CONFORMED COPY
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement ("the Agreement"), dated as of the 28th
day of September 2004, by and among Gateway International Holdings, Inc., a
Nevada corporation ("Gateway") ,and All American CNC Sales, Inc. a California
corporation ("American") and the shareholders of American ("Shareholders"), with
reference to the following:
A. The respective Boards of Directors of Gateway and American
have deemed it advisable and in the best interests of Gateway and
American that American be acquired by Gateway, pursuant to the terms
and conditions set forth in this Agreement.
D. Gateway and American propose to enter into this Agreement
which provides among other things that all of the outstanding shares of
American be acquired by Gateway, in exchange for 1,000,000 shares of
Gateway common stock and such additional items as more fully described
in the Agreement.
E. The parties desire the transaction to qualify as a tax-free
reorganization under Section 368 (a)(1)(B) of the Internal Revenue Code
of 1986, as amended.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE ACQUISITION
SECTION 1.1 At the Closing, a total of 9,000 shares of common stock, which
represents all of the issued and outstanding shares of American's capital stock
shall be acquired by Gateway in exchange for 1,000,000 restricted shares of
Gateway common stock Gateway (the "Initial Shares"). The Initial Shares will be
issued to Xxx Xxxxxxxx and Xxxxxx Xxxxxxxx as community property with right of
survivorship.
SECTION 1.2 At the Closing, the American shareholders will deliver certificates
for the outstanding shares of American, duly endorsed so as to make Gateway the
sole holder thereof, free and clear of all claims and encumbrances and Gateway
shall deliver a transmittal letter directed to the transfer agent of Gateway
directing the issuance of the Shares to the shareholders of American as set
forth in Section 1.1 above.
SECTION 1.3 Following the reorganization, American will be a wholly owned
subsidiary of Gateway.
SECTION 1.4. As contingent consideration for the purchase of American's
outstanding capital stock, Gateway agrees to issue to the shareholders of
American, in addition to the Initial Shares, an aggregate of Two Hundred Fifty
Thousand (250,000) shares of Gateway common stock if American's gross profit for
the fiscal year ended September 30, 2005 equals or exceeds Three Hundred
Thousand Dollars ($300,000), and a further additional Two Hundred Fifty Thousand
(250,000) shares of Gateway common stock if American's gross profit for the
fiscal year ended September 30, 2006 equals or exceeds Three Hundred Thousand
Dollars ($300,000). For purposes of this Section 1.4, "gross profit" shall mean
gross revenues less cost of goods sold. The Initial Shares together with any
additional shares that may be issued pursuant to this Section 1.4 are
collectively referred to as the "Shares".
ARTICLE II
THE CLOSING
SECTION 2.1 The consummation of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Gateway on or before October
1, 2004, (the "Closing Date") or at such other place or date and time as may be
agreed to in writing by the parties hereto.
SECTION 2.2 The following conditions are a part of this Agreement and must be
completed on the Closing Date, or such other date specified by the parties:
(a) American will confirm in writing with its main equipment
suppliers that they will continue to supply inventory to American following the
Closing Date for a minimum of 1 month.
(b) Contemporaneous with the Closing, American agrees to offer
employment to Xxx Xxxxxxxx for a period of one (1) year at the rate of $14,000
per month. Xxx Xxxxxxxx shall also receive all other benefits provided to other
employees of American, including health insurance and reasonable automobile
expense reimbursement, including repairs, gas and insurance. American shall also
pay Xx. Xxxxxxxx'x cellular phone bills.
(c) American will offer employment to Xxxxx Xxxxx, at the rate
of $4,000 per month, plus all benefits provided to non-management employees
(including health insurance).
(d) American shall provide separate employment agreements for
Xxx Xxxxxxxx and Xxxxx Xxxxx substantially in the from of the attached Exhibits
A and B, respectively.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to
Gateway as of the Closing Date as follows:
SECTION 3.1 Organization and Qualification. American is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted. American is qualified to do business and is in good standing in
each jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary. True,
accurate and complete copies of American's Articles of Incorporation and
By-laws, including all amendments thereto, have heretofore been delivered to
Gateway.
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SECTION 3.2 Capitalization.
(a) The authorized capital stock of American consists of 9000 shares of
common stock , no par value (the "American Common Stock"). As of the date
hereof, there were 9000 shares of American Common Stock issued and outstanding.
All of the issued and outstanding shares of American Common Stock are duly
authorized, validly issued, fully paid, non-assessable, free of preemptive
rights and were issued in compliance with federal and applicable state
securities laws. All of the issued and outstanding shares of American Common
Stock held by the Shareholders are owned free and clear of all liens, claims,
security interests, pledges and other encumbrances or restrictions on transfer.
