PREFERRED STOCK EXCHANGE AGREEMENT
This Agreement is entered into as of this 28th day of October, 1997 between
Diamond Equities, Inc. ("DEI"), a Nevada Corporation, and Dingaan Holdings, S.A.
("Dingaan").
RECITALS
WHEREAS, Dingaan holds 727 shares of Series A 6% Preferred Stock ("Series A
Stock") of DEI and,
WHEREAS, DEI desires to exchange a new series of preferred stock without
dividends for the Series A Stock and,
WHEREAS, Dingaan has agreed to such an exchange,
NOW THEREFORE, in consideration of the premises contained in the recitals, the
parties agree as follows:
AGREEMENT
SECTION 1. SERIES A STOCK.
1.1 The Series A Stock presently held by Dingaan have a stated value of
$1,817,591.00 (one million eight hundred seventeen thousand, five hundred ninety
one dollars).
1.2 Cumulative Dividends are at 6% payable annually, and are presently in
arrears in the amount of $194,023.00 (one hundred ninety three thousand and
twenty three dollars).
1.3 The Series A Stock is convertible at the option of the holder at a rate
equal to 75% (seventy five percent) of the average bid price of the common
shares for the ten (10) days prior to the conversion date.
1.4 The Series A Stock is redeemable by DEI at the cash price paid for the
shares plus the amount of any dividends accumulated and unpaid as of the date of
the redemption.
SECTION 2. OWNERSHIP.
2.1 Dingaan confirms that its ownership of the Series A Stock is unencumbered
and that it is able to pass clear title to the shares to DEI on the Closing
Date.
SECTION 3. AUTHORIZATION AND EXCHANGE OF SERIES A STOCK FOR NEW SERIES B
PREFERRED STOCK.
3.1 The Board of Directors of DEI has, by resolution dated September 24, 1997,
authorized the issuance and exchange of a new Series B Preferred Stock for its
existing Series A Stock.
3.2 Twenty thousand (20,000) shares of the Series B Stock shall be valued at
$1,817,591.00 (one million, eight hundred seventeen thousand, five hundred and
ninety one dollars), plus the Series A stock dividends in arrears in the amount
of $194,023.00, for a total value of $2,011, 614.00 (two million, eleven
thousand, six hundred fourteen dollars).
3.3 The twenty five thousand (25,000) shares of the Series B Stock shall be
convertible into 20,000,000 (twenty million) shares of common stock of DEI.
3.4 Other specific terms and conditions of the Series B Preferred Stock shall be
determined between the parties and represented in a Series B Preferred Stock
Certificate.
SECTION 4. CLOSING.
4.1 The Closing of the Exchange of Shares hereunder shall be held at offices of
DEI on November 1 ,1997 or such other place or date as the parties may agree.
4.2 At the Closing, DEI shall deliver a definitive certificate registered in
Dingaan's name representing 20,000 shares of Series B Preferred Stock and the
value thereof being exchanged, signed by the President of DEI.
4.3 At the Closing, Dingaan shall deliver its certificate, representing
ownership of 727 shares of the Series A Preferred Stock, duly endorsed or
accompanied by a duly executed stock power in blank with a signature guaranteed
by a bank, trust company or a member firm of the NASD.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF DEI. DEI hereby represents and
warrants to Dingaan as set forth below.
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5.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. DEI is a corporation duly
incorporated and validly existing and in good standing under the laws of the
State of Nevada. DEI has requisite corporate power and authority to own and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. DEI is duly qualified and authorized
to do business, and is in good standing as a foreign corporation, in each
jurisdiction where the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary and where a failure to do
so qualify would have a material adverse effect on its business or properties.
5.2 CORPORATE POWER. DEI will have at the Closing Date all requisite legal and
corporate power and authority to execute and deliver this Agreement, to sell and
issue the Shares hereunder, to issue the Common Stock issuable upon conversion
of the Preferred Stock ("Underlying Common Stock") and to carry out and perform
its obligations under the terms of this Agreement.
