ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION,
(hereinafter the "Agreement") is made and entered into
this 9th day of May, 1996 by and between Rako
Corporation, an Idaho corporation (hereinafter "Rako"),
Xxxxxxx Entertainment, Inc., a Nevada corporation
(hereinafter "Xxxxxxx"), and the shareholders of Xxxxxxx
(hereinafter "Shareholders").
RECITALS
WHEREAS, Rako desires to acquire all of the issued and
outstanding shares of Xxxxxxx common stock in exchange
for 6,300,000 shares of authorized but previously
unissued Rako common stock, par value $.001 per share
(post-split and adjusted as per Section 1.4 below), and
pursuant to the terms, conditions and other
consideration set forth herein;
WHEREAS, the Shareholders of Xxxxxxx desire to
exchange their shares of Xxxxxxx common stock for shares
of Rako common stock in the respective amounts set forth
herein; and
WHEREAS, the parties hereto desire to reorganize the
management and operations of Rako, to change its
corporate name, and to change its principal place of
business.
NOW, THEREFORE, in consideration of the premises and
mutual representations, warranties and covenants herein
contained, the parties hereby agree as follows:
ARTICLE I
ACQUISITION AND EXCHANGE OF SHARES
SECTION 1.1 Acquisition and Plan of Reorganization.
Rako and Xxxxxxx have executed a certain Letter of
Intent dated April 4, 1996 concerning the transactions
contemplated by this Agreement. The parties hereto
agree that this Agreement and the terms and conditions
contained herein shall supplant and take precedence over
said Letter of Intent. The parties hereby agree that
Rako shall acquire 100% of the issued and outstanding
shares of Xxxxxxx common stock, without regard to
outstanding stock options, in exchange for six million,
three hundred thousand (6,300,000) shares of authorized
but previously unissued Rako common stock, par value
$.001 per share, post-split and adjusted as per the
terms of Section 1.4 below. It is also agreed to by the
parties hereto that by acquiring the shares of Xxxxxxx
common stock, Rako will acquire all rights, title and
interest to certain identified assets and property
presently owned by Xxxxxxx and its subsidiaries and
specifically described and set forth in Exhibit 1.1,
annexed hereto and by this reference made a part hereof,
by virtue of such shareholdings. Said assets and
property may be subject to certain interests, liens
and/or encumbrances which are further described in
Exhibit 1.1. The parties hereto hereby further agree
that (i) at the Closing, as hereinafter defined, Xxxxxxx
shall be a wholly-owned subsidiary of Rako subject to
the conditions and provisions of Section 1.5 hereof;
(ii) as promptly as practicable after the effectiveness
of the Closing, Rako's corporate name shall be changed
to Xxxxxxx Entertainment, Inc.; (iii) as promptly as
practicable after the Closing, the necessary steps shall
be taken in order to reflect the relocation of Rako's
principal place of business to Beverly Hills,
California; and (iv) following the Closing the combined
entity shall become engaged in the current business of
Xxxxxxx.
SECTION 1.2 Issuance of Shares.
(a) Upon the Closing of this Agreement, Rako shall
cause to be issued and delivered to the
Shareholders of Xxxxxxx, as set forth in Exhibit
1.2 annexed hereto and by this reference made a
part hereof, or their designees, stock certificates
representing an aggregate of 6,300,000 shares (the
"Rako Shares") of Rako common stock in exchange for
all the Shareholders' shares of Xxxxxxx common stock.
(b) The Rako Shares to be issued hereunder shall
be authorized but previously unissued shares of
Rako common stock, and shall be issued to those
persons and in the respective amounts set forth in
Exhibit 1.2.
(c) All Rako Shares to be issued hereunder are
deemed "restricted securities" as defined by Rule
144 of the Securities Act of 1933, as amended (the
"1933 Act"), and the recipients shall represent
that they are acquiring the Rako Shares for
investment purposes only and without the intent to
make a further distribution of the Rako Shares.
All Rako Shares to be issued under the terms of
this Agreement shall be issued pursuant to an
exemption from the registration requirements of the
1933 Act, under Section 4(2) of the 1933 Act and
the rules and regulations promulgated thereunder.
Certificates representing the Rako Shares to be
issued hereunder shall bear the following legend:
The shares represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, and may not be
offered for sale, sold or otherwise
transferred except in compliance with the
registration provisions of such Act or
pursuant to an exemption from such
registration provisions, the availability of
which is to be established to the satisfaction
of the Company.
