Exhibit 2.3
Page 1of 18
REORGANIZATION AGREEMENT
This Reorganization Agreement ("Agreement") is made, entered into and
effective as of this 31st day of December 2003, between and among Tamboril Cigar
Company, a corporation organized under the laws of the State of Delaware (the
"Company"), Axion Power Corporation, a Canadian Federal Corporation, ("Axion")
and the persons identified in Schedules A-1 through A-4 (the "Axion
Securityholders").
WHEREAS, the Axion Securityholders identified in Exhibit "A" own common
stock and convertible notes of Axion (the "Axion Securities") that will, upon
full conversion of the notes, collectively represent 92.3% of the issued and
outstanding common stock of Axion; and
WHEREAS, the Axion Securityholders want to create an irrevocable trust
for the benefit of certain stockholders of Mega-C Power Corporation; and
WHEREAS, the purpose of the trust will be to protect certain legitimate
interests of the stockholders of Mega-C Power Corporation while insulating the
Axion Securityholders and the Company from certain potential litigation risks
associated with ongoing litigation and potential regulatory enforcement actions
arising from the prior activities of Mega-C Power Corporation and certain of its
directors, officers and stockholders; and
WHEREAS, the Company wishes to acquire the Axion Securities, solely in
exchange for certain common stock and warrants the (the "Company Securities")
that will be issued to the Axion Securityholders and placed in trust for the
benefit of the stockholders of Mega-C Power Corporation;
NOW, THEREFORE, in consideration of the mutual covenants, obligations and
benefits hereinafter set forth, the parties hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF AXION. Axion represents and warrants
to the Company:
a. Organization and Qualification; Subsidiaries. Axion is a Canadian
Federal Corporation duly organized, validly existing and in good standing, which
has all requisite corporate or other power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted; and is duly qualified and in good standing to do business in the
Province of Ontario and each other jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its properties makes
such qualification necessary. Axion has no directly or indirectly owned
subsidiaries.
b. Articles of Incorporation and By-Laws. Axion has heretofore furnished
to the Company complete and correct copies of all material corporate documents.
The documentation provided includes Axion's Articles of Incorporation and all
amendments thereto, Axion's By-laws and all amendments thereto, minutes of all
of the meetings of the incorporators, board of directors and shareholders and
copies of all material contracts, leases, licenses or other contracts to which
Axion is a party or in which Axion has an interest.
c. Capitalization. The authorized capital stock of Axion consists of an
unlimited number of shares of common stock without par value ("Axion Common").
As of the date hereof one (1) share of Axion Common is issued and outstanding
and 3,400,000 shares of common stock are issuable to the founders of Axion for
out-of-pocket costs incurred and substantial personal services actually rendered
in connection with the organization of Axion. All of the issued and outstanding
shares of Axion Common are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, Axion'
Articles of Incorporation or By-Laws or any other agreement to which Axion is a
party or bound. Axion has received the full consideration for the founders'
shares and the shares are presently issuable to the persons entitled thereto.
Schedule A-1 identifies the owner of the one issued and outstanding share of
Axion Common and the beneficial owners of the 3,060,000 founders' shares that
will be acquired by the Company pursuant to this Agreement.
Axion has previously sold $550,000 aggregate principal amount of
convertible seed financing notes, which are convertible into Axion Common at a
price of $.50 per share. Schedule A-2 identifies the holders of the $500,000
aggregate principal amount of Axion's convertible seed financing notes that will
be acquired by the Company pursuant to this Agreement.
Axion has previously sold $800,000 aggregate principal amount of
convertible first round private placement notes, which are convertible into
Axion units at a price of $.75 per unit. Each Axion unit will include one share
of Axion Common and one warrant that entitles the holder to purchase one
additional share of Axion Common for a period of one year upon payment of a
warrant exercise price $1.00 per share. If the warrants are not exercised within
six months from the issue date, the exercise price will increase to $1.50 per
share. Schedule A-3 identifies the holders of the $800,000 aggregate principal
amount of Axion's convertible first round private placement notes that will be
acquired by the Company pursuant to this Agreement.
Axion has previously sold $150,000 aggregate principal amount of
convertible second round private placement notes, which are convertible into
Axion units at a price of $1.00 per unit. Each Axion unit will include one share
of Axion Common and one warrant that entitles the holder to purchase one
additional share of Axion Common for a period of one year upon payment of a
warrant exercise price $1.50 per share. If the warrants are not exercised within
six months from the issue date, the exercise price will increase to $2.00 per
share. Schedule A-4 identifies the holders of the $150,000 aggregate principal
amount of Axion's convertible second round private placement notes that will be
acquired by the Company pursuant to this Agreement.
Except as set forth above, there are no bonds, debentures, notes or other
debt securities presently outstanding, or any agreements, understandings or
arrangements obligating Axion to issue, deliver or sell any debt securities in
the future.
Except as set forth above, there are no options, warrants, calls or other
rights, agreements, arrangements or commitments presently outstanding, or any
agreements, understandings or arrangements obligating Axion to issue, deliver,
sell or enter into any such option, warrant, call or other such right,
agreement, arrangement or commitment in the future.
All of the Axion securities specified above are duly authorized, validly
issued, fully paid and nonassessable and are owned by the persons specified in
Schedules A-1 through A-4, free and clear of any security interests, liens,
claims, pledges, agreements, limitations on voting rights, charges or other
encumbrances of any nature whatsoever ("Encumbrances").
d. Authority. Axion has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated herein. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action and no other corporate
proceeding on the part of Axion is necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Axion and, assuming the due authorization, execution
and delivery thereof by the Company, constitutes the legal, valid and binding
obligation of Axion enforceable in accordance with its terms.
e. No Conflict; Required Filings and Consent. The execution and delivery
of this Agreement by Axion does not, and the performance of this Agreement by
Axion will not (i) conflict with or violate the Articles of Incorporation or
By-Laws of Axion, (ii) conflict with or violate any shareholders agreement that
is binding on Axion, (iii) conflict with or violate any federal, state, or local
law, statute, ordinance, rule, regulation, order, judgment or decree
(collectively, "Laws") in effect as of the date of this Agreement and applicable
to Axion or by which its properties are bound or subject, or (iv) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of an Encumbrance on, any of the properties or
assets of Axion pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Axion is a party or by which Axion or its properties are bound or
subject except for breaches, defaults, events, rights of termination, amendment,
acceleration or cancellation, payment obligations or liens or Encumbrances that
would not have a material adverse effect on the business, properties, assets,
condition (financial or otherwise) operations or prospects of Axion, taken as a
whole ("Axion Material Adverse Effect").
