STOCK EXCHANGE AGREEMENT
Agreement dated as of March 31, 2000 between Sangui Biotech International,
Inc., a Colorado corporation ("SGBI"), on the one hand, and MRC Legal Services
LLC ("MRC" or the "Shareholder").
1. THE ACQUISITION.
1.1 Purchase and Sale Subject to the Terms and Conditions of this
Agreement. At the Closing to be held as provided in Section 2, SGBI shall sell
the SGBI Shares (defined below) to the Shareholder and the Shareholder shall
purchase the SGBI Shares from SGBI, free and clear of all Encumbrances other
than restrictions imposed by Federal and State securities laws.
1.2 Purchase Price. SGBI will exchange 100,000 shares of its
restricted common stock (the "SGBI Shares") for 1,461,000 shares of Felnam
Investments, Inc. ("Felnam"), representing 100% of the issued and outstanding
common shares of Felnam (the "Felnam Shares"). The SGBI Shares shall be issued
and delivered to the Shareholder or assigns as set forth in Exhibit "A" hereto.
2. THE CLOSING.
2.1 Place and Time. The closing of the sale and exchange of the SGBI
Shares for the Felnam Shares (the "Closing") shall take place at Xxxxxx Law
Group, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxxx, XX 00000 no later
than the close of business (Orange County California time) on or before April 3,
2000 or at such other place, date and time as the parties may agree in writing.
2.2 Deliveries by the Shareholders. At the Closing, the Shareholder
shall deliver the following to SGBI:
a. Certificates representing the Felnam Shares, duly endorsed for transfer
to SGBI and accompanied by appropriate medallion guaranteed stock powers; the
Shareholder shall immediately change those certificates for, and to deliver to
SGBI at the Closing, a certificate representing the Felnam Shares registered in
the name of SGBI (without any legend or other reference to any Encumbrance other
than appropriate federal securities law limitations).
b. The documents contemplated by Section 3.
c. ll other documents, instruments and writings required by this Agreement
to be delivered by the Shareholder at the Closing and any other documents or
records relating to Felnam's business reasonably requested by SGBI in
connection with this Agreement.
2.3 Deliveries by SGBI. At the Closing, SGBI shall deliver the
following to the Shareholder:
a. The SGBI Shares for further delivery to the Shareholder or assigns as
contemplated by section 1.
b. The documents contemplated by Section 4.
c. All other documents, instruments and writings required by this Agreement
to be delivered by SGBI at the Closing.
3. CONDITIONS TO SGBI'S OBLIGATIONS.
The obligations of SGBI to effect the Closing shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any one or
more of which may be waived by SGBI:
3.1 No Injunction. There shall not be in effect any injunction, order
or decree of a court of competent jurisdiction that prevents the consummation of
the transactions contemplated by this Agreement, that prohibits SGBI's
acquisition of the Felnam Shares or the SGBI Shares or that will require any
divestiture as a result of SGBI's acquisition of the Felnam Shares or that will
require all or any part of the business of SGBI to be held separate and no
litigation or proceedings seeking the issuance of such an injunction, order or
decree or seeking to impose substantial penalties on SGBI or Felnam if this
Agreement is consummated shall be pending.
3.2 Representations, Warranties and Agreements. (a) The
representations and warranties of the Shareholder set forth in this Agreement
shall be true and complete in all material respects as of the Closing Date as
though made at such time, and (b) the Shareholder shall have performed and
complied in all material respects with the agreements contained in this
Agreement required to be performed and complied with by it at or prior to the
Closing.
3.3 Regulatory Approvals. All licenses, authorizations, consents,
orders and regulatory approvals of Governmental Bodies necessary for the
consummation of SGBI's acquisition of the Felnam Shares shall have been obtained
and shall be in full force and effect.
3.4 Resignations of Director. Effective on the Closing Date, all of
officers and directors shall have resigned as an officer, director and employee
of Felnam.
