ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is dated as of
February 9, 2001, by and among Nova Natural Resources Corporation,
a Colorado corporation (the "Company"), those shareholders of the
Company identified on Exhibit A to this Agreement (each a "Nova
Shareholder," and, collectively, the "Nova Shareholders"), and
Torita Donghao, LLC, a Delaware limited liability company
("Torita").
RECITALS:
A. Torita manufactures, markets, and sells electronic
equipment including computer hardware, televisions, digital video
devices and related equipment.
B. The Company has a series of common stock, par value of
$.10 per share (the "Company Common Stock"), registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and files reports required by the Exchange
Act.
C. The Company has conducted certain oil, gas, and mineral
operations, but has sold most of its assets and terminated most of
its operations.
D. Upon the covenants and conditions set forth in this
Agreement, the Company desires to purchase from Torita, and Torita
desires to sell to the Company, substantially all of the assets and
rights of Torita as a going concern (the "Asset Purchase"). In the
course of the Asset Purchase, the parties also desire that the
Company finalize the liquidation of all of its assets and payment
of all of its liabilities. Upon completion of the Asset Purchase,
the parties contemplate that Torita will own 91.5% of the issued
and outstanding common stock of the Company.
E. The parties desire that the transactions contemplated
by this Agreement qualify as a non-taxable transaction pursuant to
the provisions of Section 368 of the Internal Revenue Code.
NOW, THEREFORE, in consideration of the mutual promises
contained in this Agreement and the Recitals, which are
incorporated in and constitute a portion of the consideration for
this Agreement, the parties agree:
1. Purchase and Sale of Assets. Subject to and upon the
terms, conditions, and limitations set forth in this Agreement, as
of the Closing Date (as hereinafter defined), Torita shall sell,
transfer, convey, assign, and deliver to the Company, and the
Company shall purchase from Torita all of the assets and rights
relating to the operation of Torita's business (the "Torita
Assets") of the following type or description:
1.1 Property. All tangible personal and real property.
1.2 Inventory. All inventory of Torita.
1.3 Intellectual Property. To the extent permitted by
applicable license agreements, Torita's rights in and to all
computer programs and systems used in Torita's business,
including data bases and their contents, operating
specifications, magnetic tapes, disks, records, files, and
documentations, and sets of statements or instructions, which
may be used directly or indirectly in or with a computer in
order to bring about a certain result (in the aggregate, the
"Torita Software").
1.4 Leases. All lease agreements to which Torita is a
party and any or all leasehold improvements with respect to
such leased property.
1.5 Contracts and Agreements. To the fullest extent
assignable, all contracts and agreements incidental to the
operation of Torita's business, including, but not limited to,
contracts with suppliers, customers, maintenance and service
entities; broker, distributor, dealer, sales agency, and
research and development agreements; sales promotion,
advertising, market research, marketing, and consulting
agreements; partnership and joint venture agreements;
licensing agreements; and all other agreements, whether or not
made in the ordinary course of business that are material to
the business, assets, results of operations, condition or
prospects of Torita.
1.6 Other Agreements. All covenants not to compete with
Torita and agreements not to disclose confidential information
executed in Torita's favor by any Person, whether now in force
or to which such Persons may become subject in the future.
1.7 Rights in Name. All of Torita's ownership,
possession, and rights in and to any name under which Torita
now or has undertaken business.
1.8 Goodwill. The goodwill of the business and right to
use all manner of communications used in connection with
Torita's business.
1.9 Other Intellectual Property. Torita's ownership of
or rights under those copyrights, licenses, tradenames,
trademarks, name registrations, patents, or other tangible
assets, including pending applications for any such asset.
1.10 Insurance Policies. To the fullest extent
assignable, Torita's insurance policies covering the Torita
Assets and Torita's business.
1.11 Customers. Torita's ownership, possession, and
rights in and to Torita's customer list.
1.12 Books and Records. All books, records, books of
account, ledgers, and other documents and information relating
to Torita's business, including, without limitation,
accounting books and records, sales, literature, customer
orders, product data, correspondence, commission records,
catalogs, and product information of every kind.
1.13 Actions Regarding the Torita Assets. All choses in
action and causes of action, claims, and rights of recovery or
setoff of every kind or nature arising out of or attributable
to any of the Torita Assets on or prior to the Closing Date,
irrespective of the date on which any such cause of action,
claim, or right may arise or accrue.
1.14 Other Assets or Rights. Any other tangible or
intangible property used in connection with Torita's business.
2. Excluded Assets. The Torita assets shall not include,
and Torita is not selling, nor the Company purchasing any of the
assets set forth on Schedule 2 to this Agreement (the "Excluded
Assets"). In addition, Torita is not selling and the Company is
not purchasing any chose in action or cause of action, claim, or
right of recovery or setoff arising out of or attributable to any
of the Excluded Assets on or prior to the Closing Date.
3. Assumed Liabilities. As explicitly set forth in
Schedule 3, the Company shall assume all liabilities reflected in
the Financial Statements of Torita described in Section 5.5.
4. Purchase Price. In consideration of the sale,
transfer, conveyance, assignment and delivery of the Torita Assets
to the Company, and in reliance upon the covenants,
representations, and warranties contained in this Agreement, the
Company shall issue to Torita that number of shares of the Company
Common Stock such that, subsequent to such issuance, Torita will
own 91.5% of all of the issued and outstanding Company Common
Stock. For purposes of calculating such percentage, all options,
warrants, convertible securities and other documents entitling the
holder to purchase or obtain shares of the Company Common Stock
shall be deemed to have been exercised as of the Closing Date and
included as issued and outstanding Company Common Stock. When
issued, all shares of the Company Common Stock issued to Torita
shall be fully paid and non-assessable.
5. Representations and Warranties of Torita. Torita
hereby represents and warrants to the Company and the Nova
Shareholders that all the statements contained in this Section 5
are true, correct, and complete as of the date of this Agreement
and will be true, correct, and complete as of the Closing Date.
Between the date of this Agreement and the Closing Date, Torita
shall prepare and deliver to the Company a disclosure schedule (the
"Torita Disclosure Schedule") setting forth the information
required or anticipated by all subsections of this Section 5 and
any exceptions to the representations and warranties contained in
this Section 5. The Torita Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 5. For purposes of this Section 5,
"Torita" shall be deemed to include all predecessor entities which
owned the Torita Assets or operated the business being acquired by
the Company pursuant to this Agreement.
5.1 Organization, Qualification and Corporate Power.
(a) Torita is a limited liability company duly
organized, validly existing, and in good standing under
the laws of the State of Delaware. Torita has full power
and authority to carry on the businesses in which it is
engaged and to own and use the Torita Assets. Except as
set forth in Section 5.1 to the Torita Disclosure
Schedule, Torita has no Subsidiaries. Each Subsidiary set
forth therein (the Torita Subsidiary") is a corporation,
limited liability company or limited partnership, duly
organized, validly existing and in good standing under
the state or political subdivision of its formation.
Each Torita Subsidiary has full corporate, limited
liability or partnership, as the case may be, power and
authority to carry on the business in which it is engaged
and to own and use the property owned and used by it.
(b) Torita and each Torita Subsidiary is
qualified to conduct business and is in good standing
under the laws of each jurisdiction wherein the nature of
its business or its ownership of property requires it to
be so qualified, except where the failure to be so
qualified will not have a material adverse effect on the
business, properties or operations of Torita or such
Torita Subsidiary. As of the Closing Date, Section
5.1(b) of the Torita Disclosure Schedule contains a
complete and accurate list of each jurisdiction in which
Torita and each Torita Subsidiary is authorized to do
business, each jurisdiction in which it has filed tax
returns, and each jurisdiction in which it has employees
or in which inventory is located.
5.2 Authorization of Transaction. Torita has full
corporate power and authority to execute and deliver and
perform its obligations under this Agreement. Without
limiting the generality of the foregoing, the Managers of
Torita and the Members of Torita (as of the Closing Date, but
not as of the date of this Agreement), have duly authorized
the execution, delivery, and performance of this Agreement and
all other related documents (the "Transaction Documents") to
which Torita is a party. This Agreement constitutes the valid
and legally binding obligation of Torita, enforceable against
Torita in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation,
arrangement and other similar laws affecting creditors' rights
generally and by general principles of equity (regardless of
whether such enforceability is considered in proceeding in
equity or at law).
5.3 Noncontravention. Neither the execution and the
delivery of this Agreement or any other Transaction Document,
nor the consummation of the transactions contemplated hereby
or thereby will (i) violate any statute, regulation or rule
applicable to Torita, (ii) violate any judgment, order,
decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which
Torita is subject or any provision of the Articles of
Organization or Operating Agreement of Torita, or (iii)
conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any Person the
right to accelerate, terminate, modify, or cancel, or require
any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument representing
indebtedness, security interest, or other arrangement to which
Torita is a party or by which it is bound or to which any of
the Torita Assets is subject, except where such conflict,
breach or default would not have a material adverse effect on
the financial condition or operations of Torita and its
Subsidiaries taken as a whole or on the ability of the parties
to consummate the transactions contemplated by this Agreement.
Other than in connection with or in compliance with the
provisions of Delaware law, federal and state securities laws,
Torita is not required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the parties to
consummate the transactions contemplated by this Agreement.
Neither the execution and delivery of this Agreement, or the
consummation or performance of any of the transactions
contemplated hereby will, directly or indirectly, with or
without the notice or lapse of time: (i) give any governmental
authority the right to revoke, withdraw, suspend, cancel, or
modify any governmental authorization that is held by Torita
or that otherwise relates to the business or any of the Torita
Assets, (ii) cause Torita to become subject to or to become
liable for the payment of any tax, (iii) cause any of the
Torita Assets to be reassessed or revalued by any taxing
authority or other governmental authority, or (iv) result in
the imposition or creation of any Encumbrance upon or with
respect to any of the Torita Assets.
5.4 Capitalization. Outstanding Torita Common. The
outstanding membership interests of Torita are set forth in
Section 5.4 to the Torita Disclosure Schedule. All issued and
outstanding membership interests in Torita have been duly
authorized, are validly issued, fully paid, and nonassessable,
and are held of record and beneficially by the members of
Torita.
5.5 Financial Statements. Attached to this Agreement
as Schedule 5.5 are the following financial statements of
Torita (collectively the "Financial Statements"): audited
combined financial statements of Donghao Computer Enterprises
Co. Ltd. And Torita Corporation Ltd. - Video Division,
containing consolidated and consolidating balance sheets and
statements of income, changes in stockholders' equity, and
cash flows as of and for the fiscal years ended December 31,
1999 and 1998. The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout
the periods covered thereby and fairly present the financial
condition and results of operations as of the times and for
the periods referred to therein. On or before February 15,
2001, Torita shall deliver to the Company unaudited
consolidated balance sheets of Torita for the 9 months period
ended September 30, 2000 and the related statements of income,
changes in shareholders' equity and cash flow for such 9 month
period (the "Unaudited Financial Statements"). The Unaudited
Financial Statements will fairly present the financial
condition and results of operations, changes in shareholders'
equity and the cash flow of Torita as of September 30, 2000,
all in accordance with GAAP and reflect the consistent
application of such accounting principles throughout the
period involved, except for normal recurring year end
adjustments which are not, and are not expected to be,
material in amount and the addition of required footnotes
thereto.