(b) As of the date hereof and except as American has previously advised
Gateway, in writing, there are no outstanding subscriptions, options, calls,
contracts, agreements, commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating American or any
subsidiary of American to issue, deliver, sell, purchase, redeem or acquire, or
cause to be issued, delivered, sold, purchased, redeemed or acquired, shares of
the capital stock of American or obligating American or any subsidiary of
American to grant, or enter into any such agreement or commitment, except for
this Agreement. There are no outstanding or authorized stock appreciation,
phantom stock, stock participation, or other similar rights with respect to
American. There are no voting trusts, proxies, other agreements or
understandings to which American, any subsidiary of American or the Shareholders
are a party or are bound with respect to the voting of any shares of capital
stock of American.
SECTION 3.3 Subsidiaries. American has no subsidiaries.
SECTION 3.4 Authority; Non-Contravention; Approvals.
(a) The Shareholders have the power and authority to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, and the consummation by
the Shareholders of the transactions contemplated hereby, have been duly
authorized and approved by the Shareholders and no other legal proceedings are
necessary to authorize the execution and delivery of this Agreement and the
consummation by the Shareholders of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by each of the
Shareholders and, assuming the due authorization, execution and delivery hereof
by Gateway, constitutes a valid and binding agreement of each of the
Shareholders, enforceable against each such Shareholder, in accordance with its
terms, except that such enforcement may be subject to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (b) general equitable
principles.
(b) The execution and delivery of this Agreement by the Shareholders
does not, and the consummation by the Shareholders of the transactions
contemplated hereby will not, violate, conflict with or result in a breach of
any provision 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
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
American or either Shareholder under any of the terms, conditions or provisions
of (i) the Articles of Incorporation or by-laws of American, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or governmental authority applicable to American
or either Shareholder or any of their respective properties or assets, or (iii)
any note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which American or either Shareholder is now a party or by which American
or either Shareholder or any of their respective properties or assets may be
bound or affected.
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(c) No declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority, including the probate court, is necessary for the execution, delivery
or performance of this Agreement by the Shareholders or the consummation by the
Shareholders of the transactions contemplated hereby. No consent of any party to
any contract, agreement, instrument, lease, license, arrangement or
understanding to which American or either Shareholder is a party, or to which
any of them or any of their properties or assets are subject, is required for
the execution, delivery or performance of this Agreement.
SECTION 3.5 Financial Statements. American shall deliver to Gateway copies of
its financial statements for the fiscal years ending December 31, 2001, 2002 and
2003 (the "American Financial Statements"). American Financial Statements have
been prepared on a consistent basis and fairly and accurately present the
financial position of American as of the dates thereof and the results of
operations and changes in financial position for the periods then ended.
SECTION 3.6 Absence of Undisclosed Liabilities. Except as expressly disclosed
and described in American Financial Statements, neither American nor any of its
subsidiaries had at September 25, 2004, or has incurred since that date, any
liability, indebtedness, expense, claim, deficiency, guarantee or obligation of
any type (whether absolute, accrued, contingent, matured, un-matured or
otherwise) or of any nature, except (i) liabilities, obligations or
contingencies which are accrued or reserved against in American Financial
Statements or reflected in the notes thereto, and (ii) liabilities or
obligations incurred in the ordinary course of business which, in the aggregate,
do not exceed $10,000.
SECTION 3.7 Absence of Certain Changes or Events. From September 1, 2004 through
the date hereof, there has not been any material adverse change in the business,
operations, properties, assets, liabilities, condition (financial or other),
results of operations or prospects of American, taken as a whole.
SECTION 3.8 Litigation. There are no claims, suits, actions, proceedings or
investigations pending or, to the knowledge of the Shareholders, threatened
against, relating to or affecting American, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator,
and there is no basis known to either Shareholder for any of the foregoing,
except as American has previously disclosed to Gateway, in writing. Neither
American nor either Shareholder is subject to any judgment, decree, injunction,
rule or order of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator which prohibits or restricts the
consummation of the transactions contemplated hereby or would have any material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of American.
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SECTION 3.9 Compliance with Laws; Permits. American is not in violation of, nor
has it been given notice of or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance, or judgment (including, without
limitation, any applicable environmental law, ordinance or regulation) of any
governmental or regulatory body or authority. As of the date of this Agreement,
no investigation or review by any governmental or regulatory body or authority
is pending or, to the knowledge of the Shareholders, threatened, nor has any
governmental or regulatory body or authority indicated an intention to conduct
the same. American holds all permits, licenses, certificates and other
authorizations of foreign, federal, state and local governmental agencies
required for the conduct of its business.