SECTION 1.3 Closing. The closing of this Agreement and
the transactions contemplated hereby (the "Closing")
shall take place on the 9th day of May 1996 (the
"Closing Date"), at a time and place to be mutually
agreed upon by the parties hereto, and shall be subject
to the provisions of Article X of this Agreement. At
the Closing:
(a) Xxxxxxx and Shareholders shall deliver to Rako
stock certificates representing 100% of the issued
and outstanding shares of Xxxxxxx common stock,
duly endorsed, so as to make Rako the sole holder
thereof, free and clear of all claims and
encumbrances;
(b) Rako shall deliver to those persons listed in
Exhibit 1.2 stock certificates representing an
aggregate of 6,300,000 shares of Rako common stock
and which certificates shall bear a standard
restrictive legend in the form customarily used
with restricted securities and as set forth in
Section 1.2(c) above;
(c) Rako shall deliver an Officer's Certificate as
described in Sections 9.1, 9.2 and 9.4 hereof,
dated the Closing Date, that all representations,
warranties, covenants and conditions set forth
herein by Rako are true and correct as of, or have
been fully performed and complied with by, the
Closing Date; and
(d) Xxxxxxx shall deliver an Officer's Certificate
as described in Sections 8.1, 8.2 and 8.4 hereof,
dated the Closing Date, that all representations,
warranties, covenants and conditions set forth
herein by Xxxxxxx and Shareholders are true and
correct as of, or have been fully performed and
complied with by, the Closing Date;
SECTION 1.4 Rako Special Meeting of Shareholders. In
anticipation of this Agreement and prior to the Closing
Date, Rako shall have taken all necessary and requisite
corporate action to call for a Special Meeting of
Shareholders to be held on May 9, 1996, or the earliest
practical date, in order to approve and transact the
following business:
(a) To ratify the proposal to amend the Articles
of Incorporation to change the authorized
capitalization of the Company to 50,000,000 shares
of non-assessable shares of common stock, par value
$.001 per share;
(b) To ratify the proposal to effect a one (1)
share for three (3) shares reverse stock split of
Rako's currently issued and outstanding shares of
common stock;
(c) To ratify this Agreement and all transactions
contemplated hereby;
(d) To elect a new Board of Directors to consist
of the following nominees: Xxxxxxx Xxx, Xxxxxxx X.
Xxxxxxxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxxx
Xxxxx;
(e) To amend the Articles of Incorporation to
change the corporate name to Xxxxxxx Entertainment,
Inc., or any other name deemed suitable by the
shareholders;
(f) To ratify the proposal to amend the Articles
of Incorporation to change the stated corporate
purpose to a general purpose; and
(g) The proposal to amend the Articles of
Incorporation to deny pre-emptive rights to the
shareholders and to extinguish any preemptive
rights that may presently exist.
SECTION 1.5 Consummation of Transaction. If at the
Closing, no condition exists which would permit any of
the parties to terminate this Agreement, or a condition
then exists and the party entitled to terminate because
of that condition elects not to do so, then the
transactions herein contemplated shall be consummated
upon such date, and then and thereupon, Rako shall file
any additional necessary documents that may be required
by the State of Idaho, the State of California, or any
other governmental authority or agency required in order
to effectuate the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF XXXX
Xxxx hereby represents, warrants and agrees that:
SECTION 2.1 Organization of Rako. Rako is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Idaho, is duly
qualified and in good standing as a foreign corporation
in every jurisdiction in which such qualification is
necessary, and has the corporate power and authority to
own its properties and assets and to transact the
business in which it is engaged. There are no
corporations or other entities with respect to which (i)
Rako owns any of the outstanding stock or other
interest, or (ii) Rako may be deemed to be in control
because of factors or relationships other that the
quantity of stock or other interest owned. Rako has all
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is the
legal, valid and binding obligation of Rako, enforceable
against Rako in accordance with its respective terms
except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.
SECTION 2.2 Capitalization of Rako. The authorized
capital stock of Rako consists of 100,000,000 shares of
common stock, par value $.005 per share, of which
1,537,564 shares are presently issued and outstanding.
Following the one share for three shares reverse stock
split to be effected in connection with the transactions
contemplated hereby, there will be approximately 512,522
shares issued and outstanding, without taking into
consideration the rounding up of fractional shares. All
shares of Rako common stock currently issued and
outstanding have been duly authorized and validly
issued, are fully paid and non-assessable, and have been
issued in compliance with applicable federal and state
laws or pursuant to appropriate exemptions therefrom.
There are no options, warrants, rights, calls,
commitments or agreements of any character obligating
Rako to issue any shares of its capital stock or any
security representing the right to purchase or otherwise
receive any such stock. Shares of Rako common stock to
be issued pursuant to this Agreement, when so issued,
will be duly authorized, validly issued, fully paid and
non-assessable.
SECTION 2.3 Charter Documents. Complete and correct
copies of the Articles of Incorporation and By-Laws of
Rako and all amendments thereto, have been or will be
delivered to Xxxxxxx xxxxx to the Closing.
SECTION 2.4 Corporate Documents. The Rako
shareholders' list and corporate minute books are
complete and accurate as of the date hereof and the
corporate minute books contain the recorded minutes of
all corporate meetings of shareholders and directors.
SECTION 2.5 Financial Statements. Rako's financial
statements for the fiscal years ended December 31, 1995
and 1994, a copy of which is annexed hereto as Exhibit
2.5 and by this reference made a part hereof, are true
and complete in all material respects, having been
prepared in accordance with generally accepted
accounting principles applied on a consistent basis for
the periods covered by such statements, and fairly
present, in accordance with generally accepted
accounting principles, the financial condition of Rako,
and results of its operations for the periods covered
thereby. Except as otherwise disclosed to Xxxxxxx in
writing and as set forth herein, there has been no
material adverse change in the business operations,
assets, properties, prospects or condition (financial or
otherwise) of Rako taken as a whole from that reflected
in the financial statements referred to in this Section 2.5.
SECTION 2.6 Absence of Certain Changes or Events.
