STOCK PURCHASE AGREEMENT
by and among
Detto Technologies, Inc.,
a Washington corporation
and
certain Shareholders of
Detto Technologies, Inc.,
on the one hand;
and
Jitsource, Inc.,
a Delaware corporation,
and
the Majority Stockholders of Jitsource, Inc.,
on the other hand
August 19, 2004
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of August 19, 2004 (this
"Agreement"), is made and entered into by and among the shareholders of Detto
Technologies, Inc., a Washington corporation ("Detto"), listed on Schedule I
attached (each, a "Detto Shareholder," collectively, the "Detto Shareholders"),
on the one hand; and Jitsource, Inc., a publicly traded Delaware corporation
(OTCBB: JSRC.OB) ("JSRC"), Xxxx Xxxxxx, an individual, and Xxxxx Xxxxxx, an
individual (Xxxx Xxxxxx and Xxxxx Xxxxxx are hereinafter referred to
collectively as the "JSRC Shareholders") on the other hand. Detto is a party to
this agreement solely to make representations and warranties as set forth
herein.
RECITALS
WHEREAS, the Board of Directors of JSRC has adopted resolutions
approving and adopting the acquisition of shares of Detto (the "Acquisition")
upon the terms and conditions hereinafter set forth in this Agreement;
WHEREAS, each Detto Shareholder owns the number of shares of common
stock of Detto set forth opposite such Detto Shareholder's name in Column I on
Schedule I attached hereto (collectively, the "Detto Shares");
WHEREAS, the Detto Shareholders own, collectively, an amount of shares
of common stock of Detto, constituting at least 80% of the issued and
outstanding capital stock of Detto, and the Detto Shareholders desire to sell
their respective portion of the Detto Shares pursuant to the terms and
conditions of this Agreement;
WHEREAS, the JSRC Stockholders hold 10,000,000 shares of JSRC common
stock, which represent at least a majority of the issued and outstanding capital
stock of JSRC;
WHEREAS, the JSRC Stockholders will enter into this Agreement for the
purpose of making certain representations, warranties, covenants,
indemnifications and agreements;
WHEREAS, it is intended that the terms and conditions of this Agreement
comply in all respects with Section 368(a)(1)(B) of the Code and the regulations
corresponding thereto, so that the Acquisition shall qualify as a tax free
reorganization under the Code;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1
THE ACQUISITION
1.1 The Acquisition. Upon the terms and subject to the conditions
hereof, at the Closing (as hereinafter defined) the Detto Shareholders will
sell, convey, assign, transfer and deliver to JSRC one or more stock
certificates representing the Detto Shares, and as consideration for the
acquisition of the Detto Shares, JSRC will issue to each Detto Shareholder, in
exchange for such Detto Shareholder's pro rata portion of the Detto Shares, one
or more stock certificates representing the number of shares of JSRC common
stock set forth opposite such Detto Shareholder's name in Column II on Schedule
I attached hereto (collectively, the "JSRC Shares"). The amount of JSRC Shares
to be issued to the Detto Shareholders will not exceed 5,333,334 common shares.
1.2 Closing. The closing of the Acquisition (the "Closing") shall take
place on or before August 27, 2004, or on such other date as may be mutually
agreed upon by the parties. Such date is referred to herein as the "Closing
Date."
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF DETTO
Detto hereby represents and warrants to JSRC as follows:
2.1 Organization. Detto has been duly incorporated, is validly existing
as a corporation and is in good standing under the laws of its jurisdiction of
incorporation, and has the requisite power to carry on its business as now
conducted.
2.2 Capitalization. The authorized capital stock of Detto consists of
50,000,000 shares of common stock, no par value, of which at the Closing, no
more than 42,500,000 shares shall be issued and outstanding, and 30,000,000
shares of preferred stock authorized, of which no shares of preferred stock
shall be issued and outstanding. All of the issued and outstanding shares of
capital stock of Detto, as of the Closing, are duly authorized, validly issued,
fully paid, non-assessable and free of preemptive rights. There are no voting
trusts or any other agreements or understandings with respect to the voting of
Detto's capital stock.
2.3 Certain Corporate Matters. Detto is duly qualified to do business
as a corporation and is in good standing in each jurisdiction in which the
ownership of its properties, the employment of its personnel or the conduct of
its business requires it to be so qualified, except where the failure to be so
qualified would not have a material adverse effect on Detto's financial
condition, results of operations or business. Detto has full corporate power and
authority and all authorizations, licenses and permits necessary to carry on the
business in which it is engaged and to own and use the properties owned and used
by it.
2.4 Authority Relative to this Agreement. Detto has the requisite power
and authority to enter into this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this Agreement by Detto
and the consummation by Detto of the transactions contemplated hereby have been
duly authorized by the Board of Directors of Detto and no other actions on the
part of Detto are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Detto and constitutes a valid and binding agreement of Detto,
enforceable against Detto in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity.
2.5 Consents and Approvals; No Violations. Except for applicable
requirements of federal securities laws and state securities or blue-sky laws,
no filing with, and no permit, authorization, consent or approval of, any third
party, public body or authority is necessary for the consummation by Detto of
the transactions contemplated by this Agreement. Neither the execution and
delivery of this Agreement by Detto nor the consummation by Detto of the
transactions contemplated hereby, nor compliance by Detto with any of the
provisions hereof, will (a) conflict with or result in any breach of any
provisions of the charter or Bylaws of Detto, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which Detto or any Subsidiary (as hereinafter defined) is a party or by which
they any of their respective properties or assets may be bound or (c) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Detto or any Subsidiary, or any of their respective properties or assets, except
in the case of clauses (b) and (c) for violations, breaches or defaults which
are not in the aggregate material to JSRC or any Subsidiary taken as a whole.