SECTION 3.10 Agreements, Contracts and Commitments.
(a) Except as American has previously advised Gateway, in writing,
American is not a party to nor is it bound by:
(i) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or
other organization;
(ii) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property with fixed annual rental
payments in excess of $10,000;
(v) any agreement, contract, commitment or grant containing
any covenant limiting the freedom of American to engage in any line of
business or to compete with any person;
(vi) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000 either
individually or in the aggregate;
(vii) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of American's business;
(viii) any mortgage, indenture, loan or credit agreement,
security agreement or other agreement or instrument relating to the
borrowing of money, the extension of credit or placing of liens on any
assets of American;
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(ix) any guaranty of any obligation for borrowed money or
otherwise;
(x) any purchase order or contract for the purchase of
materials involving in excess of $10,000 either individually or in the
aggregate;
(xi) any dealer, distribution, joint marketing or development
agreement;
(xii) any sales representative, original equipment
manufacturer, value added, remarketing or other agreement for
distribution of American's products or services;
(xiii) any collective bargaining agreement or contract with
any labor union;
(xiv) any bonus, pension, profit sharing, retirement or other
form of deferred compensation plan;
(xv) any medical insurance or similar plan; or
(xvi) any other agreement, contract, commitment or grant
pursuant to which the obligations of any party thereto is in excess of
$10,000.
(b) American is in compliance with and has not breached, violated or
defaulted under, or received notice that it has breached, violated or defaulted
under, any of the terms or conditions of any agreement, contract, grant,
covenant, instrument, lease, license or commitment to which American is a party
or by which its assets are bound (collectively, a "Contract"), nor is either
Shareholder aware of any event that would constitute such a breach, violation or
default with the lapse of time, giving of notice or both. Each Contract is in
full force and effect and is not subject to any default thereunder by any party
obligated to American pursuant thereto. American has obtained, or will obtain
prior to the Closing Date, all necessary consents, waivers and approvals of
parties to any Contract as are required thereunder for such Contracts to remain
in effect without modification or termination after the Closing. Following the
Closing Date, American will be permitted to exercise all of its rights under the
Contracts without the payment of any additional amounts or consideration other
than ongoing fees, royalties or payments which American would otherwise be
required to pay had the transactions contemplated by this Agreement not
occurred.
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SECTION 3.11 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or,
collectively, "Taxes" means (i) any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts; (ii) any liability for the payment of any amounts of the type
described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period; and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii) as a
result of any express or implied obligation to indemnify any other person or as
a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits.
(i) American has prepared and timely filed (or have properly
filed the extensions for) all required federal, state, local and
foreign returns, estimates, information statements and reports
("Returns") relating to any and all Taxes concerning or attributable to
American, its subsidiaries or operations thereof and such Returns are
true and correct and have been completed in accordance with applicable
law.
(ii) American (A) has paid all Taxes it is required to pay and
has withheld with respect to its employees all federal and state income
taxes, Federal Insurance Contribution Act ("FICA"), Federal
Unemployment Tax Act ("FUTA") and other Taxes required to be withheld,
and (B) has accrued on American Financial Statements all Taxes
attributable to the periods covered by American Financial Statements
and has not incurred any liability for Taxes for the period prior to
the Closing Date other than in the ordinary course of business.
(iii) American has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, assessed or proposed
against American by the Internal Revenue Service (the "IRS") or any
other governmental taxing authority, nor has American executed any
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) No audit or other examination of any Return of American
or any of its subsidiaries is presently in progress, nor has American
been notified of any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by American
has been proposed formally or informally by any Tax authority to
American or any representative thereof.
(vi) American has made available to Gateway or its legal
counsel, copies of all federal and state income and all state sales and
use Returns for American filed for the past five (5) years.
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(vii) There are (and immediately following the Closing Date
there will be) no liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests or other encumbrances of any
sort (collectively, "Liens") on the assets of American relating to or
attributable to Taxes other than Liens for Taxes not yet due and
payable.
(viii) Neither Shareholder has any knowledge of any basis for
the assertion of any claim relating or attributable to Taxes, which, if
adversely determined, would result in any Lien on the assets of
American.
(ix) None of American's assets are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Internal Revenue
Code of 1986, as amended (the "Code").
(x) There is no any contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering
any employee or former employee of American that, individually or
collectively, could give rise to the payment of any amount that would
not be deductible by American or its subsidiaries as an expense under
applicable law.