Since the date of the Rako financial report attached
hereto as Exhibit 2.5 and except as disclosed otherwise
herein, Rako has not (i) issued or sold any promissory
note, stock, bond, option or other corporate security of
which it was an issuer or other obligor, (ii) discharged
or satisfied any lien or encumbrance or paid any
obligation or liability, absolute or contingent, direct
of indirect, (iii) incurred or suffered to be incurred
any liability or obligation whatsoever, (iv) caused or
permitted any lien, encumbrance or security interest to
be created or arise on or in any of its properties or
assets, (v) declared or made any dividend, payment or
distribution to stock holders or purchased or redeemed
or agreed to purchase or redeem any shares of its
capital stock, (vi) reclassified its shares of capital
stock, or (vii) entered into any agreement or
transaction except in connection with the execution and
performance of this Agreement.
SECTION 2.7 Assets and Liabilities. Rako does not have
any material assets and, as of the date hereof, Rako
does not have any material debts, liabilities or
obligations of any nature, whether accrued, absolute,
contingent, or otherwise, whether due or to become due,
that are not fully reflected in the Rako financial
statements or otherwise disclosed.
SECTION 2.8 Tax Returns and Payments. Rako has filed
with the appropriate governmental authority tax returns,
whether based upon income, sales or franchise, as
required by law to be filed on or before the date of
this Agreement. Rako has paid all taxes to be due on
said returns, any assessments made against Rako and all
other taxes, fees and similar charges imposed on Rako by
any governmental authority. No tax liens have been
filed and no claims are being assessed and no returns
are under audit with respect to any such taxes, fees or
other similar charges.
SECTION 2.9 Contracts. Rako is not a party to or bound
by any contract or commitment, including guaranty
whether written or oral, except as otherwise disclosed
in Exhibit 2.9.
SECTION 2.10 Required Authorizations. There have been
or will be timely filed, given, obtained or taken, all
applications, notices, consents, approvals, orders,
registrations, qualifications waivers or other actions
of any kind required by virtue of execution and delivery
of this Agreement by Rako or the consummation by it of
the transactions contemplated hereby. The Rako Board of
Directors has approved this Agreement and prior to the
Closing, the shareholders of Rako shall have ratified
this Agreement and the transactions contemplated
hereunder. Immediately following the Closing, the
appropriate corporate filings shall be made with the
State of Idaho.
SECTION 2.11 Compliance with Law and Government
Regulations. Rako is in compliance with and is not in
violation of, applicable federal, state, local or
foreign statutes, laws and regulations (including
without limitation, any applicable building, zoning or
other law, ordinance or regulation) affecting its
properties or the operation of its business. Rako is
not subject to any order, decree, judgment or other
sanction of any court, administrative agency or other
tribunal.
SECTION 2.12 Litigation. There is no litigation,
arbitration, proceeding or investigation pending or
threatened to which Rako is a party or which may result
in any material change in the business or condition,
financial or otherwise, of Rako or in any of its
properties or assets, or which might result in any
liability on the part of Rako, or which questions the
validity of this Agreement or of any action taken or to
be taken pursuant to or in connection with the
provisions of this Agreement, and to the best knowledge
of Rako, there is no basis for any such litigation,
arbitration, proceeding or investigation.
SECTION 2.13 Trade Names and Rights. Rako does not use
any trade xxxx, service xxxx, trade name, or copyright
in its business, nor does it own any trade marks, trade
xxxx registrations or application, trade name, service
marks, copyrights, copyright registrations or
application. No person owns any trade xxxx, trade xxxx
registration or application, service xxxx, trade name,
copyright, or copyright registration or application, the
use of which is necessary or contemplated in connection
with the operation of Rako's business.
SECTION 2.14 Governmental Consent. No consent,
approval, authorization or order of, or registration,
qualification, designation, declaration or filing with,
any governmental authority on the part of Rako is
required in connection with the execution and delivery
of this Agreement or the carrying out of any
transactions contemplated hereby with the exception of
the necessary corporate filings with the State of Idaho
relating to the amendment of the Articles of
Incorporation and the proposed exchange of shares.
SECTION 2.15 Authority. Rako's Board of Directors has
approved execution of this Agreement and its
shareholders will, prior to the Closing, ratify this
Agreement and the transactions contemplated hereby and
will duly authorize the execution and delivery hereof.
Rako has full power, authority and legal right to enter
into this Agreement and to consummate the transactions
contemplated hereby, and all corporate action necessary
to authorize the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby has been duly and validly taken.
The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and
compliance by Rako with the provisions hereof will not
(a) conflict with or result in a breach of any
provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would
constitute a default) under, or result in the creation
of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Rako under, any
of the terms, conditions or provisions of the Articles
of Incorporation or By-Laws of Rako, or any note, bond,
mortgage, indenture, license, lease, agreement or any
instrument or obligation to which Rako is a party or by
which it is bound; or (b) violate any order, writ,
injunction, decree, statute, rule or regulation
applicable to Rako or any of its properties or assets.
SECTION 2.16 Full Disclosure. None of the
representations and warranties made by Rako herein, or
in any exhibit, certificate or memorandum furnished or
to be furnished by Rako, on its behalf pursuant hereto,
contains or will contain any untrue statement of
material fact, or omits any material fact, the omission
of which would be misleading.
