Exhibit 10.07
LAND TRANSFER AND STOCK PURCHASE AGREEMENT
THIS LAND TRANSFER AND STOCK PURCHASE AGREEMENT (the "Agreement"), is
dated as of March 24, 2003, by and among Essential Innovations Technology
Corporation, a Nevada corporation (hereinafter referred to as the "Company"),
and Xxxxxx X. Xxxxxx, as Trustee of The Xxxxxx X. Xxxxxx Living Trust ("Xx
Xxxxxx, Trustee"), Xxxxxxx Xxxxxx Xxxxxx, Xxxx Xxxx Xxxxxx and Xxxxx Xxxxxx
Xxxxxxxxx (collectively, the "Land Owner").
W I T N E S S E T H:
WHEREAS, the Company has agreed to purchase, and the Land Owner has
agreed to sell, the "Land" herein described and defined; and
WHEREAS, the Company and Land Owner are executing this Agreement to set
forth the terms and conditions of said transaction;
NOW, THEREFORE, in consideration of the premises and the covenants,
agreements and conditions contained in this Agreement, the Company and the Land
Owner agree as follows:
ARTICLE 1
DEFINITIONS
For the purposes of this Agreement, the following terms will have the
following meanings:
"Agreement" means this Land Transfer and Stock Purchase Agreement, as
it may be amended from time to time.
"Board of Directors" means the board of directors of the Company.
"Cash" means legal tender of the United States of America or funds in
said currency on deposit at a state or national banking association which are
available upon closing in San Marcos, Texas, for withdrawal by a person
indicated.
"Cash Portion of the Consideration" means Three Hundred Fourteen
Thousand Sixty-seven and no/100 Dollars ($314,067.00) of Cash.
"Closing Date," means July 1, 2003, or such other date on which the
Company and the Land Owner agree as the date on which the Company shall deliver
to the Land Owner the Consideration for the conveyance of the Land to the
Company and the delivery to the Company by the Land Owner of the Land Owner's
deed to the Land.
"Company" means Essential Innovations Technology Corporation, a Nevada
corporation.
"Company Affiliate" means a corporation organized and existing under
the laws of one of the several United States of America that is controlled by,
under common control with or controls, the Company.
"Common Stock" means any of the authorized common stock ($.001 par
value) of the Company.
"Common Stock Portion of the Consideration" means 628,134 shares of the
Common Stock.
"Consideration" means the aggregate of the Cash Portion of the
Consideration and the Common Stock Portion of the Consideration.
"IPO" has the meaning set forth in Section 2.3 hereof.
"Land Owner" means Xxxxxx X. Xxxxxx, as Trustee of The Xxxxxx X. Xxxxxx
Living Trust ("Xx Xxxxxx, Trustee"), Xxxxxxx Xxxxxx Xxxxxx, Xxxx Xxxx Xxxxxx and
Xxxxx Xxxxxx Xxxxxxxxx.
"Land" means that certain portion of the three tracts of land (two
totaling 48.93 acres and one totaling 56.16 acres, more or less, respectively)
currently owned by Xxxxxx Ranch Ltd., a Texas limited partnership ("LRL"),
located in the Xxxxxx Xxxxxxxx Xxxxxx, Xxxxxxxx Xx. 00, Xxxx Xxxxxx, Xxxxx (the
"LRL Lands") that is hereafter distributed to the Land Owner as Land Owner's
one-third of the total fair market value of the LRL Lands.
"Principal Market" will mean the New York Stock Exchange, American
Stock Exchange, NASDAQ National Market System or Small Cap Market,
Over-The-Counter Electronic Bulletin Board, BBX or such other market or exchange
on which the Common Stock is then principally traded.
"Trading Day" will mean a day on which there is trading on the
Principal Market.
ARTICLE 2
PURCHASE AND SALE OF LAND FOR COMMON STOCK AND CASH
Section 2.1 Agreement of Purchase and Sale. Subject to and upon the
terms, agreements, representations, warranties, reservations, covenants and
conditions set forth in this Agreement, the Company agrees to purchase the Land
from the Land Owner, and Land Owner agrees to sell and convey the Land to the
Company, for the Consideration which shall be payable and deliverable by the
Company at the offices of Fulbright & Xxxxxxxx L.L.P. on the Closing Date.