4. CONDITIONS TO THE SHAREHOLDER'S OBLIGATIONS.
The obligations of the Shareholder to effect the Closing shall be subject
to the satisfaction at or prior to the Closing of the following conditions, any
one or more of which may be waived by the Shareholder:
4.1 No Injunction. There shall not be in effect any injunction, order
or decree of a court of competent jurisdiction that prevents the consummation of
the transactions contemplated by this Agreement, that prohibits SGBI's
acquisition of the Felnam Shares or the Shareholder's acquisition of the SGBI
Shares or that will require any divestiture as a result of SGBI's acquisition of
the Shares or the Shareholder's acquisition of the SGBI Shares or that will
require all or any part of the business of SGBI or Felnam to be held separate
and no litigation or proceedings seeking the issuance of such an injunction,
order or decree or seeking to impose substantial penalties on SGBI or Felnam if
this Agreement is consummated shall be pending.
4.2 Representations, Warranties and Agreements. (a) The
representations and warranties of SGBI set forth in this Agreement shall be true
and complete in all material respects as of the Closing Date as though made at
such time, and (b) SGBI shall have performed and complied in all material
respects with the agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing.
4.3 Regulatory Approvals. All licenses, authorizations, consents,
orders and regulatory approvals of Governmental Bodies necessary for the
consummation of SGBI's acquisition of the Felnam Shares and the Shareholder's
acquisition of the SGBI Shares shall have been obtained and shall be in full
force and effect.
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.
The Shareholder represents and warrants to SGBI that, to the Knowledge of
the Shareholder (which limitation shall not apply to Section 5.3), and except as
set forth in an Felnam Disclosure Letter:
5.1 Organization of Felnam; Authorization. Felnam is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Nevada. This Agreement constitutes a valid and binding obligation of
the Shareholder, enforceable against it in accordance with its terms.
5.2 Capitalization. The authorized capital stock of Felnam consists of
75,000,000 authorized shares of stock, par value $.001, and 10,000,000 preferred
shares, of which 1,461,000 common shares are presently issued and outstanding.
No shares have been registered under state or federal securities laws. As of
the Closing Date, all of the issued and outstanding shares of common stock of
Felnam are validly issued, fully paid and non-assessable. As of the Closing
Date there will not be outstanding any warrants, options or other agreements on
the part of Felnam obligating Felnam to issue any additional shares of common or
preferred stock or any of its securities of any kind. Except as otherwise set
forth herein, Felnam will not issue any shares of capital stock from the date of
this Agreement through the Closing Date.
5.3 No Conflict as to Felnam. Neither the execution and delivery of
this Agreement nor the consummation of the sale of the Felnam Shares to SGBI
will (a) violate any provision of the certificate of incorporation or by-laws of
Felnam or (b) violate, be in conflict with, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
any agreement to which Felnam is a party or (c) violate any statute or law or
any judgment, decree, order, regulation or rule of any court or other
Governmental Body applicable to Felnam.
5.4 Ownership of Felnam Shares. The delivery of certificates to SGBI
provided in Section 2.2 will result in SGBI's immediate acquisition of record
and beneficial ownership of the Felnam Shares, free and clear of all
Encumbrances subject to applicable State and Federal securities laws. There are
no outstanding options, rights, conversion rights, agreements or commitments of
any kind relating to the issuance, sale or transfer of any Equity Securities or
other securities of Felnam.
5.5 Consents and Approvals of Governmental Authorities. Except with
respect to applicable State and Federal securities laws, no consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Body is required to be made or obtained by Felnam or SGBI or any of its
Subsidiaries in connection with the execution, delivery and performance of this
Agreement by Felnam or the consummation of the sale of the Felnam Shares to
SGBI.
5.6 Other Consents. No consent of any Person is required to be obtained
by Felnam or SGBI to the execution, delivery and performance of this Agreement
or the consummation of the sale of the Felnam Shares to SGBI, including, but not
limited to, consents from parties to leases or other agreements or commitments,
except for any consent which the failure to obtain would not be likely to have a
material adverse effect on the business and financial condition of Felnam or
SGBI.
5.9 Financial Statements. Felnam has delivered to SGBI the consolidated
balance sheet of Felnam as at December 31, 1998 and December 31, 1999, and
statements of income and changes in financial position for the twelve month
periods then ended and the period from inception to the period then ended,
together with the report thereon of Felnam's independent accountant (the "Felnam
Financial Statements"). The Felnam Financial Statements are accurate and
complete in accordance with generally accepted accounting principles.