5.6 Events Subsequent to Most Recent Fiscal Year End.
Since December 31, 2000 (the "Most Recent Fiscal Year End"),
there has not been any material adverse change in the assets,
Liabilities, business, financial condition, operations,
results of operations, or future prospects of Torita. Without
limiting the generality of the foregoing, except as set forth
in Section 5.6 of the Torita Disclosure Schedule or as
effected by this Agreement and the other Transaction
Documents, since the Most Recent Fiscal Year End:
(a) Torita has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other
than in the Ordinary Course of Business;
(b) no party (including, without limitation,
Torita) has accelerated, terminated, modified, or
cancelled any contract, lease, sublease, license, or
sublicense (or series of related contracts, leases,
subleases, licenses, and sublicenses) involving more than
$50,000 to which Torita is a party or by which it is
bound;
(c) Torita has not cancelled, compromised,
waived, or released any right or claim (or series of
related rights and claims) either involving more than
$50,000 or outside the Ordinary Course of Business;
(d) Torita has not experienced any material
damage, destruction, or loss (whether or not covered by
insurance) to its property (other than ordinary wear and
tear not caused by neglect);
(e) Torita has not made any loan to, or entered
into any other transaction with, any of its directors,
officers, and employees or shareholders outside the
Ordinary Course of Business giving rise to any claim or
right on its part against the person or on the part of
the person against it;
(f) Torita has not entered into any other
material transaction outside the Ordinary Course of
Business;
(g) Torita has not amended or modified in any
respect (beyond any amendments and modifications
reflected in true and complete copies of such plans
delivered to Torita) any profit sharing, bonus,
incentive compensation, severance, employee benefit or
multiemployer plans;
(h) Torita has not granted any increase in
excess o $25,000 in the salary of any officer or employee
of Torita or paid any bonus in excess of $25,000 to any
such officer or employee; and
(i) Torita has not committed to do any of the
foregoing.
5.7 Undisclosed Liabilities. Torita does not have
any Liability (and to the Knowledge of Torita there is no
Basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand
against Torita giving rise to any Liability), which could have
a material adverse effect on the financial condition or
operations of Torita, taken as a whole, except for (i)
Liabilities set forth on the face of the Most Recent Fiscal
Year End Financial Statements (rather than in any notes
thereto), (ii) Liabilities which have arisen after the Most
Recent Fiscal Year End Financial Statements in the Ordinary
Course of Business (none of which relates to any breach of
contract, breach of warranty, tort, infringement, or violation
of law or arose out of any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand) and
(iii) Liabilities otherwise expressly disclosed in or
contemplated by this Agreement or Section 5.7 of the Torita
Disclosure Schedule.
5.8 Conduct of Business; Records and Books of
Account. Torita has conducted its business in the ordinary
course, consistent with past practice, since December 31,
2000. The records and books of account of Torita, as provided
to the Company, will be in conformity with GAAP, subject only
to normal year-end adjustments.
5.9 Tax Matters.
(a) Torita has made available to the Company
state, federal, local and foreign tax returns (including
informational returns and K-1's and similar reports) for
the years ended December 31, 1999 and 1998 (the "Recent
Torita Tax Returns"). The Recent Torita Tax Returns
fairly and accurately present the financial conditions
and results of operations of Torita and its consolidated
Subsidiaries as of the respective dates thereof and
periods therein referred to. Except as set forth in
Section 5.9 of the Torita Disclosure Schedule, Torita has
timely filed (or received an appropriate extension of
time to file) all Tax Returns required to be filed by it.
All such Tax Returns were, are, and will be true, correct
and complete. Torita has never filed, or been required
to file, any Tax Returns as a member of an Affiliated
Group, nor does it have any liability for Taxes of any
Person under Treas. Reg. 1.1502-6 (or any similar
provision of state, local, foreign, or other law) as a
transferee or successor by contract or otherwise. No Tax
Return described above contains or will contain a
disclosure statement under Code
Section6662(d)(2)(B)(ii)(I) or any similar provision of
state, local, foreign, or other law. Torita is not a
party to, nor has any obligation under, any tax sharing
agreement, arrangement, or practice, written or oral,
express or implied. Torita has not received notice of
any claim made by an authority in a jurisdiction where
Torita does not file Tax Returns that Torita is or may be
subject to taxation by that jurisdiction.
(b) With respect to Taxes owed by Torita and
Torita's Tax Returns:
(i) All Tax deficiencies asserted or
assessed against Torita have been paid or finally
settled;
(ii) Torita is not required to make
payments of estimated Taxes required to be made
under Code Section 6655 and any comparable
provisions of state, local, foreign or other law;
(iii) All amounts that are required to be
collected or withheld by Torita in connection with
amounts paid or owing to any employee, creditor,
independent contractor, or other third party have
been duly collected or withheld by Torita and have
been duly remitted or deposited in accordance with
law;
(iv) There is no outstanding request by
Torita for any extension of time within which to pay
any Taxes or file any Tax Returns;
(v) There has been no waiver or extension
for or on behalf of Torita of any applicable statute
of limitations for the assessment or collection of
any Taxes;
(vi) There is no pending or threatened
action, audit, proceeding, or investigation for the
assessment or collection of any Taxes of Torita;
(vii) No taxing authority has raised any
issue with respect to the liability of Torita for
any Tax that, by application of similar principles,
might result in the issuance of a notice of
deficiency or similar notice of intention to assess
Taxes by any other taxing authority;
(viii) Torita has not taken any action that
would have the effect of deferring any liability for
Taxes for Torita from any taxable period ending on
or before the Effective Time to any subsequent
taxable period;
(ix) None of the income recognized for
federal, state, local, foreign, or other income tax
purposes by Torita during the taxable year during
which the Effective Time occurs will be derived
other than in the Ordinary Course of Business; or
will arise from transactions of a type not reflected
in the relevant Tax Returns for the taxable period
immediately preceding the taxable period in which
the Effective Time occurs;
(x) No consent has been filed under Code
Section 341(f) with respect to Torita;
(xi) Torita is not required to include in
income any adjustment pursuant to Code Section
481(a) (or any similar provision of law or
regulations) by reason of a change in accounting
method nor is the Internal Revenue Service ("IRS")
or any other taxing authority considering any such
change in accounting method;
(xii) Torita has not disposed of any
property which has been accounted for Tax purposes
under the installment method pursuant to Code
Section 453;
(xiii) Torita is an entity that is
characterized as a partnership for federal income
tax purposes;
(xiv) There are no requests for rulings,
subpoenas, or requests for information pending with
respect to any taxing authority of, against, or
concerning Torita;
(xv) Any adjustment of Taxes made by the
Internal Revenue Service in any examination of
Torita, which is required to be reported to state,
local, foreign, or other taxing authorities has been
so reported, and any additional Taxes due with
respect, thereto have been paid;
(xvi) Section 5.10(b)(xvii) of the Torita
Disclosure Schedule lists all of the jurisdictions
in which Torita has earned income, filed 2000, 1999,
and 1998 calendar years. Such jurisdictions were
the only jurisdictions in which Torita earned
income.
5.10 Real and Personal Property and Related Matters.
(a) Torita owns and has good and marketable fee
simple title to, or, to the extent disclosed in Schedule
5.10, a valid leasehold interest in or license to use the
Torita Assets, including (i) all of the real property
reflected in the Most Recent Fiscal Year End Financial
Statements or acquired thereafter or used in its
operations (ii) all of the inventory and equipment
currently utilized in its operations, (iii) all other
properties and assets (personal and mixed, tangible and
intangible), reflected in the Most Recent Fiscal Year End
Financial Statements or acquired thereafter or utilized
in its operations, (iv) all properties or assets which
are subject to operating leases as defined in Financial
Accounting Standards Board Statement No. 13 and are not
reflected in the Most Recent Fiscal Year End Financial
Statements, and (v) all other properties, concessions and
assets owned, leased, used or licensed by Torita, except
in each of the foregoing clauses for any of such
properties or assets sold or otherwise disposed of in the
Ordinary Course of Business or with respect to which the
lease has expired or has been terminated, since the date
of the Most Recent Fiscal Year End Financial Statements
(i) through (v).
(b) All of the land, buildings, structures and
other improvements presently used in connection with the
operation of Torita's business are included in the Torita
Assets.
(c) Except as set forth on Section 5.10 of the
Torita Disclosure Schedule, Torita does not own or hold,
is not obligated under and is not a party to, any option,
right of first refusal or other contractual right to
purchase, acquire, sell or dispose of any real property
or interest in real property, including, without
limitation, the Torita Assets or any portion thereof or
interest therein.
(d) To the Knowledge of Torita, the continued
use, occupancy and operation of the Torita Assets as
currently used, occupied and operated will comply in all
material respects with all applicable Legal Requirements.
No claim has been made by an Governmental Body having
jurisdiction over the Properties with respect to the Law
or application thereof to the Torita Assets, or the use,
occupancy or operation thereof, which claim, if decided
adversely, would have a material adverse effect.
(e) Torita has not received any written notice
of (nor does Torita have any Knowledge of) any pending,
threatened or contemplated condemnation, zoning or
administrative proceeding affecting the Torita Assets or
any material part thereof or of any sale or other
disposition of the Torita Assets or any material portion
thereof in lieu of condemnation.
(f) Except as disclosed through recorded or
otherwise publicly available documents, there is no
pending or, to the Knowledge of Torita, contemplated
assessment of or charge against any parcel of real
property included in the Torita Assets which, when taken
together with all similar assessments and charges against
the balance of the Torita Assets, would result in any
material change in the aggregate amount of Taxes payable
in respect of the Torita Assets. All Taxes, the
non-payment of which might become a lien on any part of
the Torita Assets (or for which Torita is responsible
pursuant to any lease) and which are due and payable
prior to the Closing Date, have been, or on the Closing
Date will be, paid in full.
(g) Torita has not received written notice of
any material encroachment upon any of the parcels of real
property comprising the Torita Assets and, to the
Knowledge of Torita, there are no other facts or
conditions affecting any such parcel that an accurate
survey or careful physical inspection thereof would
reveal which would, individually or in the aggregate, (i)
interfere (except to an extent that would not have a
material adverse effect) with the use, occupancy or
operation thereof as currently used, occupied and
operated, or (ii) reduce (except to an extent that would
not have a material adverse effect) the fair market value
thereof below the fair market value such parcel would
have had but for such encroachment or other fact or
condition.
