SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT, dated as of June 16, 2003 (the "Agreement"),
among Northwest Gold, Inc., a Wyoming corporation ("NWGD"), and U.S. Energy
Corporation, a Wyoming corporation (the "NWGD Shareholder") on the one hand, and
Pogo! Products, Inc., a California corporation (the "Company") and the
stockholders of the Company set forth on the signature pages to this Agreement
(the "Sellers") on the other hand. NWGD, the NWGD Shareholder, the Sellers and
the Company are collectively referred to herein as the "Parties." NWGD and the
NWGD Shareholder are sometimes referred to herein collectively as the "NWGD
Parties."
RECITALS:
---------
WHEREAS, the Sellers own 100% of the shares of the capital stock of the
Company, in the denominations as set forth opposite their respective names on
Schedule I to this Agreement which shares constitute all of the issued and
outstanding shares of capital stock of the Company (the "Company Shares").
WHEREAS, NWGD desires to acquire from the Sellers, and the Sellers desire
to sell to NWGD, all of the Company Shares in exchange (the "Exchange") for the
issuance by NWGD of an aggregate of 12,000,000 shares (the "NWGD Shares") of
NWGD's common stock, $0.001 par value per share (the "NWGD Common Stock") to be
issued to the Sellers and their designees, on the terms and conditions set forth
below, which, after giving effect to (a) the Exchange, and (b) the subsequent
cancellation of 3,809,794 shares (the "Cancellation") will represent 75% of the
issued and outstanding shares of the capital stock of the Company on a fully
diluted basis.
WHEREAS, the NWGD Shareholder is the principal shareholder of NWGD and will
benefit from the transactions contemplated herein;
WHEREAS, it is intended that, for federal income tax purposes, the Exchange
shall qualify as a reorganization under the provisions of Section 368(b) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, the Company, the Sellers and the NWGD Parties desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement; and
WHEREAS, NWGD currently has 7,809,794 shares of Common Stock issued and
outstanding. After giving effect to the Exchange, and the subsequent
Cancellation following the Closing (as more fully set forth in Section 11.1
below), NWGD shall have 16,000,000 shares of Common Stock outstanding.
NOW, THEREFORE, in consideration of the premises and mutual promises herein
made, and in consideration of the representations, warranties, covenants and
agreements herein contained, and intending to be legally bound hereby, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Definitions. The following terms shall, when used in this
Agreement, have the following meanings:
"Affiliate" means, with respect to any Person: (i) any Person directly or
indirectly owning, controlling, or holding with power to vote 10% or more of the
outstanding voting securities of such other Person (other
than passive or institutional investors); (ii) any Person 10% or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or
held with power to vote, by such other Person; (iii) any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person; and (iv) any officer, director or partner of such other Person.
"Control" for the foregoing purposes shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities or
voting interests, by contract or otherwise.
"Business Day" means any day other than Saturday, Sunday or a day on which
banking institutions in Los Angeles are required or authorized to be closed.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Collateral Documents" mean the Exhibits and any other documents,
instruments and certificates to be executed and delivered by the Parties
hereunder.
"Commission" means the Securities and Exchange Commission or any Regulatory
Authority that succeeds to its functions.
"Company Assets" mean all properties, assets, privileges, powers, rights,
interests and claims of every type and description that are owned, leased, held,
used or useful in the Company Business and in which the Company has any right,
title or interest or in which the Company acquires any right, title or interest
on or before the Closing Date, wherever located, whether known or unknown, and
whether or not now or on the Closing Date on the books and records of the
Company, but excluding any of the foregoing, if any, transferred prior to the
Closing pursuant to this Agreement or any Collateral Documents.
"Company Business" means the development, marketing and distribution of
personal hand-held digital audio and video products, which are manufactured in
Far East Asia.
"Company Common Stock" means the common shares of the Company.
"Company Shareholders" means, as of any particular date, the holders of
Company Common Stock on that date.
"Encumbrance" means any material mortgage, pledge, lien, encumbrance,
charge, security interest, security agreement, conditional sale or other title
retention agreement, limitation, option, assessment, restrictive agreement,
restriction, adverse interest, restriction on transfer or exception to or
material defect in title or other ownership interest (including restrictive
covenants, leases and licenses).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"NWGD Assets" mean all properties, assets, privileges, powers, rights,
interests and claims of every type and description that are owned, leased, held,
used or useful in the NWGD Business and in which NWGD holds title or any
interest or in which NWGD acquires any right, title or interest on or before the
Closing Date, wherever located, whether known or unknown, and whether or not now
or on the Closing Date on the books and records of NWGD.
"NWGD Business" means the business conducted by NWGD.
2
"NWGD Common Stock" means the common shares of NWGD, $0.001 par value.
"NWGD Securities Filings" means NWGD's annual report on Form 10-KSB for the
seven month transition period ended December 31, 2002, its quarterly reports on
Form 10-QSB, and all other reports filed and to be filed with the Commission
prior to the Effective Time.
"Legal Requirement" means any statute, ordinance, law, rule, regulation,
code, injunction, judgment, order, decree, ruling, or other requirement enacted,
adopted or applied by any Regulatory Authority, including judicial decisions
applying common law or interpreting any other Legal Requirement.
"Losses" shall mean all damages, awards, judgments, assessments, fines,
sanctions, penalties, charges, costs, expenses, payments, diminutions in value
and other losses, however suffered or characterized, all interest thereon, all
costs and expenses of investigating any claim, lawsuit or arbitration and any
appeal therefrom, all actual attorneys', accountants', investment bankers' and
expert witness' fees incurred in connection therewith, whether or not such
claim, lawsuit or arbitration is ultimately defeated and, subject to Section
9.4, all amounts paid incident to any compromise or settlement of any such
claim, lawsuit or arbitration.
"Liability" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means a material adverse effect on (i) the
assets, Liabilities, properties or business of the Parties, (ii) the validity,
binding effect or enforceability of this Agreement or the Collateral Documents
or (iii) the ability of any Party to perform its obligations under this
Agreement and the Collateral Documents; provided, however, that none of the
following shall constitute a Material Adverse Effect on the Company: (i) the
filing, initiation and subsequent prosecution, by or on behalf of shareholders
of any Party, of litigation that challenges or otherwise seeks damages with
respect to the Exchange, this Agreement and/or transactions contemplated thereby
or hereby, (ii) occurrences due to a disruption of a Party's business as a
result of the announcement of the execution of this Agreement or changes caused
by the taking of action required by this Agreement, (iii) general economic
conditions, or (iv) any changes generally affecting the industries in which a
Party operates.
"Exchange Shares" means the shares of NWGD Common Stock deliverable by NWGD
in exchange for Company Common Stock pursuant to Section 2.1.
"Person" means any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company, Regulatory
Authority or other entity.
"Regulatory Authority" means: (i) the United States of America; (ii) any
state, commonwealth, territory or possession of the United States of America and
any political subdivision thereof (including counties, municipalities and the
like); (iii) any foreign (as to the United States of America) sovereign entity
and any political subdivision thereof; or (iv) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
"Representative" means any director, officer, employee, agent, consultant,
advisor or other representative of a Person, including legal counsel,
accountants and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
3
"Subsidiary" of a specified Person means (a) any Person if securities
having ordinary voting power (at the time in question and without regard to the
happening of any contingency) to elect a majority of the directors, trustees,
managers or other governing body of such Person are held or controlled by the
specified Person or a Subsidiary of the specified Person; (b) any Person in
which the specified Person and its subsidiaries collectively hold a 50% or
greater equity interest; (c) any partnership or similar organization in which
the specified Person or subsidiary of the specified Person is a general partner;
or (d) any Person the management of which is directly or indirectly controlled
by the specified Person and its Subsidiaries through the exercise of voting
power, by contract or otherwise.