The execution and delivery of this Agreement by Axion does not, and the
performance of this Agreement by Axion will not, require Axion to obtain any
consent, approval, authorization or permit of, or to make any filing with or
notification to, any governmental or regulatory authority ("Governmental
Entities") based on laws, rules, regulations and other requirements of
Governmental Entities in effect as of the date of this Agreement, except for
applicable requirements, if any, of (i) federal or state securities laws and the
filing and recordation of certain corporate documents as required by applicable
State law and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
either individually or in the aggregate, prevent Axion from performing its
obligations under this Agreement or have a Axion Material Adverse Effect.
f. Permits; Compliance. Axion is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted (collectively, the "Axion Permits"), and there is no action,
proceeding or investigation pending or, to the knowledge of Axion,
threatened, regarding suspension or cancellation of any of Axion Permits.
Axion is not in conflict with, or in default or violation of (a) any Law
applicable to Axion or by which any of its properties is bound or subject
or (b) any of the Axion Permits, except for any such conflicts, defaults
or violations which would not have a Axion Material Adverse Effect.
g. Financial Statements. Attached hereto as "Exhibit B" is a preliminary
unaudited balance sheet of Axion as of December 31, 2003. The preliminary
unaudited balance sheet has been prepared by Axion in accordance with
generally accepted accounting principles and fairly presents the
financial position of Axion as of the date thereof. Axion has not:
(1) issued any equity, debt or other securities that are not reflected in
the preliminary balance sheet;
(2) paid or declared any dividends or distributions of capital, surplus,
or profits with respect to any of its issued and outstanding securities;
(3) entered into any other transaction or agreement which would, or
might, materially impair its shareholders' equity as reflected in the
preliminary balance sheet.
h. No Undisclosed Liabilities. There are no liabilities of Axion of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation
or set of circumstances which could reasonably be expected to result in
such a liability, other than liabilities fully reflected or reserved
against on the Axion Financial Statements; and liabilities which,
individually or in the aggregate, would not have a Axion Material Adverse
Effect.
i. Absence of Litigation. There is no claim, action, suit, litigation,
proceeding, arbitration or investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or
threatened against Axion or any properties or rights of Axion and Axion
is not subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with, or continuing
investigation by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator,
including, without limitation, cease-and-desist or other orders.
j. Taxes. Axion has filed each federal, state and local tax return
required by law, or has filed proper extensions, and has paid all Taxes,
assessments and penalties due and payable. The provisions for Taxes, if
any, reflected in the most recent balance sheet included in the Axion
Financial Statements are adequate for any and all federal, state, county
and local taxes for the period ending on the date of that balance sheet
and for all prior periods, whether or not disputed. There are no present
disputes as to Taxes of any nature payable by Axion or any Subsidiary.
k. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated in this Agreement based upon arrangements made
by or on behalf of Axion.
l. Axion Corporate Action. The Board of Directors of Axion has (a)
determined that the transaction contemplated hereby is advisable and fair
and in the best interests of Axion and the Axion Securityholders, (b)
approved the transaction contemplated hereby in accordance with the
applicable laws of the Province of Ontario, Canada, (c) recommended the
approval of this Agreement by the Axion Securityholders and (d) obtained
the requisite approval of the transactions contemplated in this
Agreement.
m. Environmental Laws and Regulations. Axion is in material compliance
with all applicable federal, provincial and local laws and regulations
and common law relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata (collectively,
"Environmental Laws")), which compliance includes, but is not limited to,
the possession by Axion of all material permits and other governmental
authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof and compliance with
notification, reporting and registration provisions under applicable
Environmental Laws; Axion has not received notice of, or, to the
knowledge of Axion, is the subject of, any action, cause of action,
claim, investigation, demand or notice by any person or entity alleging
liability under or noncompliance with any Environmental Law
("Environmental Claim"); and to the knowledge of Axion, there are no
circumstances that are reasonably likely to prevent or interfere with
such material compliance in the future, or to require material
expenditures to maintain such material compliance in the future.
There are no Environmental Claims that are pending or, to the knowledge
of Axion, threatened against Axion, or, to the knowledge of Axion, against any
person or entity whose liability for any Environmental Claim Axion has or may
have retained or assumed either contractually or by operation of law.
To the knowledge of Axion, there are no circumstances that could form the
basis for an Environmental Claim against Axion, or against any person or entity
whose liability for any Environmental Claim Axion or any Subsidiary has or may
have retained or assumed either contractually or by operation of law.
n. Intellectual Property Rights. Axion has a valid license to develop and
commercialize a novel hybrid lead/acid/carbon battery technology (the
"E3Cell") as described in a license agreement dated November 15, 2003
between Axion and C and T Co. Incorporated. Except as specifically
provided in the license agreement, Axion's rights to use the licensed
technologies are free and clear of all liens, charges, encumbrances, or
restrictions, however characterized. Axion is not in default under any of
the material terms or provisions of the license agreement and there are
no known claims against Axion concerning its rights under the license
agreement.
o. Survival of Representations and Warranties. All of the representations
and warranties set forth above are true as of the date of this Agreement,
shall be true at the Closing Date and shall survive the closing for a
period of two (2) years from the Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF AXION SECURITYHOLDERS. The Axion
Securityholders severally warrant to the Company:
a. Authority. The Axion Securityholders have full power and authority to
exchange the Axion Securities for Company Securities upon the terms and
conditions provided for in this Agreement, and when delivered to the
Company in accordance with the terms of this agreement, the Axion
Securities will be free and clear of any lien or other encumbrance. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized no other
proceeding is necessary to authorize any Axion Securityholder to execute
this Agreement or consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each Axion
Securityholder and, assuming the due authorization, execution and
delivery thereof by Axion and the Company, constitutes the legal, valid
and binding obligation of each Axion Securityholder enforceable in
accordance with its terms.
b. Investment Intent. Each Axion Securityholder is acquiring the Company
Securities solely for his own account, for investment, and not with a
view to any subsequent "distribution" thereof within the meaning of that
term as defined in the Securities Act of 1933, as amended (said Act and
rules and regulations promulgated thereunder being hereinafter referred
to as the "Securities Act"). Each Axion Securityholder understands that
the Company Securities have not been registered under the Act or
securities laws of any State or Province ("State Act") by reason of the
specific exemptions therefrom, which exemptions depend in part upon each
Axion Securityholder's subjective investment intent as expressed herein.
In furtherance of the foregoing, each Axion Securityholder has previously
executed an "Investment Representation Letter and Letter of Intent
Signature Page" that contains certain representations and warranties of
the Axion Securityholder and appoints the duly authorized officers of
Axion as his attorney-in-fact to execute this Agreement on his behalf.
c. Accredited Investor Status. Each Axion Securityholders is:
(1) An "Accredited Investor" as such term is defined in Regulation D
promulgated under the Act; and
(2) Capable of evaluating the merits and risks of the exchange of Axion
Securities for Company Securities; and that they are able to bear the
economic risks of the investment and are able to protect their own
interests in an investment of this nature.