(xi) American has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(4) of the
Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by American or its subsidiaries.
(xii) American is not a party to any tax sharing,
indemnification or allocation agreement nor does American owe any
amount under any such agreement.
SECTION 3.12 Employment.
(a) Except as American has previously advised Gateway, at the date
hereof, American does not maintain, contribute to or have any liability under
any employee benefit plans, programs, arrangements or practices, including
employee benefit plans within the meaning set forth in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any
deferred compensation or retirement plans or arrangements, or other similar
material arrangements for the provision of benefits (excluding any
"Multi-employer Plan" within the meaning of Section 3(37) of ERISA or a
"Multiple Employer Plan" within the meaning of Section 413(c) of the Code).
American does not have any obligation to create any such plan.
(b) With respect to each plan that American has advised Gateway of: (i)
American has performed in all material respects all obligations required to be
performed by it under each such plan and each such plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, rules and regulations, including
but not limited to the Code and ERISA; (ii) there are no actions, suits or
claims pending or, to the knowledge of either Shareholder, threatened (other
than routine claims for benefits) against any such plan; (iii) each such plan
can be amended or terminated after the Closing Date in accordance with its
terms, without liability to American; and (iv) there are no inquiries or
proceedings pending or, to the knowledge of either Shareholder, threatened by
the IRS or the Department of Labor with respect to any such plan.
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(c) At or prior to the Closing, American shall provide to Gateway a
complete and accurate list of the employees for American, including job title,
current compensation, vacation accrued and service credited for purposes of
vesting and eligibility to participate under any pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership, severance pay, insurance, medical,
welfare or vacation plan. No employee of American is a party to, or is otherwise
bound by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such employee and any
other person or entity that in any way adversely affects or will affect (i) the
performance of his or her duties as an employee of American, or (ii) the ability
of American to conduct its business. Neither American nor the Shareholders have
received verbal or written notice that any of the employees identified on such
list will not will not continue their employment relationship with American
after the Closing Date. All employees of American are terminable at will by
American.
SECTION 3.13 Labor Controversies. There are no significant controversies pending
or, to the knowledge of either Shareholder, threatened between American and its
employees. There are no material organizational efforts presently being made
involving any of the presently unorganized employees of American. American has
complied in all material respects with all laws relating to the employment of
labor, including, without limitation, any provisions thereof relating to wages,
hours, and the payment of social security and similar taxes, and no person has
asserted that American is liable in any material amount for any arrears of wages
or any taxes or penalties for failure to comply with any of the foregoing.
SECTION 3.14 Environmental Matters. Except as American has previously advised
and informed Gateway, American (i) has obtained all applicable permits, licenses
and other authorizations which are required under federal, state or local laws
relating to pollution or protection of the environment ("Environmental Laws"),
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants or hazardous or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by American (or its agents); (ii) is in full compliance
with, and not in violation of, any terms and conditions of any required permits,
licenses and authorizations, and any other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in Environmental Laws or in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; (iii) is not aware of nor has it received notice of any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance
with or which would give rise to any Environmental Law or statutory liability,
or otherwise form the basis of any claim, action, suit or proceeding, based on
or resulting from American's (or any agent's) manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge or release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste; (iv) has taken all actions
necessary under applicable requirements of Environmental Laws, rules or
regulations to register any products or materials required to be registered by
American (or its agents) thereunder; and (v) has not transported, stored, used,
manufactured, released, disposed of or handled any hazardous substance or any
product containing a hazardous substance in violation of any Environmental Law.
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SECTION 3.15 Interested Party Transactions. American is not a party to any oral
or written (a) consulting or similar agreement with any present or former
director, officer or employee or any entity controlled by any such person, (b)
agreement with any executive officer or other key employee of American the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving American or any of its
subsidiaries of the nature contemplated by this Agreement or (c) agreement with
respect to any executive officer or other key employee of American providing any
term of employment or compensation guarantee. American is not a party to any
agreement, contract, lease, license, arrangement, or other understanding with
either Shareholder or any employee of American, any relative or affiliate of
either Shareholder or any employee of American, or any other partnership or
enterprise in which either such Shareholder or any employee of American, or any
such relative or affiliate thereof, had or now has a 5% or greater ownership
interest, or other substantial interest, other than contracts or agreements of
which American has previously provided to Gateway.
SECTION 3.16 Insurance. At or prior to the Closing, American shall provide
Gateway with a list of all insurance policies and fidelity bonds covering the
assets, business, equipment, properties, operations, employees, officers and
directors of American. All insurance policies listed are in full force and
effect. There is no claim by American pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and there is no retroactive premium
adjustment obligation of any kind, and the is otherwise in compliance with the
terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). Neither Shareholder has any knowledge
of any threatened termination of, or premium increase with respect to, any of
such policies.