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2.6 Tax Matters.
(a) Detto has duly filed all material federal, state, local
and foreign tax returns required to be filed by or with respect to them with the
Internal Revenue Service or other applicable taxing authority, and no extensions
with respect to such tax returns have been requested or granted;
(b) Detto has paid, or adequately reserved against in Detto's
Financial Statements, all material taxes due, or claimed by any taxing authority
to be due, from or with respect to them;
(c) To the best knowledge of Detto, there has been no material
issue raised or material adjustment proposed (and none is pending) by the
Internal Revenue Service or any other taxing authority in connection with any of
Detto's tax returns;
(d) No waiver or extension of any statute of limitations as to
any material federal, state, local or foreign tax matter has been given by or
requested from Detto; and
For the purposes of this Section 2.6, a tax is due (and must
therefore either be paid or adequately reserved against in Detto's Financial
Statements) only on the last date payment of such tax can be made without
interest or penalties, whether such payment is due in respect of estimated
taxes, withholding taxes, required tax credits or any other tax.
2.7 Books and Records. The books and records of Detto delivered to the
JSRC Shareholders prior to the Closing fully and fairly reflect the transactions
to which Detto is a party or by which they or their properties are bound.
2.8 Questionable Payments. Neither Detto, nor any employee, agent or
representative of Detto has, directly or indirectly, made any bribes, kickbacks,
illegal payments or illegal political contributions using Company funds or made
any payments from Detto's funds to governmental officials for improper purposes
or made any illegal payments from Detto's funds to obtain or retain business.
2.9 Intellectual Property. Detto has no knowledge of any claim that,
or inquiry as to whether, any product, activity or operation of Detto infringes
upon or involves, or has resulted in the infringement of, any trademarks,
trade-names, service marks, patents, copyrights or other proprietary rights of
any other person, corporation or other entity; and no proceedings have been
instituted, are pending or are threatened.
2.10 Litigation. Detto is not subject to any judgment or order of any
court or quasijudicial or administrative agency of any jurisdiction, domestic or
foreign, nor is there any charge, complaint, lawsuit or governmental
investigation pending against Detto. Detto is not a plaintiff in any action,
domestic or foreign, judicial or administrative. There are no existing actions,
suits, proceedings against or investigations of Detto, and Detto knows of no
basis for such actions, suits, proceedings or investigations. There are no
unsatisfied judgments, orders, decrees or stipulations affecting Detto or to
which Detto is a party.
2.11 Legal Compliance. To the best knowledge of Detto, after due
investigation, no claim has been filed against Detto alleging a violation of any
applicable laws and regulations of foreign, federal, state and local governments
and all agencies thereof. Detto hold all of the material permits, licenses,
certificates or other authorizations of foreign, federal, state or local
governmental agencies required for the conduct of their respective businesses as
presently conducted.
2.12 Disclosure. The representations and warranties and statements of
fact made by Detto in this Agreement are, as applicable, accurate, correct and
complete and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained herein not false or misleading.
5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE DETTO SHAREHOLDERS
The Detto Shareholders hereby represent and warrant to JSRC as follows:
3.1 Ownership of the Detto Shares. Each Detto Shareholder owns,
beneficially and of record, good and marketable title to the Detto Shares set
forth opposite such Detto Shareholder's name in Column I on Schedule I attached
hereto, free and clear of all security interests, liens, adverse claims,
encumbrances, equities, proxies, options or stockholders' agreements. Each Detto
Shareholder represents that such person has no right or claims whatsoever to any
shares of Detto capital stock, other than shares listed across such Detto
Shareholder on Schedule I and does not have any options, warrants or any other
instruments entitling such Detto Shareholder to exercise to purchase or convert
into shares of Detto capital stock. At the Closing, the Detto Shareholders will
convey to JSRC good and marketable title to the Detto Shares, free and clear of
any security interests, liens, adverse claims, encumbrances, equities, proxies,
options, stockholders' agreements or restrictions.
3.2 Authority Relative to this Agreement. This Agreement has been duly
and validly executed and delivered by each Detto Shareholder and constitutes a
valid and binding agreement of each Detto Shareholder, enforceable against each
Detto Shareholder in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity.
3.3 Restricted Securities. Each Detto Shareholder acknowledges that the
JSRC Shares will not be registered pursuant to the Securities Act of 1933, as
amended (the "Securities Act") or any applicable state securities laws, that the
JSRC Shares will be characterized as "restricted securities" under federal
securities laws, and that under such laws and applicable regulations the JSRC
Shares cannot be sold or otherwise disposed of without registration under the
Securities Act or an exemption therefrom. In this regard, each Detto Shareholder
is familiar with Rule 144 promulgated under the Securities Act, as currently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
3.4 Accredited Investor. Each Detto Shareholder is an "Accredited
Investor" as that term is defined in rule 501 of Regulation D promulgated under
the Securities Act. Each Detto Shareholder is able to bear the economic risk of
acquiring the JSRC Shares pursuant to the terms of this Agreement, including a
complete loss of such Detto Shareholder's investment in the JSRC Shares.