5.9 Title to Properties. Felnam owns all the material properties and
assets that it purports to own (real, personal and mixed, tangible and
intangible), including, without limitation, all the material properties and
assets reflected in the Felnam Financial Statements, and all the material
properties and assets purchased or otherwise acquired by Felnam since the date
of the Felnam Financial Statements. All properties and assets reflected in the
Felnam Financial Statements are free and clear of all material Encumbrances and
are not, in the case of real property, subject to any material rights of way,
building use restrictions, exceptions, variances, reservations or limitations of
any nature whatsoever except, with respect to all such properties and assets,
(a) mortgages or security interests shown on the Felnam Financial Statements as
securing specified liabilities or obligations, with respect to which no default
(or event which, with notice or lapse of time or both, would constitute a
default) exists, and all of which are listed in the Felnam Disclosure Letter,
(b) mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Felnam Financial Statements (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event which, with notice or
lapse of time or both, would constitute a default) exists, (c) as to real
property, (i) imperfections of title, if any, none of which materially detracts
from the value or impairs the use of the property subject thereto, or impairs
the operations of Felnam or any of its Subsidiaries and (ii) zoning laws that
do not impair the present or anticipated use of the property subject thereto,
and (d) liens for current taxes not yet due. The properties and assets of
Felnam and its Subsidiaries include all rights, properties and other assets
necessary to permit Felnam and its Subsidiaries to conduct Felnam's business
in all material respects in the same manner as it is conducted on the date of
this Agreement.
5.10 Buildings, Plants and Equipment. The buildings, plants, structures and
material items of equipment and other personal property owned or leased by
Felnam are, in all respects material to the business or financial condition of
Felnam and its Subsidiaries, taken as a whole, in good operating condition and
repair (ordinary wear and tear excepted) and are adequate in all such respects
for the purposes for which they are being used.
5.11 Litigation. There is no action, suit, inquiry, proceeding or
investigation by or before any court or Governmental Body pending or threatened
in writing against or involving Felnam which is likely to have a material
adverse effect on the business or financial condition of Felnam, SGBI and any
of their Subsidiaries, taken as whole, or which would require a payment by
Felnam in excess of $2,000 in the aggregate or which questions or challenges
the validity of this Agreement. Felnam is not subject to any judgment, order or
decree that is likely to have a material adverse effect on the business or
financial condition of Felnam, SGBI or any of their Subsidiaries, taken as a
whole, or which would require a payment by Felnam in excess of $2,000 in the
aggregate.
5.12 Absence of Certain Changes. Since the date of the Felnam Financial
Statements, Felnam has not:
a. suffered the damage or destruction of any of its properties or assets
(whether or not covered by insurance) which is materially adverse to the
business or financial condition of Felnam or made any disposition of any of its
material properties or assets other than in the ordinary course of business;
b. made any change or amendment in its certificate of incorporation or
by-laws, or other governing instruments;
c. issued or sold any Equity Securities or other securities, acquired,
directly or indirectly, by redemption or otherwise, any such Equity Securities,
reclassified, split-up or otherwise changed any such Equity Security, or granted
or entered into any options, warrants, calls or commitments of any kind with
respect thereto;
d. organized any new Subsidiary or acquired any Equity Securities of any
Person or any equity or ownership interest in any business;
e. borrowed any funds or incurred, or assumed or become subject to, whether
directly or by way of guarantee or otherwise, any obligation or liability with
respect to any such indebtedness for borrowed money;
f. paid, discharged or satisfied any material claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than in the ordinary course
of business;
g. prepaid any material obligation having a maturity of more than 90 days
from the date such obligation was issued or incurred;
h. canceled any material debts or waived any material claims or rights,
except in the ordinary course of business;
i. disposed of or permitted to lapse any rights to the use of any material
patent or registered trademark or copyright or other intellectual property owned
or used by it;
j. granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any employee benefit plan);
k. purchased or entered into any contract or commitment to purchase any
material quantity of raw materials or supplies, or sold or entered into any
contract or commitment to sell any material quantity of property or assets,
except (i) normal contracts or commitments for the purchase of, and normal
purchases of, raw materials or supplies, made in the ordinary course business,
(ii) normal contracts or commitments for the sale of, and normal sales of,
inventory in the ordinary course of business, and (iii) other contracts,
commitments, purchases or sales in the ordinary course of business;
l. made any capital expenditures or additions to property, plant or
equipment or acquired any other property or assets (other than raw materials and
supplies) at a cost in excess of $100,000 in the aggregate;
m. written off or been required to write off any notes or accounts
receivable in an aggregate amount in excess of $2,000;
n. written down or been required to write down any inventory in an
aggregate amount in excess of $ 2,000;
o. entered into any collective bargaining or union contract or agreement;
or
p. other than the ordinary course of business, incurred any liability
required by generally accepted accounting principles to be reflected on a
balance sheet and material to the business or financial condition of Felnam.