Anything in this Agreement to the contrary notwithstanding:
LAND OWNER HAS NOT MADE, DOES NOT MAKE, AND SPECIALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS, OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT, OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE
VALUE, NATURE, QUALITY OR CONDITION OF THE LAND, INCLUDING WITHOUT LIMITATION,
THE WATER, SOIL, BIOLOGY, AND GEOLOGY, (B) THE INCOME TO BE DERIVED FROM THE
LAND, (C) THE SUITABILITY OF THE LAND FOR ANY ACTIVITIES AND USES THAT GRANTEES
MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY THE LAND OR ITS OPERATION WITH
ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL BODY,
OR (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY, OR
FITNESS FOR A PARTICULAR PURPOSE OF THE LAND; NOR HAS LAND OWNER MADE, DOES NOT
MAKE, AND SPECIFICALLY DISCLAIMS, ANY REPRESENTATIONS REGARDING COMPLIANCE WITH
ANY ENVIRONMENTAL PROTECTION, POLLUTION, ENDANGERED SPECIES, OR LAND USE LAWS,
RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING SOLID WASTE, AS DEFINED BY
THE U.S. ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C.F.R., PART 261, OR
THE DISPOSAL OR EXISTENCE, IN OR ON THE PROPERTY, OF ANY HAZARDOUS SUBSTANCE, AS
DEFINED BY THE COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND LIABILITY
ACT OF 1980, AS AMENDED, AND REGULATIONS PROMULGATED THEREUNDER. THE COMPANY
ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE
PROPERTY, THE COMPANY IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE LAND AND
NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY LAND OWNER. THE COMPANY
FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED
WITH RESPECT TO THE LAND WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT LAND
OWNER MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION. LAND OWNER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR
WRITTEN STATEMENTS, REPRESENTATIONS, OR INFORMATION PERTAINING TO THE LAND, OR
THE OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE,
SERVANT, OR OTHER PERSON REGARDLESS BY WHOM ENGAGED. THE COMPANY FURTHER
ACKNOWLEDGES AND AGREES THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE
CONVEYANCE OF THE LAND AS PROVIDED FOR HEREIN IS MADE ON AN "AS IS" CONDITION
AND BASIS WITH ALL FAULTS. IT IS UNDERSTOOD AND AGREED THAT THE AMOUNT OF THE
CONSIDERATION DELIVERED BY THE COMPANY TO LAND OWNER FOR THE LAND HAS BEEN
ADJUSTED TO REFLECT THAT THE LAND IS SOLD BY LAND OWNER AND PURCHASED BY THE
COMPANY SUBJECT TO THE FOREGOING.
Section 2.2 Issuance of the Common Stock Portion of the Consideration.
(a) The Common Stock Portion of the Consideration, to be
issued to the Land Owner on the Closing Date, shall be as provided in
this Agreement and will be represented by stock certificates in various
denominations, as determined by Land Owner, with each person comprising
the Land Owner receiving one or more certificates as they direct.
(b) The Land Owner agrees that if the Common Stock, including
the Common Stock Portion of the Consideration issued to Land Owner on
the Closing Date, have not been registered under the Securities Act of
1933 on or before the Closing Date, as provided hereinafter, Land Owner
will not transfer the Common Stock Portion of the Consideration in the
absence of (a) an effective registration statement for the Common Stock
under the Securities Act of 1933 and applicable state laws or (b) an
opinion of counsel reasonably satisfactory to the Company that such
registration is not required.
Section 2.3 IPO. At the earliest date of April 15, 2003, but at the
latest date on or before May 15th 2003, the Company agrees to file a
registration statement on Form SB-2, or such other form as the Company deems
advisable, with the United States Securities Exchange Commission for the initial
public offering of the Common Stock (the "IPO"); and thereafter, the Company
agrees to use its best efforts to have such registration statement declared
effective as soon as possible. Upon the registration statement becoming
effective and subject to reasonable delay due to material, adverse market
conditions, the Company agrees to commence and complete the IPO at a proposed
price of US$5.00 per share.
Section 2.4 Registration of Common Stock and Potential Increase in the
Common Stock Portion of the Consideration.
(a) It is agreed between the Company and the Land Owner that
the registration statement filed by the Company with the Securities and
Exchange Commission shall include not less than 315,000 shares of the
Common Stock Portion of the Consideration or such greater amount of the
Common Stock Portion of the Consideration as the Land Owner shall
advise the Company prior to the filing by the Company of that
registration statement. In the event that the registration statement so
filed by the Company is not declared "effective" by the Securities
Exchange Commission on or before the Closing Date as to all the Common
Stock Portion of the Consideration, then:
(i) The certificate(s) representing the Common Stock
Portion of the Consideration not covered by such registration
statement will bear the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR ANY STATE SECURITIES LAW AND NO
TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT (a) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAW; OR (b) PURSUANT TO AN
EXEMPTION THEREFROM WITH RESPECT TO WHICH THE COMPANY MAY,
UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF COUNSEL FOR
THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS
OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAW.
And
(ii) Immediately upon such registration statement
being declared effective, the Company shall exchange the
Common Stock Portion of the Consideration delivered to the
Land Owner at Closing with the same number of shares of Common
Stock that are covered by the effective registration
statement;
(b) In the event that all of the Common Stock Portion of the
Consideration is not covered by said initial registration statement,
then the Company agrees to file another registration statement with the
Securities and Exchange Commission covering the remaining 313,134
shares of the Common Stock Portion of the Consideration owned by the
Land Owner not later than one hundred eighty (180) days following the
first Trading Day of the Common Stock.