ARTICLE III
COVENANTS OF RAKO
SECTION 3.1 Conduct Prior to the Closing. Between the
date hereof and the Closing:
(a) Rako will not enter into any material
agreement, contract or commitment, whether written
or oral, or engage in any transaction, without the
prior written consent of Xxxxxxx;
(b) Rako will not declare any dividends or
distributions with respect to its capital stock or
amend its Articles of Incorporation or By-Laws,
without the prior written consent of Xxxxxxx;
(c) Rako will not authorize, issue, sell, purchase
or redeem any shares of its capital stock or any
options or other rights to acquire its capital
stock, without the prior written consent of Xxxxxxx;
(d) Rako will comply with all requirements which
federal or state law may impose on it with respect
to this Agreement and the transactions contemplated
hereby, and will promptly cooperate with and
furnish written information to Xxxxxxx in
connection with any such requirements imposed upon
the parties hereto in connection therewith;
(e) Rako will not incur any indebtedness for money
borrowed, or issue or sell any debt securities,
incur or suffer to be incurred any liability or
obligation of any nature whatsoever, or cause or
permit any lien, encumbrance or security interest
to be created or arise on or in any of its
properties or assets, acquire or dispose of fixed
assets, change employment terms or hire any
additional employees, enter into any material or
long-term contract, guarantee obligations of any
third party, settle or discharge any balance sheet
receivable for less than its stated amount or enter
into any other transaction other than in the
regular course of business, except to comply with
the terms of this Agreement, without the prior
written consent of Xxxxxxx;
(f) Rako shall grant to Xxxxxxx and its counsel,
accountants and other representatives, full access
during normal business hours during the period
prior to the Closing to all its respective
properties, books, contracts, commitments and
records and, during such period, furnish promptly
to Xxxxxxx and such representatives all information
relating to Rako as Xxxxxxx may reasonably request,
and shall extend to Xxxxxxx the opportunity to meet
with Rako's accountants and attorneys to discuss
the financial condition of Rako; and
(g) Except for the transactions contemplated by
this Agreement, Rako will conduct its business in
the normal course, and shall not sell, pledge or
assign any of its assets without the prior written
consent of Xxxxxxx.
SECTION 3.2 Affirmative Covenants. Prior to Closing,
Rako will do the following:
(a) Use its best efforts to accomplish all
actions necessary to consummate this Agreement,
including satisfaction of all the conditions
contained in this Agreement;
(b) Promptly notify Xxxxxxx in writing of any
material adverse change in the financial condition,
business, operations or key personnel of Rako, any
threatened material litigation or investigation,
any breach of its representations or warranties
contained herein, and any material contract,
agreement, license or other agreement which, if in
effect on the date of this Agreement, should have
been included in this Agreement or in an exhibit
annexed hereto and made a part hereof;
(c) Obtain approval of this Agreement from its
shareholders;
(d) Accept the resignations of the current
directors of Rako and cause to be nominated
immediately a new Board of Directors consisting of
the following nominees: Xxxxxxx Xxx, Xxxxxxx X.
Xxxxxxxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxxx
Xxxxx;
(e) Reserve, and promptly after the Closing, issue
and deliver to Shareholders or their designees the
number of shares of Rako common stock required
hereunder;
(f) Take the necessary corporate action to amend
its Articles of Incorporation to change its name to
Xxxxxxx Entertainment, Inc. or any other name
deemed suitable and approved by the shareholders; and
(g) Take all other necessary corporate actions to
accomplish those items set forth in Section 1.4
hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXXXXX AND SHAREHOLDERS
Xxxxxxx and Shareholders hereby represent, warrant and
agree that:
SECTION 4.1 Organization of Xxxxxxx. Xxxxxxx is a
corporation duly organized, validly existing and in good
standing under the laws of Nevada and is duly qualified
and in good standing in every jurisdiction in which such
qualification is necessary. There are no corporations
or other entities with respect to which (i) Xxxxxxx
owns any of the outstanding stock or other interest, or
(ii) Xxxxxxx may be deemed to be in control because of
factors or relationships other than the percentage of
outstanding stock or other interest owned in such
entity, except as otherwise disclosed in Exhibit 4.1
annexed hereto and by this reference made a part hereof,
which Exhibit describes all of Xxxxxxx'x subsidiaries.
Xxxxxxx has all requisite corporate power and authority
to enter into this Agreement and to consummate the
transactions contemplated hereby.
SECTION 4.2 Charter Documents. Complete and correct
copies of the Articles of Incorporation and By-Laws of
Xxxxxxx and all amendments thereto, have been or will be
delivered to Rako prior to the Closing.
SECTION 4.3 Financial Statements / Assets and
Liabilities. Xxxxxxx'x financial statements for the
period ended August 30, 1995 and unaudited statements
for the six month period ended February 29, 1996, copies
of which are annexed hereto as Exhibit 4.3 and by this
reference made a part hereof, are true and complete in
all material respects, having been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis for the periods covered by
such statements, and fairly present the financial
condition of Xxxxxxx and results of its operations for
the periods covered thereby. Xxxxxxx has good and
marketable title to all of its assets and property to be
delivered to Rako hereunder (by way of Shareholders
tendering their outstanding shares of common stock to
Rako), free and clear of any and all liens, claims and
encumbrances, except as may be otherwise set forth
herein and in its financial statements or as otherwise
set forth in Exhibit 1.1.