5.13 No Material Adverse Change. Since the date of the Felnam Financial
Statements, there has not been any material adverse change in the business or
financial condition of Felnam.
5.14 Contracts and Commitments. Felnam is not a party to any:
a. Contract or agreement (other than purchase or sales orders entered into
in the ordinary course of business) involving any liability on the part of
Felnam of more than $2,000 and not cancelable by Felnam (without liability to
Felnam) within 60 days;
b. Lease of personal property involving annual rental payments in excess of
$2,000 and not cancelable by Felnam (without liability to Felnam) within 90
days;
c. Employee bonus, stock option or stock purchase, performance unit,
profit-sharing, pension, savings, retirement, health, deferred or incentive
compensation, insurance or other material employee benefit plan (as defined in
Section 2(3) of ERISA) or program for any of the employees, former employees or
retired employees of Felnam;
d. Commitment, contract or agreement that is currently expected by the
management of Felnam to result in any material loss upon completion or
performance thereof;
e. Contract, agreement or commitment that is material to the business of
Felnam with any officer, employee, agent, consultant, advisor, salesman, sales
representative, value added reseller, distributor or dealer; or
f. Employment agreement or other similar agreement that contains any
severance or termination pay, liabilities or obligations.
All such contracts and agreements are in full force and effect. Felnam is not in
breach of, in violation of or in default under, any agreement, instrument,
indenture, deed of trust, commitment, contract or other obligation of any type
to which Felnam is a party or is or may be bound that relates to the business of
Felnam or to which any of the assets or properties of Felnam is subject, the
effect of which breach, violation or default is likely to materially and
adversely affect the business or financial condition of Felnam. SGBI has not
guaranteed or assumed and specifically does not guarantee or assume any
obligations of Felnam.
5.15 Compliance with Law. The operations of Felnam have been conducted in
accordance with all applicable laws and regulations of all Governmental Bodies
having jurisdiction over it, except for violations thereof which are not likely
to have a material adverse effect on the business or financial condition of
Felnam or which would not require a payment by Felnam in excess of $2,000 in
the aggregate, or which have been cured. Felnam has not received any
notification of any asserted present or past failure by it to comply with any
such applicable laws or regulations. Felnam has all material licenses, permits,
orders or approvals from the Governmental Bodies required for the conduct of its
business, and is not in material violation of any such licenses, permits, orders
and approvals. All such licenses, permits, orders and approvals are in full
force and effect, and no suspension or cancellation of any thereof has been
threatened.
5.16 Tax Matters.
a. Felnam (1) has filed all nonconsolidated and noncombined Tax Returns and
all consolidated or combined Tax Returns required to be filed through the date
hereof and has paid any Tax due through the date hereof with respect to the time
periods covered by such Tax Returns and shall timely pay any such Taxes required
to be paid by it after the date hereof with respect to such Tax Returns and (2)
shall prepare and timely file all Tax Returns required to be filed after the
date hereof and through the Closing Date and pay all Taxes required to be paid
by it with respect to the periods covered by such Tax Returns; (B) all such Tax
Returns filed pursuant to clause (A) after the date hereof shall, in each case,
be prepared and filed in a manner consistent in all material respects (including
elections and accounting methods and conventions) with such Tax Return most
recently filed in the relevant jurisdiction prior to the date hereof, except as
otherwise required by law or regulation. Any such Tax Return filed or required
to be filed after the date hereof shall not reflect any new elections or the
adoption of any new accounting methods or conventions or other similar items,
except to the extent such particular reflection or adoption is required to
comply with any law or regulation.
