COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made and entered
into as of the 31st day of July, 2003, between SuperiorClean, Inc., a Nevada
corporation ("Buyer" or "Superior") and Megola Inc., an Ontario Canada
corporation ("Seller" or "Megola").
RECITALS
The Buyer desires to acquire all issued and outstanding shares of common
stock of Seller, and the Seller wishes to have all issued and outstanding
shares of common stock of Seller acquired by the Buyer, on the terms and
conditions set forth in this Agreement by way of an exchange of shares (the
"Exchange").
The board of directors of the Buyer and the Seller have determined that it is
in the best interest of the parties for the Buyer to acquire all issued and
outstanding shares of common stock of the Seller pursuant to an exchangeable
share transaction.
NOW, THEREFORE, in consideration of the terms, conditions, agreements and
covenants contained herein (the receipt and sufficiency of which are
acknowledged by each party), and in reliance upon the representations and
warranties contained in this Agreement, the parties hereto agree as follows:
I. RECITALS; TRUE AND CORRECT
The above stated recitals are true and correct and are incorporated into this
Agreement.
II. PURCHASE AND SALE
2.1 Purchase and Sale. Subject to all the terms and conditions of
this Agreement, at the Closing, the Seller agrees to receive from the
Buyer, and Buyer agree to issue to the shareholders of the Seller (a
"Shareholder") 17,389,591 Shares of Common Stock of the Buyer ("Buyer
Shares") (the "Share Consideration") in exchange for the transfer of all the
issued and outstanding shares of the Common Stock of the Seller ("Seller's
Shares") to the Buyer.
2.2 Other Consideration.
Cash Consideration
$250,000 consideration with a payment schedule made as follows
* $10,000 deposit paid July 8, 2003
* $40,000 paid July 14th, 2003
* $50,000 paid July 21th, 2003
* $75,000 paid July 31st, 2003
* $75,000 payment will be made by wire transfer upon an NASD market
maker submitting an application to change the SUCN ticker symbol or
120 days from July 8, 2003, whichever is sooner
ALL OF WHICH CASH CONSIDERATION, IS NON-REFUNDABLE ( see exception
below) after payment of the $50,000 second payment set forth above and any
and all of which may be used at any time to satisfy debts and obligations
of Superior and/or redeem shares held by shareholders of Superior. These
cash funds shall be paid by Megola on the dates set forth above in funds
immediately available by wire transfer to an account or accounts designated
by Superior. However, following the $50,000 second payment, Superior
agrees not to negotiate a similar transaction with any other party until
August 7, 2003. If the Parties have not executed a definitive agreement by
August 22, 2003, Superior shall be free to pursue other acquisition
opportunities without liability or obligation to Megola. If Superior
executes a letter of intent or agreement for a similar transaction with
another party within the specified period, any monies paid by Megola will
be refunded back.
Wiring Instructions For USD Account
Xxxx Xxxxxxx "In Trust"
TDCanada Trust
Branch 83689
Bank Code 004
USD Account: 0879-0000000
(000) 000-0000
Note Consideration
Megola shall execute two promissory notes to Superior or its assigns, each
in the amount of $100,000 (the "Notes"), bearing interest at the rate of 6%
simple interest per annum. The Notes shall be paid in full, all
principal and accrued interest, 12 months from the date of execution of this
agreement, regardless of the date of closing of the definitive agreement.
In addition to standard language, the Notes shall have the following terms
and conditions:
[i] The Notes may assigned and may be used to satisfy debts and obligations
of Superior and/or redeem shares held by shareholders of Superior, all
without the consent of Megola, and thereafter any payments due on the
Notes shall be paid directly to such assignee[s]. The Notes may be
pledged, sold, hypotheticated, or assigned by any assignee of Superior
without consent of Megola. All payments shall be made by wire transfer on
the due date to accounts as specified by Superior or assignees of the
Notes.
[ii] Holders of the Notes shall have the option at any time prior to
the due date so long as there is no default to convert all unpaid principal
and accrued interest into common shares of stock of Superior ("Superior
Common Stock") at the rate of US$0.10 per share. This option may be
exercised in whole or in part at any time prior to repayment of the Notes.
If there is a default in the Notes, then Holders of the Notes shall have
the option at any time the Notes are in default to convert all unpaid
principal and accrued interest into shares of stock of Superior at the
lower of (i) $0.10 per share; and (ii) the average trading price of
Superior Common Stock for the twenty (20) day period immediately prior to
the date of the option exercise notice from the Holders. This option may be
exercised in whole or in part at any time the Notes are in default.
Further, to the extent any shares are acquired under this option, the owners
of these shares if the option is exercised collectively shall have a one
time right to require that Superior register the shares for resale within
90 days of such request on a registration statement filed with the
Securities Exchange Commission ("SEC") and kept effective until all
such shares are resold, all at Superior's expense.
[iii] Payment of the Notes shall be personally guaranteed by all principals
of Megola, namely Xx. Xxxx Xxxxxxx which guarantee shall be backed by a
security interest in all of their issued and outstanding stock of Superior
post-Closing.
[iv] Megola will be obligated to pay the outstanding Notes before their due
dates if they are successful in obtaining further funding of a minimum of
$600,000 USD. If the minimum is not met, then payment due will be pro-rata
to the amount of funding obtained however the balance will still be due on
due date.
2.3 Closing. The parties shall hold the Closing no later than 30 days
after the execution of this Agreement (the "Closing Date"), at 11:00 A.M.,
local time, at the offices of Buyer, or at such other time and place as the
parties may agree upon.
2.4 Name Change. Immediately following the Closing, Superior may
change its name to Megola, Inc. (the "Name Change"). Shareholder consent
will be required under a Schedule 14C filed with the SEC and relevant
provisions of Nevada law. The Schedule 14C shall be filed with the SEC as
required.
2.5 Board of Directors. On Closing, Xxxx Xxxxxxx and the current
directors of Megola; namely Xx. Xxxx Xxxxxxx, and Mr. Xxxx Xxxxx will be
elected or appointed to Superior Board of Directors. This will require
the designation of additional directors and filing of a Schedule 14F
with the SEC and the mailing of the Schedule 14F to shareholders of
Superior 10 days prior to the date the new directors can take office.
2.6 Restriction on issuance of shares under S-8 Registration Statement.
Subsequent to the Closing Date of the definitive Agreement and for a
period of 12 months thereafter, Superior shall not undertake and Megola
Inc. shall not cause Superior to undertake registration of more than
10% of the issued and outstanding shares of common stock on the Closing
Date on Form S-8. Superior will sign an on-going Reporting
Consulting Agreement, consisting of 2,500,000 shares (See Schedule "A")
for Xxxxxxx Xxxxx, and Xxxx Xxxxxxx for on-going compliance with SEC and
NASD requirements for a period of 12 months post Closing Date. This
shall be binding upon Superior post closing. Consulting Contract with Airam
Capital Group, Inc. At the close of merger Megola will enter into a
consulting agreement with Airam Capital Group, Inc.("ACG") whereby ACG
will assist and introduce Megola to an Investor Group(s) for further
funding of up to $2.5 million in ACG's Stock Loan Program.
2.7 Transferred Assets. All Franchise Assets of SuperiorClean set forth on
Schedule C have been transferred to Xxxxx Xxxxxxx, former officer, director
and principal shareholder of Superior and no Schedule 14C filing with respect
to same has been made with the SEC. Further, no 14F filing was made in
connection with the related change of control
2.9 Plan of Action. Plan of action regarding roles and responsibilities,
including payment of costs and expenses, after execution of this Agreement is
set forth on Schedule 2.9.
2.10 Pre-Closing Actions. The parties acknowledge that this Agreement is
being executed prior to the negotiation and discussion of all matters
relating to such exchangeable share transaction and prior to the negotiation
and discussion of the schedules to this Agreement and documents to be
delivered thereto. As well, all of the representations and warranties may
not be complete or true as of the date of signing of the Agreement. The
parties agree to work together in good faith in finalizing the documentation
and resolving such issues prior to Closing, which may involve an amendment to
this Agreement to reflect such issues. All schedules and material
documentation must be presented to the other party for review as soon as
possible following execution of this Agreement.