SECTION 4.4 Tax Returns and Payments. All of Xxxxxxx'x
tax returns (federal, state, city, county or foreign)
which are required by law to be filed on or before the
date of this Agreement, have been duly filed or extended
with the appropriate governmental authority. Xxxxxxx
has paid or accrued all taxes to be due on said returns,
any assessments made against Xxxxxxx and all other
taxes, fees and similar charges imposed on Xxxxxxx by
any governmental authority (other than those, the amount
or validity of which is being contested in good faith by
appropriate proceedings). No tax liens have been filed
and no claims are being assessed with respect to any
such taxes, fees or other similar charges.
SECTION 4.5 Required Authorizations. There have been
or will be timely filed, given, obtained or taken, all
applications, notices, consents, approvals, orders,
registrations, qualifications waivers or other actions
of any kind required by virtue of execution and delivery
of this Agreement by Xxxxxxx or the consummation by it
of the transactions contemplated hereby.
SECTION 4.6 Compliance with Law and Government
Regulations. Xxxxxxx is in compliance with all
applicable statutes, regulations, decrees, orders,
restrictions, guidelines and standards affecting its
properties and operations, imposed by the State of
Nevada, the State of California, the United States of
America or any state to which Xxxxxxx is subject.
SECTION 4.7 Litigation. With the exception of any
disclosure set forth in an exhibit attached hereto,
there is no material litigation, arbitration, proceeding
or investigation pending or threatened to which Xxxxxxx
is a party or which may result in any material change in
the business or condition, financial or otherwise, of
Xxxxxxx or in any of its properties or assets, or which
if determined against Xxxxxxx would have a material
adverse effect against Xxxxxxx, or which might result in
any liability on the part of Xxxxxxx, or which questions
the validity of this Agreement or of any action taken or
to be taken pursuant to or in connection with the
provisions of this Agreement, and to the best knowledge
of Xxxxxxx, there is no basis for any such litigation,
arbitration, proceeding or investigation except as
otherwise set forth herein.
SECTION 4.8 Patents, Trademarks, Rights and Technology.
Exhibit 4.8 annexed hereto and by this reference made a
part hereof, contains a complete list of all patents,
trademarks, service marks, trademark and service xxxx
registrations, applications and licenses with respect to
the foregoing owned or held by Xxxxxxx. Xxxxxxx has no
knowledge of any facts and nothing has come to its
attention that would lead it to believe that it has
infringed or misappropriated or is infringing upon any
trademark, copyright, patent or other similar right of
any person. No claim relating thereto is pending or to
the knowledge of Xxxxxxx is threatened. Xxxxxxx further
represents and warrants that its present technology,
systems and products are commercially viable and fully
operational as previously represented and demonstrated
to Rako.
SECTION 4.9 Governmental Consent. No consent,
approval, authorization or order of, or registration,
qualification, designation, declaration or filing with,
any governmental authority on the part of Xxxxxxx is
required in connection with the execution and delivery
of this Agreement or the carrying out of any
transactions contemplated hereby.
SECTION 4.10 Authority. Xxxxxxx and its Shareholders
representing no less than one hundred percent (100%) of
the issued and outstanding shares of Xxxxxxx common
stock of record, have approved this Agreement and duly
authorized the execution and delivery hereof. Xxxxxxx
has full power, authority and legal right to enter into
this Agreement on behalf of Xxxxxxx and its Shareholders
and to consummate the transactions contemplated hereby,
and all corporate action necessary to authorize the
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has
been duly and validly taken. The execution and delivery
of this Agreement, the consummation of the transactions
contemplated hereby and compliance by Xxxxxxx with the
provisions hereof will not (a) conflict with or result
in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in
the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of
Xxxxxxx under, any of the terms, conditions or
provisions of the Articles of Incorporation or By-Laws
of Xxxxxxx, or any note, bond, mortgage, indenture,
license, agreement or any instrument or obligation to
which Xxxxxxx is party or by which it is bound; or (b)
violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Xxxxxxx or any of its
properties or assets. Execution of this Agreement
represents and acknowledges that the Xxxxxxx Board of
Directors and its Shareholders have ratified this
Agreement and agreed to proceeds as per the terms stated
herein.
SECTION 4.11 Ownership of Shares. Shareholders
representing 100% of the Xxxxxxx common stock currently
issued and outstanding and which stock is to be
transferred to Rako under this Agreement, have full
power and authority to transfer such shares of Xxxxxxx
common stock to Rako hereunder, and such shares are free
and clear of any liens, charges, mortgages, pledges or
encumbrances and such shares are not subject to any
valid claims as to the ownership thereof, or any rights,
powers or interest therein, by any third party.
SECTION 4.12 Investment Purpose . Xxxxxxx and
Shareholders represent that the recipients of the Rako
Shares hereunder are acquiring the shares for investment
purposes only and acknowledges that the Rako Shares
issued hereunder are "restricted securities" and may not
be sold, traded or otherwise transferred without
registration under the 1933 Act or exemption therefrom.
SECTION 4.13 Full Disclosure. None of the
representations and warranties made by Xxxxxxx and
Shareholders herein, or in any exhibit, certificate or
memorandum furnished or to be furnished by Rako, on its
behalf, contains or will contain any untrue statement of
material fact, or omit any material fact, the omission
of which would be misleading.