b. All Tax Returns (except those described in subparagraph (a) above)
required to be filed by any person through the date hereof that are required or
permitted to include the income, or reflect the activities, operations and
transactions, of Felnam for any taxable period have been timely filed, and the
income, activities, operations and transactions of Felnam have been properly
included and reflected thereon. Felnam shall prepare and file, or cause to be
prepared and filed, all such Tax Returns that are required or permitted to
include the income, or reflect the activities, operations and transactions, of
Felnam with respect to any taxable year or the portion thereof ending on or
prior to the Closing Date, including, without limitation, Felnam's consolidated
federal income tax return for such taxable years. Felnam will timely file a
consolidated federal income tax return for the taxable year ended December 31,
1999 and such return shall include and reflect the income, activities,
operations and transactions of Felnam for the taxable period then ended, and
hereby expressly covenants and agrees to file a federal income tax return, and
to include and reflect thereon the income, activities, operations and
transactions of Felnam for the taxable period through the Closing Date. All Tax
Returns filed pursuant to this subparagraph (b) after the date hereof shall, in
each case, to the extent that such Tax Returns specifically relate to Felnam or
any of its Subsidiaries and do not generally relate to matters affecting other
members of Felnam's consolidated group, be prepared and filed in a manner
consistent in all material respects (including elections and accounting methods
and conventions) with the Tax Return most recently filed in the relevant
jurisdictions prior to the date hereof, except as otherwise required by law or
regulation. Felnam has paid or will pay all Taxes that may now or hereafter be
due with respect to the taxable periods covered by such consolidated or combined
Tax Returns.
c. Felnam has not agreed, or is not required, to make any adjustment (x)
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise or (y) pursuant to any provision of the Tax Reform Act of 1986, the
Revenue Act of 1987 or the Technical and Miscellaneous Revenue Act of 1988.
d. Neither Felnam nor any Affiliate has, at any time, filed a consent under
Section 341(f)(1) of the Code, or agreed under Section 341(f)(3) of the Code, to
have the provisions of Section 341(f)(2) of the Code apply to any sale of its
stock.
e. There is no (nor has there been any request for an) agreement, waiver or
consent providing for an extension of time with respect to the assessment of any
Taxes attributable to Felnam or its assets or operations and no power of
attorney granted by Felnam with respect to any Tax matter is currently in force.
f. There is no action, suit, proceeding, investigation, audit, claim,
demand, deficiency or additional assessment in progress, pending or threatened
against or with respect to any Tax attributable to Felnam or its assets or
operations.
g. All amounts required to be withheld as of the Closing Date for Taxes or
otherwise have been withheld and paid when due to the appropriate agency or
authority.
h. No property of Felnam is "tax-exempt use property " within the meaning of
Section 168(h) of the Code nor property that Felnam will be required to treat as
being owned by another person pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to SGBI true and complete
copies of all income Tax Returns (or with respect to consolidated or combined
returns, the portion thereof) and any other Tax Returns requested by SGBI as may
be relevant to Felnam or its assets or operations for any and all periods ending
after December 31, 1998, or for any Tax years which are subject to audit or
investigation by any taxing authority or entity.
j. There is no contract, agreement, plan or arrangement, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of Felnam or its Subsidiaries that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
Section 280G or 162 of the Code.
k. Felnam has no liabilities not disclosed in the Felnam Financial
Statements or otherwise.
5.18 Representations and Warranties. None of the representations or
warranties made by Felnam herein or in any Schedule hereto, or in any
certificate furnished by Felnam pursuant to this Agreement, or the Felnam
Financial Statements, when all such documents are read in their entirety,
contains or will contain at the time of closing any untrue statement of a
material fact, or omits or will omit at that time 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.
5.17 Brokers or Finders. Felnam has not employed any broker or finder or
incurred any liability for any brokerage or finder's fees or commissions or
similar payments in connection with the sale of the Felnam Shares to SGBI.
6. REPRESENTATIONS AND WARRANTIES OF SGBI.
SGBI represents and warrants to the Shareholder that, to the Knowledge of
SGBI (which limitation shall not apply to Section 6.3). Such representations
and warranties shall survive the Closing for a period of two years.