III. CONDUCT OF BUSINESS PENDING CLOSING
Seller and Buyer covenant that between the date hereof and the date of
the Closing:
3.1 Access to Seller. Seller shall (a) give to Buyer and to Buyer's
counsel, accountants and other representatives reasonable access, during
normal business hours, throughout the period prior to the Closing Date (as
defined in Section 6.1), to all of the books, contracts, commitments and
other records of Seller and shall furnish Buyer during such period with all
information concerning Seller that Buyer may reasonably request; and (b)
afford to Buyer and to Buyer's representatives, agents, employees and
independent contractors reasonable access, during normal business hours, to
the properties of Seller, in order to conduct inspections at Buyer's expense
to determine that Seller is operating in compliance with all applicable
federal, state, local and foreign statutes, rules and regulations, and all
material building, fire and zoning laws or regulations and that the assets of
Seller are substantially in the condition and of the capacities represented
and warranted in this Agreement; provided, however, that in every instance
described in (a) and (b), Buyer shall make arrangements with Seller
reasonably in advance and shall use its best efforts to avoid interruption
and to minimize interference with the normal business and operations of
Seller. Any such investigation or inspection by Buyer shall not be deemed a
waiver of, or otherwise limit, the representations, warranties or covenants
of Seller contained herein.
3.2 Conduct of Business. During the period from the date hereof to the
Closing Date, Seller shall and shall use reasonable efforts, to the extent
such efforts are within Seller's control, to cause its business to be
operated in the usual and ordinary course of business and in material
compliance with the terms of this Agreement.
3.3 Exclusivity to Buyer. Until either the exchange agreement is
terminated or the exchange closed, Seller agrees not to solicit any other
inquiries, proposals or offers to purchase or otherwise acquire, in a
exchange transaction or another type of transaction, the business of Seller
or the shares of capital stock of Seller. Any person inquiring as to the
availability of the business or shares of capital stock of Seller or making
an offer therefor shall be told that Seller is bound by the provisions of
this Agreement. Seller as well as its officers, directors, representatives or
agents further agree to advise Buyer promptly of any such inquiry or offer.
3.4 Access to Buyer. Buyer shall (a) give to Seller and to Seller's
counsel, accountants and other representatives reasonable access, during
normal business hours, throughout the period prior to the Closing Date, to
all of the books, contracts, commitments and other records of Buyer and shall
furnish Seller during such period with all information concerning Buyer that
Seller may reasonably request; and (b) afford to Seller and to Seller's
representatives, agents, employees and independent contractors reasonable
access, during normal business hours, to the properties of Buyer in order to
conduct inspections at Seller's expense to determine that Buyer is operating
in compliance with all applicable federal, state, local and foreign statutes,
rules and regulations, and all material building, fire and zoning laws or
regulations and that the assets of Buyer are substantially in the condition
and of the capacities represented and warranted in this Agreement; provided,
however, that in every instance described in (a) and (b), Seller shall make
arrangements with Buyer reasonably in advance and shall use its best efforts
to avoid interruption and to minimize interference with the normal business
and operations of Buyer. Any such investigation or inspection by Seller shall
not be deemed a waiver of, or otherwise limit, the representations,
warranties or covenants of Buyer contained herein.
3.5 Conduct of Business. During the period from the date hereof to
the Closing Date, the business of Buyer shall be operated by Buyer in the
usual and ordinary course of such business and in material compliance with
the terms of this Agreement.
3.6 Exclusivity to Buyer. Until either this Agreement is terminated or
the exchange closed, Buyer agrees not to solicit any other inquiries,
proposals or offers to enter into exchange or business combination
negotiations with other parties. Any person inquiring as to the availability
of the Buyer for such purposes or the making an offer therefore shall be told
that Buyer is bound by the provisions of this Agreement. Buyer as well as its
officers, directors, representatives or agents further agree to advise Seller
promptly of any such inquiry or offer.
3.7 Approval. As promptly as reasonably practicable following the date
of this Agreement, Seller shall take all action reasonably necessary in
accordance with the laws of Canada and its Articles of Incorporation and
Bylaws to secure the required approval and adoption of this Agreement.
3.8 Mutual Cooperation. The initial press release relating to this
Agreement shall be a joint press release. Thereafter, each of the Seller and
the Buyer agree to provide 24 hour pre-notification to the other party of any
news releases or regulatory filings which the party proposes to issue or file
and shall agree to consider any reasonable recommendation or suggestion of
the other party with respect thereto. Buyer shall be permitted to make
announcements of Seller's newsworthy activities provided the consent of the
Seller is obtained, which consent shall not be reasonably withheld. Each
party shall also provide the other party with notice a reasonable time in
advance of, and shall permit a representative of the other party to review or
participate in, any communications, meetings, or correspondence relating to
investor relations matters, including matters relating to public offering
activities which are expected to take place following Closing.
IV. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows, with the knowledge and
understanding that Buyer is relying materially upon such representations and
warranties:
4.1 Organization and Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Ontario Canada.
Seller has all requisite corporate power to carry on its business as it is
now being conducted and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary under applicable law, except where the failure to
qualify (individually or in the aggregate) does not have any material adverse
effect on the assets, business or financial condition of Seller, and all
states in which Seller is qualified to do business as of the date hereof, are
listed in the information in Schedule 4.1. The copies of the Articles of
Incorporation and Bylaws of Seller, as amended to date, delivered to Buyer,
are true and complete copies of these documents as now in effect. Except as
otherwise set forth in the information Schedule 4.1, Seller does not own any
interest in any other corporation, business trust or similar entity. The
minute book of Seller contains accurate records of all meetings of its
respective Board of Directors and shareholders since its incorporation.
4.2 Capitalization. The authorized capital stock of Seller is
_______________ common shares of which _____________ are issued and
outstanding. All of such shares of capital stock are duly authorized, validly
issued and outstanding, fully paid and nonassessable, and were not issued in
violation of the preemptive rights of any person. There are no subscriptions,
options, warrants, rights or calls or other commitments or agreements to
which Seller is a party or by which it is bound, calling for any issuance,
transfer, sale or other disposition of any class of securities of Seller,
except as set forth in Schedule 4.2. There are no outstanding securities
convertible or exchangeable, actually or contingently, into shares of common
stock or any other securities of Seller. Seller has no subsidiaries except as
set forth in Schedule 4.2.
4.3 Authority. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by Seller in
accordance therewith (and assuming due execution and delivery by the other
parties hereto), the valid and binding obligation of Seller, enforceable in
accordance with their respective terms, subject to general principles of
equity and bankruptcy or other laws relating to or affecting the rights of
creditors generally.
4.4 Properties. Except as set forth on the information in Schedule 4.4
concerning Seller, Seller has good title to all of the Assets which it
purports to own as reflected on the balance sheet included in the Financial
Statements (as hereinafter defined), or thereafter acquired. Seller has a
valid leasehold interest in all material property of which it is the lessee
and each such lease is valid, binding and enforceable against Seller, as the
case may be, and, to the knowledge of Seller, the other parties thereto in
accordance with its terms. Neither Seller nor the other parties thereto are
in material default in the performance of any material provisions thereunder.
Neither the whole nor any material portion of the Assets of Seller is subject
to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without
payment of compensation therefore, nor, to the knowledge of Seller, any such
condemnation, expropriation or taking been proposed. None of the assets of
Seller is subject to any restriction which would prevent continuation of the
use currently made thereof or materially adversely affect the value thereof.