3.5 Legend. Each Detto Shareholder acknowledges that the certificate(s)
representing such Detto Shareholder's pro rata portion of the JSRC Shares shall
each conspicuously set forth on the face or back thereof a legend in
substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
JSRC AND THE JSRC STOCKHOLDERS
JSRC and the JSRC Stockholders hereby represent and warrant, jointly
and severally, to Detto and the Detto Shareholders as follows:
4.1 Organization. JSRC is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and has the requisite corporate power to carry on its business as now conducted.
4.2 Capitalization. JSRC's authorized capital stock consists of
60,000,000 shares of capital stock, of which 50,000,000 shares are designated as
Common Stock, of which 11,792,500 shares are issued and outstanding and of which
10,000,000 shares are designated as Preferred Stock, of which no shares of
Preferred Stock are issued and outstanding. In accordance with this
Agreement,the JSRC shareholders will cancel 9,500,000 common shares at the
closing and 2,292,500 shares will be issued and outstanding at such time. All
issued and outstanding shares of JSRC Common Stock are duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights. When issued,
the JSRC Shares will be duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights. There are no outstanding or
authorized options, rights, warrants, calls, convertible securities, rights to
subscribe, conversion rights or other agreements or commitments to which JSRC is
a party or which are binding upon JSRC providing for the issuance by JSRC or
transfer by JSRC of additional shares of JSRC's capital stock and JSRC has not
reserved any shares of its capital stock for issuance, nor are there any
outstanding stock option rights, phantom equity or similar rights, contracts,
arrangements or commitments to issue capital stock of JSRC. There are no voting
trusts or any other agreements or understandings with respect to the voting of
JSRC's capital stock. Other than the redemption and cancellation of 9,500,000
shares of JSRC common stock as set forth in this Agreement, there are no
obligations of JSRC to repurchase, redeem or otherwise require any shares of its
capital stock as of the Closing.
4.3 Certain Corporate Matters. JSRC is duly licensed or qualified to do
business and is in good standing as a foreign corporation in every jurisdiction
in which the character of JSRC's properties or nature of JSRC's business
requires it to be so licensed or qualified other than such jurisdictions in
which the failure to be so licensed or qualified does not, or insofar as can
reasonably be foreseen, in the future will not, have a material adverse effect
on its financial condition, results of operations or business. JSRC has full
corporate power and authority and all authorizations, licenses and permits
necessary to carry on the business in which it is engaged or in which it
proposes presently to engage and to own and use the properties owned and used by
it. JSRC has delivered to Detto true, accurate and complete copies of its
certificate or articles of incorporation and bylaws, which reflect all
restatements of and amendments made thereto at any time prior to the date of
this Agreement. The records of meetings of the stockholders and Board of
Directors of JSRC are complete and correct in all material respects. The stock
records of JSRC and the stockholder lists of JSRC that JSRC has previously
furnished to Detto are complete and correct in all material respects and
accurately reflect the record ownership and the beneficial ownership of all the
outstanding shares of JSRC's capital stock and any other outstanding securities
issued by JSRC. JSRC is not in default under or in violation of any provision of
its certificate or articles of incorporation or bylaws in any material respect.
JSRC is not in any material default or in violation of any restriction, lien,
encumbrance, indenture, contract, lease, sublease, loan agreement, note or other
obligation or liability by which it is bound or to which any of its assets is
subject.
4.4 Authority Relative to this Agreement. Each of JSRC and the JSRC
Stockholders has the requisite power and authority to enter into this Agreement
and carry out its or his obligations hereunder. The execution, delivery and
performance of this Agreement by JSRC and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of JSRC
and no other actions on the part of JSRC are necessary to authorize this
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by JSRC and the JSRC Stockholders and
constitutes a valid and binding obligation of JSRC and each JSRC Stockholder,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity.
7
4.5 Consents and Approvals; No Violations. Except for applicable
requirements of federal securities laws and state securities or blue-sky laws,
no filing with, and no permit, authorization, consent or approval of, any third
party, public body or authority is necessary for the consummation by JSRC of the
transactions contemplated by this Agreement. Neither the execution and delivery
of this Agreement by JSRC nor the consummation by JSRC of the transactions
contemplated hereby, nor compliance by JSRC with any of the provisions hereof,
will (a) conflict with or result in any breach of any provisions of the charter
or Bylaws of JSRC, (b) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which JSRC or any
Subsidiary (as hereinafter defined) is a party or by which they any of their
respective properties or assets may be bound or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to JSRC or any
Subsidiary, or any of their respective properties or assets, except in the case
of clauses (b) and (c) for violations, breaches or defaults which are not in the
aggregate material to JSRC or any Subsidiary taken as a whole.
4.6 SEC Documents. JSRC hereby makes reference to the following
documents filed with the United States Securities and Exchange Commission (the
"SEC"), as posted on the SEC's website, xxx.xxx.xxx: (collectively, the "SEC
Documents"): (a) Registration Statement on Form SB-2 as filed on October 2,
2002, and all amendments thereto; (b) Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2003; and (c) Quarterly Reports on Form 10-QSB
for the periods ended March 31, 2003, June 30, 2003, September 30, 2003, and
March 31, 2004, and any amendments thereto. The SEC Documents constitute all of
the documents and reports that JSRC was required to file with the SEC pursuant
to the Securities Exchange Act of 1934 ("Exchange Act") and the rules and
regulations promulgated thereunder by the SEC since the effectiveness of JSRC's
Form SB-2 filed on October 2, 2002. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and/or the Exchange Act, as the case may require, and the rules
and regulations promulgated thereunder and none of the SEC Documents contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of JSRC included in the SEC Documents comply
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles in the
United States (except, in the case of unaudited statements, as permitted by the
applicable form under the Securities Act and/or the Exchange Act) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the financial position of JSRC as of the dates
thereof and its consolidated statements of operations, stockholders' equity and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal and recurring year-end audit adjustments which were and
are not expected to have a material adverse effect on JSRC, its business,
financial condition or results of operations). Except as and to the extent set
forth on the consolidated balance sheet of JSRC as of December 31, 2003,
including the notes thereto, JSRC has no liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise and whether required to be
reflected on a balance sheet or not).