6.1 Organization of SGBI; Authorization. SGBI is a corporation duly
organized, validly existing and in good standing under the laws of Colorado with
full corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate action of
SGBI and this Agreement constitutes a valid and binding obligation of SGBI;
enforceable against it in accordance with its terms.
6.2 Capitalization. The authorized capital stock of SGBI consists of
50,000,000 shares of common stock, no par value, and 5,000,000 shares of
non-voting preferred stock. As of the date of this Agreement, SGBI had
40,334,360 shares of common stock issued and outstanding and no shares of of
Preferred Stock issued and outstanding. As of the Closing Date, all of the
issued and outstanding shares of common stock of SGBI are validly issued, fully
paid and non-assessable. The Common Stock of SGBI is presently listed and
trading on the Nasdaq Over-the-Counter Bulletin Board under the symbol "SGBIE."
6.3 Ownership of SGBI Shares. The delivery of certificates to Felnam
provided in Section 2.3 will result in the Shareholder or assigns immediate
acquisition of record and beneficial ownership of the SGBI Shares, free and
clear of all Encumbrances other than as required by Federal and State securities
laws.
6.4 No Conflict as to SGBI and Subsidiaries. Neither the execution and
delivery of this Agreement nor the consummation of the sale of the SGBI Shares
to the Shareholders will (a) violate any provision of the certificate of
incorporation or by-laws (or other governing instrument) of SGBI or any of its
Subsidiaries or (b) violate, or be in conflict with, 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 excuse performance by any Person of any of its obligations
under, or cause the acceleration of the maturity of any debt or obligation
pursuant to, or result in the creation or imposition of any Encumbrance upon any
property or assets of SGBI or any of its Subsidiaries under, any material
agreement or commitment to which SGBI or any of its Subsidiaries is a party or
by which any of their respective property or assets is bound, or to which any of
the property or assets of SGBI or any of its Subsidiaries is subject, or (c)
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or other Governmental Body applicable to SGBI or any of its
Subsidiaries except, in the case of violations, conflicts, defaults,
terminations, accelerations or Encumbrances described in clause (b) of this
Section 6.4, for such matters which are not likely to have a material adverse
effect on the business or financial condition of SGBI and its Subsidiaries,
taken as a whole.
6.5 Consents and Approvals of Governmental Authorities. No consent,
approval or authorization of, or declaration, filing or registration with, any
Governmental Body is required to be made or obtained by SGBI or any of either of
their Subsidiaries in connection with the execution, delivery and performance of
this Agreement by SGBI or the consummation of the sale of the SGBI Shares to the
Shareholders.
6.6 Other Consents. No consent of any Person is required to be obtained
by Felnam or SGBI to the execution, delivery and performance of this Agreement
or the consummation of the sale of the SGBI Shares to the Shareholders,
including, but not limited to, consents from parties to leases or other
agreements or commitments, except for any consent which the failure to obtain
would not be likely to have a material adverse effect on the business and
financial condition of Felnam or SGBI.
6.7 Financial Statements. Prior to closing, SGBI shall have delivered
to the Shareholder audited consolidated balance sheets of SGBI and its
Subsidiaries as at December 31, 1998 and June 30, 1999, and statements of income
and changes in financial position for each of the twelve month periods then
ended, together with the report thereon of SGBI's independent accountant, as
well as the unaudited consolidated balance sheet of SGBI and its Subsidiaries as
at December 31, 1999 and statements of income and changes in financial position
for the six month period then ended (the "SGBI Financial Statements"). Such SGBI
Financial Statements and notes fairly present the consolidated financial
condition and results of operations of SGBI and its Subsidiaries as at the
respective dates thereof and for the periods therein referred to, all in
accordance with generally accepted United States accounting principles
consistently applied throughout the periods involved, except as set forth in the
notes thereto, and shall be utilizable in any SEC filing in compliance with Rule
310 of Regulation S-B promulgated under the Securities Act.
6.8 Brokers or Finders. Other than MRC Legal Services LLC, SGBI has not
employed any broker or finder or incurred any liability for any brokerage or
finder's fees or commissions or similar payments in connection with the sale of
the SGBI Shares to the Shareholders.
6.9 Purchase for Investment. SGBI is purchasing the Felnam Shares
solely for its own account for the purpose of investment and not with a view to,
or for sale in connection with, any distribution of any portion thereof in
violation of any applicable securities law.