4.5 Contracts Listed; No Default. All contracts, agreements,
licenses, leases, easements, permits, rights of way, commitments, and
understandings, written or oral, connected with or relating in any respect to
present or proposed future operations of Seller (except employment or other
agreements terminable at will and other agreements which, in the aggregate,
are not material to the business, properties or prospects of Seller and
except governmental licenses, permits, authorizations, approvals and other
matters referred to in Section 4.17) are listed and described in the
information in Schedule 4.5 concerning Seller. Seller is the holder of, or
party to, all of the Seller Contracts. To the knowledge of Seller, the Seller
Contracts are valid, binding and enforceable by the signatory thereto against
the other parties thereto in accordance with their terms. Neither Seller nor
any signatory thereto is in default or breach of any material provision of
the Seller Contracts. Seller's operation of its business has been, is, and
will, between the date hereof and the Closing Date, continue to be,
consistent with the material terms and conditions of the Seller Contracts.
4.6 Litigation. Except as disclosed in the information in Schedule 4.6
concerning Seller, there is no claim, action, proceeding or investigation
pending or, to the knowledge of Seller, threatened against or affecting
Seller before or by any court, arbitrator or governmental agency or authority
which, in the reasonable judgment of Seller, could have any materially
adverse effect on Seller. There are no decrees, injunctions or orders of any
court, governmental department, agency or arbitration outstanding against
Seller.
4.7 Taxes. For purposes of this Agreement, (A) "Tax" (and, with
correlative meaning, "Taxes") shall mean any federal, state, local or foreign
income, alternative or add-on minimum, business, employment, franchise,
occupancy, payroll, property, sales, transfer, use, value added, withholding
or other tax, levy, impost, fee, imposition, assessment or similar charge,
together with any related addition to tax, interest, penalty or fine thereon;
and (B) "Returns" shall mean all returns (including, without limitation,
information returns and other material information), reports and forms
relating to Taxes or to any benefit plans.
Seller has duly filed all Returns required by any law or regulation to be
filed by it, except for extensions duly obtained. All such Returns were, when
filed, and to the knowledge of Seller are, accurate and complete in all
material respects and were prepared in conformity with applicable laws and
regulations in all material respects. Seller has paid or will pay in full or
has adequately reserved against all Taxes otherwise assessed against it
through the Closing Date, and the assessment of any material amount of
additional Taxes in excess of those paid and reported is not reasonably
expected.
Seller is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against Seller that has
not been paid. There are no Tax liens upon the assets (other than the lien of
property taxes not yet due and payable) of Seller. There is no valid basis,
to the knowledge of Seller, except as set forth in Schedule 4.7, for any
assessment, deficiency, notice, 30-day letter or similar intention to assess
any Tax to be issued to Seller by any governmental authority.
4.8 Compliance with Laws and Regulations. To its knowledge, Seller is
in compliance, in all material respects, with all laws, rules, regulations,
orders and requirements (federal, state and local) applicable to it in all
jurisdictions where the business of Seller is currently conducted or to which
Seller is currently subject which has a material impact on Seller, including,
without limitation, all applicable civil rights and equal opportunity
employment laws and regulations, and all state and federal antitrust and fair
trade practice laws and the Federal Occupational Health and Safety Act and
all similar Canadian laws, rules and regulations. Seller knows of no
assertion by any party that Seller is in violation of any such laws, rules,
regulations, orders, restrictions or requirements with respect to its current
operations, and no notice in that regard has been received by Seller. To the
knowledge of Seller, there is not presently pending any proceeding, hearing
or investigation with respect to the adoption of amendments or modifications
to existing laws, rules, regulations, orders, restrictions or requirements
which, if adopted, would materially adversely affect the current operations
of Seller.
4.9 Compliance with Laws. (a) To its knowledge, the business,
operations, property and assets of Seller (and, to the knowledge of Seller,
the business of any sub-tenant or licensee which is occupying or has occupied
any space on any premises of Seller and the activities of which could result
in any material adverse liability to Seller) (i) conform with and are in
compliance in all material respects with all, and are not in material
violation of any applicable federal, state and local laws, rules and
regulations, including, but not limited to, the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended (including the
1986 Amendments thereto and the Superfund Amendments and Reauthorization Act)
("CERCLA"), and the Resource Conservation and Recovery Act ("RCRA"), as well
as any other laws, rules or regulations relating to tax, product liability,
controlled substances, product registration, environmental protection,
hazardous or toxic waste, employment, or occupational safety matters whether
US or Canadian; and (ii) have been conducted and operated in a manner such
that, to Seller's knowledge, Seller has foreseeable potential liabilities for
environmental clean-up under CERCLA, RCRA or under any other law, rule,
regulation or common or civil law doctrine or similar laws, rules and
regulations in Canada.
(b) To its knowledge, no predecessor-in-title to any real property now
or previously owned or operated by Seller, nor any predecessor operator
thereof conducted its business or operated such property in violation of
CERCLA and RCRA or any other applicable federal, state and local laws, rules
and regulations relating to environmental protection or hazardous or toxic
waste matters.
(c) Except as disclosed in the information in Schedule 4.9 concerning
Seller, no suit, action, claim, proceeding, nor investigation, review or
inquiry by any court or federal, state, county, municipal or local
governmental department, commission, board, bureau, agency or
instrumentality, including, without limitation, any state or local health
department (all of the foregoing collectively referred to as "Governmental
Entity") concerning any such possible violations by Seller is pending or, to
the knowledge of Seller, threatened, including, but not limited to, matters
relating to diagnostic tests and products and product liability,
environmental protection, hazardous or toxic waste, controlled substances,
employment, occupational safety or tax matters. Seller does not know of any
reasonable basis or ground for any such suit, claim, investigation, inquiry
or proceeding. For purposes of this Section 4.9, the term "inquiry" includes,
without limitation, all pending regulatory issues (whether before federal,
state, local or inter-governmental regulatory authorities) concerning any
regulated product, including, without limitation, any diagnostic drugs and
products.
4.10 Information. Seller has furnished and will continue to furnish
Buyer all information and financial statements as Buyer may reasonably
request.
4.11 Condition of Assets. The equipment, fixtures and other personal
property of Seller, taken as a whole, is in good operating condition and
repair (ordinary wear and tear excepted) for the conduct of the business of
Seller as is contemplated to be conducted.
4.12 No Breaches. To its knowledge, the making and performance of this
Agreement and the other agreements contemplated hereby by Seller will not (i)
conflict with or violate the Articles of Incorporation or the Bylaws of
Seller; (ii) violate any material laws, ordinances, rules or regulations, or
any order, writ, injunction or decree to which Seller is a party or by which
Seller or any of its respective assets, businesses, or operations may be
bound or affected; or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or
lapse of time, or both, would become a default under, or result in the
creation of any encumbrance upon any asset of Seller under, or create any
rights of termination, cancellation or acceleration in any person under, any
Seller Contract.
4.13 Employees. None of the employees of Seller is represented by any
labor union or collective bargaining unit and, to the knowledge of Seller, no
discussions are taking place with respect to such representation.
4.14 Financial Statements. Seller has furnished or will prior to SEC
filing deadlines furnish Buyer Sellers' financial statements (the "Financial
Statements") for the period from inception through July 31, 2003. The
Financial Statements, when submitted to Buyer for inclusion in the SEC
filings, will have been prepared in accordance with Regulation S-X of the SEC
and, in particular, Rules 1-02 and 3-05 promulgated thereunder. The
Financial Statements present fairly, in all respects, the consolidated
financial position and results of operations of Seller as of the dates and
periods indicated, prepared in accordance with generally accepted accounting
principles applicable in Canada consistently applied ("GAAP"). Without
limiting the generality of the foregoing, (i) there is no basis for any
assertion against Seller as of the date of the Financial Statements of any
debt, liability or obligation of any nature not fully reflected or reserved
against in the Financial Statements; and (ii) there are no assets of Seller
as of the date of the Financial Statements, the value of which is overstated
in the Financial Statements. Except as disclosed in the Financial Statements,
Seller has no known contingent liabilities (including liabilities for Taxes),
forward or long-term commitments or unrealized or anticipated losses from
unfavorable commitments other than in the ordinary course of business. Seller
is not a party to any contract or agreement for the forward purchase or sale
of any foreign currency that is material to Seller taken as a whole.