(h) All documents, reports, plans,
specifications, studies, architectural and engineering
drawings, contracts, permits, title insurance policies,
completion bonds, arrangements, warranties, commitments
and other similar items or instruments relating to or
affecting the Torita Assets or the use, operation or
occupancy thereof have been made available by Torita to
the Company, to the extent that such materials are
already in the possession or under the control of Torita
and relate to the ownership and operation of its business
and the Torita Assets, and any such contracts which,
individually or in the aggregate, are material are in
full force and effect (unless otherwise provided
therein). Torita has paid in full or accrued all amounts
currently due thereunder and has satisfied in full or
provided for all of its liabilities thereunder to the
extent required to be satisfied or provided for on the
date hereof and on the Closing Date, as the case may be.
(i) Except as set forth on Schedule 5.10, to the
Knowledge of Torita, all components of all buildings,
structures and other improvements which are currently
being used in the operation of its business, including,
but not limited to, the roofs and structural elements
thereof and the hearing, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer, waste water,
storm water, paving and parking equipment, systems and
facilities included therein, are in all material respects
in satisfactory operating condition and repair, subject
to continued repair and replacement in accordance with
past practice.
(j) No insurer has suspended, revoked, modified,
cancelled or refused to issue any policy or casualty or
liability insurance to Torita with respect to any of the
real property due to conditions existing at such real
property.
(k) No portion of the real property has suffered
any material damage or had its operation curtailed in any
material respect by fire, flood or other casualty which
has not heretofore been repaired and restored to its
original condition and paid or provided for, all in
accordance with all applicable Law.
(l) Except as set forth in Section 5.10 of the
Torita Disclosure Schedule, Torita has good and
marketable title to or a valid leasehold interest in or
license to use all of the personal property, tangible or
intangible, used by or located upon its premises and
included in the Torita Assets whether shown on the Most
Recent Fiscal Year End Financial Statements or not or
acquired thereafter in the Ordinary Course of Business,
free and clear of all Encumbrances, except for Permitted
Exceptions and except for property and assets disposed of
in the Ordinary Course of Business since the date of the
Most Recent Fiscal Year End Financial Statement and
except for Encumbrances disclosed on the Most Recent
Fiscal Year End Financial Statements (including the notes
thereto). Except as described in Section 5.10 of the
Torita Disclosure Schedule, to Torita's Knowledge, all of
Torita's equipment, machinery, fixtures, improvements and
other tangible assets (whether owned or leased) included
on the Torita Assets are in good condition or repair
(except for ordinary wear and tear) and are fit for use
in the ordinary course of Torita's business as presently
conducted and as presently proposed to be conducted.
(m) Except as set forth on Section 5.10 of the
Torita Disclosure Schedule, Torita owns, has a leasehold
interest in, has a license to use all of the material
assets, properties and rights, whether tangible or
intangible, which are necessary for the conduct of
Torita's business as presently conducted, and none of the
Excluded Assets are material to as necessary for the
conduct of such business.
5.11 Environmental Compliance.
(a) There have been no Releases by Torita, or to
the Knowledge of Torita, by any other Person at any
Torita Assets owned or operated by Torita that is
reasonably likely to have a material adverse effect on
Torita or its operations.
(b) To the Knowledge of Torita, there has not
been any Release at any facility that has received or
treated Hazardous Materials generated by Torita or any
predecessor-in-interest.
(c) The operations of Torita are in full
compliance with Environmental Laws, except for such
violations which are not reasonably likely to have a
material adverse effect on Torita or its operations.
(d) There is no Environmental Claim asserted or
threatened to be asserted against Torita or any
predecessor-in-interest, or to the Knowledge of Torita,
against any facility which received Hazardous Materials
generated by Torita or any predecessor-in-interest.
5.12 Legal Compliance. Torita is not in violation of
any applicable permit, license, ordinance or other law,
regulation or requirement, federal, foreign, provincial, state
or local, relating to the operation of any real property or
any of the other assets of Torita (including applicable
occupational health and safety laws and regulations) or the
conduct of Torita's business, which violations, individually
or in the aggregate, could have a material adverse effect on
the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of
Torita taken as a whole.
5.13 Intellectual Property.
(a) Torita owns or has the right to use all
Intellectual Property necessary for the operation of or
used in Torita's businesses as presently conducted. Each
item of Intellectual Property owned or used by Torita
immediately prior to the Effective Time hereunder will be
owned or available for use by the Surviving Corporation
on identical terms and conditions immediately subsequent
to the Effective Time. Torita has taken all necessary
and desirable action to protect each item of Intellectual
Property that Torita owns or uses.
(b) Torita has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of third parties,
and none of the directors and officers (and employees
with responsibility for Intellectual Property matters) of
Torita has ever received any charge, complaint, claim, or
notice alleging any such interference, infringement,
misappropriation, or violation. To the Knowledge of
Torita (and employees with responsibility for
Intellectual Property matters), no third party has
interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual
Property rights of Torita.
(c) Torita has delivered or made available to
the Company correct and complete copies of each patent,
trademark or copyright registration which has been issued
to Torita with respect to any of its Intellectual
Property and has made available to the Company correct
and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of
each such item. With respect to each item of
Intellectual Property that Torita owns:
(i) Torita possesses all right, title, and
interest in and to the item;
(ii) the item is not subject to any
outstanding judgment, order, decree, stipulation,
injunction, or charge; and
(iii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand
is pending or, to the Knowledge of Torita (and
employees with responsibility for Intellectual
Property matters) is threatened which challenges the
legality, validity, enforceability, use, or
ownership of the item.
(d) With respect to each such item of
Intellectual Property that is material to the conduct of
Torita's business (including any "off-the-shelf" Torita
Software):
(i) the license, sublicense, agreement, or
permission covering the item is (and will continue
to be on substantially identical terms immediately
following the Closing Date) legal, valid, binding,
enforceable, and in full force and effect;
(ii) the underlying item of Intellectual
Property is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
and
(iii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand
is pending, or, to the Knowledge of Torita (and
employees with responsibility for Intellectual
Property matters), is threatened which challenges
the legality, validity, or enforceability of the
underlying item of Intellectual Property.
5.14 Contracts. Except as set forth in Section 5.14
to the Torita Disclosure Schedule, (i) all of the following
contracts, agreements and instruments (the "Torita
Contracts") are valid, binding and enforceable in accordance
with their respective terms, except when such enforceability
may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws from time to time
in effect which effect the enforcement of creditors' rights
generally, and all shall be in full force and effect without
penalty in accordance with their terms upon consummation of
the transactions contemplated hereby; (ii) Torita has
performed all obligations which are required to be performed
by Torita and it is not in default under or in breach of or in
receipt of any claim of default or breach under such Torita
Contract, and no event has occurred which, with the passage of
time or the giving of notice or both, would result in a
default, breach or event of noncompliance by Torita under any
Torita Contract; and (iii) Torita has no present expectation
or intention of not fully performing on a timely basis all
such obligations required to be performed by Torita under any
Torita Contract, and Torita has no Knowledge of any breach or
cancellation by the other parties to any Torita Contract;
(a) any written arrangement (or group of related
written arrangements) for the lease or license of real or
personal property or rights to minerals on or under any
real property from or to third parties;
(b) any written arrangement concerning a
partnership or joint venture;
(c) any written arrangement (or group of related
written arrangements) under which Torita has i) created,
incurred, assumed, or guaranteed (or may create, incur,
assume or guarantee) Indebtedness in excess of $30,000 or
ii) imposed (or may impose) a Security Interest on any of
its assets, tangible or intangible;
(d) any written arrangement concerning
confidentiality or any written arrangement concerning
noncompetition;
(e) any written arrangement not disclosed in the
Torita Disclosure Schedule pursuant to any other
provision in this Section 5 under which the consequences
of a default or termination could have a material adverse
effect on the assets, Liabilities, business, financial
condition, operations, results of operations, or future
prospects of Torita;
(f) any contract for the employment of any
officer, individual employee or other person on a
full-time, part-time or consulting basis;
(g) any guaranty of any obligation for borrowed
money or otherwise, other than endorsements made for
collection in the ordinary course of business;
(h) any agreement or commitment with respect to
the lending or investing of funds to or in other Persons;
(i) any license or royalty agreement (other
than with respect to "off-the-shelf" software
purchased for use in the day-to-day operations of
Torita);
(j) any contract for the purchase or sale of
products, services or real or personal property other
than in the Ordinary Course of Business;
(k) any lease agreement under which Torita is
the lessee of or holds or operates any personal property
by another party, except for any lease of such property
where the actual annual rental payments do not exceed
$50,000;
(l) any contract or group of related contracts
with the same party or group of affiliated parties for
the purchase or sale of raw materials, commodities,
supplies, products, equipment or other personal property
or for the receipt of services under which the
undelivered balance of such products and services has a
selling price in excess of $50,000;
(m) any contracts or group of related contracts
with the same party or group of affiliated parties for
the sale of commodities, supplies, products, or other
personal property or for the furnishings of services
under which the undelivered balance of such products or
services due from Torita has a selling price in excess of
$10,000;
(n) any contract related to the marketing, sale,
advertising or promotion of Torita's products;
(o) any contract with any officer, director,
shareholder or other Affiliate;
(p) any broker, agent, sales representative,
sales, distribution or other agreement pursuant to which
any party is entitled to a percentage of profits or
revenues of Torita or any of its Subsidiaries or is paid
on a commission or other basis;
(q) any contract or agreement prohibiting Torita
from freely engaging in any business or competing
anywhere in the world; and
(r) any other written arrangement or group of
related written arrangements not entered into in the
Ordinary Course of Business.
5.15 Insurance. Torita has made available to the
Company all policies or binders of casualty, liability,
worker's compensation, vehicular, or other insurance held by
or on behalf of Torita (specifying the insurer, the policy
number or covering note number with respect to binders, and
describing each pending claim thereunder of more than $25,000,
setting forth the aggregate amounts paid out under each such
policy through the date hereof and the aggregate limit of any
insurer's liability thereunder). Such policies and binders
are in full force and effect and to the Knowledge of Torita
sufficiently insure against risks and liabilities customary
for the businesses in which Torita is engaged. To the
Knowledge of Torita, Torita is not in material default with
respect to any provision contained in any such policy or
binder and has not failed to give any notice or present any
pending material claim under any such policy or binder in due
and timely fashion. There are no material outstanding unpaid
claims under any such policy or binder. Torita has not
received a notice of cancellation or nonrenewal of any such
policy or binder. Torita has no knowledge of any material
inaccuracy in any application for such policies or binders,
any failure to pay premiums when due or any similar state of
facts which might form the basis for termination or material
adverse modification of any such insurance. Torita has no
knowledge of any act, event or occurrence that could give rise
to a claim under any director and officer insurance policy
held by or on behalf of Torita.