4.7 Financial Statements.
(a) Included in the SEC Documents are the audited consolidated
balance sheet of JSRC as at December 31, 2003 and 2002, and the related
statement of operations, stockholders' equity and cash flows for the two years
then ended, together with the unqualified report thereon (except with respect to
continuation as a going concern) of Xxxxxx & Associates, LLC ("Xxxxxx"),
independent auditors (collectively, "JSRC's Audited Financials").
8
(b) Included in the SEC Documents are the unaudited
consolidated balance sheet of JSRC as at March 31, 2004, and the related
statement of operations, stockholders' equity and cash flows for the three
months then ended, as reviewed by Xxxxxx ("JSRC's Interim Financials").
(c) JSRC's Audited Financials and JSRC's Interim Financials
(collectively "JSRC's Financial Statements") are (i) in accordance with the
books and records of JSRC, (ii) correct and complete, (iii) fairly present the
financial position and results of operations of JSRC and each Subsidiary as of
the dates indicated, and (iv) prepared in accordance with U.S. GAAP (except that
(x) unaudited financial statements may not be in accordance with GAAP because of
the absence of footnotes normally contained therein, and (y) interim (unaudited)
financials are subject to normal year-end audit adjustments that in the
aggregate will not have a material adverse effect on JSRC or any Subsidiary,
their respective businesses, financial conditions or results of operations.
4.8 Events Subsequent to Financial Statements. Since December 31,
2003, there has not been:
(a) Any sale, lease, transfer, license or assignment of any
assets, tangible or intangible, of JSRC or any Subsidiary;
(b) Any damage, destruction or property loss, whether or not
covered by insurance, affecting adversely the properties or business of JSRC or
any Subsidiary;
(c) Any declaration or setting aside or payment of any
dividend or distribution with respect to the shares of capital stock of JSRC or
any Subsidiary or any redemption, purchase or other acquisition of any such
shares;
(d) Any subjection to any lien on any of the assets, tangible
or intangible, of JSRC or any Subsidiary;
(e) Any incurrence of indebtedness or liability or assumption
of obligations by JSRC or any Subsidiary;
(f) Any waiver or release by JSRC or any Subsidiary of any
right of any material value;
(g) Any compensation or benefits paid to officers or directors
of JSRC or any Subsidiary;
(h) Any change made or authorized in the Certificate of
Incorporation or Bylaws of JSRC or any Subsidiary;
(i) Any loan to or other transaction with any officer,
director or stockholder of JSRC or any Subsidiary giving rise to any claim or
right of JSRC or any Subsidiary against any such person or of such person
against JSRC or any Subsidiary; or
(j) Any material adverse change in the condition (financial or
otherwise) of the respective properties, assets, liabilities or business of JSRC
or any Subsidiary.
4.9 Liabilities. Except as otherwise disclosed in JSRC's Financial
Statements, neither JSRC nor any Subsidiary has any liability or obligation
whatsoever, either direct or indirect, matured or unmatured, accrued, absolute,
contingent or otherwise. In addition, JSRC and the JSRC Stockholders represent
that upon Closing, neither JSRC nor any Subsidiary will have any liability or
obligation whatsoever, either direct or indirect, matured or unmatured, accrued,
absolute, contingent or otherwise.
9
4.10 Tax Matters.
(a) JSRC and each Subsidiary have duly filed all material
federal, state, local and foreign tax returns required to be filed by or with
respect to them with the Internal Revenue Service or other applicable taxing
authority, and no extensions with respect to such tax returns have been
requested or granted;
(b) JSRC and each Subsidiary have paid, or adequately reserved
against in JSRC's Financial Statements, all material taxes due, or claimed by
any taxing authority to be due, from or with respect to them;
(c) To the best knowledge of JSRC, there has been no material
issue raised or material adjustment proposed (and none is pending) by the
Internal Revenue Service or any other taxing authority in connection with any of
JSRC's or any Subsidiary's tax returns;
(d) No waiver or extension of any statute of limitations as to
any material federal, state, local or foreign tax matter has been given by or
requested from JSRC or any Subsidiary; and
For the purposes of this Section 4.10, a tax is due (and must
therefore either be paid or adequately reserved against in JSRC's Financial
Statements) only on the last date payment of such tax can be made without
interest or penalties, whether such payment is due in respect of estimated
taxes, withholding taxes, required tax credits or any other tax.
4.11 Real Property. Neither JSRC nor any Subsidiary owns or leases
any real property.
4.12 Books and Records. The books and records of JSRC and each
Subsidiary delivered to the Detto Shareholders prior to the Closing fully and
fairly reflect the transactions to which JSRC each Subsidiary is a party or by
which they or their properties are bound.