Each Axion Securityholder further represents and warrants that all of the
representations and warranties set forth above are true as of the date of this
Agreement, shall be true at the Closing Date and shall survive the closing for a
period of two (2) years from the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Axion and each Axion Securityholder:
a. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate or other power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary. The
Company has no directly or indirectly owned subsidiaries.
b. Articles of Incorporation and By-Laws. The Company has heretofore
furnished complete and correct copies of its' Articles of Incorporation and
By-Laws, including all amendments thereto or restatements thereof to Axion and
each Axion Securityholder. The Company is not in violation of any of the
provisions of its Articles of Incorporation, By-Laws.
c. Capitalization. The Company has the corporate authority to issue a
total of 400,000,000 shares of $.0001 par value common stock and 100,000,000
shares of $0.0001 par value preferred stock, of which 30,000,000 shares of
common stock are presently issued and outstanding. All issued and outstanding
shares of the Company's common stock are fully paid, validly issued and
nonassessable. Except as specifically provided herein, no other capital stock of
the Company will be outstanding on the Closing Date. Except as specifically
provided herein, no stockholder of the Company will have or obtain any
registration rights with respect to any shares of the Company's capital stock
that are issued and outstanding on the Closing Date.
On the closing date, after paying all outstanding third-party debts, the
Company will have no material assets and approximately $484,123 in related party
debt owed to Xxxx X. Xxxxxxxx and Xxxxx X. Xxxxxx. Immediately after the closing
of this agreement, the Company will issue 1,865,731 common stock purchase
warrants to each of Xxxx X. Xxxxxxxx and Xxxxx X. Xxxxxx in full and settlement
of all related party debts. The warrants will expire on December 31, 2005 and
each warrant will entitle the holder to purchase one share of common stock year
upon payment of a warrant exercise price of $.125 per share.
Immediately after the closing of this Agreement, the Company will have
186,573,104 shares of Common Stock and 13,464,822 common stock purchase warrants
issued and outstanding, which will be held beneficially and of record as
follows:
Common Total
Stock Warrants Ownership
Tamboril Stockholders 30,000,000 3,731,462 33,731,462
MCP stockholders trust 114,359,736 114,359,736
Axion Founders 24,480,008 24,480,008
Seed Financing 8,000,000 8,000,000
First Round Private Placement 8,533,360 8,533,360 17,066,720
Second Round Private Placement 1,200,000 1,200,000 2,400,000
---------- ---------- ----------
Totals 186,573,104 13,464,822 200,037,926
d. Authority. Each of the Company, Xxxxx X. Xxxxxx and Xxxx X. Xxxxxxxx
has all requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated herein. The execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action and no other corporate proceeding
on the part of the Company (including, without limitation, any approval by the
shareholders of the Company of this Agreement or the transactions contemplated
herein) is necessary to authorize this Agreement or to consummate the
transactions contemplated herein. This Agreement has been duly executed and
delivered by the Company, Xxxxx X. Xxxxxx and Xxxx X. Xxxxxxxx, and assuming the
due authorization, execution and delivery hereof by Axion and the Axion
Securityholders, constitutes the legal, valid and binding obligation of the
Company enforceable in accordance with its terms.
e. No Conflict; Required Filings and Consents. The execution and delivery
of this Agreement by the Company does not, and the performance of this Agreement
by the Company will not (i) conflict with or violate the Certificate of
Incorporation or By-Laws, as amended or restated, of the Company, (ii) conflict
with or violate any Laws in effect as of the date of this Agreement applicable
to the Company or by which any of its properties is bound, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a lien or Encumbrance on, any of the
properties or assets of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the Company
or any of its properties is bound or subject except for breaches, defaults,
events, rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or Encumbrances that would not have a material adverse
effect on the business, properties, assets, condition (financial or otherwise)
operations or prospects of the Company, taken as a whole, or on the transactions
herein contemplated ("Company Material Adverse Effect").
The execution and delivery of this Agreement by the Company and the
performance of this Agreement by the Company does not require the Company to
obtain any consent, approval, authorization or permit of, or to make any filing
with or notification to, any Governmental Entities, except for applicable
requirements, if any, of (i) the Securities Act, the Exchange Act, the Blue Sky
Laws, the National Association of Securities Dealers, and the filing and
recordation of appropriate such documents as required by General Corporation Law
of Delaware and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
either individually or in the aggregate, prevent the Company from performing its
obligations under this Agreement or have a Company Material Adverse Effect.
While the Company is not required to obtain any regulatory consents prior
to the closing of this Agreement, the parties expressly acknowledge that the
Company will be required to make the following filings with the SEC in
connection with the execution of this Agreement and the performance of the
Company's obligations hereunder.
(1) Within 5 days after the execution of this Agreement, the Company
will be required to file with the SEC and promptly distribute to
its' stockholders an "Information Statement Pursuant to Section
14(f) of the Exchange Act " which discloses that effective on the
10th day after the mailing thereof, five individuals selected by
Axion will be appointed to the Board of Directors and both of the
Company's current directors will resign from the board; and
(2) Within 15 days after the execution of the Agreement, the Company
will be required to file with the SEC a Current Report on Form 8-K
that provides detailed information on the business combination
effected by this Agreement, including audited financial statements
for Axion and unaudited pro forma financial information.
f. Permits; Compliance. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted
(collectively, the "Company Permits"), and there is no action, proceeding or
investigation pending or, to the knowledge of the Company, threatened, regarding
suspension or cancellation of any of the Company Permits. The Company is not in
conflict with, or in default or violation of (a) any Law applicable to the
Company or by which any of its properties is bound or subject or (b) any of the
Company Permits, except for any such conflicts, defaults or violations which
would not have a the Company Material Adverse Effect. The Company has not
received from any Governmental Entity any written notification with respect to
possible conflicts, defaults or violations of Laws.
g. Reports; Financial Statements. The Company and two wholly owned
subsidiaries filed voluntary petitions under Chapter 11 of the Bankruptcy Act on
April 11, 2000, in the U.S. Bankruptcy Court for the Southern District of
Florida (Cases 00-13040-BKC-AJC through 00-13042-BKC-AJC). The Company filed an
Amended Plan of Reorganization and Disclosure Statement (the "Plan") with the
Bankruptcy Court on August 9, 2000. Thereafter each class of debt and equity
interests that was entitled to vote approved the Company's Plan. On December 7,
2000, the Bankruptcy Court entered an order confirming the Company's Plan (the
"Confirmation Order"). On December 19, 2000, the Company commenced the
implementation of its Plan and the reorganization was substantially complete as
of December 31, 2000.