"Tax" means any U.S. or non U.S. federal, state, provincial, local or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, intangible property,
recording, occupancy, sales, use, transfer, registration, value added minimum,
estimated or other tax of any kind whatsoever, including any interest, additions
to tax, penalties, fees, deficiencies, assessments, additions or other charges
of any nature with respect thereto, whether disputed or not.
1.2 Other Definitions. The following terms shall, when used in this
Agreement, have the meanings assigned to such terms in the Sections indicated.
Term
Location
"Agreement"......................................................... Preamble
"Closing"........................................................... 2.1
"Closing Date"...................................................... 2.1
"Company Certificates".............................................. 2.7(a)
"Company Financial Statements"...................................... 3.8
"Company Intellectual Property Rights".............................. 3.6
"Company Shares".................................................... Recitals
"Exchange".......................................................... Recitals
"NWGD Parties"...................................................... Preamble
"Material Company Contract"......................................... 3.4
"Material NWGD Contract"............................................ 4.4
"Options"........................................................... 3.2(b)
"Parties"........................................................... Preamble
"NWGD Common Stock"................................................. Recitals
"Sellers"........................................................... Recitals
ARTICLE II
EXCHANGE OF SHARES AND ISSUANCE OF WARRANTS
-------------------------------------------
2.1 Exchange of Shares. Subject to the terms and conditions of this
Agreement, on the Closing Date (as hereinafter defined):
(a) NWGD shall issue and deliver to each of the Sellers and their
designees the number of authorized but unissued shares of NWGD Common Stock set
forth opposite such Seller's and designee's names set forth on Exhibit A hereto,
and
4
(b) each Seller agrees to deliver to the Company, the number of
issued shares of the Company set forth opposite such Seller's name on Schedule I
hereto along with an appropriately executed stock power endorsed in favor of the
Company, and
(c) NWGD shall file Articles of Share Exchange with the Wyoming
Secretary of State, and
(d) The Company shall make such reciprocal filing as may be
required with the California Secretary of State.
2.2 Issuance of Warrants. On the eleventh day after Closing, NWGD
shall issue to the NWGD Shareholder warrants to purchase 500,000 restricted
shares of common stock of NWGD, with an exercise price of $1.00 per share,
exercisable for two years after Closing. These warrants are additional
consideration to the NWGD Shareholder to enter into this Agreement. The form of
warrants shall be in form reasonably acceptable to the NWGD Shareholder.
2.3 Restrictive Legend. All certificates representing the Exchange
Shares shall contain a legend in customary form restricting transfer under the
1933 Act absent registration with the Commission therefor, or available
exemption:
2.3 Closing. The closing of the transactions contemplated by this
Agreement and the Collateral Documents ("Closing") shall take place at the
offices of NWGD, or at such other location as the parties may agree on or before
June 13, 2003, at 11:00 a.m., Mountain Time, it being understood and agreed that
the Closing shall be deemed to occur simultaneously with the execution of this
Agreement. The date on which the Closing actually occurs is referred to herein
as the "Closing Date." The Closing may occur by exchange of documents and
instruments, without personal attendance of representatives of the parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
-------------------------------------------------------------
The Company and each of the Sellers (as to Sections 3.1-3.13, to the best
knowledge of such Seller) represent and warrant to NWGD that the statements
contained in this ARTICLE III are correct and complete as of the date of this
Agreement and, except as provided in Section 7.1, will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ARTICLE III, except
in the case of representations and warranties stated to be made as of the date
of this Agreement or as of another date and except for changes contemplated or
permitted by this Agreement).
3.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of California.
The Company has all requisite power and authority to own, lease and use its
assets as they are currently owned, leased and used and to conduct its business
as it is currently conducted. The Company is duly qualified or licensed to do
business in and is in good standing in each jurisdiction in which the character
of the properties owned, leased or used by it or the nature of the activities
conducted by it make such qualification necessary, except any such jurisdiction
where the failure to be so qualified or licensed would not have a Material
Adverse Effect on the Company or a material adverse effect on the validity,
binding effect or enforceability of this Agreement or the Collateral Documents
or the ability of the Company to perform its obligations under this Agreement or
any of the Collateral Documents.
5
3.2 Capitalization.
(a) As of the date hereof, the authorized, issued and outstanding
capital stock and other ownership interests of the Company consists of
10,000,000 shares of common stock, of which 4,968,000 shares are outstanding.
All of the outstanding Company Common Stock and Preferred Stock have been duly
authorized and are validly issued, fully paid and nonassessable. The owners of
the Company's stock and the amounts paid therefor (a total of $1,059,500,
comprised of $799,500 cash plus $260,000 of accounts payable owed to Nextway Co.
Ltd. which Nextway canceled for stock) is listed on Exhibit B.
(b) There are no outstanding or authorized options, warrants,
purchase rights, preemptive rights or other contracts or commitments that could
require the Company to issue, sell, or otherwise cause to become outstanding any
of its capital stock or other ownership interests (collectively "Options").
Excepted are warrants to purchase 500,000 shares of common stock of the Company,
at $1.00 per share, for two years, to be issued to the NWGD Shareholder.
(c) All of the issued and outstanding capital stock of Company has
been duly authorized and are validly issued and outstanding, fully paid and
nonassessable and have been issued in compliance with applicable securities laws
and other applicable Legal Requirements or transfer restrictions under
applicable securities laws.
3.3 Authority and Validity. The Company and each of the Sellers have
all requisite power to execute and deliver, to perform such Party's obligations
under, and to consummate the transactions contemplated by, this Agreement
(subject to receipt of any consents, approvals, authorizations or other
matters). The execution and delivery by the Company and each of the Sellers of,
the performance by the Company and each of the Sellers of such Party's
obligations under, and the consummation by the Company and each of the Sellers
of the transactions contemplated by, this Agreement have been duly authorized by
all requisite action of the Company and each of the Sellers. This Agreement has
been duly executed and delivered by the Company and each of the Sellers and
(assuming due execution and delivery by the NWGD Parties) is the legal, valid,
and binding obligation of the Company and each of the Sellers, enforceable
against such Party in accordance with its terms. Upon the execution and delivery
of the Collateral Documents by each Person (other than the NWGD Parties) that is
required by this Agreement to execute, or that does execute, this Agreement or
any of the Collateral Documents, and assuming due execution and delivery thereof
by the NWGD Parties, the Collateral Documents will be the legal, valid and
binding obligations of the Company and each of the Sellers, enforceable against
such Party in accordance with their respective terms.
3.4 No Breach or Violation. Subject to obtaining the consents,
approvals, authorizations, and orders of and making the registrations or filings
with or giving notices to Regulatory Authorities and Persons identified herein,
the execution, delivery and performance by the Company and each of the Sellers
of this Agreement and the Collateral Documents to which such Party is a party,
and the consummation of the transactions contemplated hereby and thereby in
accordance with the terms and conditions hereof and thereof, do not and will not
conflict with, constitute a violation or breach of, constitute a default or give
rise to any right of termination or acceleration of any right or obligation of
the Company or any of the Sellers under, or result in the creation or imposition
of any Encumbrance upon the Company, the Company Assets, the Company Business or
the Company Common Stock.