4.15 Absence of Certain Changes or Events. Since the date of the last
financial statement furnished to Buyer, there has not been:
(a) Any material adverse change in the financial condition,
properties, assets, liabilities or business of Seller;
(b) Any material damage, destruction or loss of any material
properties of Seller, whether or not covered by insurance;
(c) Any material change in the manner in which the business of
Seller has been conducted;
(d) Any material change in the treatment and protection of trade
secrets or other confidential information of Seller;
(e) Any material change in the business or contractual relationship
of Seller with any customer or supplier which might reasonably be expected
to materially and adversely affect the business or prospects of Seller;
(f) Any agreement by Seller, whether written or oral, to do any of
the foregoing; and
(g) Any occurrence not included in paragraphs (a) through (f) of
this Section 4.16 which has resulted, or which Seller has reason to believe,
in its reasonable judgment, might be expected to result, in a material
adverse change in the business or prospects of Seller.
4.16 Governmental Licenses, Permits, Etc. To its knowledge, Seller has
all governmental licenses, permits, authorizations and approvals necessary
for the conduct of its business as currently conducted ("Licenses and
Permits"). The information in Schedule 4.16 concerning Seller includes a list
of all Licenses and Permits. All Licenses and Permits are in full force and
effect, and no proceedings for the suspension or cancellation of any thereof
is pending or threatened.
4.17 Employee Agreements. (a) For purposes of this Agreement, the
following definitions apply:
(1) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any regulations promulgated thereunder or similar laws,
rules and regulations in Canada.
(2) "Multi-employer Plan" means a plan, as defined in ERISA Section
3(37) or similar laws, rules and regulations in Canada, to which Seller
contributes or is required to contribute.
(3) "Employee Plan" means any pension, retirement, profit sharing,
deferred compensation, vacation, bonus, incentive, medical, vision, dental,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA other than a Multi-employer Plan or similar laws, rules
and regulations in Canada to which Seller contributes, sponsors, maintains or
otherwise is bound to with regard to any benefits on behalf of the employees
of Seller.
(4) "Employee Pension Plan" means any Employee Plan for the
provision of retirement income to employees or which results in the deferral
of income by employees extending to the termination of covered employment or
beyond as defined in Section 3(2) of ERISA or similar laws, rules and
regulations in Canada.
(5) "Employee Welfare Plan" means any Employee Plan other than an
Employee Pension Plan.
(6) "Compensation Arrangement" means any plan or compensation
arrangement other than an Employee Plan, whether written or unwritten, which
provides to employees of Seller, former employees, officers, directors or
shareholders of Seller any compensation or other benefits, whether deferred
or not, in excess of base salary or wages, including, but not limited to, any
bonus or incentive plan, stock rights plan, deferred compensation
arrangement, life insurance, stock purchase plan, severance pay plan and any
other employee fringe benefit plan.
(b) The information in Schedule 4.17 concerning Seller lists, all (1)
employment agreements and collective bargaining agreements to which Seller is
a party; (2) compensation arrangements of Seller with any officer, director
or employee; (3) Employee Welfare Plans; (4) Employee Pension Plans; and (5)
consulting agreements under which Seller has or may have any monetary
obligations to employees or consultants of Seller or their beneficiaries or
legal representatives or under which any such persons may have any rights.
Seller has previously made available to Buyer true and complete copies of all
of the foregoing employment contracts, collective bargaining agreements,
Employee Plans and Compensation Arrangements, including descriptions of any
unwritten contracts, agreements, Compensation Arrangements or Employee Plans,
as amended to date. In addition, with respect to any Employee Plan which
continues after the Closing Date, Seller has previously delivered or made
available to Buyer (1) any related trust agreements, master trust agreements,
annuity contracts or insurance contracts; (2) certified copies of all Board
of Directors' resolutions adopting such plans and trust documents and
amendments thereto; (3) current investment management agreements; (4)
custodial agreements; (5) fiduciary liability insurance policies; (6)
indemnification agreements; (7) the most recent determination letter (and
underlying application thereof and correspondence and supplemental material
related thereto) issued by the Internal Revenue Service with respect to the
qualification of each Employee Plan under the provisions of Section 401(a) of
the Code; (8) copies of all "advisory opinion letters," "private letter
rulings," "no action letters," and any similar correspondence (and the
underlying applications therefor and correspondence and supplemental material
related thereto) that was issued by any governmental or quasigovernmental
agency with respect to the last plan year; (9) Annual Reports (Form 5500
Series) and Schedules A and B thereto for the last plan year; (10) all
actuarial reports prepared for the last plan year; (11) all certified
Financial Statements for the last plan year; and (12) all current Summary
Plan Descriptions, Summaries of Material Modifications and Summary Annual
Reports. All documents delivered by Seller to Buyer as photocopies faithfully
reproduce the originals thereof, such originals are authentic and were, to
the extent execution was required, duly executed.
(c) Except as otherwise disclosed in the information in Schedule 4.17
concerning Seller:
(1) It is not a party to and has, in effect or to become effective
after the date of this Agreement, any bonus, cash or deferred compensation,
severance, medical, health or hospitalization, pension, profit sharing or
thrift, retirement, stock option, employee stock ownership, life or group
insurance, death benefit, welfare, incentive, vacation, sick leave,
cafeteria, so-called "golden parachute" payment, disability or trust
agreement or arrangement.
4.18 Brokers. Seller has not made any agreement or taken any action
with any person or taken any action which would cause any person to be
entitled to any agent's, broker's or finder's fee or commission in connection
with the transactions contemplated by this Agreement.
4.19 Business Locations. Seller does not nor does it own or lease any
real or personal property in any location except as set forth on the
information in the Schedule 4.19 concerning Seller. Seller does not have a
place of business (including, without limitation, Seller's executive offices
or place where Seller's books and records are kept) except as otherwise set
forth on the information in Schedule 4.19 concerning Seller.
4.20 Intellectual Property. The information in Schedule 4.20 concerning
Seller lists all of the Intellectual Property (as hereinafter defined) used
by Seller which constitutes a material patent, trade name, trademark, service
xxxx or application for any of the foregoing. "Intellectual Property" means
all of Seller's right, title and interest in and to all patents, trade names,
assumed names, trademarks, service marks, and proprietary names, copyrights
(including any registration and pending applications for any such
registration for any of them), together with all the goodwill relating
thereto and all other intellectual property of Seller. Other than as
disclosed in the information in Schedule 4.20 concerning Seller, Seller does
not have any licenses granted by or to it or other agreements to which it is
a party, relating in whole or in part to any Intellectual Property, whether
owned by Seller or otherwise. All of the patents, trademark registrations and
copyrights listed in the information in Schedule 4.20 concerning Seller that
are owned by Seller are valid and in full force and effect. To the knowledge
of Seller, it is not infringing upon, or otherwise violating, the rights of
any third party with respect to any Intellectual Property. No proceedings
have been instituted against or claims received by Seller, nor to its
knowledge are any proceedings threatened alleging any such violation, nor
does Seller know of any valid basis for any such proceeding or claim. To the
knowledge of Seller, there is no infringement or other adverse claims against
any of the Intellectual Property owned or used by Seller. To the knowledge of
Seller, its use of software does not violate or otherwise infringe the rights
of any third party.
4.21 Warranties. The information in Schedule 4.21 concerning Seller sets
forth a true and complete list of the forms of all express warranties and
guaranties made by Seller to third parties with respect to any services
rendered by Seller.
4.22 Suppliers. Except as set forth in the information in Schedule 4.22
concerning Seller, Seller knows and has no reason to believe that, either as
a result of the transactions contemplated hereby or for any other reason
(exclusive of expiration of a contract upon the passage of time), any present
material supplier of Seller will not continue to conduct business with
Seller after the Closing Date in substantially the same manner as it has
conducted business prior thereto.