As a result of the Bankruptcy, the Company was inactive and engaged in no
business activities until January 23, 2003, when its corporate charter was
restored. On March 20, 2003, the Company filed with the Securities and Exchange
Commission an omnibus Annual Report on Form 10-KSB for the fiscal years ended
December 31, 1998 through 2002, together with quarterly reports for the periods
ended March 31. June 30 and September 30, 2002. Since March 20, 2003, the
Company has timely filed (i) all forms, reports, statements and other documents
required to be filed with (A) the Securities and Exchange Commission ("SEC"),
including, without limitation (1) all Quarterly Reports on Form 10-QSB, (2) all
proxy and information statements relating to meetings of stockholders (whether
annual or special), (3) all necessary Reports on Form 8-K, (4) all other
necessary amendments and supplements to all such reports and registration
statements (collectively, the "Company SEC Reports") and (B) any applicable Blue
Sky Laws and (ii) all forms, reports, statements and other documents required to
be filed with any other applicable federal or state regulatory authorities (all
such forms, reports, statements and other documents being referred to herein,
collectively, as the "Company Reports"). The Company Reports were prepared in
all material respects in accordance with the requirements of applicable Law
(including, with respect to the Company SEC Reports, the Securities Act and
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports) and did not at the time they
were filed 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.
Each of the financial statements (including, in each case, any related
notes thereto) contained in the Company SEC Reports filed prior to or on the
date of this Agreement (i) have been prepared in accordance with, and complied
as to form with, the published rules and regulations of the SEC and generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as otherwise noted therein) and (ii) fairly present the
financial position of the Company as of the respective dates thereof and the
results of its operations and cash flows for the periods indicated.
The Company's auditors have issued no management letters in connection
with the Company's financial statements.
Attached hereto as Exhibit "C" is preliminary unaudited balance sheet of
the Company as of December 31, 2003. The preliminary unaudited balance sheet has
been prepared in accordance with generally accepted accounting principles and
practices consistently followed by the Company, and fairly presents the
financial position of the Company as of the date thereof. The Company has not
(1) issued any equity, debt or other securities that are not reflected in
the preliminary balance sheet;
(2) paid or declared any dividends or distributions of capital, surplus,
or profits with respect to any of its issued and outstanding securities;
(3) entered into any other transaction or agreement which would, or
might, materially impair its shareholders' equity as reflected in the
preliminary balance sheet.
h. No Undisclosed Liabilities. There are no liabilities of any kind
whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation
or set of circumstances which could reasonably be expected to result in
such a liability, other than (a) liabilities fully reflected or reserved
against on the balance sheet contained in the Company Financial
Statements; (b) liabilities under this Agreement and fees and expenses
related thereto; and (c) liabilities which, individually or in the
aggregate, would not have a Company Material Adverse Effect.
i. Absence of Certain Changes or Events. Except as disclosed in SEC
Reports filed prior to or on the date of this Agreement, there has not
been any significant change by the Company in its accounting methods,
principles or practices.
j. Absence of Litigation. There is no claim, action, suit, litigation,
proceeding, arbitration or investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or
threatened against the Company or any properties or rights of the Company
and the Company is not subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement with, or
continuing investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease and desist or other
orders.
k. Taxes. The Company has filed each federal, state and local tax return
required by law, or has filed proper extensions, and has paid all taxes,
assessments and penalties due and payable. The provisions for taxes, if
any, reflected in the most recent balance sheet included in the Company
Financial Statements are adequate for any and all federal, state, county
and local taxes for the period ending on the date of that balance sheet
and for all prior periods, whether or not disputed. There are no present
disputes as to taxes of any nature payable by the Company.
l. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated in this Agreement based upon arrangements made
by or on behalf of the Company, Xxxxx X. Xxxxxx or Xxxx X. Xxxxxxxx.
m. Company Corporate Action. The stockholders of the Company have
approved the transaction contemplated hereby to the extent required by
the applicable provisions of the General Corporation Law of Delaware.
n. Environmental Laws and Regulations. The Company is in material
compliance with all applicable Environmental Laws, which compliance
includes, but is not limited to, the possession by the Company of all
material permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and
conditions thereof and compliance with notification, reporting and
registration provisions under applicable Environmental Laws; the Company
has not received notice of, or, to the knowledge of the Company, is the
subject of any Environmental Claim; and to the knowledge of the Company,
there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future, or to require
material expenditures to maintain such material compliance in the future.
There are no Environmental Claims that are pending or, to the knowledge
of the Company, threatened against the Company or, to the knowledge of the
Company, against any person or entity whose liability for any Environmental
Claim the Company has or may have retained or assumed either contractually or by
operation of law.
To the knowledge of the Company, there are no circumstances that could
form the basis for an Environmental Claim against the Company, or against any
person or entity whose liability for any Environmental Claim the Company has or
may have retained or assumed either contractually or by operation of law.
o. Contract Rights. Except for this Agreement and the agreements
contemplated herein, the Company is not a party to or bound by any contract or
agreement, whether written or oral, including, without limitation, any contract
or agreement for employment, consulting or similar services, for capital
expenditures or the acquisition or construction of fixed assets, which
constitutes any note, bond, indenture or other evidence of indebtedness or
guaranty or security for indebtedness of others, for the sale of any asset, or
the grant of any right or option to purchase such asset, which constitutes a
lease, which purports to limit the freedom of the Company to compete in any line
of business or in any geographic area or to borrow money or incur indebtedness.
p. Employee Benefit Plans. The Company does not have, and has not had any
employee benefit plan (including, without limitation, any "employee benefit
plan," as defined in Section 3(3) of the ERISA), or any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, insurance or other plan, arrangement
or understanding (whether or not legally binding). No incentive grants of any
type or nature are outstanding under the Company's Incentive Stock Plan and no
person has any right to require the Company to issue any such incentive grant in
the future.
The Company is not party to any collective bargaining agreement.
The Company has no obligation for retiree health, medical or life
insurance benefits under any plan or arrangement. The Company has no employees
other than Xxxxx X. Xxxxxx.
q. Public Offering. The initial public offering of the Company was a bona
fide offering to the "public" as such term is used and defined in
connection with offerings of securities subject to the Securities Act in
material compliance with the Securities Act and the rules and regulations
promulgated thereunder. The Common Stock of the Company which was issued
and outstanding prior to the Closing Date of this Agreement has been (a)
issued pursuant to a valid claim of exemption under Section 4(2) of the
Securities Act, (b) issued pursuant to an effective registration
statement under the Securities Act, or (c) issued in violation of the
applicable registration requirements of the Securities Act, but at a date
sufficiently remote from the Closing Date that that purchasers of such
shares are precluded from initiating or maintaining an action in law or
in equity based on the sale and issuance of such share
r. Transfer Agent. The Company has appointed Continental Stock Transfer &
Trust Company, New York, New York as the Company's transfer agent. The
Company will continue to retain a transfer agent reasonably satisfactory
to Axion and the Shareholders for so long as the Company is subject to
the reporting requirements under Section 12(g) or Section 15(d) of the
Exchange Act. The Company will make arrangements to have available at the
office of the transfer agent sufficient quantities of the Company's
common stock certificates as may be needed for the quick and efficient
transfer of the Shares.
s. Survival of Representations and Warranties. All of the representations
and warranties set forth above are true as of the date of this Agreement,
shall be true at the Closing Date and shall survive the closing for a
period of two (2) years from the Closing Date.