(c) It is additionally agreed that if the net proceeds
received by the Land Owner from the sale of shares of the Common Stock
Portion of the Consideration during the first twelve (12) months
following the first day of secondary market trading of the Common Stock
do not equal at least US$1,570,334 (which the Company and the Land
Owner agree is the fair market value of the Land), then the Company
agrees, immediately following written notice from the Land Owner, to
make up such deficiency (the "Deficiency") by issuing to the Land Owner
that number of shares of Common Stock as shall be necessary (based on
the closing price of the Common Stock on the next business day
following the date on which the Land Owner gives such written notice)
to enable the Land Owner to obtain net proceeds equal to the Deficiency
from the sale of such additional shares of Common Stock.
(d) The Company will pay any and all issue, documentary, stamp
and other taxes, excluding any income, franchise or similar taxes
incurred by Land Owner, that may be payable in respect of any issue or
delivery of Common Stock.
(e) In event of any reorganization, consolidation, merger,
exchange, recapitalization of or involving the Company, or of any stock
dividend or stock split of the Common Stock, or of any
reclassification, or authorization of additional shares, of the capital
stock of the Company of any type or series, or of any sale or transfer
of all or substantially all of the assets of the Company to any other
person (collectively, "Major Events" and any of them, a "Major Event"),
then the Company agrees that it will be a condition precedent to the
consummation of any such Major Event that provision will be made such
that each share of the Common Stock Portion of the Consideration will
be converted, as a part of consummating such Major Event, into such new
securities and at a conversion price and pricing formula which places
the Land Owner in an economically equivalent position as to the shares
of the Common Stock Portion of the Consideration then held by the Land
Owner immediately prior to the consummation of such Major Event as
existed with respect to such shares immediately prior to consummation
of such Major Event.
(f) In the event of any offering by the Company of any shares
of its Common Stock (including, without limitation, the IPO), pursuant
to an effective registration statement filed with the Securities and
Exchange Commission or any state securities commission or board, in
which the Company uses one or more underwriters, the Company agrees to
give written notice to Land Owner thereof and to include in such
underwriting such number of the shares of the Common Stock Portion of
the Consideration (which are covered by an effective registration
statement and held by the Land Owner) which the Land Owner advises the
Company the Land Owner elects to have included in such underwriting.
(g) At any time commencing six (6) months after the Closing
Date and ending seven (7) years after the Closing Date, if the Company
shall receive a written request (specifying that it is being made
pursuant to this Section 2.4) from the Land Owner that the Company file
a registration statement under the Securities Act of 1933 covering any
of the shares of the Common Stock Portion of the Consideration not then
covered by an effective registration statement, then the Company shall
use its best efforts to cause all such unregistered shares of the
Common Stock Portion of the Consideration to be so registered.
(h) In lieu of the Company's obligation to effect a
registration pursuant to Paragraph 2.4(g), after receiving a written
request therefor, the Company shall have the option to purchase the
shares with respect to which the Land Owner requested to be registered
upon the terms set forth in this Paragraph 2.4(h). The Company may
exercise such option by written notice to the Land Owner within 14 days
after receipt of the request from the Land Owner specifying in such
notice the particulars of price, date, time and place for the
consummation of the purchase of such unregistered shares. The price per
share at which such option may be exercised shall be equal to the
average of the daily closing prices for the 20 Trading Days immediately
preceding the date of the request by the Land Owner to the Company to
effect registration of such shares pursuant to this Section 2.4. Unless
otherwise agreed to by the parties to such transaction, the closing of
such transaction shall occur not later than 30 days following the date
of the notice from the Company exercising such option, at the offices
of the Land Owner's counsel, Fulbright & Xxxxxxxx L.L.P., in Xxxxxx,
Xxxxxx County, Texas. The daily closing prices shall be (i) the last
reported sales price on the Principal Market, or (ii) if not listed or
admitted to trading on any Principal Market, then the average of the
closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. (the "NASD") selected
from time to time by the Company for that purpose. If, on the date of
the request by the Land Owner to the Company to effect a registration
pursuant to this Section 2.4, the Common Stock is not so listed,
admitted to trading, furnished by two members of the NASD, then the
Company shall not have the option to purchase them as set forth in this
Paragraph 2.4(h).
Section 2.5 Stipulation of Values. For the purposes of this Agreement,
the Company and the Land Owner agree:
(a) That the Common Stock has a fair market value of US$2.00
per share.
(b) That the Land has a fair market value of US$1,570,334.00.
The Company and the Land Owner agree to use these values in preparing and filing
all income tax return, public information reportings, and other tax and
information reporting returns and filings that relate to or cover the
transaction provided in this Agreement.
Section 2.6 Special Covenant of Company. Notwithstanding anything in
this Agreement to the contrary, unless and until at least 315,000 shares of the
Common Stock Portion of the Consideration shall have been duly registered with
the United States Securities and Exchange Commission, the Company agrees that it
will not permit any officer or director of the Company to sell any of their
shares of Common Stock or any other securities of the Company (including,
without limitation, preferred stock, warrants, options or debt or equity
securities convertible into any of them), whether now owned or hereafter
acquired. The Company agrees to take such actions as are necessary to effectuate
this section at and after the Closing Date.