3.5 Consents and Approvals. No consent, approval, authorization or
order of, registration or filing with, or notice to, any Regulatory Authority or
any other Person is necessary to be obtained, made or given by the Company or
any Seller in connection with the execution, delivery and performance by the
Company or any Seller of this Agreement or any Collateral Document or for the
consummation by the
6
Company of the transactions contemplated hereby or thereby, except to the extent
the failure to obtain any such consent, approval, authorization or order or to
make any such registration or filing would not have a Material Adverse Effect on
the Company or a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents or the ability of
the Company to perform its obligations under this Agreement or any of the
Collateral Documents.
3.6 Intellectual Property. To the knowledge of the Company, the
Company has good title to or the right to use all material company intellectual
property rights and all material inventions, processes, designs, formulae, trade
secrets and know-how necessary for the operation of the Company Business without
the payment of any royalty or similar payment.
3.7 Compliance with Legal Requirements. The Company has operated the
Company Business in compliance with all Legal Requirements applicable to the
Company except to the extent the failure to operate in compliance with all
material Legal Requirements would not have a Material Adverse Effect on the
Company or Material Adverse Effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents.
3.8 Financial Statements. The Company's financial statements
(including the notes thereto) ("Company Financial Statements") have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby (except as may be indicated in the notes thereto) and
present fairly in all material respects the financial condition of the Company
and its results of operations as of the dates and for the periods indicated
(except as may be indicated in the notes thereto), subject in the case of the
interim unaudited financial statements only to normal year-end adjustments (none
of which will be material in amount) and the omission of footnotes. Company
Financial Statements are the reviewed (not audited) statements at December 31,
2002, and for the month ended March 31, 2003.
The Company covenants and agrees with NWGD and the NWGD Shareholder that
the Company shall obtain an audit of the Company Financial Statements within 60
days of Closing, and file such Financial Statements with the SEC. Fulfillment of
this covenant and agreement by the Company is a material condition subsequent to
all of the transactions under and contemplated by this Agreement.
3.9 Ordinary Course. The Company conducted its business, marketed its
property and equipment and kept its books of accounts, records and files,
substantially in the same manner as previously conducted.
3.10 Litigation. There are no outstanding judgments or orders against
or otherwise affecting or related to the Company, the Company Business or the
Company Assets; and (ii) there is no action, suit, complaint, proceeding or
investigation, judicial, administrative or otherwise, that is pending or, to the
Company's knowledge, threatened that, if adversely determined, would have a
Material Adverse Effect on the Company or a material adverse effect on the
validity, binding effect or enforceability of this Agreement or the Collateral
Documents.
3.11 Taxes. The Company has duly and timely filed in proper form all
Tax Returns for all Taxes required to be filed with the appropriate Regulatory
Authority, except where such failure would not have a Material Adverse Effect on
the Company.
3.12 Books and Records. The books and records of the Company accurately
and fairly represent the Company Business and its results of operations in all
material respects. All accounts receivable and inventory of the Company Business
are reflected properly on such books and records in all material respects.
7
3.13 Brokers or Finders. No broker or finder has acted directly or
indirectly for the Company or any of its Affiliates in connection with the
transactions contemplated by this Agreement, and neither the Company, nor any of
its Affiliates has incurred any obligation to pay any brokerage or finder's fee
or other commission in connection with the transaction contemplated by this
Agreement.
3.14 Purchase for Investment.
(a) Each Seller is acquiring the NWGD Shares for investment for
such Seller's own account and not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and such Seller has no present
intention of selling, granting any participation in, or otherwise distributing
the same. Each Seller further represents that such Seller does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Company Shares.
(b) Each Seller understands that the NWGD Shares are not
registered under the Securities Act, that NWGD's sale and the issuance of its
securities hereunder is exempt from registration under the Securities Act
pursuant to Section 4(2) thereof, and that NWGD's reliance on such exemption is
predicated on such Seller's representations set forth herein. Such Seller is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
under the Act.
3.15 Investment Experience. Each Seller acknowledges that such Seller
can bear the economic risk of its investment, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment in the NWGD Shares.
3.16 Information. The Sellers have carefully reviewed such information
as each Seller deemed necessary to evaluate an investment in the NWGD Shares,
including NWGD's Securities Filings and this Agreement. To the full satisfaction
of each Seller, such Seller has been furnished all materials that such Seller
has requested relating to the Company and the issuance of the NWGD Shares
hereunder, and each Seller has been afforded the opportunity to ask questions of
representatives of the Company to obtain any information necessary to verify the
accuracy of any representations or information made or given to the Sellers.
Notwithstanding the foregoing, nothing herein shall derogate from or otherwise
modify the representations and warranties of the Company set forth in this
Agreement, on which each of the Sellers has relied in making the Exchange of the
Company Shares for the NWGD Shares.
3.17 Restricted Securities. Each Seller understands that the NWGD
Shares may not be sold, transferred, or otherwise disposed of without
registration under the Act or an exemption there from, and that in the absence
of an effective registration statement covering the NWGD Shares or any available
exemption from registration under the Act, the NWGD Shares must be held
indefinitely. Each Seller is aware that the NWGD Shares may not be sold pursuant
to Rule 144 promulgated under the Act unless all of the conditions of that Rule
are met. Among the conditions for use of Rule 144 is the availability of current
information to the public about the Company.
3.18 Disclosure. No representation or warranty of the Company in this
Agreement or in the Collateral Documents and no statement in any certificate
furnished or to be furnished by the Company pursuant to this Agreement
contained, contains or will contain on the date such agreement or certificate
was or is delivered, or on the Closing Date, any untrue statement of a material
fact, or omitted, omits or will omit on such date to state any material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE NWGD PARTIES
--------------------------------------------------
Each of the NWGD Parties, jointly and severally, represent and warrant to
the Company that the statements contained in this ARTICLE IV are correct and
complete as of the date of this Agreement and, except as provided in Section
8.1, will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this ARTICLE IV, except in the case of representations and
warranties stated to be made as of the date of this Agreement or as of another
date and except for changes contemplated or permitted by the Agreement).
4.1 Organization and Qualification. NWGD is a corporation duly
organized, validly existing and in good standing under the laws of Wyoming. NWGD
has all requisite power and authority to own, lease and use its assets as they
are currently owned, leased and used and to conduct its business as it is
currently conducted. NWGD is duly qualified or licensed to do business in and is
in good standing in each jurisdiction in which the character of the properties
owned, leased or used by it or the nature of the activities conducted by it
makes such qualification necessary, except any such jurisdiction where the
failure to be so qualified or licensed and in good standing would not have a
Material Adverse Effect on NWGD or a Material Adverse Effect on the validity,
binding effect or enforceability of this Agreement or the Collateral Documents
or the ability of the Company or any of the NWGD Parties to perform their
obligations under this Agreement or any of the Collateral Documents.
4.2 Capitalization.
(a) As of the date hereof, NWGD's authorized capital stock of
200,000,000 shares of common stock, $0.001 par value, of which there are
7,809,794 shares outstanding. The NWGD Shares, when issued in accordance with
this Agreement, will have been duly authorized, validly issued and outstanding
and will be fully paid and nonassessable.
(b) There are no outstanding or authorized options, warrants,
purchase rights, preemptive rights or other contracts or commitments that could
require NWGD to issue, sell, or otherwise cause to become outstanding any of its
capital stock or other ownership interests.
(c) All of the issued and outstanding shares of NWGD Common Stock
have been duly authorized and are validly issued and outstanding, fully paid and
nonassessable and have been issued in compliance with applicable securities laws
and other applicable Legal Requirements.