4. AFFIRMATIVE COVENANTS OF THE COMPANY.
(a) SEC Reporting Obligations. For so long as the Company's common stock
is registered under the Securities Exchange Act of 1934, as amended (said
Act and rules and regulations promulgated thereunder being hereinafter
referred to as the "Exchange Act"), the Company (i) will file all forms,
reports, statements and other documents required to be filed with (A) the
Securities and Exchange Commission ("SEC"), including, without limitation
(1) all Annual Reports on Form 10-KSB, (2) all Quarterly Reports on Form
10-QSB, (3) all proxy statements relating to meetings of stockholders
(whether annual or special), (4) all Reports on Form 8-K, (5) all other
reports or registration statements and (6) all amendments and supplements
to all such reports and registration statements and (B) any state, local
or other governmental authority pursuant to applicable laws regulating
the offer and sale of securities (the "Blue Sky Laws") and (C) all forms,
reports, statements and other documents required to be filed with any
other applicable federal or state regulatory authorities. The Company
Reports shall be prepared in all material respects in accordance with the
requirements of applicable Law (including, the Securities Act and
Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such Company Reports) and shall not at the
time they are filed 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 are made, not misleading.
(b) Reports to Stockholders. For so long as the Company's common stock is
registered under the Exchange Act, the Company will hold an annual
meeting of shareholders for the election of directors within 180 days
after the end of each of the Company's fiscal years and, within 180 days
after the end of each of the Company's fiscal years, will provide the
Company's shareholders with the audited financial statements of the
Company as of the end of the fiscal year just completed prior thereto.
Such financial statements shall be those required by Rule 14a-3 under the
Exchange Act and shall be included in an annual report meeting the
requirements of the Rule. Further, the Company agrees to make available
to the Company's shareholders in printable form within 60 days after the
end of each fiscal quarter of the Company (other than the last fiscal
quarter in any fiscal year) reasonably itemized financial statements of
the Company and its subsidiaries, if any, for the fiscal quarter just
ended and a narrative discussion of such financial statements and the
business conducted by the Company and its subsidiaries, if any, during
such quarter.
5. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company hereunder shall be subject to the following conditions:
a. The Company shall not have discovered any material error, misstatement
or omission in any of the representations and warranties made by Axion or
the Shareholders herein and all the terms and conditions of this
Agreement to be performed and complied with have been performed and
complied with.
b. There shall have been no material adverse changes in the financial
condition, business or operations of Axion, except for changes resulting
from operations in the usual and ordinary course of its business.
c. The Company shall have received an opinion of Axion's legal counsel to
the effect that:
(1) Axion is a Canadian Federal Corporation duly organized, validly
existing and in good standing under the laws of Canada and the Province
of Ontario, and has the power and authority to own its properties and to
carry on its business in the Province of Ontario;
(2) The outstanding Axion Securities are validly issued, fully paid and
nonassessable;
(3) This Agreement has been duly executed and delivered by Axion and the
Axion Securityholders and constitutes a legal, valid and binding
obligation of Axion enforceable in accordance with its terms.
6. CONDITIONS TO THE OBLIGATIONS OF AXION AND THE AXION SECURITYHOLDERS.
The obligations of the Axion and the Axion Securityholders hereunder are
subject to the following conditions:
a. Axion and the Axion Securityholders shall not have discovered any
material error or misstatement in any of the representations and
warranties made by the Company herein and all the terms and conditions of
this Agreement to be performed and complied with by the Company have been
performed and complied with.
b. There shall have been no material adverse changes in the financial
condition, business or operations of the Company, except for changes
resulting from those operations in the usual ordinary course of the
business.
c. Axion shall have received the opinion of the Company's legal counsel
to the effect that:
(1) The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware and has the power to own and
operate its properties wherever the same shall be located as of the
Closing Date;
(2) The execution, delivery and performance of this Agreement by the
Company has been duly authorized by all necessary corporate action and
constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms;
(3When delivered to the Axion Securityholders, the Company Securities
will be validly issued, fully paid and nonassessable;
(4) The common stock of the Company which was issued and outstanding
prior to the Closing Date of this Agreement has been (a) issued pursuant
to a valid claim of exemption under Section 4(2) of the Securities Act,
(b) issued pursuant to an effective registration statement under the
Securities Act, or (c) issued in violation of the applicable registration
requirements of the Securities Act, but at a date sufficiently remote
from the Closing Date that that purchasers of such shares are precluded
from initiating or maintaining an action in law or in equity based on the
sale and issuance of such shares;
(5) The transaction contemplated qualifies as a tax-free reorganization
under ss.368(a)(1)(B) of the Internal Revenue Code and related
regulations thereunder and the receipt of Company Securities by the Axion
Securityholders at the Closing will not give rise to a taxable event; and
(6) The common stock of the Company is fully registered under the
Exchange Act and the Company has, for the preceding 12 months, filed all
necessary reports under Sections 12 and 15 of the Exchange Act.
7. CLOSING DATE. The closing of this Agreement shall take place in
Xxxxxxx, Xxxxxxx, Xxxxxx on December 31, 2003, or at such other
reasonable time and place as the parties hereto shall agree upon.
8. EXCHANGE OF AXION SECURITIES. Subject to the terms and conditions set
forth herein, and at the time of the closing set forth in Section 7 and
the conditions to which are specified in Sections 5 and 6, the Company
will:
(1) Issue and deliver 24,480,008 shares of common stock to the person
identified in Schedule A-1 in exchange for 100% of their right title and
interest 3,060,001 shares Axion Common;
(2) Issue and deliver 8,000,000 shares of common stock to the persons
identified in Schedule A-2 in exchange for 100% of their right title and
interest in $500,000 aggregate principal amount of Axion's seed financing
notes;
(3) Issue and deliver 8,533,560 shares of common stock and 8,533,560
warrants to the persons identified in Schedule A-3 in exchange for 100%
of their right title and interest in $800,000 aggregate principal amount
of Axion's first round private placement notes. Each such warrant shall
entitle the holder to purchase one additional share of Tamboril Common
for a period of one year upon payment of a warrant exercise price $.125
per share. If the warrants are not exercised within six months from the
issue date, the exercise price will increase to $.1875 per share; and
(4) Issue and deliver 1,200,000 shares of common stock and 1,200,000
warrants to the person identified in Schedule A-4 in exchange for 100% of
his right title and interest in $150,000 aggregate principal amount of
Axion's second round private placement notes. Each such warrant shall
entitle the holder to purchase one additional share of Tamboril Common
for a period of one year upon payment of a warrant exercise price $.125
per share. If the warrants are not exercised within six months from the
issue date, the exercise price will increase to $.1875 per share.
Concurrently, the Axion Securityholders shall deliver to the Company
certificates evidencing the ownership of all issued and outstanding Axion
Securities, duly endorsed to the Company.