ARTICLE V
COVENANTS OF XXXXXXX
SECTION 5.1 Conduct Prior to the Closing. Between the
date hereof and the Closing:
(a) Except within the regular course of business,
Xxxxxxx and its subsidiaries will not enter into
any material agreement, contract or commitment,
whether written or oral, or engage in any
transaction outside the normal scope of its
business, without the prior written consent of Rako;
(b) Xxxxxxx and its subsidiaries will not declare
any dividends or distributions with respect to its
common stock or amend its Articles of Incorporation
or By-Laws, without the prior written consent of Rako;
(c) Except within the regular course of business
and for the unsecured note detailed in Exhibit 5.1,
attached hereto and by this reference made a part
hereof, Xxxxxxx and its subsidiaries will not incur
any indebtedness for money borrowed or issue any
debt securities, or incur or suffer to be incurred
any liability or obligation of any nature
whatsoever, or cause or permit any lien,
encumbrance or security interest to be created or
arise on or in any of its properties or assets,
without the prior written consent of Rako;
(d) Xxxxxxx will comply with all requirements
which federal or state law may impose on it with
respect to this Agreement and the transactions
contemplated hereby, and will promptly cooperate
with and furnish information to Rako in connection
with any such requirements imposed upon the parties
hereto in connection therewith; and
(e) Xxxxxxx shall grant to Rako and its counsel,
accountants and other representatives, full access
during normal business hours during the period
prior to the Closing to all its respective
properties, books, contracts, commitments and
records and, during such period, furnish promptly
to Rako and such representatives all information
relating to Xxxxxxx as Rako may reasonably request,
and shall extend to Rako the opportunity to meet
with Xxxxxxx'x accountants and attorneys to discuss
the financial condition of Xxxxxxx.
SECTION 5.2 Affirmative Covenants. Prior to Closing,
Xxxxxxx will do the following:
(a) Use its best efforts to accomplish all actions
necessary to consummate this Agreement, including
satisfaction of all the conditions contained in
this Agreement;
(b) Promptly notify Rako in writing of any
materially adverse change in the financial
condition, business, operations or key personnel of
Xxxxxxx, any breach of its representations or
warranties contained herein, and any material
contract, agreement, license or other agreement
which, if in effect on the date of this Agreement,
should have been included in this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Expenses. Whether or not the transactions
contemplated in this Agreement are consummated, all
costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense or as
otherwise agreed to herein. Certain expenses related to
this Agreement shall be paid as provided by Section 6.3
below.
SECTION 6.2 Brokers and Finders. Each of the parties
hereto represents, as to itself, that no agent, broker,
investment banker or other firm or person is or will be
entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement.
SECTION 6.3 Necessary Actions. Subject to the terms
and conditions herein provided, each of the parties
hereto agree to use all reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make
effective the transactions contemplated by this
Agreement. In the event at any time after the Closing,
any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers
and/or directors of Rako or Xxxxxxx, as the case may be,
shall take all such necessary action.
SECTION 6.4 Indemnification.
(a) Xxxxxxx and Shareholders agree to defend and
hold Rako harmless against and in respect of any
and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties, and
reasonable attorney fees, that Rako shall incur or
suffer, which arise out of, result from or relate
to any material breach of, or failure by Xxxxxxx
and/or Shareholders to perform any of its
representations, warranties, covenants and
agreements in this Agreement or in any exhibit or
other instrument furnished or to be furnished by
Xxxxxxx and Shareholders under this Agreement.
(b) Rako agrees to defend and hold Xxxxxxx and
Shareholders harmless against and in respect of any
and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties, and
reasonable attorney fees, that Xxxxxxx and/or
Shareholders shall incur or suffer, which arise out
of, result from or relate to any material breach
of, or failure by Rako to perform any of its
representations, warranties, covenants and
agreements in this Agreement or in any exhibit or
other instrument furnished or to be furnished by
Rako under this Agreement.
SECTION 6.5 Confidentiality. All parties hereto agree
to keep confidential this Agreement and all information
and documents relating to this Agreement until such time
as the Agreement and the transactions contemplated
hereunder are made public by means of an appropriate
press release or by any other means reasonably assured
to make such information publicly available. It is the
intent of the parties hereto that as soon as practical
following the execution of this Agreement, Rako and
Xxxxxxx shall cause to be prepared and distributed in
the appropriate manner a press release publicly
announcing the execution of the Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
All obligations of Rako under this Agreement are subject
to the fulfillment and satisfaction by Xxxxxxx and Shareholders
prior to or at the time of Closing, of each of the following
conditions:
SECTION 7.1 Legal Action. No preliminary or permanent
injunction or other order by any federal or state court
which prevents the consummation of this Agreement or any
of the transactions contemplated by this Agreement shall
have been issued and remain in effect.
SECTION 7.2 Absence of Termination. The obligations to
consummate the transactions contemplated hereby shall
not have been canceled pursuant to Article X hereof.
SECTION 7.3 Required Approvals. Rako and Xxxxxxx shall
have received all such approvals, consents,
authorizations or modifications as may be required to
permit the performance by Rako and Xxxxxxx of the
respective obligations under this Agreement, and the
consummation of the transactions herein contemplated,
whether from governmental authorities or other persons,
and Rako and Xxxxxxx shall each have received any and
all permits and approvals from any regulatory authority
having jurisdiction required for the lawful consummation
of this Agreement.
SECTION 7.4 Blue Sky Compliance. There shall have been
obtained any and all permits, approvals and consents of
the Securities or "Blue Sky" Commissions of any
jurisdictions, and of any other governmental body or
agency, which counsel for Rako may reasonably deem
necessary or appropriate so that consummation of the
transactions contemplated by this Agreement may be in
compliance with all applicable laws.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF RAKO
All obligations of Rako under this Agreement are
subject to the fulfillment and satisfaction by Xxxxxxx
and Shareholders prior to or at the time of the Closing,
of each of the following conditions, any one or more of
which may be waived by Rako.