4.3 Authority and Validity. Each NWGD Party has all requisite power to
execute and deliver, to perform such party's obligations under, and to
consummate the transactions contemplated by, this Agreement and the Collateral
Documents. The execution and delivery by each NWGD Party of, the performance by
each NWGD Party of such party's respective obligations under, and the
consummation by the NWGD Parties of the transactions contemplated by, this
Agreement and the Collateral Documents have been duly authorized by all
requisite action of each NWGD Party. This Agreement has been duly executed and
delivered by each of the NWGD Parties and (assuming due execution and delivery
by the Company and the Sellers) is the legal, valid and binding obligation of
each NWGD Party, enforceable against each of them in accordance with its terms.
Upon the execution and delivery by each of the NWGD Parties of the Collateral
Documents to which each of them is a party, and assuming due execution and
delivery thereof by the other parties thereto, the Collateral Documents will be
the legal, valid and binding obligations of each such Person, as the case may
be, enforceable against each of them in accordance with their respective terms.
9
4.4 No Breach or Violation. Subject to obtaining the consents,
approvals, authorizations, and orders of and making the registrations or filings
with or giving notices to Regulatory Authorities and Persons identified herein,
the execution, delivery and performance by the NWGD Parties of this Agreement
and the Collateral Documents to which each is a party and the consummation of
the transactions contemplated hereby and thereby in accordance with the terms
and conditions hereof and thereof, do not and will not conflict with, constitute
a violation or breach of, constitute a default or give rise to any right of
termination or acceleration of any right or obligation of any NWGD Party under,
or result in the creation or imposition of any Encumbrance upon the property of
NWGD.
4.5 Consents and Approvals. Except for requirements under applicable
United States or state securities laws, no consent, approval, authorization or
order of, registration or filing with, or notice to, any Regulatory Authority or
any other Person is necessary to be obtained, made or given by any NWGD Party in
connection with the execution, delivery and performance by them of this
Agreement or any Collateral Documents or for the consummation by them of the
transactions contemplated hereby or thereby, except to the extent the failure to
obtain such consent, approval, authorization or order or to make such
registration or filings or to give such notice would not have a Material Adverse
Effect on NWGD or a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents or the ability of
the Company or any of the NWGD Parties to perform its obligations under this
Agreement or any of the Collateral Documents.
4.6 Compliance with Legal Requirements. NWGD has operated the NWGD
Business in compliance with all material Legal Requirements applicable to NWGD
except to the extent the failure to operate in compliance with all material
Legal Requirements would not have a Material Adverse Effect on NWGD or a
Material Adverse Effect on the validity, binding effect or enforceability of
this Agreement or the Collateral Documents.
4.7 Litigation. (i) There are no outstanding judgments or orders
against or otherwise affecting or related to NWGD, its business or assets; and
(ii) there is no action, suit, complaint, proceeding or investigation, judicial,
administrative or otherwise, that is pending or, to the best knowledge of any
NWGD Party, threatened that, if adversely determined, would have a Material
Adverse Effect on NWGD or a material adverse effect on the validity, binding
effect or enforceability of this Agreement or the Collateral Documents.
4.8 Ordinary Course. Since the date of the balance sheet included in
the most recent NWGD Securities Filings filed through the date hereof, there has
not been any occurrence, event, incident, action, failure to act or transaction
involving NWGD which is reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on NWGD.
4.9 Assets and Liabilities. As of the date of this Agreement, NWGD has
no Assets or Liability. NWGD's Assets and Liabilities disclosed in the NWGD Form
10-QSB for the quarter ended March 31, 2003 will have been eliminated as of the
Closing.
4.10 Taxes. NWGD has duly and timely filed in proper form all Tax
Returns for all Taxes required to be filed with the appropriate Governmental
Authority, except where such failure to file would not have a Material Adverse
Effect on NWGD.
4.11 Books and Records. The books and records of NWGD accurately and
fairly represent the NWGD Business and its results of operations in all material
respects. All accounts receivable and inventory of the NWGD Business are
reflected properly on such books and records in all material respects.
10
4.12 Environmental Matters. NWGD has not violated any Environmental
Laws, lacks any permits, licenses or other approvals required of them under
applicable Environmental Laws or is violating any term or condition of any such
permit, license or approval, except in each case as would not, individually or
in the aggregate, result in a Material Adverse Effect on NWGD.
4.13 Financial and Other Information.
(a) The historical financial statements (including the notes
thereto) contained (or incorporated by reference) in the NWGD Securities Filings
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby (except as may be indicated in the notes
thereto), and present fairly the financial condition of NWGD and its results of
operations as of the dates and for the periods indicated, subject in the case of
the unaudited financial statements only to normal year-end adjustments (none of
which will be material in amount) and the omission of footnotes.
(b) NWGD Securities Filings did not, as of their filing dates,
contain (directly or by incorporation by reference) any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (or incorporated therein by reference),
in light of the circumstances under which they were or will be made, not
misleading.
4.14 Trading. No order suspending the sale or ceasing the trading or
quotation of the NWGD Common Stock on the Over-The-Counter Bulletin Board has
been issued by any court, securities commission or regulatory authority in the
United States, and no proceedings for such purpose are pending or, to the
knowledge of NWGD, after reasonable inquiry, threatened.
4.15 Brokers or Finders. Except for $40,000 which will be paid to X.
Xxxxxxx Group for consulting services under a letter agreement with NWGD dated
April 25, 2003, no broker or finder has acted directly or indirectly for NWGD,
any NWGD Party or any of their Affiliates in connection with the transactions
contemplated by this Agreement, and neither NWGD, any NWGD Party nor any of
their Affiliates has incurred any obligation to pay any brokerage or finder's
fee or other commission in connection with the transaction contemplated by this
Agreement.
4.16 Disclosure. No representation or warranty of NWGD in this
Agreement or in the Collateral Documents and no statement in any certificate
furnished or to be furnished by NWGD pursuant to this Agreement contained,
contains or will contain on the date such agreement or certificate was or is
delivered, or on the Closing Date, any untrue statement of a material fact, or
omitted, omits or will omit on such date to state any material fact necessary in
order to make the statements made, in light of the circumstances under which
they were made, not misleading.
4.17 Filings. NWGD has made all of the filings required by the
Securities Act of 1933, as amended, and the Exchange Act of 1934, as amended,
required to be made and no such filing contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
made, not misleading.
ARTICLE V
COVENANTS OF THE COMPANY
------------------------
Between the date of this Agreement and the Closing Date:
11
5.1 Additional Information. The Company shall provide to NWGD and its
Representatives such financial, operating and other documents, data and
information relating to the Company, the Company Business and the Company Assets
and Liabilities of the Company, as NWGD or its Representatives may reasonably
request.
5.2 Continuity and Maintenance of Operations. The Company shall, and
shall cause each of its Subsidiaries to use its commercially reasonable efforts
to promote the financial success of the Company Business and promptly notify
NWGD of any material adverse change in the condition (financial or otherwise) of
the Company Business and use its commercially reasonable efforts to promote,
develop and preserve its relationships with its present employees as well as the
goodwill of its customers and promptly notify NWGD of any material adverse
change in such relationships.
5.3 Consents and Approvals. As soon as practicable after execution of
this Agreement, the Company shall use commercially reasonable efforts to obtain
any necessary consent, approval, authorization or order of, make any
registration or filing with or give any notice to, any Regulatory Authority or
Person as is required to be obtained, made or given by the Company to consummate
the transactions contemplated by this Agreement and the Collateral Documents.