9. CREATION OF MEGA-C SHAREHOLDERS TRUST. On the closing date, or as soon
thereafter as practicable, the Company shall create an irrevocable trust for the
benefit of the shareholders of Mega-C Power Corporation and issue 114,359,736
shares of the Company's common stock to the trust. The purpose of the Trust
shall be to preserve the potential equitable interests of the Mega-C
Shareholders in the lead-acid-carbon battery technologies that Axion and the
Company intend to develop, while insulating Axion and the Company from
litigation risks arising from the business of Mega-C and the alleged unlawful
activities of certain directors, officers and stockholders of Mega-C. The
Company, Axion and each Axion Securityholder acknowledge that the shares the
Company will issue to the Mega-C shareholders trust would, in the absence of
potential equitable interests, be issuable to the Axion Securityholders as
additional consideration for the value associated with an unencumbered license
to the technology. Upon creation of the trust, the Company shall select a
suitable trustee and enter into a trust agreement substantially in the form
attached hereto as Exhibit "D." All shares of common stock delivered to the
trustee shall, upon issuance, be validly issued, fully paid, nonassessable and
subject to all of the terms, conditions and provisions of the trust agreement.
10. ACTIONS AT THE CLOSING. At the final closing of this Agreement, the
Company and the Axion Securityholders will each deliver, or cause to be
delivered to the other, the securities to be exchanged in accordance with
Section 8 of this Agreement and each party shall pay any and all federal and
state taxes required to be paid in connection with the issuance and the delivery
of their own securities. All stock certificates shall be registered in the name
of the party to which the same are deliverable, as specified herein. In addition
to the above-mentioned exchange of certificates, the following transactions will
take place at the final closing.
Axion and the Axion Securityholders will deliver to the Company:
(1) The opinion of legal counsel for Axion, as provided for in Section 5(d)
hereof;
(2) A certificate of corporate good standing for Axion which shall be
dated no more than sixty (60) days prior to the Closing Date;
(3) A certificate by a principal officer of Axion that each of the
representations and warranties of Axion and the Axion Securityholders,
respectively, are true and correct as of the Closing Date and that all of
the conditions to the obligations of the Company which are to be
performed by Axion have been performed.
The Company will deliver to Axion and the Axion Securityholders:
(1) The opinion of legal counsel for the Company, as provided for in Section
6(c) hereof;
(2) A certificate of corporate good standing for the Company which shall be
dated no more than sixty (60) days prior to the Closing Date;
(3) A certificate executed by a principal officer of the Company
attesting that each of the representations and warranties of the Company
are true and correct as of the Closing Date and that all of the
conditions to the obligations of Axion and the Axion Securityholders
which are to be performed by the Company have been performed; and
(4) Duly executed resignations of all existing officers of the Company,
effective as of 8:00 p.m. on the Closing Date.
11. CONDUCT OF BUSINESS. Between the date hereof and the Closing Date,
the Company, Axion shall conduct its business in the same manner in which
it has heretofore been conducted and the Axion Securityholders will not
permit Axion to (1) enter into any contract, other than in the ordinary
course of business, or (2) declare or make any distribution in the nature
of a dividend or return of capital to the Axion Securityholders without
first obtaining the written consent of the Company. Likewise, the Company
will not (1) enter into any contract, other than in the ordinary course
of business, or (2) declare or make any distribution in the nature of a
dividend or return of capital to its shareholders without first obtaining
the written consent of Axion and the Axion Securityholders.
12. BOARD OF DIRECTORS. Promptly after the closing of this Agreement, the
Board of Directors of the Company shall have a meeting, at which the
Board of Directors shall appoint Xxxx Xxxxxxx as a member of the Board of
Directors, in accordance with the By-Laws of the Company. Promptly after
compliance with Section 14(f) of the Exchange Act, the Board of Directors
of the Company shall have another meeting, at which Xxxx X. Xxxxxxxx and
Xxxxx X. Xxxxxx resign, and they shall elect as members of the Company's
Board of Directors, in accordance with the By-Laws of the Company and
this agreement five additional individuals as the Axion shall designate
to the Company in writing.
13. UNREGISTERED SECURITIES. The Axion Securityholders understand that
because the Company Securities have not been registered under the Act or
any State Act, they must hold the Company Securities indefinitely, and
cannot dispose of any or all of the Company Securities unless such
Company Securities are subsequently registered under the Act and any
applicable State Act, or exemptions from registration are available. The
Axion Securityholders further understand that the Company may, as a
condition to the transfer of any Company Securities, require that the
request for transfer by an Axion Securityholder be accompanied by an
opinion of counsel, in form and substance satisfactory to the Company,
provided at such an Axion Securityholder's expense, to the effect that
the proposed transfer does not result in violation of the Act or any
applicable State Act, unless such transfer is covered by an effective
registration statement under the Act and is in compliance with all
applicable State Acts.
All Company Securities that will be issued to the Axion Securityholders
pursuant to the terms of this Agreement are restricted securities within the
meaning of Regulation D promulgated under Section 4(2) of the Securities Act.
The Company will issue stop transfer instructions to its transfer agent for the
shares common stock issued to the Axion Securityholders and shall place the
following legend on each certificate representing Company Securities:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
PURSUANT TO A TRANSACTION EFFECTED IN RELIANCE UPON AN EXEMPTION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE NOT BEEN THE
SUBJECT TO A REGISTRATION STATEMENT UNDER THE ACT OR ANY STATE SECURITIES
ACT. THE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR APPLICABLE EXEMPTION THEREFROM UNDER THE
ACT OR ANY APPLICABLE STATE SECURITIES ACT."
14. PARTIAL REGISTRATION OF COMMON STOCK. The Axion Securityholders
acknowledge and understand that they have no independent right to require the
Company to register any of the Company Securities issued to them pursuant to
this Agreement. Notwithstanding the generality of the foregoing, the Company
expressly assumes Axion's responsibility to register certain shares that will be
held in trust for the benefit of the stockholders of Mega-C Power Corporation
under applicable securities laws. In furtherance of the foregoing, the Company
shall, within 30 days after the successful completion of beta testing on the
E3Cell, file a registration statement under the Securities Act so as to allow
the unrestricted resale of:
o All shares held in trust for the benefit of the stockholders of Mega-C;
o All shares of common stock issued or issuable upon exercise of the
warrants issued to the Axion Securityholders;
o All shares of common stock issued or issuable upon exercise of the
warrants issued to Xx. Xxxxxx and Xx. Xxxxxxxx; and
o Such additional Company Securities as the board of directors may
designate.