7. Access and Reporting; Filings With Governmental Authorities; Other
Covenants.
7.1 Access Between the date of this Agreement and the Closing Date.
Each of the Shareholder and SGBI shall (a) give to the other and its authorized
representatives reasonable access to all plants, offices, warehouse and other
facilities and properties of Felnam or SGBI, as the case may be, and to its
books and records, (b) permit the other to make inspections thereof, and (c)
cause its officers and its advisors to furnish the other with such financial and
operating data and other information with respect to the business and properties
of such party and its Subsidiaries and to discuss with such and its authorized
representatives its affairs and those of its Subsidiaries, all as the other may
from time to time reasonably request.
7.2 Regulatory Matters. The Shareholder and SGBI shall (a) file with
applicable regulatory authorities any applications and related documents
required to be filed by them in order to consummate the contemplated transaction
and (b) cooperate with each other as they may reasonably request in connection
with the foregoing.
8. CONDUCT OF FELNAM'S BUSINESS PRIOR TO THE CLOSING. The Shareholder shall
use its best efforts to ensure the following:
8.1 Operation in Ordinary Course. Between the date of this Agreement
and the Closing Date, Felnam shall cause conduct its businesses in all material
respects in the ordinary course.
8.2 Business Organization. Between the date of this Agreement and the
Closing Date, Felnam shall (a) preserve substantially intact the business
organization of Felnam; and (b) preserve in all material respects the present
business relationships and good will of Felnam.
8.3 Corporate Organization. Between the date of this Agreement and the
Closing Date, Felnam shall not cause or permit any amendment of its certificate
of incorporation or by-laws (or other governing instrument) and shall not:
a. issue, sell or otherwise dispose of any of its Equity Securities, or
create, sell or otherwise dispose of any options, rights, conversion rights or
other agreements or commitments of any kind relating to the issuance, sale or
disposition of any of its Equity Securities;
b. create or suffer to be created any Encumbrance thereon, or create, sell
or otherwise dispose of any options, rights, conversion rights or other
agreements or commitments of any kind relating to the sale or disposition of any
Equity Securities;
c. reclassify, split up or otherwise change any of its Equity Securities;
d. be party to any merger, consolidation or other business combination;
e. sell, lease, license or otherwise dispose of any of its properties or
assets (including, but not limited to rights with respect to patents and
registered trademarks and copyrights or other proprietary rights), in an amount
which is material to the business or financial condition of Felnam except in the
ordinary course of business; or
f. organize any new Subsidiary or acquire any Equity Securities of any
Person or any equity or ownership interest in any business.
8.4 Other Restrictions. Between the date of this Agreement and the
Closing Date, Felnam shall not:
a. borrow any funds or otherwise become subject to, whether directly or by
way of guarantee or otherwise, any indebtedness for borrowed money;
b. create any material Encumbrance on any of its material properties or
assets;
c. increase in any manner the compensation of any director or officer or
increase in any manner the compensation of any class of employees;
d. create or materially modify any material bonus, deferred compensation,
pension, profit sharing, retirement, insurance, stock purchase, stock option, or
other fringe benefit plan, arrangement or practice or any other employee benefit
plan (as defined in section 3(3) of ERISA);
e. make any capital expenditure or acquire any property or assets;
f. enter into any agreement that materially restricts SGBI, Felnam or any of
their Subsidiaries from carrying on business;
g. pay, discharge or satisfy any material claim, liability or obligation,
absolute, accrued, contingent or otherwise, other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities or obligations
reflected in the Felnam Financial Statements or incurred in the ordinary course
of business and consistent with past practice since the date of the Felnam
Financial Statements; or
h. cancel any material debts or waive any material claims or rights.
9. DEFINITIONS.
As used in this Agreement, the following terms have the meanings specified
or referred to in this Section 9.
9.1 "Business Day" C Any day that is not a Saturday or Sunday or a day
on which banks located in the City of New York are authorized or required to be
closed.
9.2 "Code" C The Internal Revenue Code of 1986, as amended.
9.3 "Encumbrances" C Any security interest, mortgage, lien, charge,
adverse claim or restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership, other than a restriction on transfer arising under
Federal or state securities laws.
