conduct its confirmatory due diligence. During the Company's due diligence
period, the Company and their accountants, consultants, and advisers were
permitted to review the premises, facilities, books and records and contracts of
the Purchaser, and to conduct interviews with the Purchaser's senior management
regarding the business, operations, financial condition and results of
operations of Purchaser, for the purpose of confirming the accuracy of the
representations and warranties of Purchaser contained herein. The Company had
the right, at any time during the Company's Due Diligence Period, at the
Company's sole discretion and without any liability or obligation, to terminate
all negotiations with the Purchaser.
Section 8.13 Press Releases and Public Announcements. No party shall
----------------------------------------
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the Purchaser and the Company; provided, however, that any party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing party will use its efforts to advise the other parties prior
to making the disclosure).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year set forth in the heading hereof.
BLUETORCH INC. ("Purchaser")
By: /s/ Xxxxx XxxXxxxxx
________________________________
Xxxxx XxxXxxxxx, President
ISLAND TRIBE, INC.
By: /s/ Xxxxxxx Xxxxxxxx
________________________________
Xxxxxxx Xxxxxxxx, CEO
By:/s/ Xxxxxxx Xxxxxxxx
________________________________
Xxxxxxx Xxxxxxxx, an individual
By: /s/ Xxxxxxx Xxxxxxxx
________________________________
Xxxxxxx Xxxxxxxx, Attorney-In-Fact for
Each of the Sellers ("Sellers")
SCHEDULE A
List of Island Tribe Shareholders
SCHEDULE A-2
Licensing Agreement between Blue Torch Inc. and Xxxxxxx Xxxxxxxx
SCHEDULE B-1
Island Tribe Assets as of June 30, 2004
SCHEDULE B-2
Island Tribe Liabilities as of June 30, 2004
SCHEDULE C
List of All Island Tribe, Inc. Contracts and Agreements
SCHEDULE D
Litigation Pending or Threatened
NONE
SCHEDULE E
Island Tribe Bank Accounts or other Financial Accounts
(List name and address of the institution and the account number)
SCHEDULE F
Insurance Policies
NONE
SCHEDULE G
Island Tribe Accounts Receivable as of June 30, 2004
SCHEDULE H
List of Island Tribe Employees
NONE
SCHEDULE I
List of the Company's Officers and Directors on June 30, 2004
Xxxxxxx Xxxxxxxx, President, CEO, Secretary, Director and Chairman of the Board
Xxx Xxxxxxx, Director