SECTION 3.17 Intellectual Property Rights.
(a) At or prior to the Closing, American shall provide Gateway with a
list of all of American's federal, state and foreign patents, inventions and
discoveries that may be patentable, copyrights, trade names, trademarks, service
marks and all pending applications for any patents or other intellectual
property rights or in which American has any interest whatsoever and all other
trade secrets, know-how, confidential information, customer lists, software,
technical information, data, plans, drawings and blueprints and intellectual
property rights, whether or not registered, created or used by or on behalf of
American, in each case relating to its business (collectively, "American
Intellectual Property Rights").
(b) No person has a right to receive a royalty or similar payment in
respect of any American Intellectual Property Rights. American does not have any
licenses granted, sold or otherwise transferred by or to it or other agreements
to which it is a party, relating in whole or in part to any of American
Intellectual Property Rights, except as American has previously advised Gateway.
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(c) American Intellectual Property Rights are all those necessary for
the operation of the business of American as it is currently conducted. American
is the owner of all right, title, and interest in and to American Intellectual
Property Rights, free and clear of all liens, security interests, charges,
encumbrances and other adverse claims, and has the right to use without payment
to a third party all of American Intellectual Property Rights. All employees of
American that work with or have access to American Intellectual Property Rights
have signed nondisclosure agreements and intellectual property agreements.
(d) None of American Intellectual Property Rights is involved in any
pending or threatened litigation, nor has been the subject of any interference,
opposition or cancellation proceedings. American has not received any notice of
invalidity or infringement of any rights of others with respect to American
Intellectual Property Rights. American has taken all reasonable and prudent
steps to protect American Intellectual Property Rights from infringement by any
other firm, corporation, entity or person. The use of American Intellectual
Property Rights by American is not infringing upon or otherwise violating the
rights of any third party in or to such American Intellectual Property Rights,
nor has any third party alleged any such infringement. All of American
Intellectual Property Rights are valid and enforceable rights of American or a
subsidiary and will not cease to be valid and in full force and effect by reason
of the execution, delivery and performance of this Agreement or the consummation
of the transactions contemplated by this Agreement. To the knowledge of either
Shareholder, there is no infringement by any third party of American
Intellectual Property Rights.
SECTION 3.18 Books and Records. The books of account, minute books, stock record
ledgers and other records of American, all of which have been made available to
Gateway, are complete and correct and have been maintained in accordance with
sound business practices, including the maintenance of an adequate system of
internal controls. The minute books of American contain accurate and complete
records of all meetings held of, and corporate action taken by, the
Shareholders, the Board of Directors and committees of the Board of Directors of
American and no meeting of the Shareholders, Board of Directors, or committee
has been held for which minutes have not been prepared and are not contained in
such minute books.
SECTION 3.19 Title To and Condition of Properties.
(a) American owns good and marketable title to the properties and
assets reflected on American Financial Statements or acquired since the date
thereof, free and clear of all liens and encumbrances, except for (i) liens for
current taxes not yet due and payable, and (ii) assets disposed of since
December 31, 2003, in the ordinary course of business.
(b) (i) American does not own any real estate; (ii) the properties
subject to the real property leases provided to Gateway at or prior to Closing,
constitute all of the real estate used or occupied by American (the "American
Real Estate"), and (iii) American Real Estate has access, sufficient for the
conduct of American's business, to public roads and to all utilities, including
electricity, sanitary and storm sewer, potable water, natural gas and other
utilities, used in the operations of American.
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(c) The real property leases provided to Gateway at or prior to
Closing, are in full force and effect, and American has a valid and existing
leasehold interest under each such lease for the term set forth therein.
American has delivered to Gateway complete and accurate copies of each of the
leases and none of such leases has been modified in any respect, except to the
extent that the copies delivered to Gateway disclose such modifications.
American is not in default, and no circumstances exist which could result in
such default, under any of such leases, nor, to the knowledge of either
Shareholder, is any other party to any of such leases in default.
(d) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of American's business are in good condition
and repair, ordinary wear and tear excepted, and are usable in the ordinary
course of business. A complete list of all items of machinery and equipment used
in the business of American shall be provided to Gateway at or prior to the
Closing. American owns or leases under valid leases, all buildings, machinery,
equipment and other tangible assets necessary for the conduct of its business.