5.4 Notification of Certain Matters. The Company shall promptly notify
NWGD of any fact, event, circumstance or action known to it that is reasonably
likely to cause the Company to be unable to perform any of its covenants
contained herein or any condition precedent in ARTICLE VII not to be satisfied,
or that, if known on the date of this Agreement, would have been required to be
disclosed to NWGD pursuant to this Agreement or the existence or occurrence of
which would cause any of the Company's representations or warranties under this
Agreement not to be correct and/or complete. The Company shall give prompt
written notice to NWGD of any adverse development causing a breach of any of the
representations and warranties in ARTICLE III as of the date made.
5.5 Company Schedules. The Company shall, from time to time prior to
Closing, supplement its Schedules with additional information that, if existing
or known to it on the date of delivery to the NWGD Parties, would have been
required to be included therein.
5.6 Audit of Company Financial Statements. The Company covenants and
agrees with NWGD and the NWGD Shareholder that the Company shall obtain an audit
of the Company Financial Statements within 60 days of Closing, and file such
Financial Statements with the SEC by Form 8-K/A, together with required pro
forma financial information. The Financial Statements shall be compliant with
the SEC's Form 8-K as to periods covered and presentation of information.
Fulfillment of this covenant and agreement by the Company is a material
condition subsequent to all of the transactions under and contemplated by this
Agreement.
ARTICLE VI
COVENANTS OF THE NWGD PARTIES
-----------------------------
Between the date of this Agreement and the Closing Date,
6.1 Additional Information. NWGD shall provide to the Company and its
Representatives such financial, operating and other documents, data and
information relating to NWGD, the NWGD Business and
12
the NWGD Assets and the Liabilities of NWGD, as the Company or its
Representatives may reasonably request.
6.2 No Solicitations. From and after the date of this Agreement until
the Closing or termination of this Agreement pursuant to ARTICLE X, NWGD will
not nor will it authorize or permit any of its officers, directors, affiliates
or employees or any investment banker, attorney or other advisor or
representative retained by it, directly or indirectly, (i) solicit or initiate
the making, submission or announcement of any other acquisition proposal, (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to any other acquisition
proposal, (iii) engage in discussions with any Person with respect to any other
acquisition proposal, except as to the existence of these provisions, (iv)
approve, endorse or recommend any other acquisition proposal or (v) enter into
any letter of intent or similar document or any contract agreement or commitment
contemplating or otherwise relating to any other acquisition proposal.
6.3 Continuity and Maintenance of Operations. NWGD shall operate the
NWGD Business in a commercially reasonable manner and promptly notify the
Company of any material adverse change in the condition (financial or otherwise)
of the NWGD Business.
6.4 Consents and Approvals. As soon as practicable after execution of
this Agreement, the NWGD Parties shall use their commercially reasonable efforts
to obtain any necessary consent, approval, authorization or order of, make any
registration or filing with or give notice to, any Regulatory Authority or
Person as is required to be obtained, made or given by any of the NWGD Parties
to consummate the transactions contemplated by this Agreement and the Collateral
Documents.
6.5 Notification of Certain Matters. NWGD shall promptly notify the
Company of any fact, event, circumstance or action known to it that is
reasonably likely to cause any NWGD Party to be unable to perform any of its
covenants contained herein or any condition precedent in ARTICLE VIII not to be
satisfied, or that, if known on the date of this Agreement, would have been
required to be disclosed to the Company pursuant to this Agreement or the
existence or occurrence of which would cause any of the NWGD Parties'
representations or warranties under this Agreement not to be correct and/or
complete. The NWGD Parties shall give prompt written notice to the Company of
any adverse development causing a breach of any of the representations and
warranties in ARTICLE IV.
6.6 NWGD Further Information. The NWGD Parties shall, from time to
time prior to Closing, supplement the information previously supplied to the
Company with additional information that, if existing or known to it on the date
of this Agreement, would have been required to be included therein.
6.7 Securities Filings. NWGD will timely file all reports and other
documents required to be filed with the Securities and Exchange Commission,
which reports and other documents do not and will not contain any misstatement
of a material fact, and do not and will not omit any material fact necessary to
make the statements therein not misleading.
6.8 Election to NWGD's Board of Directors. On the eleventh day after
the closing, NWGD shall secure the resignation of the present directors in order
to cause the nominees of the Company to be appointed to NWGD's board of
directors subject to fiduciary obligations under applicable law. On the Closing
NWGD shall prepare, with the assistance of the Company, and file with the
Commission, and send to all NWGD shareholders, the notice and information
required by Commission Rule 14f-1
13
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NWGD PARTIES
-------------------------------------------------------
All obligations of the NWGD Parties under this Agreement shall be subject
to the fulfillment at or prior to Closing of each of the following conditions,
it being understood that the NWGD Parties may, in their sole discretion, to the
extent permitted by applicable Legal Requirements, waive any or all of such
conditions in whole or in part.
7.1 Accuracy of Representations. All representations and warranties of
the Company contained in this Agreement, the Collateral Documents and any
certificate delivered by any of the Company at or prior to Closing shall be, if
specifically qualified by materiality, true in all respects and, if not so
qualified, shall be true in all material respects, in each case on and as of the
Closing Date with the same effect as if made on and as of the Closing Date,
except for representations and warranties expressly stated to be made as of the
date of this Agreement or as of another date other than the Closing Date and
except for changes contemplated or permitted by this Agreement. The Company
shall have delivered to NWGD a certificate dated as of the Closing Date to the
foregoing effect.
7.2 Covenants. The Company shall, in all material respects, have
performed and complied with each of the covenants, obligations and agreements
contained in this Agreement and the Collateral Documents that are to be
performed or complied with by them at or prior to Closing. The Company shall
have delivered to a certificate dated the Closing Date to the foregoing effect.
7.3 Consents and Approvals. All consents, approvals, permits,
authorizations and orders required to be obtained from, and all registrations,
filings and notices required to be made with or given to, any Regulatory
Authority or Person as provided herein shall have been obtained.
7.4 Delivery of Documents. The Company shall have delivered, or caused
to be delivered, to NWGD the following documents:
(i) Certified copies of the Company's articles of incorporation
and by-laws and certified resolutions of the board of directors and
Shareholders of the Company authorizing the execution of this
Agreement and the Collateral Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby.
(ii) Such other documents and instruments as NWGD may reasonably
request: (A) to evidence the accuracy of the Company's representations
and warranties under this Agreement, the Collateral Documents and any
documents, instruments or certificates required to be delivered
thereunder; (B) to evidence the performance by the Company of, or the
compliance by the Company with, any covenant, obligation, condition
and agreement to be performed or complied with by the Company under
this Agreement and the Collateral Documents; or (C) to otherwise
facilitate the consummation or performance of any of the transactions
contemplated by this Agreement and the Collateral Documents.
7.5 No Material Adverse Change. Since the date hereof, there shall
have been no material adverse change in the Company Assets, the Company Business
or the financial condition or operations of the Company, taken as a whole.
7.6 Lock-Up Agreements. The Company will have obtained signed Lock-Up
Agreements, a form of which is attached hereto as Exhibit B, from the Company's
stockholders set forth on Exhibit C.
14
7.7 Delivery of Company Shares. The Sellers shall have delivered
certificates representing 100% of the Company Shares together with appropriate
stock powers therefor. The Closing may occur even if not all certificates have
been delivered to NWGD, in which event the NWGD Shares issuable to persons who
have not delivered Company certificates with stock powers will be issued after
the Closing upon such delivery to NWGD of Company certificates and stock powers.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SELLERS
------------------------------------------------------------------
All obligations of the Company and the Sellers under this Agreement shall
be subject to the fulfillment at or prior to Closing of the following
conditions, it being understood that the Company and the Sellers may, in their
sole discretion, to the extent permitted by applicable Legal Requirements, waive
any or all of such conditions in whole or in part.