4.13 Questionable Payments. Neither JSRC or any Subsidiary, nor any
employee, agent or representative of JSRC or any Subsidiary has, directly or
indirectly, made any bribes, kickbacks, illegal payments or illegal political
contributions using Company funds or made any payments from JSRC's or any
Subsidiary's funds to governmental officials for improper purposes or made any
illegal payments from JSRC's or any Subsidiary's funds to obtain or retain
business.
4.14 RESERVED
4.15 Intellectual Property. Neither JSRC nor any Subsidiary owns or
uses any trademarks, trade names, service marks, patents, copyrights or any
applications with respect thereto. JSRC and the JSRC Stockholders have no
knowledge of any claim that, or inquiry as to whether, any product, activity or
operation of JSRC or any Subsidiary infringes upon or involves, or has resulted
in the infringement of, any trademarks, trade-names, service marks, patents,
copyrights or other proprietary rights of any other person, corporation or other
entity; and no proceedings have been instituted, are pending or are threatened.
4.16 Insurance. Neither JSRC nor any Subsidiary has any insurance
policies in effect.
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4.17 Contracts. Except as set forth on Schedule 4.17, neither JSRC nor
any Subsidiary has any material contracts, leases, arrangements or commitments
(whether oral or written). Neither JSRC nor any Subsidiary is a party to or
bound by or affected by any contract, lease, arrangement or commitment (whether
oral or written) relating to: (a) the employment of any person; (b) collective
bargaining with, or any representation of any employees by, any labor union or
association; (c) the acquisition of services, supplies, equipment or other
personal property; (d) the purchase or sale of real property; (e) distribution,
agency or construction; (f) lease of real or personal property as lessor or
lessee or sublessor or sublessee; (g) lending or advancing of funds; (h)
borrowing of funds or receipt of credit; (i) incurring any obligation or
liability; or (j) the sale of personal property.
4.18 Litigation. Neither JSRC nor any Subsidiary is subject to any
judgment or order of any court or quasijudicial or administrative agency of any
jurisdiction, domestic or foreign, nor is there any charge, complaint, lawsuit
or governmental investigation pending against JSRC or any Subsidiary. Neither
JSRC nor any Subsidiary is a plaintiff in any action, domestic or foreign,
judicial or administrative. There are no existing actions, suits, proceedings
against or investigations of JSRC or any Subsidiary, and JSRC knows of no basis
for such actions, suits, proceedings or investigations. There are no unsatisfied
judgments, orders, decrees or stipulations affecting JSRC or any Subsidiary or
to which JSRC or any Subsidiary is a party.
4.19 Employees. Neither JSRC nor any Subsidiary has any employees.
Neither JSRC nor any Subsidiary owes any compensation of any kind, deferred or
otherwise, to any current or previous employees. Neither JSRC nor any Subsidiary
has a written or oral employment agreement with any officer or director of JSRC
or any Subsidiary. Neither JSRC nor any Subsidiary is a party to or bound by any
collective bargaining agreement. Except as set forth on Schedule 4.19, there are
no loans or other obligations payable or owing by JSRC or any Subsidiary to any
stockholder, officer, director or employee of JSRC or any Subsidiary, nor are
there any loans or debts payable or owing by any of such persons to JSRC or any
Subsidiary or any guarantees by JSRC or any Subsidiary of any loan or obligation
of any nature to which any such person is a party.
4.20 Employee Benefit Plans. Neither JSRC nor any Subsidiary has any
(a) non-qualified deferred or incentive compensation or retirement plans or
arrangements, (b) qualified retirement plans or arrangements, (c) other employee
compensation, severance or termination pay or welfare benefit plans, programs or
arrangements or (d) any related trusts, insurance contracts or other funding
arrangements maintained, established or contributed to by JSRC or any
Subsidiary.
4.21 Legal Compliance. To the best knowledge of JSRC, after due
investigation, no claim has been filed against JSRC or any Subsidiary alleging a
violation of any applicable laws and regulations of foreign, federal, state and
local governments and all agencies thereof. JSRC and each Subsidiary hold all of
the material permits, licenses, certificates or other authorizations of foreign,
federal, state or local governmental agencies required for the conduct of their
respective businesses as presently conducted.
4.22 Subsidiaries and Investments.
(a) Except as set forth in Schedule 4.22(a), JSRC does not own
any capital stock or have any interest of any kind whatsoever in any
corporation, partnership, or other form of business organization (any such
organization is referred to as a "Subsidiary").
(b) Schedule 4.22(b) sets forth true and complete copies of
the charter of each Subsidiary, as well as any limited liability company
agreement, operating agreement or shareholder agreement relating to such
Subsidiary, and any acquisition agreement relating to any Subsidiary. All
corporate or other action that has been taken by any Subsidiary has been duly
authorized and does not conflict with or violate any provision of its charter,
bylaws or other organizational documents.
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(c) Each Subsidiary (i) is duly organized and validly existing
under the laws of its jurisdiction of organization, (ii) has all requisite and
necessary power and authority to own, operate or lease those assets or
properties which are owned, operated or leased by it and to conduct its business
as it has been and currently is being conducted, (iii) is qualified to do
business in all jurisdictions where the failure to be so qualified would have a
material adverse effect on its business.
(d) Except as set forth in Schedule 4.22(d), all outstanding
shares of capital stock or other ownership interests of each Subsidiary are
validly issued, fully paid, nonassessable and free of preemptive rights and are
owned (either directly or indirectly) by JSRC without any encumbrances.