5.16 Litigation. Except as set forth in Section 5.16
to the Torita Disclosure Schedule, Torita is not (i) subject
to any unsatisfied judgment, order, decree, stipulation,
injunction, or charge or (ii) a party or, to the Knowledge of
Torita, is not threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation
of or in any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or
before any arbitrator. To the Knowledge of Torita, there
exists no basis on which any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or
threatened against Torita, where such charge, complaint,
action, suit, proceeding, hearing or investigation would have
a material adverse effect on Torita's business or operations.
5.17 Employees; Employment Practices: Compensation
and Vacations. Torita has not received notice of any
non-compliance and, to the Knowledge of Torita, Torita is in
compliance with the Fair Labor Standards Act and any similar
state, county, local, or foreign legislation, ordinance or
regulation. Torita is not currently involved in any Claim,
nor, to the Knowledge of Torita, is any Claim threatened,
involving an unfair employment practice, wage and hour
violation, or occupational safety and health violation under
any foreign, federal, provincial, foreign, state, county or
local law.
5.18 Employee Benefit Plans. With respect to the
Employer Benefit Plan which will be assumed by the Company:
(a) Neither Torita nor any other corporation or
other trade or business that is or has been under common
control with Torita (as determined under Section 414(b),
(c), (m) or (o) of the Code) has ever maintained,
contributed to or incurred any obligation or liability
with respect to (i) any "multiemployer plan", as defined
in Section 3(37) or 4001(a)(3) or ERISA or Section 414(f)
of the Code, or similar provision of the law of any other
jurisdiction (either as an employer or a joint employer)
or (ii) any other plan covered by Title IV of ERISA or
subject to the requirements of Section 412 of the Code,
or similar provision of the law of any other
jurisdiction, and Torita has no actual or contingent
liability under Title IV of ERISA or Section 412 of the
Code to any person or entity, including the Pension
Benefit Guaranty Corporation, the IRS, any such plan or
the participants (or their beneficiaries) in any such
plan and there is no basis for any such liability as the
result of or after the consummation of the transactions
contemplated by this Agreement.
(b) Each such Employee Benefit Plan that is
intended to be qualified under Section 401 of the Code,
or similar provision of the law of any other
jurisdiction, is so qualified and has been so qualified
during the period from its adoption to date, and each
trust forming a part thereof is exempt from tax pursuant
to Section 501 of the Code, or similar provision of the
law of any other jurisdiction, and all contributions made
thereto have been deductible by Torita. A favorable
determination letter has been issued by the IRS, or
similar foreign governmental entity, with respect to each
such plan and trust, which letter includes a
determination with respect to the qualification of the
plan under the Tax Reform Act of 1986 and subsequent tax
legislation, or similar provision of the law of any other
jurisdiction (or if such letter has not yet been
received, an application has been made to the IRS for
such determination within the remedial amendment period
so that such letter will have retroactive effect to the
effective date of such legislation), and, to the
Knowledge of Torita, there are no facts and nothing has
occurred that would adversely affect the qualification of
such plan.
(c) Each such Employee Benefit Plan has, in all
material respects, been maintained and administered in
compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and
regulations, which are applicable to such plan and there
is no audit, investigation, dispute, arbitration, claim,
suit, or grievance, pending or, to the Knowledge of
Torita, threatened, involving an Employee Benefit Plan
(other than routine claims for benefits), and, to the
Knowledge of Torita after due inquiry, there is no basis
for such a claim. There have been no "prohibited
transactions" (within the meaning of Section 4975 of the
Code or Section 406 of ERISA, or similar provision of
foreign tax laws) with respect to any Employee Benefit
Plan.
(d) All contributions have been, or prior to the
consummation of the Asset Purchase will be, made under,
and all obligations to any of the employees or former
employees of Torita (including vacation entitlements)
have been, or, prior to the consummation of the Asset
Purchase will be, satisfied with respect to, each
Employee Benefit Plan for all periods up to the
consummation of the Asset Purchase, except as set forth
in the Financial Statements. Except as set forth on
Section 5.18 of the Torita Disclosure Schedule, the costs
of all such Employee Benefit Plans are fully accrued and
reflected in the Financial Statements.
(e) Except as otherwise set forth on Section
5.18 of the Torita Disclosure Schedule, no such Employee
Benefit Plan provides for the payment of separation,
severance, termination or similar-type benefits to any
person or the acceleration of any rights to benefits
under any Employee Benefit Plan or obligates Torita to
pay separation, severance, termination or similar-type
benefits solely as a result of any transaction
contemplated by this Agreement or any agreement related
thereto or as a result of a "change in control" (within
the meaning of such term under Section gI of the Code,
or similar provisions of foreign tax laws).
5.19 Compliance with Laws; Certain Operations.
Torita is in compliance with and has not violated in any way
which would have a material adverse effect on the business of
Torita and its subsidiaries, taken as a whole, any law, rule
or regulation of any foreign, federal, state, provincial,
local or foreign government or agency thereof which affects
Torita's business, properties, or assets and no notice, claim,
charge, complaint, action, suit, proceeding, investigation or
hearing has been received by Torita or filed, commenced or
threatened against Torita alleging any such violation.
5.20 Brokers' Fees. Except as described in Section
5.20 of the Torita Disclosure Schedule, no person or entity
has, or will have, as a result of any act or omission by
Torita any right, interest, or valid claim against or upon
Torita for any commission, fee, or other compensation as a
finder or broker, or in any similar capacity, in connection
with the consummation of the Asset Purchase or any other
transaction contemplated by this Agreement.
5.21 Labor Discussions and Troubles. There are no
strikes or other labor troubles now pending or, to the
Knowledge of Torita, threatened against Torita.
5.22 Notes and Accounts Receivable. All of the notes
and accounts receivable of Torita reflected on the Financial
Statements or on the books of Torita are actual and bona fide
notes and accounts receivable, representing obligations for
the total dollar amount thereof that resulted from Torita's
Ordinary Course of Business, and there are no Encumbrances on
any such notes or accounts receivable. All accounts
receivable over 90 days old as of December 31, 2000 are set
forth in Section 5.22 of the Torita Disclosure Schedule which
shall be updated 10 days prior to closing to the latest date
at which such information is available at such time.
5.23 No Bankruptcy Proceedings. Torita has not made
any assignment for the benefit of creditors, filed any
petition in bankruptcy, been adjudicated insolvent or
bankrupt, petitioned or applied to any tribunal for any
receiver, conservator or trustee of any of them or any of
their property or assets, or commenced any action or
proceeding under any reorganization arrangement, readjustment
of debt, conservation, dissolution or liquidation law or
statute or any jurisdiction; and no such action or proceeding
has been commenced or threatened against Torita by any
creditor, claimant, governmental authority or any other person
or entity.
5.24 Potential Conflicts of Interest. To the
Knowledge of Torita, except as set forth on Section 5.24 of
the Torita Disclosure Schedule, no officer or director of
Torita or any member of the immediate family of any of the
foregoing:
(a) owns, directly or indirectly, any material
interest in or is an owner, sole proprietor, shareholder,
partner, director, officer, employee, consultant or agent
of any person which is a competitor, lessor, lessee,
customer or supplier of Torita (except for ownership of
shares equaling 5% or less of a class of stock trading on
a national or regional stock exchange);
(b) owns or has an interest in, directly or
indirectly, in whole or in part, any material property,
patent, trademark, service xxxx, trade name, copyright,
franchise, invention, permit, license or secret or
confidential information related to the current
activities or the activities currently contemplated by
Torita; or
(c) has any material cause of action whatsoever
against, or owes any material amount to, Torita, except
for claims in the ordinary course of business, such as
for accrued vacation pay, accrued benefits under Torita
Employer Benefit Plans and similar matters.
5.25 Disclosures. Neither this Section 5 nor the
Torita Disclosure Schedule contains any untrue statement of a
material fact or omits a material fact necessary to make the
statements contained herein or therein, in light of the
circumstances in which they were made, not misleading. There
is no material fact affecting Torita which has not been
disclosed to Torita which materially adversely affects or
could reasonably be anticipated to materially adversely affect
Torita's business, Liabilities, financial condition,
operations, future prospects, properties or assets.
5.26 Recent Events. Except as disclosed in the
Torita Disclosure Schedule, between the date of this Agreement
and the Closing Date, there will not be any material adverse
change in the business relationship of Torita and its
Subsidiaries with any material customer or supplier.
5.27 Investment and Securities Representations.
(a) Torita is acquiring the Company Common Stock
for investment for Torita's own account and not with the
view to, or for resale in connection with, any
distribution thereof. Torita understands that the
Company's Common Stock has not been registered under the
Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of
the investment intent as expressed herein. Torita
further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to any third person
with respect to any of the Company Common Stock. Torita
understands and acknowledges that the offering of the
Company's Common Stock pursuant to this Agreement will
not be registered under the Securities Act on the ground
that the sale provided for in this Agreement and the
issuance of securities hereunder is exempt from the
registration requirements of the Securities Act.
(b) To Torita's Knowledge, neither the Company,
nor any person acting on its behalf, offered to sell the
Company's Common Stock by means of any form of general
solicitation or advertising, such as media advertising or
seminars.
(c) Neither the Company, nor any person acting
on its behalf, has made any representation concerning the
tax treatment of the Company Common Stock. Torita has
consulted and relied solely upon its own tax advisors
with respect to all tax matters involved in its
investment in the Company's Common Stock.
(d)Torita acknowledges and agrees that transfer of
the Company Common Stock is subject to an appropriate
exemption from the Securities Act and that, pending
compliance with such provisions, a stop transfer order
will be placed on the books of the Company with respect
to the Common Stock.
6. Representations and Warranties of the Company.
6.1 Organization, Good Standing and Qualification.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado
and has all requisite corporate power and authority to carry
on its business as currently conducted. The Company is duly
qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.
6.2 Authorization. All corporate action on the part
of the Company, its officers, directors and shareholders
necessary for the authorization, execution and delivery of
this Agreement, and the performance of all obligations of the
Company hereunder, has been taken or will be taken prior to
the any applicable closing date. This Agreement constitutes
a valid and legally binding obligation of the Company,
enforceable in accordance with its terms, subject to: (i)
judicial principles limiting the availability of specific
performance, injunctive relief, and other equitable remedies;
and (ii) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect generally
relating to or affecting creditors' rights.
6.3 Governmental Consents. No consent, approval,
order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or
local governmental authority on the part of the Company is
required in connection with the consummation of any
transaction contemplated hereby, except for the following:
(i) any filings required by the CBCA, (ii) the filing of such
documents as may be required under the Securities Act, and
(iii) the compliance with applicable state securities laws,
which compliance will have occurred within the appropriate
time periods therefor.