SECTION 8.1 Representations and Warranties True at the
Closing. All representations and warranties of Xxxxxxx
and Shareholders contained in this Agreement will be
true and correct at and as of the time of the Closing,
and Xxxxxxx and Shareholders shall have delivered to
Rako certificates, dated the date of the Closing, to
such effect and in the form and substance satisfactory
to Rako, and signed, in the case of Xxxxxxx, by its
president and secretary.
SECTION 8.2 Performance. The obligations of Xxxxxxx
and Shareholders to be performed on or before the
Closing pursuant to the terms of this Agreement shall
have been duly performed at such time, and Xxxxxxx and
Shareholders shall have delivered to Rako a certificate,
dated the date of the Closing, to such effect and in
form and substance satisfactory to Rako.
SECTION 8.3 Authority. All action required to be taken
by, or on the part of Xxxxxxx and its Shareholders to
authorize the execution, delivery and performance of
this Agreement by Xxxxxxx and Shareholders and the
consummation of the transactions contemplated hereby,
shall have been duly and validly taken.
SECTION 8.4 Absence of Certain Changes or Events.
There shall not have occurred, since the date hereof,
any adverse change in the business, condition,
(financial or otherwise), assets or liabilities of
Xxxxxxx or any event or condition of any character
adversely affecting Xxxxxxx, and it shall have delivered
to Rako, certificates, dated the date of the Closing, to
such effect and in form and substance satisfactory to
Rako and signed, in the case of Xxxxxxx, by its
president and secretary.
SECTION 8.5 Acceptance by Xxxxxxx Shareholders. The
holders of record as of the Closing of an aggregate of
not less than one hundred percent (100%) of the issued
and outstanding shares of common stock of Xxxxxxx have
agreed to exchange their shares for the Rako Shares
specified herein.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXXXX
All obligations of Xxxxxxx and Shareholders under this
Agreement are subject to the fulfillment and
satisfaction by Rako, prior to or at the time of
Closing, of each of the following conditions, any one or
more of which may be waived by Xxxxxxx and Shareholders.
SECTION 9.1 Representations and Warranties True at the
Closing. All representations and warranties of Rako
contained in this Agreement will be true and correct at
and as of the time of the Closing, and Rako shall have
delivered to Xxxxxxx a certificate, dated the date of
the Closing, to such effect and in the form and
substance satisfactory to Xxxxxxx and Shareholders, and
signed, in the case of Rako, by its president and
secretary.
SECTION 9.2 Performance. Each of the obligations of
Rako to be performed on or before the Closing pursuant
to the terms of this Agreement shall have been duly
performed at the time of the Closing, and Rako shall
have delivered to Xxxxxxx a certificate, dated the date
of the Closing, to such effect and in form and substance
satisfactory to Xxxxxxx and Shareholders, and signed, in
the case of Rako, by its president and secretary.
SECTION 9.3 Authority. All action required to be taken
by, or on the part of Rako, to authorize the execution,
delivery and performance of this Agreement by Rako, and
the consummation of the transactions contemplated hereby
shall be duly and validly taken.
SECTION 9.4 Absence of Certain Changes or Events.
There shall not have occurred, since the date hereof,
any adverse change in the business, condition,
(financial or otherwise), assets or liabilities of Rako
or any event or condition of any character adversely
affecting Rako and it shall have delivered to Xxxxxxx,
certificates, dated the date of the Closing, to such
effect and in form and substance satisfactory to Xxxxxxx
and Shareholders and signed, in the case of Rako, by its
president and secretary.
SECTION 9.5 Action by Rako Shareholders. Prior to the
Closing of this Agreement, the shareholders of Rako
shall have ratified this Agreement and the transactions
contemplated hereunder, and shall have approved the
amendments to the Rako Articles of Incorporation and
elected new directors as set forth in Section 1.4 above.
The current directors and officers of Rako shall have
submitted their resignations as directors and officers
of Rako effective on the Closing of this Agreement or at
such other time as mutually agreed to by Rako and Xxxxxxx.
ARTICLE X
TERMINATION
SECTION 10.1 Termination. Notwithstanding anything
herein or elsewhere to the contrary, this Agreement may
be terminated:
(a) By mutual agreement of all the parties hereto
at any time;
(b) By the board of directors of Rako at any time
prior to the Closing if:
(i) a condition to performance by Rako under
this Agreement or a covenant of Xxxxxxx and/or
Shareholders contained herein shall not be
fulfilled on or before the time of the Closing
or at such other time and date specified for
the fulfillment for such covenant or
condition; or
(ii) a material default or breach of this
Agreement shall be made by Xxxxxxx,
Shareholders, or any individual Shareholder.
(c) By the board of directors of Xxxxxxx at any
time prior to the Closing if:
(i) a condition to Xxxxxxx'x and
Shareholders' performance under this Agreement
or a covenant of Rako contained in this
Agreement shall not be fulfilled on or before
the Closing or at such other time and date
specified for the fulfillment of such covenant
or conditions; or
(ii) a material default or breach of this
Agreement shall be made by Rako.