(e) Except as set forth in Schedule 4.22(e), there are no
outstanding securities convertible into or exchangeable for the capital stock of
or other equity interests in any Subsidiary and no outstanding options, rights,
subscriptions, calls commitments, warrants or rights of any character for JSRC,
any Subsidiary or any other person or entity to purchase, subscribe for or to
otherwise acquire any shares of such stock or other securities of any
Subsidiary.
(f) Except as set forth in Schedule 4.22(f), there are no
outstanding agreements affecting or relating to the voting, issuance, purchase,
redemption, repurchase or transfer of any capital stock of or other equity
interests in any Subsidiary.
(g) Each Subsidiary's stock register or similar register of
ownership has complete and accurate records indicating the following: (i) the
name and address of each person or entity owning shares of capital stock or
other equity interest of the Subsidiary and (ii) the certificate number of each
certificate evidencing shares of capital stock or other equity interest issued
by the Subsidiary, the number of shares or other equity interests evidenced by
each such certificate, the date of issuance of such certificate, and, if
applicable, the date of cancellation. Copies of same have been made available to
Detto.
4.23 Broker's Fees. Neither JSRC, nor anyone on its behalf has any
liability to any broker, finder, investment banker or agent, or has agreed to
pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
this Agreement.
4.24 Internal Accounting Controls. JSRC maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. JSRC
has established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for JSRC and designed such disclosure controls
and procedures to ensure that material information relating to JSRC is made
known to the certifying officers by others within those entities, particularly
during the period in which the JSRC's Form 10-KSB or 10-QSB, as the case may be,
is being prepared. JSRC's certifying officers have evaluated the effectiveness
of JSRC's controls and procedures as of end of the filing period prior to the
filing date of the Form 10-QSB for the quarter ended March 31, 2004 (such date,
the "Evaluation Date"). JSRC presented in its most recently filed Form 10-KSB or
Form 10-QSB the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in JSRC's internal controls (as such term is defined in Item 307(b) of
Regulation S-K under the Exchange Act) or, to the Company's knowledge, in other
factors that could significantly affect the Company's internal controls.
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4.25 Listing and Maintenance Requirements. JSRC is currently quoted on
the OTC Bulletin Board and JSRC has not, in the 12 months preceding the date
hereof, received any notice from the OTC Bulletin Board or the NASD or any
trading market on which JSRC's common stock is or has been listed or quoted to
the effect that JSRC is not in compliance with the quoting, listing or
maintenance requirements of the OTCBB or such other trading market. JSRC is, and
has no reason to believe that it will not, in the foreseeable future continue to
be, in compliance with all such quoting, listing and maintenance requirements.
4.26 Application of Takeover Protections. JSRC and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under JSRC's certificate or articles of incorporation
(or similar charter documents) or the laws of its state of incorporation that is
or could become applicable to Detto or the Detto Shareholderss as a result of
the Acquisition or the exercise of any rights by Detto or the Detto
Shareholderss pursuant to this Agreement.
4.27 No SEC or NASD Inquiries. Neither JSRC nor any of its past or
present officers or directors is, or has ever been, the subject of any formal or
informal inquiry or investigation by the SEC or NASD.
4.28 Disclosure. The representations and warranties and statements of
fact made by JSRC in this Agreement are, as applicable, accurate, correct and
complete and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained herein not false or misleading.
ARTICLE 5
INDEMNIFICATION
5.1 JSRC Stockholders Indemnification. For a period of two years after
the Closing, the JSRC Stockholders (each an "Indemnifying Party") jointly and
severally agree to indemnify Detto, the Detto Shareholders and each of the
officers, agents and directors of Detto or the Detto Shareholders against any
loss, liability, claim, damage or expense (including, but not limited to, any
and all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever) (each an "Indemnified Party") to which it or they may become subject
arising out of or based on either (i) any breach of or inaccuracy in any of the
representations and warranties or covenants or conditions made by JSRC and/or
the JSRC Stockholders herein in this Agreement; or (ii) any and all liabilities
arising out of or in connection with: (A) any of the assets of JSRC or any
Subsidiary prior to the Closing; or (B) the operations of JSRC prior to the
Closing (the "JSRC Stockholders Indemnification").
5.2 Indemnification Procedures. If any action shall be brought against
any Indemnified Party in respect of which indemnity may be sought pursuant to
this Agreement, such Indemnified Party shall promptly notify the Indemnifying
Party in writing, and the Indemnifying Party shall have the right to assume the
defense thereof with counsel of its own choosing. Any Indemnified Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party except to the extent that the employment
thereof has been specifically authorized by the Indemnifying Party in writing,
the Indemnifying Party has failed after a reasonable period of time to assume
such defense and to employ counsel or in such action there is, in the reasonable
opinion of such separate counsel, a material conflict on any material issue
between the position of the Indemnifying Party and the position of such
Indemnified Party. The Indemnifying Party will not be liable to any Indemnified
Party under this Article 5 for any settlement by an Indemnified Party effected
without the Indemnifying Party's prior written consent, which shall not be
unreasonably withheld or delayed; or to the extent, but only to the extent that
a loss, claim, damage or liability is attributable to any Indemnified Party's
indemnification pursuant to this Article 5.