4.23 Accounts Receivable. The accounts receivable reflected on the
balance sheets included in the Financial Statements, or thereafter acquired
by Seller, consists, in the aggregate in all material respects, of items
which are collectible in the ordinary and usual course of business.
4.24 Governmental Approvals. To its knowledge, other than as set forth
herein, no authorization, license, permit, franchise, approval, order or
consent of, and no registration, declaration or filing by Seller with, any
governmental authority, federal, state or local, is required in connection
with Seller's execution, delivery and performance of this Agreement.
4.25 No Omissions or Untrue Statements. None of the information relating to
Seller supplied or to be supplied in writing by it specifically for inclusion
in SEC filings, at the respective times that the filings are made contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.26 Information concerning Seller Complete. Seller shall promptly
provide to Buyer notice concerning any of the information concerning Seller
furnished hereunder if events occur prior to the Closing Date that would have
been required to be disclosed had they existed at the time of executing this
Agreement. The information provided to Buyer concerning Seller, as
supplemented prior to the Closing Date, will contain a true, correct and
complete list and description of all items required to be set forth therein.
The information provided to Buyer concerning Seller, as supplemented prior to
the Closing Date, is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the information in
furnished by Seller following the date hereof shall not in any way affect
Buyer's right not to consummate the transactions contemplated hereby as set
forth herein.
V. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows, with the knowledge
and understanding that Seller is relying materially on such representations
and warranties:
5.1 Organization and Standing of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Nevada, and has the corporate power to carry on its business as now
conducted and to own its assets and it not required to qualify to transact
business as a foreign corporation in any state or other jurisdiction. The
copies of the Articles of Incorporation and Bylaws of Buyer, delivered to
Seller, are true and complete copies of those documents as now in effect.
Buyer does not own any capital stock in any other corporation, business trust
or similar entity, and is not engaged in a partnership, joint venture or
similar arrangement with any person or entity. The minute books of Buyer
contain accurate records of all meetings of its incorporator, shareholders
and Board of Directors since its date of incorporation.
5.2 Buyer's Authority. Buyer's Board of Directors has approved and
adopted this Agreement and the Exchange.
5.3 Due Execution. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by Buyer in
accordance herewith (and assuming due execution and delivery by the other
parties hereto), the valid and binding obligations of Buyer, enforceable in
accordance with their respective terms, subject to general principles of
equity and bankruptcy or other laws relating to or affecting the rights of
creditors generally.
5.4 No Breaches. To its knowledge, the making and performance of this
Agreement (including, without limitation, the issuance of the Buyer Shares
and Exchangeable Shares) by Buyer will not (i) conflict with the Articles of
Incorporation or the Bylaws of Buyer or Sub; (ii) violate any order, writ,
injunction, or decree applicable to Buyer of Sub; or (iii) result in any
breach or termination of, or constitute a default under, or constitute an
event which, with notice or lapse of time, or both, would become a default
under, or result in the creation of any encumbrance upon any asset of Buyer
under, or create any rights of termination, cancellation or acceleration in
any person under, any agreement, arrangement or commitment, or violate any
provisions of any laws, ordinances, rules or regulations or any order, writ,
injunction or decree to which Buyer or Sub is a party or by which Buyer or
Sub or any of its assets may be bound.
5.5 Capitalization. The authorized capital stock of Buyer is as set
forth in Schedule A and at the Closing Date shall be adjusted as set forth in
Schedule A. Except for the foregoing and for the shares to be issued under
the terms of this Agreement or otherwise referred to in this Agreement, there
are no agreements, commitments, obligations, options, warrants or similar
rights, oral or written, known to Buyer or its affiliates under which
additional shares of Buyer are required to be issued after the Closing. All
of the outstanding Buyer Common Stock is duly authorized, validly issued,
fully paid and nonassessable, and was not issued in violation of the
preemptive rights of any person. The Share Consideration to be issued upon
effectiveness of the Exchange, when issued in accordance with the terms of
this Agreement shall be duly authorized, validly issued, fully paid and non-
assessable.
5.6 Business. Buyer, since its formation, has engaged in no business
other than as set forth in Buyer's SEC filings.
5.7 Governmental Approval; Consents. To its knowledge, except for the
reports filed by Buyer, as a reporting company, under the Exchange Act, the
filing of Buyer's SEC filings under the Securities Act, no authorization,
license, permit, franchise, approval, order or consent of, and no
registration, declaration or filing by Buyer with, any governmental
authority, federal, state or local, is required in connection with Buyer's
execution, delivery and performance of this Agreement. No consents of any
other parties are required to be received by or on the part of Buyer to
enable Buyer to enter into and carry out this Agreement.
5.8 Financial Statements. To its knowledge, the financial statements of
Buyer as set forth in Buyer's SEC filings (the "Buyer Financial Statements")
present fairly, in all material respects, the financial position of Buyer as
of the respective dates and the results of its operations for the periods
covered in accordance with GAAP applicable to the United States. Without
limiting the generality of the foregoing, (i) except as set forth in Schedule
5.13 and as follows, there is no basis for any assertion against Buyer as of
the date of said balance sheets of any material debt, liability or obligation
of any nature not fully reflected or reserved against in such balance sheets
or in the notes thereto; and (ii) there are no assets of Buyer, the value of
which (in the reasonable judgment of Buyer) is materially overstated in said
balance sheets. Except as disclosed therein, Buyer has no known material
contingent liabilities (including liabilities for taxes), unusual forward or
long-term commitments or unrealized or anticipated losses from unfavorable
commitments. Buyer is not a party to any contract or agreement for the
forward purchase or sale of any foreign currency.
5.9 Adverse Developments. Except as expressly provided or set forth in,
or required by, this Agreement, or as set forth in the Buyer Financial
Statements, since the last date of its financial information in Buyer's SEC
filings, there have been no materially adverse changes in the assets,
liabilities, properties, operations or financial condition of Buyer, and no
event has occurred other than in the ordinary and usual course of business or
as set forth in Buyer's SEC filings or in the Buyer Financial Statements
which could be reasonably expected to have a materially adverse effect upon
Buyer, and Buyer does not know of any development or threatened development
of a nature that will, or which could be reasonably expected to, have a
materially adverse effect upon Buyer's operations or future prospects. The
parties recognize that Buyer is essentially dormant, conducts no operations
and has no significant assets.
5.10 Contracts Listed. All material contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral, connected with or relating in any respect to the present
operations of Buyer are, with the exception of this Agreement, described in
Buyer's SEC filings.
5.11; No Default. All of the contracts, agreements, leases, commitments
and understandings, written or oral, and any other contract, agreement,
lease, commitment or understanding, written or oral, binding upon Buyer
referred to in section 5.10 above, are listed in Buyer's SEC filings. To the
knowledge of Buyer, the Buyer Contracts are valid, binding and enforceable by
Buyer against the other parties thereto in accordance with their terms.
Neither Buyer nor, to the knowledge of Buyer, any of the other parties
thereto is in default or breach of any material provision of the Buyer
Contracts. Buyer has furnished Seller with a true and complete copy of each
Buyer Contract, as amended.
5.12 Taxes. Buyer has duly filed all Returns required by any law or
regulation to be filed by it except for extensions duly obtained. All such
Returns were, when filed, and to the best of Buyer's knowledge are, accurate
and complete in all material respects and were prepared in conformity with
applicable laws and regulations. Buyer has paid or will pay in full or has
adequately reserved against all Taxes otherwise assessed against it through
the Closing Date, and the assessment of any material amount of additional
Taxes in excess of those paid and reported is not reasonably expected.
Buyer is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against Buyer that has
not been paid. There are no Tax liens upon the assets of Buyer (other than
the lien of personal property taxes not yet due and payable). There is no
valid basis, to the best of Buyer's knowledge, except as set forth in the
Buyer Disclosure Schedule, for any assessment, deficiency, notice, 30-day
letter or similar intention to assess any Tax to be issued to Buyer by any
governmental authority.