ARTICLE 3
CLOSING
Section 3.1 Closing. The closing of the transaction provided in this
Agreement shall occur on the Closing Date at the offices of Fulbright & Xxxxxxxx
L.L.P., in Xxxxxx, Xxxxxx County, Texas, provided that all the conditions set
forth in Article 5 hereof, have been satisfied or waived. At the closing:
(a) The Land Owner will transfer title to the Land to the
Company, free and clear of any and all liens, debts, and all other
encumbrances securing obligations owing by the Land Owner, but subject
to the easements, rights-of-way, covenants, conditions and restrictions
and other non-monetary encumbrances of record, if any, in Xxxx County,
Texas, as well as to the reasonable covenants, conditions and
restrictions to be imposed on the Land by the Land Owner as provided in
Paragraph 5.1(c) and to the reservation described below in this Section
3.1; and
(b) The Company will pay the Cash Portion of the Consideration
in Cash, and issue Common Stock Portion of the Consideration, to the
Land Owner as provided in this Agreement.
The Deed to the Company shall contain a warranty of title made by, through or
under the Land Owner, but not otherwise, and shall also reserve and retain unto
Land Owner a profits interest in and to that portion of the Land that is
associated with any facilities and improvements constructed thereon other than a
manufacturing facility for the Company. Such profits interest shall be equal to
one percent (1%) of the gross profit realized from the operation and sale or
other disposition of such portion of the Land until such portion of the Land
shall be conveyed to a third party that is not controlled by, does not control,
nor is under common control with, the Company, any affiliate of the Company or
any of the executive management of the Company, and that is not owned in any
respect by any of them.
Section 3.2 Selection of Closing Date. The Closing Date has been
jointly agreed upon between the Company and the Land Owner and has been
determined to be July 1, 2003. By their execution of this Agreement, the Land
Owner agrees and acknowledges that the Company intends to, but is under no
obligation to build a manufacturing facility on such lands. During the period
from the date hereof to the Closing Date, the Company and the Land Owner will
use their best efforts to take all action necessary or appropriate to satisfy
the closing conditions set forth in Article 6 hereof.
Section 3.3 Survival of Covenants. All covenants and obligations of the
Company and the Land Owner set out in this Agreement which are not, or cannot
be, fully performed by them, respectively, shall survive the closing of the
transaction provided in this Agreement and shall remain valid and enforceable
even if not specifically carried forth into a document executed at closing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Company. The Company
represents and warrants to the Land Owner that the statements made in this
Section 4.1 are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company further
agrees that at the closing on the Closing Date, the representations and
warranties of the Company set forth in this Section 4.1 will be deemed to have
been remade as of the Closing Date and shall survive the closing of this
transaction for the applicable period of limitations.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada,
and has all requisite corporate power and authority to own or lease its
properties and to carry on its business in all material respects as
currently owned, leased or conducted and as contemplated to be owned,
leased and conducted. The Company is in good standing as a foreign
corporation and licensed or qualified to transact business in each
jurisdiction in which the nature of the properties owned or leased by
it or the business transacted by it requires it to be so licensed or
qualified. The copies of the Company's Articles of Incorporation and
Bylaws attached hereto as Exhibit A include all amendments made thereto
at any time prior to the date of this Agreement and are correct and
complete. Any changes to the Articles of Incorporation or Bylaws of the
Company hereafter made will be provided to the Land Owner promptly
following adoption.
(b) The authorized capital stock of the Buyer consists of
100,000,000 shares of Common Stock ($.001 par value), and 10,000,000
shares of preferred stock, divided into multiple series at the
discretion of the Board of Directors. As of March 1, 2003, there were
9,822,467 outstanding shares of the Common Stock and no shares of
preferred stock. All of the issued and outstanding shares of the Common
Stock were duly authorized and validly issued, are fully paid,
non-assessable and free of preemptive rights.
(c) Except as stated on Schedule 4.1(c) attached hereto and
made a part hereof for all purposes, there are not outstanding any: (i)
securities of the Company convertible into or exchangeable for any
shares of capital stock or other securities of the Company, (ii)
subscriptions, options, warrants or other rights obligating the Company
to issue or entitling any third party to acquire from the Company any
shares of capital stock or other securities of the Company or (iii)
other than this Agreement, agreements or understandings to which the
Company is a party with respect to the voting, sale, transfer or other
restriction on shares of capital stock of the Company.
(d) The Company has all requisite corporate power and
authority to enter into and deliver this Agreement and any other
agreement or document necessary to perform this Agreement and to
perform its obligations hereunder and thereunder, to issue and deliver
the Consideration. The execution of this Agreement and such other
agreements and instruments by the Company, their delivery to the Land
Owner, and the performance of their terms by the Company, including,
but not limited to, issuance and delivery of the Consideration have
been duly and validly authorized by the Board of Directors of the
Company, and no further corporate action or authorization on behalf of
the Company is required.