8.1 Accuracy of Representations. All representations and warranties of
the NWGD Parties contained in this Agreement and the Collateral Documents and
any other document, instrument or certificate delivered by any of the NWGD
Parties at or prior to the Closing shall be, if specifically qualified by
materiality, true and correct in all respects and, if not so qualified, shall be
true and correct in all material respects, in each case on and as of the Closing
Date with the same effect as if made on and as of the Closing Date, except for
representations and warranties expressly stated to be made as of the date of
this Agreement or as of another date other than the Closing Date and except for
changes contemplated or permitted by this Agreement. The NWGD Parties shall have
delivered to the Company a certificate dated as of the Closing Date to the
foregoing effect.
8.2 Covenants. The NWGD Parties shall, in all material respects, have
performed and complied with each obligation, agreement, covenant and condition
contained in this Agreement and the Collateral Documents and required by this
Agreement and the Collateral Documents to be performed or complied with by the
NWGD Parties at or prior to Closing. The NWGD Parties shall have delivered to
the Company a certificate dated the Closing Date to the foregoing effect.
8.3 Consents and Approvals. All consents; approvals, authorizations
and orders required to be obtained from, and all registrations, filings and
notices required to be made with or given to, any Regulatory Authority or Person
as provided herein shall have been obtained.
8.4 Delivery of Documents. The NWGD Parties, as applicable, shall have
executed and delivered, or caused to be executed and delivered, to the Company
the following documents:
(i) Certified copies of the articles of incorporation and by-laws
of NWGD and certified resolutions by the board of directors
authorizing the execution of this Agreement and the Collateral
Documents and the consummation of the transactions contemplated
hereby.
(ii) Such other documents and instruments as the Company may
reasonably request: (A) to evidence the accuracy of the
representations and warranties of the NWGD Parties under this
Agreement and the Collateral Documents and any documents, instruments
or certificates required to be delivered thereunder; (B) to evidence
the performance by the NWGD Parties of, or the compliance by the NWGD
Parties with, any covenant, obligation, condition and agreement to be
performed or complied with by the NWGD Parties under this Agreement
and the Collateral Documents; or (C) to otherwise facilitate the
consummation or performance of any of the transactions contemplated by
this Agreement and the Collateral Documents.
15
(iii) Letters of resignation from NWGD's current officers and
directors to be effective upon the eleventh day after Closing.
(iv) Board resolutions from NWGD's current directors appointing
only designees of the Company to NWGD's board of directors, effective
the eleventh day after closing.
(v) All other corporate books and records of NWGD.
8.5 No Material Adverse Change. There shall have been no material
adverse change in the business, financial condition or operations of NWGD and
its Subsidiaries taken as a whole.
8.6 No Assets and No Liabilities. NWGD shall have no assets or
liabilities.
8.7 Payment of Costs. The NWGD Shareholder shall have paid all of the
costs and expenses of NWGD associated with the transactions contemplated herein.
8.8 Lock-Up Agreements. NWGD will have obtained signed Lock-Up
Agreements, a form of which is attached hereto as Exhibit B, from certain of the
NWGD stockholders set forth on Exhibit C, for a total of 3,214,388 of the NWGD
shares owned by those stockholders. Certificates for the locked shares shall be
held in escrow for the purposes of the Lock-Up Agreements by counsel to the
Company.
ARTICLE IX
INDEMNIFICATION
---------------
9.1 Indemnification by the Sellers. Each of the Sellers (pro rata
based on each Seller's percentage interest in the Company) shall indemnify,
defend and hold harmless (i) NWGD, (ii) each of NWGD's assigns and successors in
interest to the Company Shares, and (iii) each of their respective shareholders,
members, partners, directors, officers, managers, employees, agents, attorneys
and representatives, from and against any and all Losses which may be incurred
or suffered by any such party and which may arise out of or result from any
breach of any representation, warranty, covenant or agreement of the Company or
the Sellers contained in this Agreement. Notwithstanding the foregoing, (a) no
claim under this Section 9.1 may be made unless notice is given pursuant to
Section 9.3 within two years from the Closing Date, and (b) as to Sections 3.14-
3.17, no Seller shall be responsible for the representations and warranties of
any other Seller.
9.2 Indemnification by the NWGD Parties. The NWGD Parties shall
indemnify, defend and hold harmless the Company and each of the Sellers from and
against any and all Losses which may be incurred or suffered by any such party
hereto and which may arise out of or result from any breach of any
representation, warranty, covenant or agreement of the NWGD Parties contained in
this Agreement made as of the Closing. Notwithstanding the foregoing, no claim
under this Section 9.2 may be made unless notice is given pursuant to Section
9.3 within two years from the Closing Date.
9.3 Notice to Indemnifying Party. If any party (the "Indemnified
Party") receives notice of any claim or other commencement of any action or
proceeding with respect to which any other party (or parties) (the "Indemnifying
Party") is obligated to provide indemnification pursuant to Sections 9.1 or 9.2,
the Indemnified Party shall promptly give the Indemnifying Party written notice
thereof, which notice shall specify in reasonable detail, if known, the amount
or an estimate of the amount of the liability arising therefrom and the basis of
the claim. Such notice shall be a condition precedent to any liability of the
Indemnifying Party for indemnification hereunder, but the failure of the
Indemnified Party to give prompt notice of a claim shall not adversely affect
the Indemnified Party's right to indemnification hereunder unless the defense of
that claim is materially prejudiced by such failure. The Indemnified Party shall
not settle or
16
compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the Indemnifying
Party (which shall not be unreasonably withheld or delayed) unless suit shall
have been instituted against it and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in Section 9.4.
9.4 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding (i) if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim (subject to any
limitations on such liability contained in this Agreement) and (ii) if it
provides assurances, reasonably satisfactory to the Indemnified Party, that it
will be financially able to satisfy such claims in full if the same are decided
adversely. If the Indemnifying Party assumes the defense of any such claim or
legal proceeding, it may use counsel of its choice to prosecute such defense,
subject to the approval of such counsel by the Indemnified Party, which approval
shall not be unreasonably withheld or delayed. The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its counsel and at its own expense; provided, however, that if the
Indemnified Party, in its sole discretion, determines that there exists a
conflict of interest between the Indemnifying Party (or any constituent party
thereof) and the Indemnified Party, the Indemnified Party (or any constituent
party thereof) shall have the right to engage separate counsel, the reasonable
costs and expenses of which shall be paid by the Indemnified Party. If the
Indemnifying Party assumes the defense of any such claim or legal proceeding,
the Indemnifying Party shall take all steps necessary to pursue the resolution
thereof in a prompt and diligent manner. The Indemnifying Party shall be
entitled to consent to a settlement of, or the stipulation of any judgment
arising from, any such claim or legal proceeding, with the consent of the
Indemnified Party, which consent shall not be unreasonably withheld or delayed;
provided, however, that no such consent shall be required from the Indemnified
Party if (i) the Indemnifying Party pays or causes to be paid all Losses arising
out of such settlement or judgment concurrently with the effectiveness thereof
(as well as all other Losses theretofore incurred by the Indemnified Party which
then remain unpaid or unreimbursed), (ii) in the case of a settlement, the
settlement is conditioned upon a complete release by the claimant of the
Indemnified Party and (iii) such settlement or judgment does not require the
Encumbrance of any asset of the Indemnified Party or impose any restriction upon
its conduct of business.