5.13 Litigation. Except as disclosed in this Agreement, Buyer's SEC
filings or Schedule 5.13, there is no claim, action, proceeding or
investigation pending or, to Buyer's knowledge, threatened against or
affecting Buyer before or by any court, arbitrator or governmental agency or
authority which, in the reasonable judgment of Buyer, could have a materially
adverse effect on Buyer. There are no decrees, injunctions or orders of any
court, governmental department, agency or arbitration outstanding against
Buyer.
5.14 Compliance with Laws and Regulations. To its knowledge, Buyer is
in compliance, in all material respects, with all laws, rules, regulations,
orders and requirements (federal, state and local) applicable to it in all
jurisdictions in which the business of Buyer is currently conducted or to
which Buyer is currently subject, which may have a material impact on Buyer,
including, without limitation, all applicable civil rights and equal
opportunity employment laws and regulations, all state and federal antitrust
and fair trade practice laws and the Federal Occupational Health and Safety
Act. Buyer does not know of any assertion by any party that Buyer is in
violation of any such laws, rules, regulations, orders, restrictions or
requirements with respect to its current operations, and no notice in that
regard has been received by Buyer. To Buyer's knowledge, there is not
presently pending any proceeding, hearing or investigation with respect to
the adoption of amendments or modifications of existing laws, rules,
regulations, orders, restrictions or requirements which, if adopted, would
materially adversely affect the current operations of Buyer.
5.15 Compliance with Laws. (a) To its knowledge, the business
operations, property and assets of Buyer (and to the knowledge of Buyer, the
business of any sub-tenant or license which is occupying or has occupied any
space on any premises of Buyer and the activities of which could result in
any material adverse liability to Buyer) (i) conform with and are in
compliance in all material respects with all, and are not in material
violation of any applicable federal, state and local laws, rules and
regulations, including, but not limited to, CERCLA and RCRA, as well as any
other laws, rules or regulations relating to tax, product liability,
controlled substances, product registration, environmental protection,
hazardous or toxic waste, employment, or occupational safety matters; and
(ii) have been conducted and operated in a manner such that, to Buyer's
knowledge, Buyer has no foreseeable potential liabilities for environmental
clean-up under CERCLA, RCRA or under any law, rule, regulation or common or
civil law doctrine.
(b) To its knowledge, no predecessor-in-title to any real property now
or previously owned or operated by Buyer, nor any predecessor operator
thereof conducted its business or operated such property in violation of
CERCLA and RCRA or any other applicable, federal, state and local laws, rules
and regulations relating to environmental protection or hazardous or toxic
waste matters.
(c) Except as disclosed Buyer's SEC filings, no suit, action, claim,
proceeding nor investigation review or inquiry by any Government Entity (as
defined in Section 4.9) concerning any such possible violations by Buyer is
pending or, to Buyer's knowledge, threatened, including, but not limited to,
matters relating to diagnostic tests and products and product liability,
environmental protection, hazardous or toxic waste, controlled substances,
employment, occupational safety or tax matters. Buyer does not know of any
reasonable basis or ground for any such suit, claim, investigation, inquiry
or proceeding.
5.16 Governmental Licenses, Permits, Etc. To its knowledge, Buyer has
all governmental licenses, permits, authorizations and approvals necessary
for the conduct of its business as currently conducted. All such licenses,
permits, authorizations and approvals are in full force and effect, and no
proceedings for the suspension or cancellation of any thereof is pending or
threatened.
5.17 Brokers. Buyer has not made any agreement or taken any action with any
person or taken any action which would cause any person to be entitled to any
agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
5.18 Employee Plans. Except as listed in Buyer's SEC filings, Buyer has
no employees, consultants or agents, and Buyer has no Employee Plans or
Compensation Arrangements.
5.19 SEC Filings. The Buyer has filed all forms, reports and
documents that are required to be filed by the Buyer with the SEC since May
13, 2002, except as otherwise disclosed herein. All such required forms,
reports and documents (including such forms, reports and documents that the
Buyer may file subsequent to the date hereof) are referred to herein as the
"SEC Reports." As of their respective dates, to the Buyer's knowledge the
SEC Reports (i) complied as to form in all material respects with the
requirements of the Securities Act or the Securities Exchange Act of 1934, as
applicable, and the rules and regulations of the SEC thereunder applicable to
such SEC Reports, and (ii) did not at the time they were filed (or if amended
or superseded by a filing, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except to the extent corrected by a subsequently filed the SEC Report that
was filed before the date of this Agreement.
VI. STOCKHOLDER APPROVAL; CLOSING DELIVERIES
6.1 Stockholder Approval. Seller shall submit the Exchange and this
Agreement to its shareholders for approval and adoption at the Meeting or by
written consent as soon as practicable. Subject to the Exchange and this
Agreement receiving all approvals of Seller and Seller shareholders and
regulatory approvals and the absence of 10% or more of the non-affiliated
shareholders of Seller (i) voting against the Exchange; and (ii) requesting
redemption of their shares of Seller's Shares in the manner provided under
Nevada law.
6.2 Closing Deliveries of Seller. At the Closing, Seller shall deliver, or
cause to be delivered, to Buyer:
(a) A certificate dated as of the Closing Date, to the effect that the
representations and warranties of Seller contained in this
Agreement (and the Schedules to be provided for Closing) are true
and correct in all material respects at and as of the Closing Date
and that Seller has complied with or performed in all material
respects all terms, covenants and conditions to be complied with or
performed by Seller on or prior to the Closing Date;
(b) A certificate, dated as of the Closing Date, certifying as to the
Articles of Incorporation and Bylaws of Seller, the incumbency and
signatures of the officers of each of Seller and copies of the
directors' and shareholders' resolutions of Seller approving and
authorizing the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby;
(c) Stock certificates representing all of Seller's Shares, duly
endorsed for transfer to the Buyer or as the Buyer may otherwise
direct.
(d) Such other documents, at the Closing or subsequently, as may be
reasonably requested by Buyer as necessary for the implementation
and consummation of this Agreement and the transactions
contemplated hereby.
6.3 Closing Deliveries of Buyer. At the Closing, Buyer shall deliver to
Seller:
(a) A certificate of Buyer, dated as of the Closing Date, to the effect
that the representations and warranties of Buyer contained in this
Agreement (and the Schedules to be provided for Closing) are true
and correct in all material respects and that Buyer has complied
with or performed in all material respects all terms, covenants and
conditions to be complied with or performed by Buyer on or prior to
the Closing Date;
(b) A certificate, dated as of the Closing Date, executed by the
Secretary of Buyer, certifying the Articles of Incorporation,
Bylaws, incumbency and signatures of officers of Buyer and copies
of Buyer's directors' and shareholders' resolutions approving and
authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(c) Books and records of Buyer;
(e) Documentation satisfactory to Seller evidencing the fact that the
signatories on all relevant bank accounts of Buyer have been
changed to signatories designated by Seller.
(f) A corporate resolution that will irrevocably instruct Pacific
Stock Transfer about the exchange ratio representing the Buyer
Shares issued as partial consideration hereunder and instructions
to issue share certificates to the Shareholders in the appropriate
amounts, including evidence of any share conditions attributable to
the Buyer Shares. No Buyer Shares shall be issued until the Buyer
shall have received a certificate for required number of Seller's
Shares.
(g) Share certificates in the appropriate amount of Buyers Shares
issued to the Shareholders. No Buyers Shares shall be issued until
the Buyer shall have received a certificate for required number of
Seller's Shares.
(h) Such other documents, at the Closing or subsequently, as may be
reasonably requested by Seller as necessary for the implementation
and consummation of this Agreement and the transactions
contemplated hereby.
VII. CONDITIONS TO OBLIGATIONS OF SELLER
The obligation of Seller to consummate the Closing is subject to the
following conditions, any of which may be waived by Seller in its sole
discretion:
7.1 Compliance by Buyer. Buyer shall have performed and complied in all
material respects with all agreements and conditions required by this
Agreement to be performed or complied with by Buyer prior to or on the
Closing Date.