At or prior to the Closing, American shall deliver to Gateway a complete and
accurate copies of all equipment leases. None of such equipment leases has been
modified in any respect, except to the extent that the copies disclose such
modifications delivered to Gateway. American is not in default, and no
circumstances exist which could result in such default, under any of such
equipment leases, nor, to the knowledge of the Shareholder, is any other party
to any of such equipment leases in default.
(e) American is not in any material respect in violation of any
applicable zoning ordinance or other law, regulation or requirement relating to
the operation of any properties used in the operation of its business, and
American has not received any notice of any such violation, or of the existence
of any condemnation proceeding with respect to any properties owned or leased by
American.
SECTION 3.20 Representations Complete. None of the representations or warranties
nor any statement made by either Shareholder in this Agreement or any Schedule
or certificate furnished by the Shareholders pursuant to this Agreement,
contains any untrue statement of a material fact, or omits to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GATEWAY
Gateway hereby represents and warrants to the Shareholders as of the
Closing Date as follows:
SECTION 4.1 Organization and Qualification. Gateway is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has the requisite power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
Gateway is qualified to do business and is in good standing in each jurisdiction
in which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary. True, accurate and
complete copies of Gateway's Articles of Incorporation and By-laws, in each case
as in effect on the date hereof, including all amendments thereto, have
heretofore been delivered to American.
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SECTION 4.2 Capitalization. The authorized capital stock of Gateway consists of
100,000,000 shares of Gateway Common Stock and no shares of preferred stock
("Gateway Preferred Stock"). As of the Closing, there are approximately 31
million shares of Gateway Common Stock issued and outstanding and no shares of
Gateway Preferred Stock outstanding. All of the issued and outstanding shares of
Gateway Common Stock are duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights.
SECTION 4.3 Authority, Non-Contravention, and Approvals.
(a) Gateway has full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. Gateway's
Board of Directors has duly authorized the execution and delivery of this
Agreement, and the consummation by Gateway of the transactions contemplated
hereby, and no other corporate proceedings on the part of Gateway are necessary
to authorize the execution and delivery of this Agreement and the consummation
by Gateway of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Gateway and, assuming the due
authorization, execution and delivery hereof by the Shareholders, constitutes a
valid and binding agreement of Gateway, enforceable against Gateway in
accordance with its terms, except that such enforcement may be subject to (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (b)
general equitable principles.
(b) The execution and delivery of this Agreement by Gateway does not,
and the consummation by Gateway of the transactions contemplated hereby will
not, violate, conflict with or result in a breach of any provision 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 termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Gateway under any
of the terms, conditions or provisions of (i) the charter or by-laws of Gateway,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to Gateway or any of its properties or assets, or (iii) any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which Gateway is now a party or by which Gateway or any of its
properties or assets may be bound or affected.
(c) No declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by
Gateway or the consummation by Gateway of the transactions contemplated hereby.
SECTION 4.4 Absence of Certain Changes or Events. From January 1, 2004 through
the date hereof, there has not been any material adverse change in the business,
operations, properties, assets, liabilities, condition (financial or other),
results of operations or prospects of Gateway and its subsidiaries, taken as a
whole.
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SECTION 4.5 Financial Statements. Gateway shall deliver to American copies of
its financial statements for the fiscal years ending December 31, 2003 and 2002
(the "Gateway Financial Statements"). To the best knowledge of the Board of
Directors of Gateway, the Financial Statements have been prepared on a
consistent basis and fairly and accurately present the financial position of
American as of the dates thereof and the results of operations and changes in
financial position for the periods then ended.
SECTION 4.6 Litigation. There are no claims, suits, actions, proceedings or
investigations pending or, to the knowledge of Gateway, threatened against,
relating to or affecting Gateway or any of its subsidiaries, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator, except as previously disclosed by Gateway to American. Neither
Gateway nor any of its subsidiaries is subject to any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator which prohibits or
restricts the consummation of the transactions contemplated hereby or would have
any material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of Gateway
and its subsidiaries.
SECTION 4.7 Compliance with Laws. Neither Gateway nor any of its subsidiaries is
in violation of, or has been given notice or been charged with any violation of,
any law, statute, order, rule, regulation, ordinance, or judgment (including,
without limitation, any applicable environmental law, ordinance or regulation)
of any governmental or regulatory body or authority, except for violations
which, in the aggregate, do not have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of Gateway and its subsidiaries, taken as a whole. As of
the date of this Agreement, to the knowledge of Gateway, no investigation or
review by any governmental or regulatory body or authority is pending or
threatened, nor has any governmental or regulatory body or authority indicated
an intention to conduct the same.