(e) This Agreement is legal, valid and binding upon and
enforceable against the Company in accordance with its terms (except as
the enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other laws affecting creditors' rights
generally or by general principles of equity, regardless of whether
such enforceability is considered in equity or at law).
(f) Neither the issuance and sale of the Common Stock nor the
consummation of any of the other transactions contemplated by this
Agreement nor the fulfillment of the terms hereof and thereof will
conflict with, result in a breach or violation of or constitute a
default under any law or the charter or bylaws of the Company or the
terms of any indenture or other agreement or instrument to which the
Company is a party or is bound or any judgment, order or decree
applicable to the Company of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over the
Company (any thereof being herein called a "Governmental Body").
(g) Except for the registration of the Common Stock, the
Company is not required to submit any notice, report or other filing
with any Governmental Body in connection with the execution, delivery
or performance of this Agreement by the Company and the consummation of
the transactions contemplated hereby by the Company.
(h) No waiver, consent, approval or authorization of any
Governmental Body or any other person is required to be obtained or
made by the Company in connection with the execution, delivery or
performance of this Agreement by the Company and the consummation of
the transactions contemplated hereby by the Company.
(i) No litigation, claim, administrative proceeding or other
proceeding or governmental investigation is pending or threatened that
would prevent or delay the execution, delivery or performance of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby.
(j) The audited consolidated financial statements and
unaudited condensed consolidated interim financial statements of the
Company and its consolidated subsidiaries included in such reports were
prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of the Company
and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended, subject, in the case of the unaudited condensed
consolidated interim financial statements, to normal year-end
adjustments and any other adjustments described therein.
(k) Except for matters that would not have a material adverse
effect on the business, properties, financial condition or results of
operations of the Company, (a) the Company has timely filed with the
appropriate taxing authorities all returns, reports and forms in
respect of taxes required to be filed (taking into account all
extensions) by the Company on or before the date hereof; (b) the
Company has timely paid, or has made adequate provision for the payment
of all taxes required to be paid by it for periods ending on or before
the date hereof, and (c) no material deficiencies for taxes have been
threatened, claimed, proposed or assessed by any taxing or other
Governmental Body against the Company.
(l) The Company has good title to all the assets and
properties shown in the financial statements referenced in Paragraph
(j) next above (other than inventory sold or otherwise disposed of in
the ordinary course of business subsequent to the date thereof).
(m) The Company owns or possesses adequate licenses or other
rights to use all proprietary rights necessary for the conduct of the
business of the Company and as currently conducted. The Company has not
received any notice of infringement, misappropriation or conflict from
any other person with respect to such proprietary rights, and to the
Company's knowledge, the conduct of the business of the Company has not
infringed, misappropriated or otherwise conflicted with any proprietary
rights of any such Person in any manner that could reasonably be
expected to materially and adversely affect the Company.
(n) There has not been any material default in any obligation
to be performed by the Company or any other party under any material
contract, commitment or agreement which default could materially
adversely affect the business, properties, financial condition or
results of operations of the Company, and the Company has not waived
any right under any such contract, commitment or agreement that would
materially adversely affect its business, properties, financial
condition or results of operations.
(o) There is no suit, action, proceeding, claim, complaint or
accusation (a) (i) pending or, (ii) to the Company's knowledge,
threatened against and (b) which is reasonably likely to have a
material adverse affect on the Company and to which the Company is a
party, in any court or before any arbitration panel of any kind or
before or by any Governmental Body relating to the Company. To the
Company's knowledge, no basis exists for any such suit, action,
proceeding, claim, complaint or accusation that, in each case, is
material to the business, properties, financial condition or results of
operations of the Company. To Company's knowledge, the Company is not
subject to any suit, action, proceeding, claim, complaint or accusation
that, in each case, if adversely determined is material to the
business, properties, financial condition or results of operations of
the Company. There is no outstanding order, writ, injunction, decree,
judgment or award by any court, arbitration panel or Governmental Body
against or materially affecting the Company.
(p) To the Company's knowledge: (1) the Company has complied
in all material respects with all laws and regulations of Governmental
Bodies applicable to the business and operations of the Company and has
filed with the proper authorities all material statements and reports
required by all applicable laws and regulations; and (b) the Company
has not received notice of any violation of any laws and regulations
applicable to the business or operations of the Company.
(q) There has not been any adverse affect on the business and
properties of the Company as the result of any fire, explosion,
accident, riot, civil or labor disturbance, strike, boycott, lockout,
flood, drought, storm, earthquake, embargo or other casualty or act of
God or the public enemy and there has not been any change in the
financial condition, assets or liabilities of the Company, other than
changes occurring in the ordinary course of business, which
individually or in the aggregate have not materially adversely affected
the business, properties, financial condition or results of operations
of the Company.
(r) The Company has not retained, directly or indirectly, any
broker or finder or incurred any liability or obligation for any
brokerage fees or finder's fees with respect to this Agreement or the
transactions contemplated hereby. The Land Owner will have no
responsibility for any fees paid to such company and persons, should
they be retained.
Section 4.2 Section 4.2 Representations and Warranties of Land Owner.