6.4 Compliance with Other Instruments. The Company
is not in violation or default of any provision of its
Articles of Incorporation and Bylaws, each as amended and in
effect on and as of the Closing Date. The Company is not in
violation or default of any provision of any instrument,
mortgage, deed of trust, loan, contract, commitment, judgment,
decree, order or obligation to which it is a party or by which
it or any of its properties or assets are bound which would
materially adversely affect the condition (financial or
otherwise), business, property, assets or liabilities of the
Company or of any provision of any federal, state or local
statute, rule or governmental regulation which would
materially adversely affect the condition (financial or
otherwise), business, property, assets or liabilities of the
Company. The execution, delivery and performance of and
compliance with this Agreement will not result in any such
violation, be in conflict with or constitute, with or without
the passage of time or giving of notice, a default under any
such provision, require any consent or waiver under any such
provision (other than any consents or waivers that have been
obtained), or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or
assets of the Company pursuant to any such provision.
6.5 SEC Filings.
(a) The Company has filed all reports,
registration statements, forms and other documents that
it is required to file with the SEC or any exchange on
which it is traded or reporting service through which any
of its securities are quoted, including without
limitation all filings required by the Securities Act,
any rules promulgated thereunder, the Exchange Act, and
an any rules promulgated thereunder ("the Company SEC
Filings"). As of the Closing Date, true and correct
copies of all the Company SEC Filings filed since January
1, 1998 will have been provided to Torita. None of the
Company SEC Filings includes any untrue statement of
material fact or omits to state a material fact necessary
in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
(b) There has been no material adverse change in
any information reported in the most recent report filed
by the Company pursuant to the Exchange Act since the
effective date of such report.
6.6 Litigation. The Company's ability to carry out
the terms of this Agreement is not subject to any order from
any court or other governmental entity affecting the Company.
There is no action, suit, litigation, arbitration, lawsuit,
claim, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding and any
informal proceeding), prosecution, contest, hearing, inquiry,
inquest, audit, examination, investigation, challenge,
controversy or dispute commenced, brought, conducted or heard
by or before, or otherwise involving, any governmental
authority or any arbitrator pending or threatened against the
Company which would affect the Company's ability to carry out
the terms of this Agreement, and there exist no facts to serve
as a basis for any assertion or institution of any such
proceeding.
6.7 Bankruptcy. The Company has not made any
assignment for the benefit of creditors, filed any petition in
bankruptcy, been adjudicated insolvent or bankrupt, petitioned
or applied to any tribunal for any receiver, conservator or
trustee of any of them or any of their property or assets, or
commenced any action or proceeding under any reorganization
arrangement, readjustment of debt, conservation, dissolution
or liquidation law or statute or any jurisdiction; and no such
action or proceeding has been commenced or threatened against
the Company by any creditor, claimant, governmental authority
or any other person or entity.
6.8 Disclosures. No representation or warranty of
the Company contained in this Agreement and no agreement,
document, financial statement or other item or information
provided to the Company in connection with this Agreement
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances
under which they were made, not misleading.
6.9 Recent Events. Except as disclosed to Torita in
writing prior to the Closing Date, between the date of the
most recent financial statements included in the SEC filings
and the Closing Date, there has not been any material adverse
change in the business relationship of the Company with any
material customer or supplier.
6.10 Brokers. Except for an obligation to compensate
Xxxxxxx X. Xxxxxxx and Focus Tech Investment, no person, or
entity has, or will have, as a result of any act or omission
by the Company, any right, interest, or valid claim against or
upon the Company for any commission, fee, or other
compensation as a finder or broker, or in any similar
capacity, in connection with the purchase by Torita of the
Company Common Stock.
6.11 Capitalization. The authorized capital stock of
the Company consists of 300,000,000 shares of the Company's
Common, of which 13,254,033 shares are issued and outstanding,
3,000,000 shares of Class A preferred stock, of which
1,792,267 shares are issued and outstanding, and 2,000,000
shares of Class B preferred stock of which no shares are
issued and outstanding. As of February 9, 2001, there do not
exist any shares of the Company Common Stock subject to
options or warrants, issued by the Company, to purchase the
Company Common Stock from the Company.
6.12 Tax Matters.
(a) The Company has made available to Torita
state, federal, local and foreign tax returns for the
years ended December 31, 1999, 1998 and 1997. The recent
Company Tax Returns fairly and accurately present the
financial conditions and results of operations of the
Company and its consolidated subsidiaries as of the
respective dates thereof and periods therein referred to.
The Company has timely filed (or received an appropriate
extension of time to file) all Tax Returns required to be
filed by it. The Company has paid all Taxes shown to be
due on such Tax Returns or otherwise due and all such Tax
Returns were, are, and will be true, correct and
complete. The Company has never filed, or been required
to file, any Tax Returns as a member of an Affiliated
Group, nor does it have any liability for Taxes of any
Person under Treas. Reg. 1.1502-6 (or any similar
provision of state, local, foreign, or other law) as a
transferee or successor by contract or otherwise. No Tax
Return described above contains or will contain a
disclosure statement under Code Section
6662(d)(2)(B)(ii)(I) or any similar provision of state,
local, foreign, or other law. The Company is not a party
to, nor has any obligation under, any tax sharing
agreement, arrangement, or practice, written or oral,
express or implied. The Company has not received notice
of any claim made by an authority in a jurisdiction where
the Company does not file Tax Returns that the Company is
or may be subject to taxation by that jurisdiction.
(b) With respect to Taxes owed by the Company
and the Company's Tax Returns:
(i) All Tax deficiencies asserted or
assessed against the Company have been paid or
finally settled;
(ii) The Company has made all payments of
estimated Taxes required to be made under Code
Section 6655 and any comparable provisions of state,
local, foreign or other law;
(iii) All amounts that are required to be
collected or withheld by the Company in connection
with amounts paid or owing to any employee,
creditor, independent contractor, or other third
party have been duly collected or withheld by the
Company and have been duly remitted or deposited in
accordance with law;
(iv) There is no outstanding request by the
Company for any extension of time within which to
pay any Taxes or file any Tax Returns;
(v) There has been no waiver or extension
for or on behalf of the Company of any applicable
statute of limitations for the assessment or
collection of any Taxes;
(vi) There is no pending or threatened
action, audit, proceeding, or investigation for the
assessment or collection of any Taxes of the
Company;
(vii) No taxing authority has raised any
issue with respect to the liability of the Company
for any Tax that, by application of similar
principles, might result in the issuance of a notice
of deficiency or similar notice of intention to
assess Taxes by any other taxing authority;
(viii) The Company has not taken any action
that would have the effect of deferring any
liability for Taxes for the Company from any taxable
period ending on or before the Closing Date to any
subsequent taxable period;
(ix) None of the income recognized for
federal, state, local, foreign, or other income tax
purposes by the Company during the taxable year
during which the Closing Date occurs will be derived
other than in the Ordinary Course of Business; or
will arise from transactions of a type not reflected
in the relevant Tax Returns for the taxable period
immediately preceding the taxable period in which
the Closing Date occurs;
(x) No consent has been filed under Code
Section 341(f) with respect to the Company;
(xi) The Company is not required to include
in income any adjustment pursuant to Code Section
481(a) (or any similar provision of law or
regulations) by reason of a change in accounting
method nor is the IRS or any other taxing authority
considering any such change in accounting method;
(xii) The Company has not disposed of any
property which has been accounted for Tax purposes
under the installment method pursuant to Code
Section 453;
(xiii) The Company does not own an interest
in any entity that is characterized as a partnership
for federal income tax purposes;
(xiv) There are no requests for rulings,
subpoenas, or requests for information pending with
respect to any taxing authority of, against, or
concerning the Company;
(xv) Any adjustment of Taxes made by the
Internal Revenue Service in any examination of the
Company, which is required to be reported to state,
local, foreign, or other taxing authorities has been
so reported, and any additional Taxes due with
respect thereto have been paid;
(xvi) No power of attorney has been granted
by the Company which is currently in force, with
respect to any matter relating to Taxes; and
(xvii) Section 6.13(b)(xvii) of the Company
Disclosure Schedule lists all of the jurisdictions
in which the Company has filed Tax Returns during
the 1999, 1998, and 1997 calendar years. Such
jurisdictions were the only jurisdictions in which
Torita was required to file Tax Returns.
6.13 Environmental Compliance.
(a) There have been no Releases by the Company,
or to the Knowledge of the Company, by any other Person
at any Properties owned or operated by the Company that
is reasonably likely to have a material adverse effect on
the Company or its operations.
(b) To the Knowledge of the Company, there has
not been any Release at any facility that has received or
treated Hazardous Materials generated by the Company or
any predecessor-in-interest.
(c) To the Knowledge of the Company, the
operations of the Company are in full compliance with
Environmental Laws, except for such violations which
are not reasonably likely to have a material adverse
effect on the Company or its operations.
(d) There is no Environmental Claim asserted or,
to the knowledge of the Company threatened to be
asserted, against the Company or, to the Knowledge of the
Company, any predecessor-in-interest, or to the Knowledge
of the Company, against any facility which received
Hazardous Materials generated by the Company or any
predecessor-in-interest.
6.14 Compliance with Laws; Certain Operations. The
Company is in compliance with and has not violated in any way
which would have a material adverse effect on the business of
the Company, any law, rule or regulation of any foreign,
federal, state, provincial, local or foreign government or
agency thereof which affects the Company's business,
properties, or assets and no notice, claim, charge, complaint,
action, suit, proceeding, investigation or hearing has been
received by the Company or filed, commenced or threatened
against the Company alleging any such violation.
7. Proxy Statement.
(a) If, following closing (as defined in this
Agreement), Torita determines to change the name of the
Company, undertake a reverse split of issued and
outstanding shares of the Company's common stock, obtain
shareholder ratification of this Agreement and the
transactions contemplated herein, and/or take any action
requiring approval of shareholders of the Company,
Torita, shall (i) prepare and file with the United States
Securities and Exchange Commission (the "SEC") a Proxy
Statement (the "Proxy Statement") which shall (i) satisfy
the requirements of Section 14 of the Exchange Act, and
(ii) satisfy the disclosure obligations of the Company
under the CBCA. In such event, Torita shall use
reasonable efforts to cause the Proxy Statement to become
effective as soon as practicable and distributed to the
Company's shareholders in connection with a meeting (the
"Company Shareholder Meeting") to be held for any such
purpose; provided, however, that any such reverse split
shall not have the effect of causing the shareholdings of
any Shareholder to be composed of fractional shares or
otherwise be subject to being purchased by the Company.
(collectively, the "Company Shareholder Actions").
(b) Torita shall assure that the Proxy Statement
is complete, accurate and in compliance with all
applicable state and federal securities laws.
(c) The Company Shareholders Meeting shall be
scheduled as soon as possible following the effectiveness
of the Proxy Statement, and in no event more than 45 days
after the effectiveness of the Proxy Statement. Torita
shall assure that the Company sends the Proxy Statement
to all of its shareholders of record immediately after
the Proxy Statement becomes effective.