In connection with such registration statement the Company's board of
directors may establish reasonable resale restrictions that are intended to
protect the market for the Company's common stock from unusual selling pressure
and do not unreasonably discriminate between the beneficial owners of the
securities included in the registration statement. The Company shall pay all
costs and expenses relating to the registration, offer, and sale of such
securities, other than the fees of underwriters or brokers who sell shares on
behalf of the owners of such securities. Notwithstanding the foregoing, the
manner and conduct of the registration, including the contents of the
registration statement, will be entirely in the control and at the discretion of
the Company. After the effective date of such registration statement, the
Company shall file such post-effective amendments and supplements as may be
necessary to maintain the currency of the registration statement for a period of
not less than six months. In addition, if any holders of securities included in
the registration statement are advised by counsel that the registration
statement, in the opinion of such counsel, is deficient in any material respect,
the Company shall use its best efforts to cause the registration statement to be
amended to eliminate the concerns raised. The Company shall furnish to the
various holders of securities included in the registration statement the number
of copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of securities owned by
them.
15. ACCESS TO INFORMATION. Either previously or concurrently herewith,
the Company has delivered to the Axion Securityholders correct and complete
copies of all documents and records requested by the Axion Securityholders. In
addition, the Axion Securityholders have had the opportunity to ask questions
of, and receive answers from, officers and directors of the Company, and persons
acting on its behalf concerning the terms and conditions of the Agreement, and
has received sufficient information relating to the Company to enable them to
make an informed decision with respect to the acquisition of the Company
Securities.
16. NO SOLICITATION. At no time were the Axion Securityholders presented
with or solicited by any leaflet, public promotion meeting, circular, newspaper
or magazine article, radio or television advertisement, or any other form of
general advertising in connection with their acquisition of the Company
Securities.
17. EXPENSES. Axion and the Company shall each pay their respective
expenses incident to this Agreement and the transactions contemplated hereby,
including all fees of their counsel and accountants, whether or not such
transactions shall be consummated. The Axion Securityholders shall pay all fees
and expenses incurred by them by reason of this Agreement and the proposed
transactions contemplated hereby.
18. ATTORNEYS FEES. In the event of any litigation among the parties
related to this Agreement, the prevailing party shall be entitled to reasonable
attorneys fees and costs to be fixed by the Court, said fees to include appeal
and collection of judgment.
19. ARBITRATION. In the event a dispute arises out of, in connection
with, or with respect to this Agreement, or any breach thereof, such dispute
shall, on the written request of one party delivered to the other party, be
submitted to and settled by binding arbitration conducted in Xxxxxxx, Xxxxxxx,
Xxxxxx in accordance with Arbitrations Act (Ontario). The award of such
arbitrator shall be final and may be entered by any party hereto in any court of
competent jurisdiction. The party against whom the arbitrator's award is
rendered shall pay all costs and expenses of such arbitration, unless the
arbitrator shall specifically allocate costs in a different manner because the
award is not entirely in favor of either party
20. Indemnification
(a) From and after the closing date, Xxxxx X. Xxxxxx and Xxxx X. Xxxxxxxx
(the "Tamboril Parties") shall jointly and severally indemnify Axion and its
directors, officers, agents, employees, stockholders and noteholders (the "Axion
Parties") against and hold the Axion Parties harmless from all damages, losses
or liabilities in respect of claims, suits, proceedings, demands, judgments,
damages, expenses and costs (including, without limitation, reasonable
attorney's fees and costs and expenses incurred in the investigation, defense or
settlement of any claims covered by this indemnity) (collectively, the
"Indemnifiable Damages") which the Axion Parties may suffer or incur by reason
of (i) the inaccuracy of any of the representations and warranties of the
Tamboril Parties contained in this Agreement; (ii) any material misstatements or
omissions of material fact in this Agreement; (iii) any costs or expenses
incurred to defend against, settle or pay claims of any nature whatsoever
arising from the operations of the Company prior to its Chapter 11 Bankruptcy
proceeding; or (iv) the nonperformance by the Tamboril Parties of any of the
obligations set forth in this Agreement. Without limiting the generality of the
foregoing, the amount of Indemnifiable Damages that shall be recoverable from
each of Xx. Xxxxxx and Xx. Xxxxxxxx in their individual capacities shall (x) be
limited to $200,000 in respect of any claim for Indemnifiable Damages concerning
any matter, issue or thing that arose on or before December 7, 2000, and (y)
unlimited in respect of any claim for Indemnifiable Damages concerning any
matter, issue or thing that arose or might arise after December 7, 2000. No
claim by any of the Tamboril Parties under this Section 20(a) may be commenced
more than one (1) year after the closing date of this Agreement.
(b) From and after the Closing, Axion shall indemnify the Tamboril
Parties against and hold the Tamboril Parties harmless from all damages, losses
or liabilities in respect of suits, proceedings, demands, judgments, damages,
expenses and costs (including, without limitation, reasonable counsel fees and
costs and expenses incurred in the investigation, defense or settlement of any
claims covered by this indemnity) (collectively, the "Indemnifiable Damages")
which the Tamboril Parties may suffer or incur by reason of (i) the inaccuracy
of any of the representations and warranties of Axion contained in this
Agreement; (ii) other than in respect of any claims or litigation disclosed by
Axion, any liability for claims made by third parties against the Tamboril
Parties arising out of the activities of Axion or the operations of Tamboril
after the closing of the reverse takeover, or (iii) the non-performance by Axion
of any of the covenants or agreements contained in this Agreement. Without
limiting the generality of the foregoing, with respect to the measurement of
Indemnifiable Damages, the Tamboril Parties shall only have the right to be
restored to the financial position they enjoyed immediately prior to the
execution of this Agreement, but in no event shall the total amount of Axion's
liability hereunder exceed $200,000. No claim by any of the Tamboril Parties
under this Section 20(b) may be commenced more than one (1) year after the
closing date of this Agreement.