ARTICLE V
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
CONCERNING THE SHARES
Each Shareholder hereby represents and warrants to Gateway as of the
Closing Date as follows:
SECTION 5.1 Purchase Entirely For Own Account.
This Agreement is made with each Shareholder in reliance upon such
Shareholder's representation to Gateway, which by such Shareholder's execution
of this Agreement such Shareholder hereby confirms, that the Shares to be
acquired by such Shareholder will be acquired for investment for such
Shareholder's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Shareholder has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, each Shareholder further
represents that such Shareholder does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any person, with respect to any of the
Shares.
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SECTION 5.2 Disclosure Of Information.
Each Shareholder believes it or he has received all of the information
it or he considers necessary or appropriate for deciding whether to acquire the
Shares. Each Shareholder further represents that it or he has had an opportunity
to ask questions and receive answers from Gateway regarding the Shares. The
foregoing, however, does not limit or modify the representations and warranties
of Gateway contained in Article 4 or the right of each Shareholder to rely
thereon.
SECTION 5.3 Restricted Securities.
Each Shareholder understands that the Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities Act") by reason of
a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of such Shareholder's representations as expressed
herein. Each Shareholder understands that such unregistered the Shares are
"restricted securities" under applicable U.S. federal and state securities laws
and that, pursuant to these laws, such Shareholder must hold the Shares unless
and until they are registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration and
qualification requirements is available. Each Shareholder acknowledges that
Gateway has no obligation to register or qualify any of the Shares for resale.
Each Shareholder further acknowledges that if an exemption from registration or
qualification is available, such as that under Rule 144 under the Securities
Act, it may be conditioned on various requirements including, but not limited
to, the time and manner of sale, the one (1) year holding period for the Shares,
and on requirements relating to Gateway which are outside of such Shareholder's
control.
SECTION 5.4 Legends.
(a) Each Shareholder understands that the certificates representing the
Shares, and any securities issued in respect of or exchange for the Shares, may
bear one or all of the following legends:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM REASONABLY SATISFACTORY TO THE PURCHASER THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933"; and
(ii) Any legends required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
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ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 Conditions to Obligations of American. The obligation of American to
perform this Agreement is subject to the satisfaction of the following
conditions on or before the Closing unless waived in writing by American.
(a) Representations and Warranties. There shall be no
information disclosed in the schedules delivered by Gateway, which in the
opinion of American would materially adversely affect the proposed transaction
and intent of the parties as set forth in this Agreement. The representations
and warranties of Gateway set forth in Article 4 hereof shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing as though made on and as of the Closing, except as otherwise permitted
by this Agreement.
(b) Performance of Obligations. Gateway shall have in all
material respects performed all agreements required to be performed by it under
this Agreement and shall have performed in all material respects any actions
contemplated by this Agreement prior to or on the Closing and Gateway shall have
complied in all material respects with the course of conduct required by this
Agreement.
(c) Consents. Execution of this Agreement by the shareholders
of American and any consents necessary for or approval of any party listed on
any Schedule delivered by Gateway whose consent or approval is required pursuant
thereto shall have been obtained.
SECTION 6.2 Conditions to Obligations of Gateway. The obligation of Gateway to
perform this Agreement is subject to the satisfaction of the following
conditions on or before the Closing unless waived in writing by Gateway.
(a) Representations and Warranties. There shall be no
information disclosed in the schedules delivered by the Shareholders, which in
the opinion of Gateway, would materially adversely affect the proposed
transaction and intent of the parties as set forth in this Agreement. The
representations and warranties of the Shareholders set forth in Articles 3 and 5
hereof shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing as though made on and as of the Closing, except
as otherwise permitted by this Agreement.
(b) Performance of Obligations. The Shareholders shall have in
all material respects performed all agreements required to be performed by them
under this Agreement and shall have performed in all material respects any
actions contemplated by this Agreement prior to or on the Closing and American
shall have complied in all respects with the course of conduct required by this
Agreement.
(c) Consents. Any consents necessary for or approval of any
party listed on any Schedule delivered by the Shareholders, whose consent or
approval is required pursuant thereto, shall have been obtained.
(d) Statutory Requirements. All statutory requirements for the
valid consummation by the Shareholders of the transactions contemplated by this
Agreement shall have been fulfilled.
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(e) Governmental Approval. All authorizations, consents,
approvals, permits and orders of all federal and state governmental agencies
required to be obtained by American for consummation of the transactions
contemplated by this Agreement shall have been obtained.