7.2 Accuracy of Buyer's Representations. Buyer's representations and
warranties contained in this Agreement (including all Schedules) or any
schedule, certificate or other instrument delivered pursuant to the
provisions hereof or in connection with the transactions contemplated hereby
shall be true and correct in all material respects at and as of the Closing
Date (except for such changes permitted by this Agreement) and shall be
deemed to be made again as of the Closing Date.
7.3 Documents. All documents and instruments delivered by Buyer to
Seller at the Closing shall be in form and substance reasonably satisfactory
to Seller and its counsel.
7.4 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall
be pending or, to Seller's knowledge, be threatened.
VIII. CONDITIONS TO BUYER'S OBLIGATIONS
Buyer's obligation to consummate the closing is subject to the following
conditions, any of which may be waived by Buyer in its sole discretion:
8.1 Compliance by Seller. Seller shall have performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with prior to or on the Closing Date.
8.2 Accuracy of Seller's Representations. Seller's representations and
warranties contained in this Agreement (including the Schedules hereto) or
any schedule, certificate or other instrument delivered pursuant to the
provisions hereof or in connection with the transactions contemplated hereby
shall be true and correct in all material respects at and as of the Closing
Date (except for such changes permitted by this Agreement) and shall be
deemed to be made again as of the Closing Date.
8.3 Material Adverse Change. No material adverse change shall have
occurred subsequent to the last date of the financial statements of Seller
furnished Buyer under this Agreement in the financial position, results of
operations, assets, liabilities or prospects of Seller taken as a whole, nor
shall any event or circumstance have occurred which would result in a
material adverse change in the business, assets or condition, financial or
otherwise, of Seller taken as a whole, within reasonable discretion of Buyer.
8.4 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall
be pending or, to Seller's knowledge, be threatened.
IX. INDEMNIFICATION
9.1 By Seller. Subject to Section 9.4, Seller shall indemnify, defend
and hold Buyer, its directors, officers, shareholders, attorneys, agents and
affiliates, harmless from and against any and all losses, costs, liabilities,
damages, and expenses (including legal and other expenses incident thereto)
of every kind, nature and description, including any undisclosed liabilities
(collectively, "Losses") that result from or arise out of (i) the breach of
any representation or warranty of Seller set forth in this Agreement or in
any certificate delivered to Buyer pursuant hereto; or (ii) the breach of any
of the covenants of Seller contained in or arising out of this Agreement or
the transactions contemplated hereby.
9.2 By Buyer. Subject to Section 9.4, Buyer and the Buyer pre-exchange
board of directors as of the date of signing of this agreement shall
indemnify, defend, and hold Seller its directors, officers, shareholders,
attorneys, agents and affiliates harmless from and against any and all Losses
that arise out of (i) the breach of any representation or warranty of Buyer
set forth in this Agreement or in any certificate delivered to Seller
pursuant hereto; (ii) the breach of any of the covenants of Buyer contained
in or arising out of this Agreement or the transactions contemplated hereby,
(iii) any liabilities of Buyer not disclosed herein or in its SEC filings
which arise from any facts or circumstances prior to the date of the closing
of the exchange and which occurred through no fault of Seller or its
Affiliates; or (iv) any liabilities of the Buyer resulting from the
litigation matters disclosed in Schedule 5.13.
9.3 Claims Procedure. Should any claim covered by Sections 9.1 or 9.2
be asserted against a party entitled to indemnification under this Article
(the "Indemnitee"), the Indemnitee shall promptly notify the party obligated
to make indemnification (the "Indemnitor"); provided, however, that any delay
or failure in notifying the Indemnitor shall not affect the Indemnitor's
liability under this Article if such delay or failure was not prejudicial to
the Indemnitor. The Indemnitor upon receipt of such notice shall assume the
defense thereof with counsel reasonably satisfactory to the Indemnitee and
the Indemnitee shall extend reasonable cooperation to the Indemnitor in
connection with such defense. No settlement of any such claim shall be made
without the consent of the Indemnitor and Indemnitee, such consent not to be
unreasonably withheld or delayed, nor shall any such settlement be made by
the Indemnitor which does not provide for the absolute, complete and
unconditional release of the Indemnitee from such claim. In the event that
the Indemnitor shall fail, within a reasonable time, to defend a claim, the
Indemnitee shall have the right to assume the defense thereof without
prejudice to its rights to indemnification hereunder.
9.4 Limitations on Liability. Neither Seller nor Buyer shall be liable
hereunder as a result of any misrepresentation or breach of such party's
representations, warranties or covenants contained in this Agreement unless
and until the Losses incurred by each, as the case may be, as a result of
such misrepresentations or breaches under this Agreement shall exceed, in the
aggregate, US$20,000 (in which case the party liable therefor shall be liable
for the entire amount of such claims, including the first US$20,000), except
that Seller shall have the additional right to offset against the Notes any
amounts it pays or is subject to a valid, binding, enforceable obligation to
pay as a result of Buyer or its pre-exchange board member as set forth above
failure to furnish the indemnification required under this Article IX.
X. TERMINATION
10.1 Termination Prior to Closing. (a) If the Closing has not occurred
by 30 days after the execution of this Agreement or such other date as
mutually agreed upon by the parties (the "Termination Date"), any of the
parties hereto may terminate this Agreement at any time thereafter by giving
written notice of termination to the other parties; provided, however, that
no party may terminate this Agreement if such party has willfully or
materially breached any of the terms and conditions hereof. Prior to the
Termination Date, Seller may terminate this Agreement but shall receive NO
REFUND OF ANY CONSIDERATION PAID PRIOR TO SAID DATE. If the parties agree
to extend the Termination Date, ALL payments previously made shall be NON-
REFUNDABLE EVEN IF THE TRANSACTION DOES NOT ULTIMATELY CLOSE THEREAFTER.
(b) Prior to the Termination Date either party to this Agreement may
terminate this Agreement following the insolvency or bankruptcy of the other,
or if any one or more of the conditions to Closing set forth in Article VI,
Article VII or Article VIII shall become incapable of fulfillment and shall
not have been waived by the party for whose benefit the condition was
established, then
either party may terminate this Agreement.
10.2 Consequences of Termination. Upon termination of this Agreement
pursuant to this Article X or any other express right of termination provided
elsewhere in this Agreement, the parties shall be relieved of any further
obligation to the other. No termination of this Agreement, however, whether
pursuant to this Article X hereof or under any other express right of
termination provided elsewhere in this Agreement, shall operate to release
any party from any liability to any other party incurred before the date of
such termination or from any liability resulting from any willful
misrepresentation made in connection with this Agreement or willful breach
hereof.
XI. ADDITIONAL COVENANTS
11.1 Mutual Cooperation. The parties hereto will cooperate with each
other, and will use all reasonable efforts to cause the fulfillment of the
conditions to the parties' obligations hereunder and to obtain as promptly as
possible all consents, authorizations, orders or approvals from each and
every third party, whether private or governmental, required in connection
with the transactions contemplated by this Agreement.
11.2 Changes in Representations and Warranties of Seller. Between the
date of this Agreement and the Closing Date, Seller shall not, directly or
indirectly, enter into any transaction, take any action, or by inaction
permit an event to occur, which would result in any of the representations
and warranties of Seller herein contained not being true and correct at and
as of (a) the time immediately following the occurrence of such transaction
or event or (b) the Closing Date. Seller shall promptly give written notice
to Buyer upon becoming aware of (i) any fact which, if known on the date
hereof, would have been required to be set forth or disclosed pursuant to
this Agreement and (ii) any impending or threatened breach in any material
respect of any of the representations and warranties of Seller contained in
this Agreement and with respect to the latter shall use all reasonable
efforts to remedy same.