(c) Promptly, upon receipt of notice of any claim, demand or assessment
or the commencement of any suit, action or proceedings by any party not a party
to this Agreement in respect of which indemnity may be sought on account of an
indemnity agreement contained herein, the party seeking indemnification (the
"Indemnitee") will notify, within sufficient time to respond to such claim or
answer or otherwise plead in such action, the party from whom indemnification is
sought (the "Indemnitor"), in writing, thereof. The omission of such Indemnitee
to notify promptly the Indemnitor of any such claim or action shall not relieve
such Indemnitor from any liability which it may have to such Indemnitee in
connection therewith on account of the indemnity agreements contained herein
unless the Indemnitor is prejudiced thereby, and then only to the extent of the
prejudice caused by such delay. In case any claim, demand or assessment shall be
asserted or suit, action or proceeding commenced against an Indemnitee, and it
shall notify the Indemnitor of the commencement thereof, the Indemnitor will be
entitled to participate therein, and, to the extent that it may wish, to assume
the defense, conduct or settlement thereof, with counsel reasonably satisfactory
to the Indemnitee; provided that no settlement may be made by an Indemnitor on
behalf of an Indemnitee without the Indemnitee's express written consent if such
settlement would impose continuing obligations or any liability upon the
Indemnitee. After notice from the Indemnitor to the Indemnitee of its election
so to assume the defense, conduct or settlement thereof, the Indemnitor will not
be liable to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense, conduct or settlement
thereof. The Indemnitee will cooperate with the Indemnitor in connection with
any such claim, make personnel, books and records relevant to the claim
available to the Indemnitor, and grant such authorizations or powers of attorney
to the agents, representatives and counsel of the Indemnitor as such Indemnitor
may reasonably consider desirable in connection with the defense of any such
claim. In the event that the Indemnitor does not wish to assume the defense,
conduct or settlement of any claim, demand, or assessment, the Indemnitee will
not settle such claim, demand, or assessment without the consent of the
Indemnitor, which shall not be unreasonably withheld. It is understood and
agreed that to the extent the Axion Parties or the Tamboril Parties make a claim
for indemnification within the survival periods stated herein, the
responsibility for indemnification with respect to such claim shall survive
until such claim is resolved. Each of the Axion Parties and each of the Tamboril
Parties expressly understands and agrees that notwithstanding any disclosure
herein or in the Schedules hereto or in any document, certificate, or instrument
delivered pursuant hereto of actual or potential defaults, claims, litigation
and the like that may be asserted against Tamboril, the Tamboril Parties or the
Axion Parties, the Tamboril Parties and the Axion Parties shall be entitled to
indemnification against such matters to the extent set forth above.
21. MISCELLANEOUS.
a. This Agreement shall be controlled, construed and enforced in
accordance with the laws of the State of Delaware without giving effect to
conflict of laws principles thereof.
b. This Agreement shall not be assignable by any party without prior
written consent of the others.
c. All Section headings herein are inserted for convenience only. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, which together shall constitute one and the same instrument.
Facsimile signatures shall constitute original signatures.
d. This Agreement incorporates the term of all prior agreements and sets
forth the entire understanding between the parties. No amendments hereto shall
be valid unless made in writing and signed by the parties hereto.
e. This Agreement shall be binding upon and shall inure to the benefit of
the heirs, executors, administrators and assigns of Axion and the Shareholders
and upon the successors and assigns of the Company.
f. All notices, requests, instructions, or other documents to be given
hereunder shall be in writing and sent by registered mail:
If to the Company or Axion: with copies to:
Fogler, Xxxxxxxx LLP,
Axion Power Corporation Barristers & Solicitors
000 Xxxxxx Xxxxxx Xxxxx 0000, Xxxxx Trust Tower
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 00 Xxxx Xxxxxx Xxxx
Xxxxxxx Xxxxxxx X0X 0X0
If to Xxxxxx or Xxxxxxxx: with copies to:
Xxxxx X. Xxxxxx Xxxxxxxx & Xxxxx, Attorneys
0000 Xxxxxxxx Xxxxxxxxx Xxxxxxx de Barbereche
Xxxxxxx, Xxxxxxx 00000 Switzerland 1783 Barbereche
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
TAMBORIL CIGAR COMPANY
/s/
Xxxxx X. Xxxxxx, President
Principal Stockholders of
Tamboril Cigar Company
/s/ /s/
Xxxxx X. Xxxxxx Xxxx X. Xxxxxxxx
AXION POWER CORPORATION
/s/
Xxxxxx Xxxxxxxxx, Director
Shareholders and Noteholders of
Axion Power Company
/s/
By Xxxxxx Xxxxxxxxx, a Director of Axion Power Corporation acting as
attorney-in-fact for the Axion Securityholders identified in Schedules A-1
through A-4
EXHIBIT A
SCHEDULE OF STOCK ISSUANCES
PAGE 1 OF 2
SCHEDULE A-1
HOLDERS OF COMMON STOCK AND
BENEFICIAL OWNERS OF FOUNDERS SHARES
Name of Stockholder or Axion Shares Company
Beneficial Owner Surrendered Shares Issued
Xxxx Xxxxxxx 1 8
Xxxxxx Xxxxxxx 340,000 2,720,000
Xxxxx Xxxxx 340,000 2,720,000
Xxxxxx Xxxxxxxxx 340,000 2,720,000
Xxxxx Xxxxxxxxx 340,000 2,720,000
Xxxxxx Xxxxxxxxxx 340,000 2,720,000
Xxxxx Xxxxx 340,000 2,720,000
Xxxxxx Xxxxxxx 340,000 2,720,000
Canadian Consultants Bureau Inc. 340,000 2,720,000
Xxx Xxxxxx 340,000 2,720,000
Schedule A-1 Total 3,060,001 24,480,008
SCHEDULE A-2
HOLDERS OF CONVERTIBLE
SEED FINANCING NOTES
Name of Convertible Principal Amount Axion Shares Company
Seed Financing Noteholder of Notes Issuable Shares Issued
Xxxxxx Xxxxxxx $50,000 100,000 800,000
Xxxxx Xxxxx $50,000 100,000 800,000
Xxxxx Xxxxx $50,000 100,000 800,000
Xxxxxx Xxxxxxxxx $50,000 100,000 800,000
Xxxxxx Xxxxxxxxxx $50,000 100,000 800,000
Xxxxxx Xxxxxxx $50,000 100,000 800,000
HAP Investments LLC $50,000 100,000 800,000
Canadian Consultants Bureau Inc. $50,000 100,000 800,000
Infinity Group LLC $100,000 200,000 1,600,000
Schedule A-2 Total $500,000 1,000,000 8,000,000
EXHIBIT A
SCHEDULE OF STOCK ISSUANCES
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SCHEDULE A-3
HOLDERS OF CONVERTIBLE
FIRST ROUND PRIVATE PLACEMENT NOTES
Name of Convertible
First Round Private Principal Amount Axion Shares Company
Placement Noteholder of Notes Issuable Shares Issued
Xxxxxx Xxxxxxx $200,000 266,667 2,133,336
Xxxxx Xxxxx $100,000 133,337 1,066,696
Xxxxx Xxxxx $100,000 133,333 1,066,664
Xxxxxx Xxxxxxxxx $100,000 133,333 1,066,664
HAP Investments LLC $200,000 266,667 2,133,336
Canadian Consultants Bureau Inc. $100,000 133,333 1,066,664
1,066,670
Schedule A-2 Total $800,000 8,533,360
SCHEDULE A-4
HOLDERS OF CONVERTIBLE
SECOND ROUND PRIVATE PLACEMENT NOTES
Name of Convertible
Second Round Private Principal Amount Axion Shares Company
Placement Noteholder of Notes Issuable Shares Issued
Xxxxx Xxxx $150,000 150,000 1,200,000
400,000
Schedule A-4 Total $150,000 3,200,000
Total Shares Issuable to Axion Stockholders $1,450,000 5,276,671 42,213,368
Shares Issuable to Trust for the Benefit of
Stockholder of Mega-C Power Corporation 114,359,736
Grand Total of Stock Issuances 156,573,104