5.4 CAPITALIZATION. The authorized capital stock of DEI immediately prior to the
Closing consists of (a) [NUMBER] shares of Common Stock, of which [NUMBER]
shares are or will be issued and outstanding, and (b) [NUMBER] shares of
preferred stock ("Preferred Stock"), of which [NUMBER] shares are or will be
issued and outstanding prior to the Closing. The outstanding shares have been
duly authorized and validly issued, and are fully paid and nonassessable and
were issued in compliance with all applicable federal and state securities laws.
DEI has reserved [NUMBER] shares of Common Stock for issuance upon conversion of
the Preferred Stock. There are (i) no options, warrants or other rights to
purchase any of DEI's authorized and unissued capital stock, or any security
directly or indirectly convertible into or exchangeable for shares of capital
stock of DEI, (ii) so far as known to DEI, no voting trust or voting agreements
among, or irrevocable proxies executed by, stockholders of the Company, (iii) so
far as known to DEI, no agreements among stockholders providing for the purchase
or sale of DEI's capital stock, and (iv) no obligations (contingent or
otherwise) of DEI to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. All such issued and outstanding options and
warrants have been duly and validly issued in compliance with applicable federal
and state securities laws.
5.5 AUTHORIZATION. All corporate action on the part of DEI, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of this Agreement by DEI, the authorization, issuance and delivery
of the Shares and the Underlying Common Stock and the performance of all of
DEI's obligations hereunder has been taken or will be taken prior to Closing.
This Agreement constitutes a valid and binding obligation of DEI, enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other general principles of equity,
whether such enforcement is considered in a proceeding in equity or law. The
Shares, when issued in compliance with the provisions of this Agreement, and the
Underlying Common Stock, when issued, will be validly issued, will be fully paid
and nonassessable, will be free of any duties or other governmental charges and
will be free of any liens, encumbrances or restrictions, other than any liens,
encumbrances or restrictions created by or imposed upon the holders under the
documents relating to this transaction; provided, however, that the Shares and
the Underlying Common Stock may be subject to
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restrictions on transfer under state and/or federal securities laws. Except as
contemplated herein, the Shares and the Underlying Common Stock are not subject
to any preemptive rights or rights of first refusal.
5.6 LIABILITIES. Except as set forth in DEI's financial statements as of June
30, 1997], copies of which have been heretofore delivered to Dingaan, DEI has no
liabilities or obligations, absolute or contingent, except liabilities and
obligations which have been incurred in the ordinary course of business none of
which, in the aggregate, exceeds $10,000.
5.7 COMPLIANCE WITH OTHER INSTRUMENTS. Company is not in violation of any term
of its Articles or Bylaws, or in any material respect of any term or provision
of the mortgages, indebtedness, indentures, contracts, agreements, or
instruments set forth on Exhibit D or any other material agreement, or any
judgment or decree. The best of its knowledge, DEI is not in violation of any
order, statute, rule or regulation applicable to DEI where such violation would
materially and adversely affect DEI; to DEI's actual knowledge, DEI is not in
violation of any order, statute or regulation applicable to DEI. The execution,
delivery and performance of and compliance with this Agreement and the issuance
of the Shares and the Underlying Common Stock have not resulted and will not
result in any material violation of, or conflict with, or constitute a material
default under, DEI's Articles or Bylaws or any of such material agreements nor
result in the creation of, or mortgage, pledge, lien, encumbrance or charge upon
any of the material properties or assets of DEI.
5.8 LITIGATION, ETC. There are no actions, suits, proceedings or investigations
pending against DEI or its properties or in which DEI is the plaintiff, before
any court or governmental agency (nor, to DEI's knowledge, is there any threat
thereof or any reasonable basis therefor).
5.9 REGISTRATION RIGHTS. DEI is not under any contractual obligation to register
with the Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended ("Securities Act") any of its presently outstanding securities
or any of its securities which may hereafter be issued.
5.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the party
of DEI is required in connection with the valid execution and delivery of this
Agreement, or the offer, or issuance of the Shares or the underlying Common
Stock or the consummation of any other transaction contemplated hereby.
5.11 EXEMPTION. The offer, issue and exchange of the Shares and the Underlying
Common Stock are and will be exempt from the registration and prospectus
delivery requirements of the 1933 Act, pursuant to the exemption 5 provided by
Section 4(1) and 4(2) of the Act.