11.3 Changes in Representations and Warranties of Buyer. Between the
date of this Agreement and the Closing Date, Buyer shall not, directly or
indirectly, enter into any transaction, take any action, or by inaction
permit an event to occur, which would result in any of the representations
and warranties of Buyer herein contained not being true and correct at and as
of (a) the time immediately following the occurrence of such transaction or
event or (b) the Closing Date. Buyer shall promptly give written notice to
Seller upon becoming aware of (i) any fact which, if known on the date
hereof, would have been required to be set forth or disclosed pursuant to
this Agreement and (ii) any impending or threatened breach in any material
respect of any of the representations and warranties of Buyer contained in
this Agreement and with respect to the latter shall use all reasonable
efforts to remedy same.
XII. MISCELLANEOUS
12.1 Expenses. Buyer will pay for its counsel and accountants and all
their costs. Seller will pay for its accountants and attorneys and all their
costs.
12.2 Survival of Representations, Warranties and Covenants. All
statements contained in this Agreement or in any certificate delivered by or
on behalf of Seller or Buyer pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed representations, warranties
and covenants by Seller or Buyer, as the case may be, hereunder. All
representations, warranties and covenants made by Seller and by Buyer in this
Agreement, or pursuant hereto, shall survive through the Closing Date.
12.3 Nondisclosure. Buyer will not at any time after the date of this
Agreement, without Seller' consent, divulge, furnish to or make accessible to
anyone (other than to its representatives as part of its due diligence or
corporate investigation) any knowledge or information with respect to
confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable
or not, with respect to any confidential or secret aspects (including,
without limitation, customers or suppliers) ("Confidential Information") of
Seller.
Seller will not at any time after the date of this Agreement, without
Buyer's consent (except as may be required by law), use, divulge, furnish to
or make accessible to anyone any Confidential Information (other than to its
representatives as part of its due diligence or corporate investigation) with
respect to Buyer. The undertakings set forth in the preceding two
paragraphs of this Section 12.3 shall lapse if the Closing takes place as to
Buyer and Seller, but shall not lapse as to the officers and directors of
Buyer, individually.
Any information, which (i) at or prior to the time of disclosure by
either of Seller or Buyer was generally available to the public through no
breach of this covenant, (ii) was available to the public on a non-
confidential basis prior to its disclosure by either of Seller or Buyer or
(iii) was made available to the public from a third party, provided that such
third party did not obtain or disseminate such information in breach of any
legal obligation to Seller or Buyer, shall not be deemed Confidential
Information for purposes hereof, and the undertakings in this covenant with
respect to Confidential Information shall not apply thereto.
12.4 Succession and Assignments; Third Party Beneficiaries. This
Agreement may not be assigned (either voluntarily or involuntarily) by any
party hereto without the express written consent of the other party. Any
attempted assignment in violation of this Section shall be void and
ineffective for all purposes. In the event of an assignment permitted by this
Section, this Agreement shall be binding upon the heirs, successors and
assigns of the parties hereto. Except as expressly set forth in this Section,
there shall be no third party beneficiaries of this Agreement.
12.5 Notices. All notices, requests, demands or other communications
with respect to this Agreement shall be in writing and shall be (i) sent by
facsimile transmission, (ii) sent by the federal postal service, registered
or certified mail, return receipt requested, or (iii) personally delivered by
a nationally recognized express overnight courier service, charges prepaid,
to the
addresses specified in writing by each party.
Any such notice shall, when sent in accordance with the preceding
sentence, be deemed to have been given and received on the earliest of (i)
the day delivered to such address or sent by facsimile transmission, (ii) the
fifth (5th) business day following the date deposited with the United States
Postal Service, or (iii) twenty-four (24) hours after shipment by such
courier service.
12.6 Construction. This Agreement shall be construed and enforced in
accordance with the internal laws of Nevada without giving effect to the
principles of conflicts of law thereof.
12.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same Agreement.
12.8 No Implied Waiver; Remedies. No failure or delay on the part of
the parties hereto to exercise any right, power or privilege hereunder or
under any instrument executed pursuant hereto shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. All rights, powers and privileges granted herein
shall be in addition to other rights and remedies to which the parties may be
entitled at law or in equity.
12.9 Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto, sets forth the entire understandings of the
parties with respect to the subject matter hereof, and it incorporates and
merges any and all previous communications, understandings, oral or written,
as to the subject matter hereof, and cannot be amended or changed except in
writing, signed by the parties.
12.10 Headings. The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the
parties.
12.11 Severability. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom
and the remainder of such provision and of this Agreement shall be unaffected
and shall continue in full force and effect.
12.12 Public Disclosure. From and after the date hereof through the
Closing Date, Buyer shall not issue a press release or any other public
announcement with respect to the transactions contemplated hereby without the
prior consent of Seller, which consent shall not be unreasonably withheld or
delayed. It is understood by Seller that Buyer is required under the Exchange
Act to make prompt disclosure of any material transaction.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, HAVE HAD THE
OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE, AND
UNDERSTAND EACH OF THE PROVISIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
SUPERIORCLEAN, INC.
By: /s/ Xxxx Xxxxxxx
-----------------
Name: Xxxx Xxxxxxx
Title: President
MEGOLA, INC.
By: /s/ Xxxx Xxxxxxx
-------------------
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
Schedule "A"
Superior Shares as of April 30, 2003 Superior Shares at Closing
X. Xxxxxxx 2,500,000 X. Xxxxxxx 1,250,000
Nevada Fund 2,500,000 Nevada Fund 1,250,000
X. Xxxxxxx 500,000 X. Xxxxxxx 500,000
X. Xxxxx 500,000 X. Xxxxx 500,000
Xxxx Xxxxxxxx 250,000 Xxxx Xxxxxxxx 250,000
Xxxx Xxxxxxxxx 100,000 Xxxx Xxxxxxxxx 100,000
Xxxxxxx Xxxxxx 50,000 Xxxxxxx Xxxxxx 50,000
Others 3,189,000 Others 3,189,000
---------------- ----------------
Total Shares 9,589,000 Total Shares 7,089,000
---------------- ----------------
TOTAL SHARES POST MERGER 24,478,591
Ownership Percentage Post
Original California City Properties, Inc. Shareholders % 71.04%
Original Superior Shareholders % 28.96%
Schedule 2.9
ACTION DONE BY PAID BY*
----------------------------------------- --------- ---------
Execute LOI Both
Prepare and file 8-K Pubco Private
Prepare definitive share exchange Pubco
agreement
Prepare schedules to definitive share Both
exchange agreement
Board approval of definitive share Both
exchange agreement
Execute definitive share exchange Both
agreement
Prepare and file 8-K Pubco Private
Shareholder notice, consent and Private Private
dissenter rights
Prepare and file Schedule 14F for change Pubco Private
in majority of board - must file 10 days
before closing
When 10 days is up, notify transfer Pubco Private
agent to mail 14F
If share exchange agreement calls for Pubco Private
any action requiring shareholder vote of
Pubco, i.e. - name change, change in
capital structure, etc. - must file 20
days before closing
Close share exchange Both
Officers and directors of Pubco resign Both
and new directors and officers installed
Execute any other agreements required Pubco Private
under share exchange, i.e. MCS contract,
Investor Relations, promissory notes,
etc.;
Also related SEC filings, such as S-8
Prepare and file 8-K Pubco Private
Notice to transfer agent to issue stock Pubco Private
- Note: all stock issued in share
exchange is restricted under 144;
holding period starts day of closing
POST CLOSING
Private assumes all debts and Pubco Private
obligations of Pubco
File 8-K with audit of private and pro Pubco Private
forma financials as required by the SEC
no more than 75 days after closing
File 13G's for more than 5% beneficial Pubco Private
owners
File Form 3's for all officers, Pubco Private
directors and 5% stockholders
Continue filing periodic and annual Pubco Private
reports with SEC
BBX listing application Pubco Private
Secure outside director Pubco Private
Establish audit committee and audit Pubco Private
committee charter and procedures
Pubco = SuperiorClean
Private = Megola, Inc.
Schedule "C"
Franchise Assets
-- See Attached --
Schedule "D"
Megola, Inc. Financial Statements
-- See Attached --
Schedule "E"
Shareholder Agreements of Megola, Inc.
-- See Attached --