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ARTICLE 6
COVENANTS AND AGREEMENTS OF THE PARTIES
EFFECTIVE PRIOR TO CLOSING
6.1 Corporate Examinations and Investigations. Prior to the Closing,
each party shall be entitled, through its employees and representatives, to make
such investigations and examinations of the books, records and financial
condition of Detto and JSRC (and any Subsidiary) as each party may request. In
order that each party may have the full opportunity to do so, Detto and JSRC,
the Detto Shareholders and the JSRC Stockholders shall furnish each party and
its representatives during such period with all such information concerning the
affairs of Detto or JSRC or any Subsidiary as each party or its representatives
may reasonably request and cause Detto or JSRC and their respective officers,
employees, consultants, agents, accountants and attorneys to cooperate fully
with each party's representatives in connection with such review and examination
and to make full disclosure of all information and documents requested by each
party and/or its representatives. Any such investigations and examinations shall
be conducted at reasonable times and under reasonable circumstances, it being
agreed that any examination of original documents will be at each party's
premises, with copies thereof to be provided to each party and/or its
representatives upon request.
6.2 Cooperation; Consents. Prior to the Closing, each party shall
cooperate with the other parties to the end that the parties shall (i) in a
timely manner make all necessary filings with, and conduct negotiations with,
all authorities and other persons the consent or approval of which, or the
license or permit from which is required for the consummation of the Acquisition
and (ii) provide to each other party such information as the other party may
reasonably request in order to enable it to prepare such filings and to conduct
such negotiations.
6.3 Conduct of Business. Subject to the provisions hereof, from the
date hereof through the Closing, each party hereto shall (i) conduct its
business in the ordinary course and in such a manner so that the representations
and warranties contained herein shall continue to be true and correct in all
material respects as of the Closing as if made at and as of the Closing and (ii)
not enter into any material transactions or incur any material liability not
required or specifically contemplated hereby, without first obtaining the
written consent of Detto and the Detto Shareholders on the one hand and JSRC and
the JSRC Stockholders on the other hand. Without the prior written consent of
Detto, the Detto Stockholders, JSRC or the JSRC Stockholders, except as required
or specifically contemplated hereby, each party shall not undertake or fail to
undertake any action if such action or failure would render any of said
warranties and representations untrue in any material respect as of the Closing.
6.4 Litigation. From the date hereof through the Closing, each
party hereto shall promptly notify the representative of the other parties of
any lawsuits, claims, proceedings or investigations which after the date hereof
are threatened or commenced against such party or any of its affiliates or any
officer, director, employee, consultant, agent or shareholder thereof, in their
capacities as such, which, if decided adversely, could reasonably be expected to
have a material adverse effect upon the condition (financial or otherwise),
assets, liabilities, business, operations or prospects of such party or any of
its subsidiaries.
6.5 Notice of Default. From the date hereof through the Closing,
each party hereto shall give to the representative of the other parties prompt
written notice of the occurrence or existence of any event, condition or
circumstance occurring which would constitute a violation or breach of this
Agreement by such party or which would render inaccurate in any material respect
any of such party's representations or warranties herein.
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ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Detto and the Detto Shareholders. The
obligations of Detto and the Detto Shareholders under this Agreement shall be
subject to each of the following conditions:
(a) Closing Deliveries. At the Closing, JSRC and/or the JSRC
Stockholders shall have delivered or caused to be delivered to Detto and the
Detto Stockholders the following:
(i) resolutions duly adopted by the Board of
Directors of JSRC authorizing and approving the Acquisition
and the execution, delivery and performance of this Agreement;
(ii) a certificate of good standing for JSRC and each
Subsidiary from their respective jurisdictions of
incorporation, dated not earlier than five days prior to the
Closing Date;
(iii) written resignations of all officers and
directors of JSRC and each Subsidiary in office immediately
prior to the Closing, and board resolutions electing the
following individuals to the positions with JSRC and each
Subsidiary listed opposite their names below:
Xxxxx Mana'o Director & CEO
Xxxxxx Xxxxxx Director
Xxxxx Xxxxx Director
Xxxxxxx Xxxx Director
Xxxxxxx Xxxxx Chief Financial Officer
(iv) [reserved];
(v) this Agreement and the Escrow Agreement duly
executed by JSRC and the JSRC Stockholders;
(vi) all corporate records, agreements, seals and any
other information reasonably requested by Detto's
representatives with respect to JSRC; and
(vii) such other documents as Detto and/or the Detto
Shareholders may reasonably request in connection with the
transactions contemplated hereby.
(b) Representations and Warranties to be True. The
representations and warranties of JSRC and the JSRC Stockholders herein
contained shall be true in all material respects at the Closing with the same
effect as though made at such time. JSRC and the JSRC Stockholders shall have
performed in all material respects all obligations and complied in all material
respects with all covenants and conditions required by this Agreement to be
performed or complied with by them at or prior to the Closing.
(c) Assets and Liabilities. At the Closing, neither JSRC nor
any Subsidiary shall have any material assets or liabilities, contingent or
otherwise, or any tax obligations or any material changes to its business or
financial condition.
(d) SEC Filings. At the Closing, JSRC will be current in all
SEC filings required by it to be filed, and will have filed its Quarterly Report
on Form 10-QSB for the period ended June 30, 2004.
(e) Cancellation of Stock and Capital Structure. At the
Closing, JSRC shall provide proof satisfactory to Detto's counsel or other agent
that 9,500,000 outstanding restricted shares of JSRC has been redeemed by JSRC
and cancelled and that immediately before the Closing, the total fully diluted
outstanding shares of JSRC common stock shall be 2,292,500 shares.