ARTICLE VII
MATTERS SUBSEQUENT TO CLOSING
SECTION 7.1 Covenant of Further Assurance. The parties covenant and agree that
they shall, from time to time, execute and deliver or cause to be executed and
delivered all such further instruments of conveyance, transfer, assignments,
receipts and other instruments, and shall take or cause to be taken such further
or other actions as the other party or parties to this Agreement may reasonably
deem necessary in order to carry out the purposes and intent of this Agreement.
ARTICLE VIII
NATURE AND SURVIVAL OF REPRESENTATIONS
SECTION 8.1 All statements contained in any written certificate, schedule,
exhibit or other written instrument delivered by Gateway or American pursuant
hereto, or otherwise adopted by Gateway, by its written approval, or by American
by its written approval, or in connection with the transactions contemplated
hereby, shall be deemed representations and warranties by Gateway or American as
the case may be. All representations, warranties and agreements made by either
party shall survive for the period of the applicable statute of limitations and
until the discovery of any claim, loss, liability or other matter based on
fraud, if longer.
ARTICLE IX
SHAREHOLDERS INDEMNIFICATION
Following the Closing, each of the Shareholders, jointly and severally,
agrees to protect, defend, indemnify and hold Gateway harmless with respect to
any and all claims, demands, suits, actions, administrative proceedings, losses,
damages, obligations, liabilities, costs and expenses, including without
limitation reasonable legal and other costs and expenses of investigating and
defending any actions or threatened actions which arise as a result of or which
are related to any active or passive act, omission, occurrence, event or
condition that occurred prior to the Closing Date in connection with any
misrepresentation or breach of any of the representations, covenants or
warranties of the Shareholders contained herein.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of California excluding the conflicts of
laws.
SECTION 10.2 Notices. All notices necessary or appropriate under this Agreement
shall be effective when personally delivered or deposited in the United States
mail, postage prepaid, certified or registered, return receipt requested, and
addressed to the parties last known address which addresses are currently as
follows:
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If to Gateway If to the Shareholders
Xx. Xxxxx Xxxxxxxx Xx. Xxx Xxxxxxxx
Gateway International Holdings, Inc. All American CNC Sales, Inc.
0000 Xxxx Xxxxx Xxxxx 0000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxxx, Xxxxxxxxxx 00000
SECTION 10.3 Amendment and Waiver. The parties hereby may, by mutual agreement
in writing signed by each party, amend this Agreement in any respect. Any term
or provision of this Agreement may be waived in writing signed by an authorized
officer at any time by the party which is entitled to the benefits thereof, such
waiver right shall include, but not be limited to, the right of either party to:
(a) Extend the time for the performance of any of the
obligations of the other;
(b) Waive any inaccuracies in representations by the other
contained in this Agreement or in any document delivered pursuant
hereto;
(c) Waive compliance by the other with any of the covenants
contained in this Agreement, and performance of any obligations by the
other; and
(d) Waive the fulfillment of any condition that is precedent
to the performance by the party so waiving of any of its obligations
under this Agreement.
Any writing on the part of a party relating to such amendment,
extension or waiver as provided in this Section 10.3 shall be valid if
authorized or ratified by the Board of Directors of such party.
SECTION 10.4 Remedies not Exclusive. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise. The election of any one or more remedies by Gateway or
American shall not constitute a waiver of the right to pursue other available
remedies.
SECTION 10.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 10.6 Benefit. This Agreement shall be binding upon, and inure to the
benefit of, the respective successors and assigns of Gateway and American and
its shareholders.
SECTION 10.7 Entire Agreement. This Agreement and the Schedules and Exhibits
attached hereto, represent the entire agreement of the undersigned regarding the
subject matter hereof, and supersedes all prior written or oral understandings
or agreements between the parties.
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SECTION 10.8 Cost and Expenses. American shall bear all expenses incurred in
connection with the negotiation, execution, closing, and performance of this
Agreement, including counsel fees and accountant fees.
SECTION 10.9 Captions and Section Headings. Captions and section headings used
herein are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
Executed as of the date first written above.
Gateway International Holdings, Inc. All American CNC Sales, Inc.
By: // S // By: // S //
----------------------------------------- -------------------------
Xxxxx Xxxxxxxx, President Xxx Xxxxxxxx, President
The undersigned hereby approves the Share Exchange Agreement with
Gateway International Holdings, Inc. The undersigned hereby represent and
warrant that the undersigned have read the Share Exchange Agreement and
understand its terms and conditions.
Shareholders of Xxxxxxxx/Xxxxx, Inc.
// S // Date: September 28, 2004
--------------------------------------
Xxx Xxxxxxxx
// S // Date: September 28, 2004
--------------------------------------
Xxxxxxx Xxxxxxxx
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