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SECTION 6. REPRESENTATIONS AND WARRANTIES OF DINGAAN. Dingaan hereby represents
and warrants to DEI with respect to the exchange of the Preferred Stock as
follows:
6.1 INVESTMENT. Dingaan is acquiring the shares for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the shares to be
issued have not been, and will not be, registered under the Securities Act of
1933, as amended ("Securities Act") or the securities laws of any state by
reason of a specific exemption from the registration provisions of the
Securities Act and the securities law of the State of Nevada and other
applicable jurisdictions, the availability of which depends upon, among other
things, the bona fide nature of the investment intent.
6.2 RULE 144. It acknowledges that the Shares must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
such registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being effected through a
"broker's transaction" or in transactions directly with a "market maker" and the
number of shares being sold during any three-month period not exceeding
specified limitations. Dingaan acknowledges that, except as specifically set
forth in this Agreement, it is not relying on DEI in any way to satisfy the
conditions precedent for limited resale of shares pursuant to Rule 144 under the
Securities Act.
6.3 NO PUBLIC MARKET. It understands that no public market now exists for any of
the Series B Preferred Stock issued by DEI and that DEI has made no assurances
that a public market will ever exist for such securities.
6.4 ACCESS TO DATA. It has had an opportunity to discuss the business of DEI,
its management and financial affairs with its management and the opportunity to
review the Company's financial statements, books and records, facilities and
business plan. It has also had an opportunity to ask questions of officers of
the company, which questions were answered to its satisfaction.
6.5 POWER AND AUTHORITY. Dingaan will have at the Closing Date all requisite
legal and other power and authority to execute and deliver this Agreement and to
carry out and perform its obligations under the terms of this Agreement. This
Agreement constitutes a valid and legally binding obligation of Dingaan,
enforceable in accordance with its terms, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other general
principals of equity, whether such enforcement is considered in a proceeding in
equity or law.
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SECTION 7. MISCELLANEOUS PROVISIONS.
7.1 NOTICES. All notices, requests, demands, and other communications required
or permitted hereunder will be in writing and will be deemed to have been duly
given when delivered by hand or two days after being mailed by certified or
registered mail, return receipt requested, with postage prepaid:
If to DEI to: If to Dingaan to:
Xxxxx X. Xxxxxxxx Dingaan Holdings, S.A.
0000 X. Xxxxxxxxxx Xxxxx, Xxxx Xxxxxxxx Center, Xxxxx Xxxxx
Xxxxx # 0 Xxxxxxxxxxx Xxxxxx
Xxxxx, XX 00000 X.X. Xxx X-00-0
Xxxxxx, Xxxxxxx
7.2 TITLES AND CAPTIONS. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor effect the interpretation of this Agreement.
7.3 ENTIRE AGREEMENT. This Agreement contains the entire understanding between
and among the parties and supersedes any prior understandings and agreements
among them respecting the subject matter of this Agreement.
7.4 AGREEMENT BINDING. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
7.5 ATTORNEY FEES. In the event an arbitration, suit or action is brought by any
party under this Agreement to enforce any of its terms, or in any appeal
therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
7.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada.
7.7 PRESUMPTION. This Agreement or any section thereof shall not be construed
against any party due to the fact that said Agreement or any section thereof was
drafted by said party.
7.8 FURTHER ACTION. The parties hereto shall execute and deliver all documents,
provide all information and take or forbear from all such action as may be
necessary or appropriate to achieve the purposes of the Agreement.
7.9 PARTIES IN INTEREST. Nothing herein shall be construed to be to the benefit
of any third party, nor is it intended that any provision shall be for the
benefit of any third party.
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7.10 SAVINGS CLAUSE. If any provision of this Agreement, or the application of
such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid, shall not be
affected thereby.
Indicating their agreement to the above, the parties have signed this Agreement
below:
DIAMOND EQUITIES, INC., A NEVADA CORPORATION: DINGAAN HOLDINGS, S.A.
By:/s/ Xxxxx X. Xxxxxxxx By: E.P. Toothe & Associates
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Xxxxx X. Xxxxxxxx, President (Print or type full name)
Date: 10-28-97 E.P. Toothe & Associates
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(Signature)
Date: 21st October, 1997.
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