8. Expenses of Transaction. Following execution of this
Agreement and no later than at Closing, Torita shall pay the
Company a non-refundable payment of $30,000, less $10,000
previously paid by Torita, for legal, accounting, printing,
mailing, and related costs of this transaction and for severance
payments to certain employees of the Company.
9. Indemnification.
(a) Torita shall indemnify the Company and the Nova
Shareholders and every officer, director, and employee of
the Company with respect to the Proxy Statement against
all Adverse Consequences, including any Adverse
Consequences incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any
untrue statement (or alleged untrue statement) of a
material fact contained in the Proxy Statement, or any
amendment or supplement thereof, incident to such filing
or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading, in each case only to the extent
that such untrue statement or omission is made in the
Proxy Statement in reliance upon and in conformity with
information furnished by Torita about Torita in the Proxy
Statement, and shall reimburse the Company, its
directors, officers, employees and control Persons for
reasonable legal or any other expenses reasonably
incurred in connection with investigating, preparing or
defending any claim related thereto as incurred.
(b) The Company Shareholders will indemnify the
Company, each of its officers and directors, against all
Adverse Consequences, including any Adverse Consequences
incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material
fact contained in the Proxy Statement, or any amendment
or supplement thereof, incident to such filing or
compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading, in each case only to the extent
that such untrue statement or omission is made in the
Proxy Statement in reliance upon and in conformity with
information furnished by the Shareholders about the
Shareholders and shall reimburse the Company, such
officers and directors and members for reasonable legal
or any other expenses reasonably incurred in connection
with investigating, preparing or defending any Claim
related thereto as incurred.
(c) Any Claim made under this Section 9 must be
made within the applicable statute of limitations for
bringing a claim based upon the definitive Proxy
Statement. If the indemnification provided for in this
Section 9 is held by a court of competent jurisdiction to
be unavailable to any of the parties entitled thereto
under this Agreement with respect to any Adverse
Consequences, then the indemnifying party, in lieu of
indemnifying the party otherwise entitled to such
indemnification, shall contribute to the amount paid in
respect of such Adverse Consequences or payable by such
parties in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one
hand and of the party otherwise entitled to such
indemnification on the other in connection with the
statements or omissions or actions that resulted in
Adverse Consequences as well as any other relevant
equitable considerations. The relative fault of the
indemnifying party and of the party otherwise entitled to
indemnification shall be determined by reference to,
among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a
material fact relates to information supplied by the
indemnifying party or by the party otherwise entitled to
such indemnification and the relative intent, knowledge,
access to information and opportunity to correct or
prevent such statement or omission of or by the
indemnifying party or the party otherwise entitled to
such indemnification.
10. Closing. Closing of the transactions contemplated by
this Agreement (the "Closing") shall occur on a date (the "Closing
Date") agreed to by the parties no later than March 31, 2001.
10.1 Deliveries by the Company. At Closing, the
Company shall have prepared and shall deliver to Torita the
following:
(a) A certificate or certificates for that
number of shares of Company Common Stock equal to 91.5%
of all issued and outstanding shares of Company Common
Stock. For purposes of calculating such percentage, all
stock so issued to Torita and options, warrants,
convertible securities and other documents entitling the
holder to purchase or obtain shares of the Company Common
Stock shall be deemed to have been exercised as of the
Closing Date. When issued, all shares of the Company
Common Stock issued to Torita shall be fully paid and
non-assessible.
(b) Elections of all directors designated by
Torita and appointment of all officers designated by
Torita; and the resignations of all of the Company's
officers and directors, except Xxxxx X. Xxxxxxxx as
director.
(c) A certificate signed by an officer of the
Company, confirming that each of the conditions set forth
in Sections 12.1 and 12.3 is satisfied.
(d) The following corporate documents:
(i) A certified copy of the text of the
resolutions by which all corporate action on the
part of the Company necessary to approve this
Agreement were taken; and
(ii) A certificate executed by the
president of the Company that all the transactions
contemplated by this Agreement have been approved by
the board of directors and shareholders of the
Company in the manner required by the Colorado
Business Corporation Act.
(e) Agreements substantially in the form set
forth in Exhibit D, executed by the Company Management
pursuant to which each such individual shall agree to
sell no more than 10% of his or her issued and
outstanding shares of Company Common Stock in any month
subsequent to the Closing Date; provided, however, that
Xxxxxx X. Childers, Xxxx X. Xxxxxx, Xxxxx X. Xxxxxx and
Xxxxx X. Xxxxxxxx each shall have the right to sell up to
200,000 shares of Company Common Stock at any time, in
addition to the shares which such individuals may sell as
set forth in this Section 10.1(e).
10.2 Delivery by Torita. At Closing, Torita shall
have prepared and shall deliver to the Company the following:
(a) Warrants (the "Warrants") to purchase
that number of shares of the Company Common Stock equal
to 1.5% of the issued and outstanding shares of the
Company after completion of all transactions contemplated
by this Agreement. The Warrants shall be issued to those
officers and directors of the Company (the "Company
Management") set forth in Exhibit B to this Agreement, in
amounts determined and provided in writing to Torita
prior to Closing. The Warrants shall be exercisable in
whole or in part for a period of 18 months from the date
that the Company first files a report with the United
States Securities Exchange Commission containing audited
financial statements of Torita for the fiscal year ended
December 31, 2000; and shall be exercisable for an
aggregate price of $30,000.00 (equaling a per warrant
exercise price equal to $30,000.00 divided by 1.5% of the
shares of the Company Common Stock issued and outstanding
upon completion of the Asset Purchase) shall be
substantially in the form set forth in Exhibit C; shall
contain provisions requiring adjustment of the Purchase
Price; and shares of the Company Common Stock obtainable
upon exercise on the occurrence of certain events;
contain no restrictions on transfer other than those
imposed by applicable laws; and shall contain "piggyback"
registration rights and, beginning one year after the
Closing Date, demand registration rights.
(b) A certificate signed by an officer of
Torita, confirming that each of the conditions set forth
in Sections 12.1 and 12.2 is satisfied.
11. Pre-Closing Covenants.
11.1 Affirmative Covenants. Except as expressly
contemplated by this Agreement, during the period from the
execution of this Agreement to the Closing Date,
(a) Each party will give any notices to third
parties and use its reasonable efforts to obtain any
third-party consents or assignments necessary to
consummate the transactions contemplated by this
Agreement and to obtain any other consents or assignments
reasonably requested by the other party in connection
with such transactions. Each party will take any
additional action necessary, proper, or advisable in
connection with any other notices to, filings with, and
authorizations, consents and approvals of third parties.
(b) Each party will operate its business in all
material respects in the Ordinary Course of Business.
Each party will use all reasonable efforts to preserve
substantially intact its business organizations, and to
maintain the rights and franchises that are material to
it, retain the services of its officers and maintain its
relationships with all material customers and suppliers,
lessors and licensors.
(c) Each party shall maintain and keep all
material properties and assets (including the Torita
Assets) in as good repair and condition in all material
respects as of the date of this Agreement, ordinary wear
and tear excepted.
(d) Each party shall use all commercially
reasonable efforts to comply in all material respects
with all applicable Laws.
(e) Each party shall permit representatives of
the other party to have full access at all reasonable
times, in any manner so as not to interfere with normal
business operations to all business operations of the
other party, and to all premises, properties, books,
records, contracts, tax records, and all other business
material documents and shall provide copies of any and
all records, contracts, tax records and other material
documents reasonably requested by such party.
(f) Each party shall give prompt written notice
to the other party of any material developments affecting
the assets, liabilities, business, financial condition,
operations, results of operations, or future prospects of
such party providing such notice. Each party will give
prompt written notice to the other party of any material
development affecting the ability of the parties to
consummate the transactions contemplated by this
Agreement.
(g) Each party shall maintain in confidence and
will cause its directors, officers, managers, employees,
agents, and advisors, as the case may be, to maintain in
confidence any Confidential Information and any other
written, oral or other information obtained in confidence
from each other or another party in connection with this
Agreement or the transactions contemplated hereby unless
(i) such information becomes publicly available through
no fault of such party, (ii) the use of such information
is necessary and appropriate in making any filing or
obtaining any consent or approval required for the
consummation of the transactions contemplated hereby, or
(iii) the furnishing or use of such information is
required by legal proceedings or requirements. If the
transactions contemplated hereby are not consummated,
each party will return or destroy as much of such written
information as the other party may reasonably request.
11.2 Negative Covenants of the Parties. Except as
expressly contemplated by this Agreement (and with respect to
the Company by Section 12.3(i)), from the execution of this
Agreement until the Closing Date, neither party shall:
(a) Take any actions which would cause or would
reasonably likely cause a breach of any representation or
warranty set forth in this Agreement;
(b) Sell, lease, license, or otherwise dispose
of any material assets or property except (i) pursuant to
existing contracts or commitments, (ii) in the Ordinary
Course of Business consistent with past practice, and
(iii) as contemplated or permitted by this Agreement;
(c) Take or agree or commit to take any action
that would make any warranty or representation of such
party under this Agreement inaccurate in any respect or
omit or agree to omit any action necessary to prevent any
such warranty or representation from being inaccurate in
any respect;
(d) Pay, discharge, or satisfy any material
claims, liabilities, or obligations (whether absolute,
accrued, asserted, or unasserted, contingent or
otherwise) other than in the Ordinary Course of Business.
(e) Grant any material Lien with respect to any
material assets;
(f) Take, cause, or permit to take any action
which could reasonably be expected to prevent the
transactions contemplated by this Agreement from
constituting a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code; or
(g) Agree, or commit to do any of the foregoing.
11.3 Negative Covenants of the Company. Except as
expressly contemplated by this Agreement, or otherwise
consented to in writing by Torita, from the execution of this
Agreement until the Closing Date, the Company will not:
(a) Adopt or propose any change in its Articles
of Incorporation or Bylaws;
(b) Split, combine, or reclassify any shares of
the Company Common Stock, declare, set aside, or pay any
dividend or other distribution in respect of its Common
Stock, or redeem, repurchase, or otherwise acquire or
offer to redeem, repurchase, or otherwise acquire any of
its securities;
(c) Except for payment of accrued but unpaid
salaries, severance, and re-commencement of salaries,
adopt any change in executive compensation except in the
Ordinary Course of Business or adopt, adjust, or amend
any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred
compensation, employment or employee benefit plan,
agreement, trust, plan, fund, or other arrangement for
the benefit and welfare of any director, officer, or
employee;
(d) Offer, sell, issue, or grant, or authorize
the offering, sale, issuance or grant, of any shares of
Company Common Stock, or other equity interests in, any
securities convertible into or exchangeable for any
shares of Company Common Stock, or any options, warrants,
or rights of any kind to acquire any shares of Company
Common Stock;
(e) Authorize or permit any of its
representatives to, directly or indirectly, solicit,
encourage or initiate any proposal or offer with respect
to (i) a tender or exchange offer, a merger,
consolidation or other business combination, or (ii) the
acquisition of an equity interest in the Company
representing in excess of 50% of the voting rights; or
(f) Participate in discussions or negotiations
regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other
manner any effort or attempt by any person to do or seek
to do any of the foregoing and will notify Torita
immediately if any person makes any such proposal, offer,
inquiry or contact.