ARTICLE X
TERMINATION
-----------
10.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time.
(a) by mutual written agreement of Parties; or
(b) by either the Company or NWGD upon notification to the
non-terminating party by the terminating party:
(i) if the terminating party is not in material breach of its
obligations under this Agreement and there has been a material breach
of any representation, warranty, covenant or agreement on the part of
the non-terminating party set forth in this Agreement such that the
conditions in Sections 7.1, 7.2, 8.1 or 8.2 will not be satisfied;
17
(ii) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making
illegal or otherwise permanently restricting, preventing or otherwise
prohibiting the Exchange and such order shall have become final and
nonappealable.
10.2 Effect of Termination. If this Agreement is validly terminated by
either the Company or NWGD pursuant to Section 10.1, this Agreement will
forthwith become null and void and there will be no liability or obligation on
the part of the parties hereto, except that nothing contained herein shall
relieve any party hereto from liability for willful breach of its
representations, warranties, covenants or agreements contained in this
Agreement.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Cancellation of Shares. As a material subsequent condition to this
Agreement and the Closing, within thirty (30) days following the Closing, but
not prior to the Closing, NWGD and the NWGD Shareholder shall have caused
3,809,794 shares of NWGD Common Stock held by the NWGD Shareholder to be
cancelled. Both NWGD and the NWGD Shareholder acknowledge that failure to abide
by this Section 11.1 of the Agreement will cause irreparable harm to Company and
the Company's shareholders and that Company will suffer significant damage as a
result of such failure.
11.2 Anti-Dilution Provision. From the Closing until the first to occur
of (1) 180 days after Closing, or (2) that date when the NWGD Shareholder and
the other NWGD shareholders subject to the Exhibit A lock up agreement own
688,060 or fewer shares of NWGD stock, NWGD either (3) shall not issue shares of
Common Stock to anyone without prior written consent of the NWGD Shareholder,
following detailed notice to NWGD Shareholder of the number of shares proposed
to be issued, the persons to receive such shares, the consideration to be
received by NWGD for issuing such new shares, and such other details as the NWGD
Shareholder may request; or (4) issue shares of Common Stock pro rata to the
NWGD Shareholder and the other shareholders of NWGD subject to the Exhibit B
lock up agreement, without further consideration, in number sufficient to keep
the 3,214,388 shares so locked up always equal to 16.2% of the total outstanding
19,809,794 shares of Common Stock on a fully diluted basis (20% of the
16,000,000 shares after the Cancellation). The number of shares to be issued on
exercise of the anti-dilution right of this clause (4) shall be reduced, and the
resulting percentage ownership to be maintained shall be reduced, if and to the
extent there are fewer than 3,214,388 shares locked up at such time as a
triggering event occurs. If shares issued under (3) are in amounts and for
consideration reasonably acceptable to the NWGD Shareholder, and NWGD gives
written prior notice of its acceptance of such amounts and the consideration to
be paid to NWGD for such new shares., then the NWGD Shareholder shall be deemed
to have waived its anti-dilution rights for that transaction under this Section
11.2. If shares are issued to the NWGD Shareholder under (4) in exercise of its
anti-dilution rights, such shares shall deemed to be issued in further
consideration of the Cancellation pursuant to Section 11.1
11.3 Parties Obligated and Benefited. This Agreement shall be binding
upon the Parties and their respective successors by operation of law and shall
inure solely to the benefit of the Parties and their respective successors by
operation of law, and no other Person shall be entitled to any of the benefits
conferred by this Agreement, except that the Company Shareholders shall be third
party beneficiaries of this Agreement. Without the prior written consent of the
other Party, no Party may assign this Agreement or the Collateral Documents or
any of its rights or interests or delegate any of its duties under this
Agreement or the Collateral Documents.
18
11.4 Publicity. The initial press release shall be a joint press
release and thereafter the Company and NWGD each shall consult with each other
prior to issuing any press releases or otherwise making public announcements
with respect to the Exchange and the other transactions contemplated by this
Agreement and prior to making any filings with any third party and/or any
Regulatory Authorities (including any national securities interdealer quotation
service) with respect thereto, except as may be required by law or by
obligations pursuant to any listing agreement with or rules of any national
securities interdealer quotation service.
11.5 Notices. Any notices and other communications required or
permitted hereunder shall be in writing and shall be effective upon delivery by
hand or upon receipt if sent by certified or registered mail (postage prepaid
and return receipt requested) or by a nationally recognized overnight courier
service (appropriately marked for overnight delivery) or upon transmission if
sent by telex or facsimile (with request for immediate confirmation of receipt
in a manner customary for communications of such respective type and with
physical delivery of the communication being made by one or the other means
specified in this Section as promptly as practicable thereafter). Notices shall
be addressed as follows:
(a) If to the NWGD Parties, to:
Northwest Gold Inc.
000 Xxxxx 0xx Xxxx
Xxxxxxxx, Xxxxxxx 00000
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx. Xxxxxxxx 00000
Facsimile: 000-000-0000
If to the Company and the Sellers to:
Pogo! Products, Inc.
000 Xxxx Xxxxxxx Xxx., Xxxxx X
Xxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxxxx X. Xxxxxx, P.C.
00000 Xxxx Xxxxxxxx Xxxx
Tower One, Penthouse
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
Any Party may change the address to which notices are required to be sent
by giving notice of such change in the manner provided in this Section.
11.6 Attorneys' Fees. In the event of any action or suit based upon or
arising out of any alleged breach by any Party of any representation, warranty,
covenant or agreement contained in this Agreement or the Collateral Documents,
the prevailing Party shall be entitled to recover reasonable attorneys' fees and
other costs of such action or suit from the other Party. Notwithstanding the
foregoing, the prevailing Party shall
19
only be entitled to recover reasonable attorneys' fees from the NWGD Shareholder
in connection with an enforcement of his indemnity obligations set forth in
Section 9.2 hereof.
11.7 Headings. The Article and Section headings of this Agreement are
for convenience only and shall not constitute a part of this Agreement or in any
way affect the meaning or interpretation thereof.
11.8 Choice of Law. This Agreement and the rights of the Parties under
it it shall be governed by and construed in all respects in accordance with the
laws of the State of California, without giving effect to any choice of law
provision or rule (whether of the State of California or any other jurisdiction
that would cause the application of the laws of any jurisdiction other than the
State of California). However, any litigation shall be conducted only in the
Wyoming or Colorado courts, at the sole election of the NWGD Shareholder, which
election shall be given in writing to the Company, specifying that court in
which litigation is to be conducted.
11.9 Rights Cumulative. All rights and remedies of each of the Parties
under this Agreement shall be cumulative, and the exercise of one or more rights
or remedies shall not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
11.10 Further Actions. The Parties shall execute and deliver to each
other, from time to time at or after Closing, for no additional consideration
and at no additional cost to the requesting party, such further assignments,
certificates, instruments, records, or other documents, assurances or things as
may be reasonably necessary to give full effect to this Agreement and to allow
each party fully to enjoy and exercise the rights accorded and acquired by it
under this Agreement.
11.11 Time of the Essence. Time is of the essence under this Agreement.
If the last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act shall be extended to the next succeeding Business Day.
11.12 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.