This Agreement requires information, representations and warranties to enable
the Company to determine whether to accept Land for the Securities in light of
the requirements of applicable securities laws and regulations. Land Owner
therefore represents and warrants as follows:
(a) Land Owner's information, representations and warranties
set forth herein are true and complete and may be relied upon by the
Company.
(b) If, before the Closing Date, there is any material change
with respect to Land Owner's affairs that would affect Land Owner's
information, representations or warranties set forth herein, Land Owner
will promptly notify the Company of that change.
(c) Land Owner has been advised to consult with his own
independent counsel regarding the consequences of investment in the
Company and its Common Stock.
(d) Land Owner has adequate means for current and long-term
personal needs and contingencies, has no need for liquidity of
investment in the Common Stock, is in a financial position to hold the
Common Stock for an indefinite period of time, and is able to bear the
economic risk of, and can withstand, a complete loss of Land Owner's
investment in the Company and the Common Stock.
(e) Land Owner, together with Land Owner's advisors, has such
knowledge and experience in financial and business matters and is
capable of (a) requesting, reviewing and understanding the information
Land Owner has acquired regarding the Company and its operations,
management and control, and (b) evaluating the merits and risks of an
investment in the Company and the Common Stock.
(f) Land Owner and Land Owner's duly authorized
representatives, agents and employees, if any, have been given an
opportunity to obtain any additional information necessary to verify
the accuracy of the information about the Company set forth herein, and
have received all requested information regarding the Company and have
utilized such information and access to his satisfaction. In
particular, Land Owner and his authorized representatives, agents and
employees (if any) have been given reasonable opportunity to meet with
representatives of the Company for the purpose of asking questions of,
and receiving answers from, such representatives concerning the Company
and the Common Stock.
(g) Land Owner (a) is of legal age in accordance with the laws
of Land Owner's state of residency, (b) is acquiring the Common Stock
solely for Land Owner's own account or as fiduciary for the benefit of
another, and (c) is not acquiring the Securities as a nominee or agent
for the benefit of any other person. To the extent Land Owner is acting
as a fiduciary in acquiring the Common Stock, all warranties,
representations and covenants herein shall be deemed to have been made
on behalf of the person or persons for whom Land Owner is acting,
except that such person(s) need not be of legal age.
(h) Land Owner understands that (a) as of the date of this
Agreement, the Securities have not been registered under the Securities
Act of 1933 or state securities laws, and unless are registered prior
to the Closing Date, are being offered and sold pursuant to exemptions
from such laws, (b) the availability of an exemption from the
applicable securities laws depends, in part, on the representations
made by Land Owner, and the Company will not enter into this Agreement
in the absence of such representations, (c) the Company is relying on
the accuracy and the completeness of the representations and warranties
contained herein in complying with its obligations under applicable
securities laws, and (d) no federal, provincial or state agency has
made any determination as to the fairness of the offering for
investment purposes, or any recommendations or endorsement of this
investment.
(i) Land Owner acknowledges that until registered as herein
contemplated, the Common Stock constitutes "restricted securities" as
defined under the Securities Act, and confirms that the Common Stock
will be acquired for investment and not with a view to any offering,
sale or distribution of any part thereof prior to the registration
thereof as contemplated in this Agreement. Land Owner has no present
intention of selling, granting participation in, or otherwise
distributing the Securities prior to a registration statement becoming
effective with respect to the Common Stock, subject, however, to any
requirement of law that the disposition of Land Owner's property shall
at all times be within Land Owner's control. Other than this Agreement,
Land Owner does not have any contract, understanding, agreement, or
arrangement with any person to sell, transfer, or grant participation
to such person, or to any third person, with respect to the Securities
or any portion thereof.
(j) Land Owner understands that (a) an investment in the
Securities involves certain risks, (b) financial forecasts developed by
the Company are based on certain assumptions regarding future events,
many of which will not occur, and actual results of operations will
vary from projected results, and such variations may be material, and
(c) until registered as provided in this Agreement, there are
restrictions upon the transferability of the Common Stock Portion of
the Consideration and no public market for the Common Stock Portion of
the Consideration is expected to develop until such registration is
effective, and, accordingly, Land Owner may not be able to dispose of
the Common Stock Portion of the Consideration when desired (even in the
event of an emergency), and (d) although the Company has agreed to
register the resale of a portion of the Common Stock Portion of the
Consideration, the Company cannot provide any assurance that such
registration will be declared effective by the Securities Exchange
Commission.
(k) The only information regarding the offering of the Common
Stock Portion of the Consideration that has been furnished to Land
Owner is this Agreement and the information referenced or recited in
this Agreement and written responses to inquiries, if any, and Land
Owner has relied only upon such information in determining whether to
invest in the Company. Land Owner was at no time solicited by any
leaflet, public promotional meeting, circular, newspaper or magazine
article, radio or television advertisement, or any other form of
general advertising or solicitation in connection with the offer, sale
or purchase of the Securities.