SECTION 10.2 Effect of Termination. If this Agreement
is terminated, this Agreement, except as to Section 11.1
and Section 11.2, shall no longer be of any force or
effect and there shall be no liability on the part of
any party or its respective directors, officers or
stockholders; provided however, that in the case of a
Termination without cause by a party or a termination
pursuant to Sections 10.1(b)(i) or 10.1(c)(i) hereof
because of a prior material default under or a material
breach of this Agreement by another party, the damages
which the aggrieved party or parties may recover from
the defaulting party or parties shall in no event exceed
the amount of out-of-pocket costs and expenses incurred
by such aggravated party or parties in connection with
this Agreement, and no party to this Agreement shall be
entitled to any injunctive relief.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Cost and Expenses. All costs and expenses
incurred in connection with this Agreement will be paid
by the party incurring such expenses unless otherwise
expressly provided for herein. In the event of any
termination of this Agreement pursuant to Section 10.1,
subject to the provisions of Section 10.2, Rako and
Xxxxxxx will each bear their own respective expenses.
SECTION 11.2 Extension of Time: Waivers. At any time
prior to the Closing date:
(a) Rako may (i) extend the time for the
performance of any of the obligations or other acts
of Xxxxxxx and/or Shareholders, (ii) waive any
inaccuracies in the representations and warranties
of Xxxxxxx and/or Shareholders contained herein or
in any document delivered pursuant hereto by
Xxxxxxx and Shareholders, and (iii) waive
compliance with any of the agreements or conditions
contained herein to be performed by Xxxxxxx and/or
Shareholders. Any agreement on the part of Rako to
any such extension or waiver shall be valid only if
set forth in an instrument, in writing, signed on
behalf of Rako;
(b) Xxxxxxx and Shareholders may (i) extend the
time for the performance of any of the obligations
or other acts of Rako, (ii) waive any inaccuracies
in the representations and warranties of Rako
contained herein or in any document delivered
pursuant hereto by Rako and (iii) waive compliance
with any of the agreements or conditions contained
herein to be performed by Rako. Any agreement on
the part of Xxxxxxx and Shareholders to any such
extension or waiver shall be valid only if set
forth in an instrument, in writing, signed on
behalf of Xxxxxxx and Shareholders.
SECTION 11.3 Notices. Any notice to any party hereto
pursuant to this Agreement shall be in writing and given
by Certified or Registered Mail or by facsimile,
addressed as follows:
Copy to:
Rako Corporation c/o Xxxxxxx X. Xxxxxxx
3256 Agate Court Attorney at Law
Xxxxx, Xxxxx 00000 1121 East 0000 Xxxxx, Xxxxx X-000
Xxxx Xxxx Xxxx, Xxxx 00000
Copy to:
Xxxxxxx Entertainment, Inc. --------------
0000 Xxxxxxxx Xxxx., Xxxxx 0000 --------------
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 ---------------
Additional notices are to be given as to each
party, at such other address as should be designated in
writing complying as to delivery with the terms of this
Section 11.3. All such notices shall be effective when
sent, addressed as aforesaid.
SECTION 11.4 Parties in Interest. This Agreement shall
inure to the benefit of and be binding upon the parties
hereto and the respective successors and assigns.
Nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any
rights or remedies under or by reason of this Agreement.
SECTION 11.5 Counterparts. This Agreement may be
executed in one or more counterparts, each of which
shall be deemed an original and together shall
constitute one document. The delivery by facsimile of
an executed counterpart of this Agreement shall be
deemed to be an original and shall have the full force
and effect of an original executed copy.
SECTION 11.6 Severability. The parties hereto agree
and affirm that none of the provisions herein is
dependent upon the validity of any other provision, and
if any part of this Agreement is deemed to be
unenforceable, the remainder of the Agreement shall
remain in full force and effect.
SECTION 11.7 Headings. The Article and Section
headings are provided herein for convenience of
reference only and do not constitute a part of this
Agreement.
SECTION 11.8 Governing Law. This Agreement shall be
governed by the laws of the State of Idaho. Any action
to enforce the provisions of this Agreement shall be
brought in a court of competent jurisdiction in the
State of Idaho and in on other place.
SECTION 11.9 Survival of Representations and
Warranties. All terms, conditions, representations and
warranties set forth in this Agreement or in any
instrument, certificate, opinion, or other writing
providing for in it, shall survive the Closing and the
delivery of the Rako Shares issued hereunder at the
Closing, for a period of one year from the Closing
regardless of any investigation made by or on behalf of
any of the parties hereto.
SECTION 11.10 Assignability. This Agreement shall not
be assignable by any of the parties hereto without the
prior written consent of the other parties.
SECTION 11.11 Amendment. This Agreement may be amended
with the approval of Shareholders and the boards of
directors of Rako and Xxxxxxx at any time before or
after approval thereof by stockholders of Rako, if
required, and Xxxxxxx; but after such approval by the
Rako shareholders, no amendment shall be made which
substantially and adversely changes the terms hereof.
This Agreement may not be amended except by an
instrument, in writing, signed on behalf of each of the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Agreement in a manner
legally binding upon them as of the date first above
written.
"Rako"
RAKO CORPORATION
Attest:
By: _______________________ ______________________
Its: President Secretary
"Xxxxxxx"
XXXXXXX ENTERTAINMENT, INC..
Attest:
By: _______________________ ______________________
Its: President Secretary