11.13 Entire Agreement. This Agreement (including the Exhibits, the
Company Schedules, the NWGD Schedules and any other documents, instruments and
certificates referred to herein, which are incorporated in and constitute a part
of this Agreement) contains the entire agreement of the Parties. Without
limiting the generality of the foregoing, this Agreement is intended to
supersede the Letter of Intent dated April 28, 2003.
11.14 Expenses. Each party will be responsible for payment of its
expenses in connection with the transactions contemplated by this Agreement.
11.15 Survival of Representations and Covenants. Notwithstanding any
right of any Party fully to investigate the affairs of the Company or NWGD, as
the case may be, and notwithstanding any knowledge of facts determined or
determinable by any Party pursuant to such investigation or right of
investigation, each Party shall have the right to rely fully upon the
representations, warranties, covenants and agreements of other Parties contained
in this Agreement. Each representation, warranty, covenant and agreement of the
Parties contained herein shall survive the execution and delivery of this
Agreement and the Closing and shall thereafter terminate and expire on the
second anniversary of the Closing Date unless, prior to such date, a
20
Party has delivered to the other Parties a written notice of a claim with
respect to such representation, warranty, covenant or agreement.
IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement as of the day and year first above written.
NORTHWEST GOLD, INC., a Wyoming corporation
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Xxxxxx X. Xxxxxx, President
POGO! PRODUCTS, INC., a California corporation
By: /s/ Xxxxx X. XxXxxx
------------------------------------------
Xxxxx X. XxXxxx, President
NWGD SHAREHOLDER:
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx, CEO, U.S. Energy Corp.
21
Sellers (Name and signature)
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
22
EXHIBIT B
[Form of Lock-Up]
_____________, 2003
ADDRESS
Re: Lock-Up Agreement
Dear Sirs:
Reference is made to that certain Share Exchange Agreement (the
"Agreement"), dated as of June 13, 2003, among Northwest Gold, Inc., a Wyoming
corporation, ("NWGD"), U.S. Energy Corp. ("USE"), a Wyoming corporation and the
principal shareholder of NWGD, Pogo! Products, Inc., a California corporation
("Pogo") and the stockholders of Pogo (the "Stockholders"), pursuant to section
8.8 of which USE and certain other stockholders of NWGD holding a total of
3,214,388 shares of NWGD will lock up those shares, until the 91st day after the
Closing of the Agreement. These shares are referred to as the "Lock Up Shares."
As of the Closing of the Agreement, the holders of the Lock Up Shares will
deliver certificates for the Lock Up Shares to counsel to the Company, who will
hold such certificates only for the purposes of this Lock Up Agreement. The lock
up will automatically expire on the 91st day, or sooner when the Lock Up Shares
equal 688,060 shares. NWGD shall give prompt notice to its transfer agent of
this automatic release, and counsel for the Company shall deliver the
certificates to their record holders.
The Company has determined that the prospect of sales of NWGD's common
stock ("Common Stock"), held by the undersigned within 90 days after the Closing
of the Exchange could be detrimental to the Company.
Therefore, the undersigned hereby acknowledges and agrees that the
undersigned will not, directly or indirectly, without the prior written consent
of NWGD, sell, offer, contract to sell, pledge, grant any option to purchase or
otherwise dispose (collectively, a "Disposition") of any shares of Common Stock
or any securities convertible into or exchangeable for, or any rights to
purchase or acquire, Common Stock held by the undersigned, now owned or acquired
by the undersigned after the date hereof or which may be deemed to be
beneficially owned by the undersigned pursuant to the Rules and Regulations
promulgated under the Securities Exchange Act of 1934, as amended (the "Lock Up
Shares"), for a period of 91 days from the Closing of the Exchange (June 13,
2003). This period of time is referred to as the "Lock Up Period."
The foregoing restriction is expressly agreed to preclude, among other
Dispositions, the holder of Lock Up Shares from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a Disposition of Lock Up Shares during the Lock Up Period, even if such Lock Up
Shares would be disposed of by someone other than such holder. Such prohibited
hedging or other transactions would include, without limitation, any short sale
(whether or not against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any Lock
Up
23
Shares or with respect to any security (other than a broad-based market basket
or index) that includes, relates to or derives any significant part of its value
from Lock Up Shares.
Notwithstanding the foregoing, the undersigned may transfer any or all
of the Lock Up Shares (i) as a bona fide gift or gifts or (ii) as a distribution
to limited partners or shareholders of such person; provided, however, that in
any such case it shall be a condition to the transfer that the transferee
execute an agreement stating that the transferee is receiving and holding the
Lock Up Shares subject to the provisions of this letter agreement. The
transferor shall notify NWGD in writing prior to the transfer and there shall be
no further transfer of such Lock Up Shares except in accordance with this letter
agreement. Moreover, notwithstanding any other provision of this letter
agreement, the undersigned may exercise any option to purchase shares of Common
Stock, provided, however, that any shares so acquired shall constitute Lock Up
Shares for the purposes of this letter agreement.
The undersigned also agrees and consents to the entry of stop transfer
instructions with the transfer agent for NWGD against the transfer of any Lock
Up Shares.
Executed this ___ day of ________________, 2003.
Very truly yours,
Stockholder of Northwest Gold, Inc.
By:
--------------------------------------------
Signature of Stockholder
--------------------------------------------
Address
Name of Co-Stockholder, if applicable
(please
print):
--------------------------------------------
By:
---------------------------------------------
Signature of Co-Securityholder, if applicable
-------------------------------------
Address
24
EXHIBIT C
LIST OF NWGD SHAREHOLDERS SUBJECT TO EXHIBIT B LOCK UP AGREEMENT
No. NWGD Shares
Name Subject to Lock Up Agreement
---- ----------------------------
U. S. Energy Corp 2,974,388
000 Xxxxx 0xx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxx X. Xxxxxx 40,000
000 Xxxxx 0xx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxx X. Xxxxxx 40,000
000 Xxxxx 0xx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxx X. Xxxxxx 40,000
000 Xxxxx 0xx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxx X. Xxxxxx 40,000
000 Xxxxx 0xx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxx X. Xxxxxxx 40,000
000 Xxxxx 0xx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxxx Xxxxxxxx 40,000
000 Xxxxx 0xx Xxxx
Xxxxxxxx, Xxxxxxx 00000 _________
3,214,388
25
EXHIBIT A
LIST OF POGO SHAREHOLDERS AND SHARES OF NWGD TO BE ISSUED
No. PoGo Shares No. NWGD
Name to be Exchanged Shares to be Issued
---- --------------- -------------------
Xxxxx X. An 2,940,000 7,102,280
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Jae Ryong Bum 60,000 144,900
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xxxx Xxxx 100,000 241,500
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xxxx Xxxx 100,000 241,500
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xxxx Xxxxx 86,000 207,690
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xx Xxxxx 110,000 265,650
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
S. K. Park 100,000 241,500
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xxxxx Jun 80,000 193,200
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Nextway Co., Ltd 520,000 1,225,800
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
26
Xxxxx X. XxXxxx 136,667 330,050
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xxxxxxx XxXxxx 30,000 72,450
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xxx Xxxxxxxxx 100,000 241,500
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xxxxx XxXxxxxx 333,333 805,000
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
My Xxxx Xxx 22,000 53,130
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xxxxx Xxxx 20,000 48,300
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Joong Xxxx Xxxx 10,000 24,150
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xxxxxx X. Xxxxxx 200,000 483,000
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000
Xx Xxxxx 20,000 48,300
000 Xxxx Xxxxxxx Xxx
Xxxxx X
Xxxx, Xxxxxxxxxx 00000 _________ __________
4,968,000 12,000,000
27