(l) It is agreed between the Land Owner and the Company, that
the Company will, prior to the Closing Date, at it's sole cost and
expense, retain the services of Mr. Xxx Xxxxxx, to serve as Chief
Project Consultant for the Company in developing the required Phase One
development plan or "Project Book" for the Land, and to serve as
liaison for the Company in discussions and negotiations with the Land
Owner at all times during the term of this Agreement or for any future
project initiatives between the Land Owner and the Company.
Section 4.3 Indemnity. The Land Owner and the Company hereby agree to
indemnify the other of them and to hold the other of them harmless from and
against any and all liability, damage, cost or expense (including reasonable
attorneys' fees), including the amount paid in settlement and whether or not
suit is commenced, incurred on account of or arising out of any inaccuracy in
their respective representations and warranties set forth in this Agreement.
ARTICLE 5
CLOSING CONDItIONS
Section 5.1 Closing Conditions. The respective obligations of the
Company and the Land Owner to close the transaction provided in this Agreement
is expressly subject to the satisfaction or waiver by all parties of the
following conditions on or before the Closing Date:
(a) The Board of Directors of the Company has approved the
transactions contemplated by this Agreement on or before April 15,
2003.
(b) The Land Owner and the Company have evidenced their
agreement to reasonable covenants, conditions and restrictions on the
use of the Land by the Company, its successors and assigns, in favor of
Xx Xxxxxx and wife, Xxxxxxx Xxxxxx Xxxxxx, their successors and assigns
as the owners of the lands adjacent to the Land and on which their
homestead is currently located, such agreement to be in writing and in
recordable form.
(c) No material adverse change has occurred with respect to
the Company or the Land Owner.
(d) The receipt by the Land Owner of an opinion dated as of
the Closing Date, from Xxxxx, Xxxxx & Xxxxxxx L.L.C., that the Common
Stock Portion of the Consideration has been duly and validly authorized
and issued by the Company.
(e) The Land Owner has obtained a distribution of the Land
from LRL subject to no encumbrances that are inconsistent with or would
prevent the Land Owner from performing this Agreement.
(f) The Company has filed a registration statement with the
United States Securities and Exchange Commission covering not less than
5,000,000 shares of the Common Stock, including the Common Stock
Portion of the Consideration (or such portion thereof as provided in
this Agreement) and such registration statement either remains pending
or has been declared effective.
Section 5.2 Termination for Failure of Condition Precedent. If any of
the conditions set forth in Section 5.1 have not been satisfied on or before the
Closing Date, then this Agreement shall automatically terminate and the Land
Owner and the Company shall be released and discharged of all obligations under
this Agreement.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Expenses. Except for paying (a) any obligations of the Land
Owner that are secured by liens encumbering the Land, and (b) the portion of the
ad valorem property taxes that will have accrued from January 1st to the Closing
Date for the year in which closing occurs, the Company will reimburse and pay to
the Land Owner an amount equal to the sum of (a) one-half of the Land Owners'
attorney fees, plus (b) all transaction costs and expenses, including any
potential roll back tax requirement(s) for the change in land usage, if closing
occurs.
Section 6.2 Execution. Except as otherwise provided herein, the
covenants, agreements, representations and warranties made in this Agreement, or
any certificate or instrument delivered pursuant to or in connection therewith
will survive the execution and delivery of this Agreement and the closing of the
transaction provided in this Agreement.
Section 6.3 Successors and Assignors. All representations, covenants
and agreements contained in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not; provided, that
neither party shall have the right to assign or transfer this Agreement or any
interest in this Agreement without the prior written consent of the other party;
provided, further, that
(a) the Company shall have the right to cause the Land Owner
to transfer the Land to a wholly owned subsidiary corporation of the
Company if written notice of that election is given to the Land Owner
at least five (5) day prior to the Closing Date; and
(b) the Land Owner shall have the right to transfer and assign
all its rights, titles and interests under this Agreement to, as well
as have assumed all its obligations under this Agreement by, LRL in the
event that on or before May 1, 2003, LRL accepts and agrees to such
transfer, assignment and assumption of this Agreement.
Section 6.4 Notices. All notices, requests, consents and other
communications hereunder will be in writing and will be delivered in person,
sent by facsimile or mailed by certified or registered mail; return receipt
requested, addressed as follows:
If to the Company, to:
Essential Innovations Technology Corp.
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000-000,
Xxxxxxxxxx, XX 00000
Telephone: 000-000-0000,
Telecopy: 360-733-3941
Attention: President
With a copy to:
Attention: Xxxxx Xxxxx, Esq.
Xxxxxx Xxxxx, Xxxx Xxx Xxxxx
00 Xxxx Xxxxxxxx (300 Xxxxx)
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Telephone (000) 000-0000
Facsimile (000) 000-0000
If to the Land Owner, to:
Xxxxxx X. Xxxxxx
0000 Xxxxxx Xxxx
Xxx Xxxxxx, Xxxxx 00000
Telephone: 000.000.0000
Facsimile: 512.353.0638
With a copy to:
Attention: X. X. Xxxxxxxx, Esq.