9.4 "Equity Securities" C See Rule 3aB11B1 under the Securities
Exchange Act of 1934.
9.5 "ERISA" C The Employee Retirement Income Security Act of 1974, as
amended.
9.6 "Governmental Body" C Any domestic or foreign national, state or
municipal or other local government or multi-national body (including, but not
limited to, the European Economic Community), any subdivision, agency,
commission or authority thereof.
9.7 "Knowledge" C Actual knowledge, after reasonable investigation.
9.8 "Person" C Any individual, corporation, partnership, joint venture,
trust, association, unincorporated organization, other entity, or Governmental
Body.
9.9 "Subsidiary" C With respect to any Person, any corporation of which
securities having the power to elect a majority of that corporation's Board of
Directors (other than securities having that power only upon the happening of a
contingency that has not occurred) are held by such Person or one or more of its
Subsidiaries.
10. TERMINATION.
10.1 Termination. This Agreement may be terminated before the Closing
occurs only as follows:
a. By written agreement of the Shareholder and SGBI at any time.
b. By SGBI, by notice to the Shareholders at any time, if one or more of the
conditions specified in Section 3 is not satisfied at the time at which the
Closing (as it may be deferred pursuant to Section 2.1) would otherwise occur or
if satisfaction of such a condition is or becomes impossible.
c. By the Shareholder, by notice to SGBI at any time, if one or more of the
conditions specified in Section 4 is not satisfied at the time at which the
Closing (as it may be deferred pursuant to Section 2.1), would otherwise occur
of if satisfaction of such a condition is or becomes impossible.
d. By either the Shareholders or SGBI, by notice to the other at any time
after April 5, 2000, if the transaction has not been completed.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, this Agreement shall terminate without any liability or further
obligation of any party to another.
13. NOTICES. All notices, consents, assignments and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given when (a) delivered by hand, (b) sent by telex or facsimile (with receipt
confirmed), provided that a copy is mailed by registered mail, return receipt
requested, or (c) received by the delivery service (receipt requested), in each
case to the appropriate addresses, telex numbers and facsimile numbers set forth
below (or to such other addresses, telex numbers and facsimile numbers as a
party may designate as to itself by notice to the other parties).
(a) If to SGBI:
0000 Xxxxxxxxxxx Xxxxx
Xxxxx Xxx, XX 00000
Attn: Joerg Alte, President
Facsimile
(b) If to the Shareholder:
c/o Cutler Law Group
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: M. Xxxxxxx Xxxxxx, Esq.
14. MISCELLANEOUS.
14.2 Expenses. Each party shall bear its own expenses incident to the
preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder.
14.3 Captions. The captions in this Agreement are for convenience of
reference only and shall not be given any effect in the interpretation of this
agreement.
14.4 No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
14.5 Exclusive Agreement; Amendment. This Agreement supersedes all prior
agreements among the parties with respect to its subject matter with respect
thereto and cannot be changed or terminated orally.
14.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
14.7 Governing Law, Venue. This Agreement and (unless otherwise provided)
all amendments hereof and waivers and consents hereunder shall be governed by
the internal law of the State of California, without regard to the conflicts of
law principles thereof. Venue for any cause of action brought to enforce any
part of this Agreement shall be in Orange County, California.
14.8 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns,
provided that neither party may assign its rights hereunder without the consent
of the other, provided that, after the Closing, no consent of Felnam shall be
needed in connection with any merger or consolidation of SGBI with or into
another entity.
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement
to be executed by their respective offi-cers, hereunto duly authorized, and
entered into as of the date first above written.
SANGUI BIOTECH INTERNATIONAL, INC.
a Colorado corporation
/s/ Joerg Alte
_______________________________________________
By: Joerg Alte, President
MRC LEGAL SERVICES LLC
/s/ M. Xxxxxxx Xxxxxx
_______________________________________________
By: M. Xxxxxxx Xxxxxx, President
EXHIBIT A
FELNAM SHAREHOLDER AND ASSIGNS
MRC Legal Services LLC 58,500 shares
Xxxxx Xxxxxxx 10,000 shares
Xxxxx X. Xxxxxxxx 18,000 shares
Vi Xxx 13,500 shares