11.4 Affirmative Covenants of the Company and its
Directors. From the date of execution of this Agreement until
the Closing Date, the Company and its directors shall take all
actions and execute all documents, reasonable and necessary to
effectuate the intent of this Agreement and to consummate the
transactions contemplated by this Agreement.
11.5 Public Announcements. Each party will consult
with the other before issuing any press release or making any
public statement with respect to this Agreement and the
transactions contemplated by this Agreement and, except as may
be required by applicable law, will not issue any such press
release or make any public statement prior to such
consultation.
11.6 Non-Public Information. From the date of
execution of this Agreement, to the Closing Date, neither
party, directly or indirectly, will provide any third party
any information concerning this Agreement or the transactions
contemplated thereby which have not previously been made
available to the general public; provided, however, that the
provisions of this Section 11.6 shall not apply to the
provision of information by a party to its attorneys,
accountants, and other similar advisors for purposes of
effectuating the transactions contemplated by this Agreement
as to the release of information required by the Exchange Act,
rules of securities exchanges or bylaws.
11.7 Reporting Requirements. The Company shall
assure compliance with all reporting requirements of the
Exchange Act.
12. Conditions.
12.1 Conditions to Obligations of Each Party to
Effectuate the Asset Purchase. The respective obligations of
each Party to effect the Asset Purchase and to consummate the
other transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) There shall have been no law, statute, rule
or regulation, domestic or foreign, enacted or
promulgated which would make consummation of this
Agreement illegal;
(b) No Party shall have terminated this
Agreement;
(c) No action, suit, or proceeding
("Proceeding") shall be pending or threatened before any
court or quasi-judicial or administrative agency of any
foreign, federal, state, provincial local, or foreign
jurisdiction wherein an unfavorable judgment, order,
decree, stipulation, injunction, or charge would (i)
prevent consummation of the Asset Purchase, or (ii) cause
any of the transactions contemplated by this Agreement to
be rescinded following consummation of the Asset Purchase
(and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect).
(d) The Company shareholders and the Torita
members shall have approved the Asset Purchase to any
extent required by applicable law and governing documents
at meetings called for that purpose or by written
consent.
(e) Prior to the Company Shareholder Meeting,
both parties shall have satisfactorily completed all due
diligence activities and have been satisfied with all
facts found in such activities. The Company Shareholder
Meeting shall not be conducted until each party shall
have provided to the other a certificate in writing,
signed by its president, to the effect that the
conditions set forth in this subsection (e) have been
satisfied.
Any Party may waive any condition, in whole or in part, specified
in this Section 12.1 if such Party executes a writing so stating at
or prior to the Closing Date.
12.2 Conditions to Obligation of the Company. The
obligations of the Company to effect the Asset Purchase and to
consummate the other transactions contemplated hereby and to
perform its other obligations hereunder is also subject to
satisfaction at or prior to the Closing Date of the following
conditions:
(a) The representations and warranties set forth
in Article 5 shall be true and correct in all material
respects at and as of the Closing Date;
(b) Torita shall have performed and complied
with all of its covenants hereunder in all material
respects through the Closing Date;
(c) Torita shall have procured all of the third
party consents and approvals necessary in order that this
Agreement and the transactions contemplated herein not
constitute a breach or violation of, or result in a right
of termination or acceleration of any contract or
agreement to which Torita is a party or any Encumbrance
on any of Torita's assets pursuant to the provisions of
any agreement, arrangement or understanding or any
license, franchise or permit, in any such case which is
material to Torita;
(d) An officer of Torita shall have delivered to
the Company a certificate signed by Torita to the effect
that each of the conditions specified above in Section
12.2(a) through (c) is satisfied in all respects;
(e) All actions to be taken by Torita in connection
with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other
documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in
form and substance to the Company and its counsel;
(f) No court action or proceeding (and to the
actual knowledge of Torita, no investigation by a
Governmental Body that has a substantial likelihood of
leading to an action or proceeding) to restrain or
prohibit the transactions contemplated by this Agreement
and the agreements related hereto and at the Effective
Time, there shall be no Claims, whether or not fully
covered by insurance that (i) have a substantial
probability of restraining or prohibiting or creating
damages in connection with the transactions contemplated
by this Agreement and the agreements related thereto, or
(ii) have a substantial probability of resulting in a
material adverse change of business, operations,
properties or assets or in the condition, financial or
otherwise, of Torita;
(g) There shall have been no material adverse
change, from the Closing Date until the Closing Date, in
the Torita Assets or in the business, operations,
condition, financial or otherwise, of Torita, and the
Company shall have received a certificate to that effect
as of the Closing Date and executed by a Manager of
Torita and the person primarily responsible for its
financial affairs;
(h) The Company shall not have discovered the
existence of any further transaction which materially and
adversely differs from any representation or warranty of
Torita.
(i) Torita shall have delivered all documents
required by Section 10.2.
The Company may waive any condition, in whole or in part, specified
in this Section 12.2 if the Company executes a writing so stating
at or prior to the Closing Date.
12.3 Conditions to Obligation of Torita. The
obligations of Torita to effect the Asset Purchase and to
consummate the other transactions contemplated hereby and to
perform its other obligations hereunder is also subject to
satisfaction at or prior to the Closing Date of the following
conditions:
(a) The representations and warranties set forth
in Article 6 shall be true and correct in all material
respects at and as of the Closing Date;
(b) The Company shall have performed and
complied with all of its respective covenants hereunder
in all material respects through the Closing Date;
(c) The Company shall have procured all of the
third party consents and approvals necessary in order
that this Agreement and the transactions contemplated
herein not constitute a breach or violation of, or result
in a right of termination or acceleration of any contract
or agreement to which the Company is a party or any
Encumbrance on any of the Company's assets pursuant to
the provisions of any agreement, arrangement or
understanding or any license, franchise or permit, in any
such case which is material to the Company;
(d) The Company shall have delivered to Torita
a certificate signed by an officer of the Company to the
effect that each of the conditions specified above in
Sections 12.3(a) through (c) are satisfied in all
respects;
(e) The Company shall have delivered to Torita
all documents required by Section 10.1;
(f) All actions to be taken by the Company in
connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to Torita and its
counsel;
(g) No court action or proceeding (and to the
actual knowledge of the Company, no investigation by a
Governmental Body that has a substantial likelihood of
leading to an action or proceeding) shall have been
instituted to restrain or prohibit the transactions
contemplated by this Agreement and the agreements related
hereto and at the Closing Date there shall be no Claims,
whether or not fully covered by insurance, that (i) have
a substantial probability of restraining or prohibiting
or creating damages in connection with the transactions
contemplated by this Agreement and the agreements related
thereto, or (ii) have a substantial probability of
resulting in a material adverse change in business,
operations, properties or assets or in the condition,
financial or otherwise, of the Company, and Torita shall
receive a certificate to that effect dated as of the
Closing Date, executed by an officer of the Company;
(h) No stop order with respect to the trading of
the Company Common Stock shall have been issued;
(i) The Company shall have sold, transferred, or
otherwise disposed of all of its assets, or entered into
binding agreements to effect such a disposal and shall
have paid all of its Liabilities or have placed in a bank
account controlled by Torita funds sufficient to pay all
such Liabilities.
13. This Section is intentionally omitted.
14. Post-Closing Covenants.
14.1 Representations and Warranties. Except as
explicitly set forth in this Agreement, all representations
and warranties of the parties shall survive until, and
terminate as of one year from the Closing Date.
14.2 Transitional Actions. The Company Management
shall use reasonable efforts to assist the new officers and
directors of the Company in ensuring an effective transition
of management.
14.3 NASDAQ Listing. As soon as practicable after
the Closing Date, the new directors and officers of the
Company shall use their best efforts to obtain a listing for
the Company Common Stock on the National Association of
Securities Dealers Automated Quotation System.
15. Termination.
15.1 This Agreement may be terminated as provided
below:
(a) The parties hereto may terminate this
Agreement by written consent of all parties at any time
prior to the Closing Date;
(b) The Company may terminate this Agreement by
giving written notice to Torita at any time prior to the
Closing Date in the event Torita breaches any material
representation, warranty, or covenant contained in this
Agreement in any material respect and fails to cure such
breach within thirty (30) days of receiving written
notice from the Company identifying such breach;
(c) Torita may terminate this Agreement by
giving written notice to the Company at any time prior to
the Closing Date in the event the Company is in breach of
any material representation, warranty, or covenant
contained in this Agreement in any material respect and
fails to cure such breach within thirty (30) days of
receiving written notice from Torita identifying such
breach;
(d) The Company may terminate this Agreement by
giving written notice to Torita at any time prior to the
Closing Date in the event any of the conditions precedent
to Closing set forth in Sections 12.1 or 12.2 hereof are
not satisfied on or prior to March 31, 2001, unless the
failure results from the Company having breached any
representation, warranty or covenant hereunder;
(e) Torita may terminate this Agreement by
giving written notice to the Company at any time prior to
the Closing Date in the event any of the conditions
precedent to Closing set forth in Sections 12.1 and 12.2
hereof are not satisfied by March 31, 2001, unless the
failure results from Torita having breached any
representation, warranty or covenant hereunder.
(f) The Company may terminate this Agreement by
giving notice to Torita at any time prior to the Closing
Date if it discovers in its due diligence investigation
material adverse information about the Torita Assets or
business of Torita purchased under this Agreement.
(g) Torita may terminate this Agreement by
giving notice to the Company at any time prior to the
Closing Date if it discovers in its due diligence
investigation material adverse information about the
Company's Assets as business of the Company purchased
under this Agreement.
Any notice of such termination pursuant to this Section 15.1
shall be promptly given by the Party terminating this Agreement to
the other Parties in writing. If any party shall terminate this
Agreement, all obligations of the parties hereunder shall terminate
except for any liability of any party hereunder which is in breach
of this Agreement to the other parties hereunder and except that
the confidentiality provisions of Section 11.1(g) shall survive the
termination of this Agreement.
15.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 7.1, this Agreement shall
become void and of no effect with no liability on the part of
any party hereto, except for liability or damages resulting
from a willful breach of this Agreement.
15.3 Costs and Expenses. All costs and expenses
incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense.
16. Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including facsimile or similar writing) and shall be given:
if to Nova, to:
Xxxxx X. Xxxxxxxx, President
Nova Natural Resources Corporation
X.X. Xxx 000000
Xxxxxxxx, XX 00000-0000
Facsimile: 000-000-0000
with a copy to:
Xxxx X. Xxxxxxxx, Esq.