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: 000.000.0000
Facsimile: 512.536.4598
Or, in any such case, at such other address or addresses as will have
been furnished in writing by such party to the others. All notices, requests,
consents and other communications hereunder will be deemed to have been duly
given or served on the date on which personally delivered or on the date
actually received, with receipt acknowledged.
Section 6.5 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Texas, without regard to
the conflict of laws provisions thereof.
Section 6.6 Sole and Entire Agreement. This Agreement constitutes the
sole and entire agreement of the parties with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous agreements,
discussions, representations, warranties or other communications.
Section 6.7 Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
Section 6.8 Amendments. This Agreement may not be amended or modified
without the written consent of all parties, nor will any waiver be effective
against any party unless in writing executed on behalf of such party.
Section 6.9 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision will be
excluded from this Agreement and the balance of the Agreement will be
interpreted as if such provision were so excluded and will be enforceable in
accordance with its terms to the fullest extent permitted by law.
[Section 6.10 and Signatures of Parties Appear on Following Page]
Section 6.10 Titles. The titles and subtitles used in this Agreement
are for convenience only and are not to be considered in construing or
interpreting any term or provisions of this Agreement.
IN WITNESS WHEREOF, the Company and the Land Owner have caused this
Agreement to be executed and delivered by the undersigned duly authorized
officers as of the day and year first above written.
Essential Innovations Technology Corporation
By: /s/ Xxxxx XxXxxxxxx /s/ Xxxxxx X. Xxxxxx
Xxxxx XxXxxxxxx, President/CEO Xxxxxx X. Xxxxxx, Trustee of the
Xxxxxx X. Xxxxxx Living Trust
And
By: /s/ Xxxxxxx Xxxxxxx /s/ Xxxxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxxxx, CFO/Sec./Treas Xxxxxxx Xxxxxx Xxxxxx
/s/ Xxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxxxx
/s/ Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx Xxxxxx Xxxxxxxxx
EXHIBIT A
[attach company's articles of incorporation and bylaws]
SCHEDULE 4.1(C)
Warrants and Options
During the year ended October 31, 2002 the Company granted the following
warrants and options:
(a) Warrants
i) SOTA Instruments Inc. - 200,000 warrants exercisable at
$0.25 per share as follows:
50,000 exercisable after April 9, 2003, a second 50,000
exercisable after April 9, 2004 and a third 100,000 exercisable after
April 9, 2005. The Company has expensed the fair value of $60,940 in
relation to these warrants.
ii) Morpheus Financial Corp, a shareholder, - 50,000 warrants
exercisable at $0.35 per share
iii) Private Financing - 50,000 warrants exercisable at $0.35
per share The Company has expensed the fair value of $22,658 in
relation to these warrants.
(b) Options
The Company has granted options to certain purchasers of common shares
to acquire additional common shares as follows: - 30,000 exercisable at $0.75
per share up to and including the year 2007 - 30,000 exercisable at $1.00 per
share up to and including the year 2007
The Company has granted a total of 2,520,000 options to directors, employees,
advisors and consultants to purchase common share of the Company as follows:
Number of Exercise Expiry
Options Price Date
-------------------- ------------------- --------------
Directors 225,000 $0.25 2007
& 125,000 $0.50 2007
Employees 750,000 $0.75 2012
750,000 $1.00 2012
Advisors
&
Consultants 100,000 $0.25 2007
45,000 $0.50 2007
25,000 $1.00 2007
250,000 $0.75 2012
250,000 $1.00 2012
The Company has expensed $25,000 for options issued to directors and employees
using the intrinsic method of valuation and $10,393 for options issued to
Advisors and consultants using the fair value method of valuation.
Subsequent to October 31, 2002
i) Options have been issued to certain investors to acquire 12,900
common shares at $0.25 and 12,900 common shares at $0.50 to the year 2007
ii) 400,000 options to purchase common shares of the Company to certain
employees and consultants consisting of 212,500 with an exercise price of $0.50
and 187,500 with an exercise price of $1.00
(a) The Company has entered into an agreement to acquire $25
million worth of media / advertising credits for a cost of $12.5
million. These credits are valid for an initial period of eighteen
months. Any unused credits may be extended for use up to ten years from
the date of the agreement.
The Company has agreed to issue $1.5 million worth of preferred shares
priced at $3.75/share as an initial payment on the agreement. As at
March 23rd,2003, these shares were yet to be officially issued.
The remaining balance of $11 million will become payable at such time
as the media credits are used. The preferred shares are non-voting, not
entitled to dividends and are automatically convertible into common
shares upon the later of eighteen months after the date of the
agreement or one hundred eighty days after the Company's initial public
offering. The conversion price is the face value of the preferred
shares converted divided by 75% of the price paid for common shares by
public investors in connection with the initial public offering. The
preferred shares will be redeemable for $0.01 per share if media
credits are not honored by the providers or any media credits remain
unused after their expiration.
The agreement calls for a stand-by fee, commencing six months after the
agreement date, of 1% of the unpaid cost of the first $10 million (face
value) of media credits not used.