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7.2 Conditions to Obligations of JSRC and the JSRC Stockholders. The
obligations of JSRC and the JSRC Stockholders under this Agreement shall be
subject to each of the following conditions:
(a) Closing Deliveries. On the Closing Date, Detto and/or the
Detto Shareholders shall have delivered to JSRC the following:
(i) [intentionally omitted];
(ii) this Agreement duly executed by Detto and the
Detto Shareholders;
(iv) such other documents as JSRC may reasonably
request in connection with the transactions contemplated hereby.
(b) Representations and Warranties to be True. The
representations and warranties of Detto and the Detto Shareholders herein
contained shall be true in all material respects at the Closing with the same
effect as though made at such time. Detto and the Detto Shareholders shall have
performed in all material respects all obligations and complied in all material
respects with all covenants and conditions required by this Agreement to be
performed or complied with by them at or prior to the Closing.
ARTICLE 8
OTHER COVENANTS AND AGREEMENTS
8.1 Lock Up Agreement. Following the Closing, in no event shall the
JSRC Stockholders or any of their affiliates, acting as a group, sell or cause
to be sold: (i) any shares of JSRC common stock within 90 days after the
Closing; or (ii) more than 20% of the number of shares of JSRC then held by the
JSRC Stockholders during any calendar month thereafter. Any shares permitted to
be sold but not sold during a calendar month shall not accrue to the next
calendar month. At the Closing, the JSRC Stockholders, shall deliver to JSRC's
stock transfer agent one or more stock certificates collectively representing
50,000 shares of JSRC common stock with instructions to place an appropriate
legend referring to these transfer restrictions on such certificate(s). JSRC
shall consent to the removal of such restrictive legends to the extent such
removal is appropriate under this Section 8.1 and permitted by applicable law.
8.2 Redemption and Cancellation of Stock. At the Closing 9,500,000
outstanding shares of the common stock of JSRC shall be redeemed by JSRC and
cancelled such that immediately before the Closing, the total fully diluted
outstanding shares of JSRC common stock shall be 2,292,500 shares.
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
sent by overnight courier or mailed by registered or certified mail (postage
prepaid and return receipt requested) to the party to whom the same is so
delivered, sent or mailed at addresses set forth on the signature page hereof
(or at such other address for a party as shall be specified by like notice).
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9.2 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
9.3 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify this Agreement to preserve each party's anticipated
benefits under this Agreement.
9.4 Miscellaneous. This Agreement (together with all other documents
and instruments referred to herein): (a) constitutes the entire agreement and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter hereof; (b) except as
expressly set forth herein, is not intended to confer upon any other person any
rights or remedies hereunder and (c) shall not be assigned by operation of law
or otherwise, except as may be mutually agreed upon by the parties hereto.
9.5 Separate Counsel. Each party hereby expressly acknowledges that it
has been advised to seek its own separate legal counsel for advice with respect
to this Agreement, and that no counsel to any party hereto has acted or is
acting as counsel to any other party hereto in connection with this Agreement.
9.6 Governing Law; Venue. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
U.S.A. Any and all actions brought under this Agreement shall be brought in the
state and/or federal courts of the United States sitting in the City of Los
Angeles, California and each party hereby waives any right to object to the
convenience of such venue.
9.7 Counterparts and Facsimile Signatures. This Agreement may be
executed in two or more counterparts, which together shall constitute a single
agreement. This Agreement and any documents relating to it may be executed and
transmitted to any other party by facsimile, which facsimile shall be deemed to
be, and utilized in all respects as, an original, wet-inked document.
9.8 Amendment. This Agreement may be amended, modified or supplemented
only by an instrument in writing executed by all parties hereto.
9.9 Parties In Interest: No Third Party Beneficiaries. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. This Agreement
shall not be deemed to confer upon any person not a party hereto any rights or
remedies hereunder.
9.10 Waiver. No waiver by any party of any default or breach by another
party of any representation, warranty, covenant or condition contained in this
Agreement shall be deemed to be a waiver of any subsequent default or breach by
such party of the same or any other representation, warranty, covenant or
condition. No act, delay, omission or course of dealing on the part of any party
in exercising any right, power or remedy under this Agreement or at law or in
equity shall operate as a waiver thereof or otherwise prejudice any of such
party's rights, powers and remedies. All remedies, whether at law or in equity,
shall be cumulative and the election of any one or more shall not constitute a
waiver of the right to pursue other available remedies.
9.11 Expenses. At or prior to the Closing, the parties hereto shall pay
all of their own expenses relating to the transactions contemplated by this
Agreement, including, without limitation, the fees and expenses of their
respective counsel and financial advisers.
[SIGNATURES FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DETTO TECHNOLOGIES, INC.
By:________________________________
Name: Xxxxx Mana'o
Title: Chief Executive Officer
Address: 00000 XX 00xx Xxxxxx
Xxxxx 00
Xxxxxxxx, Xxxxxxxxxx 00000
[SIGNATURE PAGES OF DETTO SHAREHOLDERS,
JSRC AND JSRC STOCKHOLDERS FOLLOW]
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[SIGNATURE PAGE OF DETTO SHAREHOLDERS]
19
[SIGNATURE PAGE OF JSRC AND JSRC STOCKHOLDERS]
JITSOURCE, INC.
By:___________________________________
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer,
President
Address: 000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 000,
Xxxxx Xxxxxx, XX 00000
JSRC Stockholders:
--------------------------------------
Xxxx Xxxxxx
--------------------------------------
Xxxxx Xxxxxx
20