XXXX, XXXXXXX XXXXXX & XXXXX, P.C.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
if to Torita, to:
with a copy to:
or such other address or telecopy number as such party may
hereafter specify for the purpose by notice to the other parties
hereto. Each such notice, request or other communication shall be
effective (a) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and
the appropriate telecopy confirmation is received or (b) if given
by any other means, when delivered at the address specified in this
Section.
17. Miscellaneous Provisions.
17.1. Amendments; No Waivers.
(a) Any provision of this Agreement may be
amended or waived prior to the Closing Date if, and only
if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the parties hereto, in the
case of a waiver, by the party against whom the waiver is
to be effective
(b) No failure or delay by any party in
exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right,
power or privilege.
17.2. Rules of Construction. Unless the context
otherwise requires, as used in this Agreement: (i) all defined
terms used herein and not otherwise defined have the meanings
assigned to such terms in Xxxxxxx 00 xxxxxx, (xx) an
accounting term not otherwise defined has the meaning ascribed
to it in accordance with GAAP; (iii) "or" is not exclusive;
(iv) "including" means "including, without limitation," (v)
words in the singular include the plural and words in the
plural include the singular, and (vi) masculine pronouns shall
be deemed to include the feminine counterpart and vice versa.
17.3 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and
assigns, provided that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
17.4 Governing Law; Specific Performance.
(a) The terms of this Agreement shall be
construed in accordance with and governed by the law of
the State of Colorado (without regard to principles of
conflict of laws).
(b) Each of the parties acknowledges and agrees
that the parties' respective remedies at law for a breach
or threatened breach of any of the provisions of this
agreement would be inadequate and, in recognition of that
fact, each agrees that, in the event of a breach or
threatened breach by any party of the provisions of this
Agreement, in addition to any remedies at law, each
party, respectively, without posting any bond, shall be
entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a
temporary or permanent injunction or any other equitable
remedy which may then be available.
17.5 Counterparts; Facsimile Signatures;
Effectiveness. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement and each document related
hereto may be executed and delivered by telecopier or other
facsimile transmission all with the same force and effect as
if the same were a fully executed and delivered original
manual counterpart. This Agreement shall become effective when
each party hereto shall have received counterparts (or
signature pages) hereof signed by all of the other parties
hereto.
17.6 Parties in Interest. No provision of this
Agreement, express or implied, is intended to or shall confer
upon any other Person, other than the parties hereto and their
respective permitted successors and assigns, any right,
benefit or remedy of any nature or kind whatsoever under or by
reason of this Agreement.
17.7 Severability. If any provisions of this
Agreement or the application thereof to either party or set of
circumstances shall in any jurisdiction and to any extent, be
finally held invalid or unenforceable, such term or provision
shall only be ineffective as to such jurisdiction, and only to
the extent of such invalidity or unenforceability, without
invalidating or rendering unenforceable any other terms or
provisions of this Agreement or under any other circumstances,
and the parties shall negotiate in good faith a substitute
provision which comes as close as possible to the invalidated
or unenforceable term or provision, and which puts each party
in a position as nearly comparable as possible to the position
it would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
17.8 Entire Agreement. This Agreement constitutes
the entire agreement among the parties to this Agreement with
respect to the subject matter of this Agreement and supersedes
all prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter of this
Agreement.
18. Definitions. For purposes of this Agreement,
unless the context otherwise clearly requires, the following
terms shall have the meanings specified or referred to below:
"Adverse Consequences" means any occurrence or series of
occurrences which, individually or in the aggregate, causes or
could reasonably be anticipated to cause, a loss or adverse impact
on the party so impacted in an amount of money or damages in excess
of $25,000.
"Affiliate", with respect to any Person, means any Person
which controls, is controlled by or is under common control with
such Person. Without limiting the foregoing, a Person will be
deemed to have control of any entity if such Person owns, directly
or indirectly, 30% or more of the outstanding equity interests of
such entity (provided that the Company shall at no time be deemed
to control, or otherwise be an Affiliate of Torita).
"Affiliated Group"" means any affiliated group within the
meaning of Code Section 1504.
"Basis"" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction
that forms or could form the basis for any specified consequence.
"Claim"" means any claim, cause of action, investigation, suit
or proceeding, whether at law or in equity, or before any
governmental department, commission, board, agency or
instrumentality, which involves a demand for any judgment or
liability.
"Code"" means the Internal Revenue Service Code of 1986, as
amended.
"Confidential Information" means any information concerning
the businesses and affairs of Torita, a Subsidiary of Torita, the
Company, respectively, other than any such information that (i) is
generally available to or known by the public immediately prior to
the time of disclosure, (ii) is available on a non-confidential
basis or (iii) has been acquired or developed independent from the
Company or Torita.
"CBCA" means the Colorado Business Corporation Act.
"Employee Benefit Plans" means any employee benefit plan,
policy, arrangement or agreement (including, without limitation,
any savings, retirement, fringe benefit, stock option, bonus,
incentive compensation, deferred compensation, excess, supplemental
executive compensation, employee stock purchase, vacation, sickness
or disability, severance or separation, restricted stock plan,
policy or arrangement) or employment or consulting contracts or
agreements (including without limitation, any "employee benefit
plan", as defined in ERISA as applies with foreign law), whether or
not subject to ERISA, as applies with foreign law, whether written
or oral.
"Encumbrance" means any charge, claim, community property
interest, condition, equitable interest, lien, pledge, security
interest, right of first refusal, option or restriction of any
kind, including any restriction on use, voting (in the case of any
security), transfer, receipt of income, or exercise of any other
attribute of ownership.
"Environmental Claim" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation,
judicial or administrative proceeding, judgment, letter or other
communication from any Governmental Authority or any third party
involving violations of Environmental Laws or Releases of Hazardous
Materials from (i) any assets, properties or businesses of the
Company; (ii) from adjoining properties or businesses; or (iii)
from any facilities which received Hazardous Materials generated by
the Company.
"Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601
et seq., as amended; the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. 6901 et seq., as amended; the Clean Air At
("CAA"), 42 U.S.C. 7401 et seq., as amended; the Clean Water Act
("CWA"), 33 U.S.C. 1251 et seq., as amended; and any other foreign,
federal, state, provincial, local or municipal laws, statutes,
regulations, rules or ordinances imposing liability or establishing
standards of conduct for protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Governmental Body" means any:
(a) nation, state, province, county, city, town,
village, district, or other governmental jurisdiction of any
nature;
(b) federal, state, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch,
department, official, or entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature,
whether in the United States or any other jurisdiction.
"Hazardous Materials" means (a) any element, compound, or
chemical that is defined, listed or otherwise classified as a
contaminant, pollutant, toxic pollutant, toxic or hazardous
substance, extremely hazardous substance or chemical, hazardous
waste, medical waste, biohazardous or infectious waste, special
waste, or solid waste under Environmental Laws; (b) petroleum,
petroleum-based or petroleum-derived products; (c) polychlorinated
biphenyls; (d) any substance exhibiting a hazardous waste
characteristic, including, but not limited to, corrosivity,
ignitibility, toxicity or reactivity as well as any radioactive or
explosive materials; and (e) any raw materials, building
components, including but not limited to, asbestos-containing
materials and manufactured products containing Hazardous Materials.
"Indebtedness" of any Person means all obligations of such
Person which in accordance with GAAP should be classified upon a
balance sheet of such Person as liabilities of such Person, and in
any event, regardless of how classified in accordance with GAAP,
shall include (i) all obligations of such Person for borrowed money
or which has been incurred in connection with the acquisition of
property or assets, (ii) obligations secured by any lien or other
charge upon property or assets owned by such Person, even though
such Person has not assumed or become liable for the payment of
such obligations, and (iii) obligations created or arising under
any conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding the
fact that the rights and remedies of such seller, lender or lessor
under such agreement in the event of default are limited to
repossession or sale of the property.
"Intellectual Property" means all (a) patents, patent
applications, patent disclosures, and improvements thereto, (b)
trademarks, service marks, trade dress, logos, trade names, and
corporate names and registrations and applications for registration
thereof, (c) copyrights and registrations and applications for
registration thereof, (d) mask works and registrations and
applications for registration thereof, (e) Software, data and
documentation, (f) trade secrets and confidential business
information (including ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and
techniques, research and development information, software
products, books, programs, websites, domain names, tapes or other
projects in development, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial,
marketing, and business data, pricing and cost information,
business and marketing plans, and customer and supplier lists and
information), (g) other proprietary rights, and (h) copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means knowledge that a reasonable person under
similar circumstances would have after reasonable investigation and
inquiry (including with legal counsel). The phrase "Knowledge of
Torita" or "Knowledge of the Company" refers to the Knowledge of
their respective officers and directors.
"Legal Requirement" means any federal, state, provincial,
local, municipal, foreign, international, multinational, or other
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty.
"Liability" means any liability (whether absolute or
contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes and any
Indebtedness.
"Loss" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, reasonable expenses, and
reasonable fees, including all reasonable attorneys' fees and court
costs, excluding incidental, consequential or special damages.
"Order" means any award, decision, injunction, judgment,
order, directive, ruling, subpoena, or verdict entered, issued,
made, or rendered by any court, administrative agency, or other
Governmental Body or by any arbitrator.
"Ordinary Course of Business" means the ordinary course of
business of a party consistent with its past custom and practice
(including with respect to quantity, value, amount and frequency).
"Party" means the Company, Torita, or Nova Shareholders.
"Person" means any natural person, corporation, limited
liability company, partnership, association, venture, trust,
estate, foundation, union, syndicate, association, society, firm,
company or any other natural or juridical entity of any nature.
"Proceeding" shall mean any action, suit or proceeding before
any court, arbitrator, mediator, Governmental Body or other person
or adjudicatory entity.
"Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating,
dumping, or disposing of Hazardous Materials (including the
abandonment or discarding of barrels, containers or other closed
receptacles containing Hazardous Materials) into the environment.
"Remedial Action" means all actions taken to (i) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate or in
any other way address Hazardous Materials in the indoor or outdoor
environment; (ii) prevent or minimize a Release or threatened
Release of Hazardous Materials so they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or
outdoor environment; (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance
activities; or (iv) any other actions authorized by 42 U.S.C. 9601.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien.
"Subsidiaries" means any entity in which a Person is the
direct or indirect beneficial or record owner of 30% or more of the
outstanding equity interests.
"Tax" or "Taxes" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax, levy, fee,
impost, charge or duty of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
NOVA NATURAL RESOURCES CORPORATION
By:________________________________
Name: Xxxxx X. Xxxxxxxx
Title: President and CEO
TORITA DONGHAO, LLC
By:________________________________
Name: Xxxxxx X. X. Xxxx
Title: CEO
