--------------------------------------------------------------------------------
EXCHANGE AGREEMENT
Between
XAIBE, INC.
and
POLARSHIELD, INC.
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Dated September 29, 2000
TABLE OF CONTENTS
ARTICLE I Representations, Covenants, and Warranties of PolarShield
Section 1.01 Organization.................................... 1
Section 1.02 Capitalization.................................. 2
Section 1.03 Subsidiaries and Predecessor Corporations....... 2
Section 1.04 Financial Statements............................ 2
Section 1.05 Information..................................... 3
Section 1.06 Options and Warrants............................ 3
Section 1.07 Absence of Certain Changes or Events............ 3
Section 1.08 Title and Related Matters....................... 4
Section 1.09 Litigation and Proceedings...................... 5
Section 1.10 Contracts....................................... 5
Section 1.11 Material Contract Defaults...................... 6
Section 1.12 No Conflict With Other Instruments.............. 6
Section 1.13 Governmental Authorizations..................... 6
Section 1.14 Compliance With Laws and Regulations............ 6
Section 1.15 Insurance....................................... 6
Section 1.16 Approval of Agreement........................... 6
Section 1.17 Material Transactions or Affiliations........... 6
Section 1.18 Labor Relations................................. 7
Section 1.19 PolarShield Schedules........................... 7
Section 1.20 Valid Obligation................................ 8
ARTICLE II Representations, Covenants and Warranties of Xaibe
Section 2.01 Organization.................................... 8
Section 2.02 Capitalization.................................. 9
Section 2.03 Subsidiaries and Predecessor Corporations....... 9
Section 2.04 Securities Filings; Financial Statements........ 9
Section 2.05 Information..................................... 10
Section 2.06 Options and Warrants............................ 11
Section 2.07 Absence of Certain Changes or Events............ 11
Section 2.08 Title and Related Matters....................... 12
Section 2.09 Litigation and Proceedings...................... 12
Section 2.10 Contracts....................................... 12
Section 2.11 Material Contract Defaults...................... 13
Section 2.12 No Conflict With Other Instruments.............. 13
Section 2.13 Governmental Authorizations..................... 13
Section 2.14 Compliance With Laws and Regulations............ 13
Section 2.15 Insurance....................................... 14
Section 2.16 Approval of Agreement........................... 14
Section 2.17 Continuity of Business Enterprises.............. 14
Section 2.18 Material Transactions or Affiliations........... 14
Section 2.19 Labor Relations................................. 14
Section 2.20 Xaibe Schedules................................. 14
Section 2.21 Bank Accounts; Power of Attorney................ 16
Section 2.22 Valid Obligation................................ 16
ARTICLE III Plan of Exchange
Section 3.01 The Exchange.................................... 16
Section 3.02 Anti-Dilution................................... 16
Section 3.03 Closing......................................... 17
Section 3.04 Closing Events.................................. 17
Section 3.05 Termination..................................... 17
ARTICLE IV Special Covenants
Section 4.01 Access to Properties and Records................ 19
Section 4.02 Delivery of Books and Records................... 19
Section 4.03 Third Party Consents and Certificates........... 19
Section 4.04 Preferred Stock Conversion...................... 20
Section 4.05 Designation of Directors and Officers........... 20
Section 4.06 Exclusive Dealing Rights........................ 20
Section 4.07 Actions Prior to Closing........................ 21
Section 4.08 Sales Under Rule 144 or 145, If Applicable...... 22
Section 4.09 Indemnification................................. 23
ARTICLE V Conditions Precedent to Obligations of Xaibe
Section 5.01 Accuracy of Representations and Performance of
Covenants........................................ 24
Section 5.02 Officer's Certificates........................... 24
Section 5.03 No Material Adverse Change....................... 24
Section 5.04 Good Standing.................................... 24
Section 5.05 Approval by PolarShield Shareholders............. 24
Section 5.06 No Governmental Prohibitions..................... 24
Section 5.07 Consents......................................... 25
Section 5.08 Other Items...................................... 25
ARTICLE VI Conditions Precedent to Obligations of PolarShield and the
PolarShield Shareholders
Section 6.01 Accuracy of Representations and Performance of
Covenants....................................... 25
Section 6.02 Officer's Certificate........................... 26
Section 6.03 No Material Adverse Change...................... 26
Section 6.04 Good Standing................................... 26
Section 6.05 No Governmental Prohibition..................... 26
Section 6.06 Consents........................................ 26
Section 6.07 Other Items..................................... 26
ARTICLE VII Miscellaneous
Section 7.01 Brokers...................................... 26
Section 7.02 Governing Law................................ 27
Section 7.03 Notices...................................... 27
Section 7.04 Attorney's Fees.............................. 27
Section 7.05 Confidentiality.............................. 28
Section 7.06 Public Announcements and Filings............. 28
Section 7.07 Schedules; Knowledge......................... 28
Section 7.08 Third Party Beneficiaries.................... 28
Section 7.09 Expenses..................................... 28
Section 7.10 Entire Agreement............................. 28
Section 7.11 Survival; Termination........................ 28
Section 7.12 Counterparts................................. 28
Section 7.13 Amendment or Waiver.......................... 29
Section 7.14 Best Efforts................................. 29
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement") is
entered into as of this 29th day of September, 2000, by and between XAIBE, INC.,
a Nevada corporation (hereinafter referred to as "Xaibe"), and POLARSHIELD,
INC., a Nevada corporation (hereinafter referred to as "PolarShield"), upon the
following premises:
Premises
WHEREAS, Xaibe is a publicly held corporation organized under the laws of
the State of Nevada;
WHEREAS, PolarShield is a privately held corporation organized under the
laws of the State of Nevada and engaged in the marketing of a patented
refrigerant process (the "Process") designed to improve efficiency of heating,
ventilation, and air condition and refrigerant systems;
WHEREAS, management of the constituent corporations entered into
discussions pursuant to which Xaibe has agreed in principal to acquire 100% of
the issued and outstanding stock of PolarShield in exchange for the issuance of
certain shares of PolarShield (the "Exchange") and PolarShield has agreed to use
its best efforts to cause the holders of PolarShield Common Stock (the
"PolarShield Common Shareholders") to exchange their securities of PolarShield
on the terms described herein; and
WHEREAS, Xaibe and PolarShield desire to set forth the terms of the
Exchange.
Agreement
NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF POLARSHIELD
As an inducement to, and to obtain the reliance of Xaibe, except as set
forth on the PolarShield Schedules (as hereinafter defined), PolarShield
represents and warrants as follows:
Section 1.01 Organization. PolarShield is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada and
has the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states or countries
in which the character and location of the assets owned by it or the nature of
the business transacted by it requires qualification, except where failure to be
so qualified would not have a material adverse effect on its business. Included
in the PolarShield Schedules are complete and correct copies of the articles of
incorporation, and bylaws of PolarShield as in effect on the date hereof. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, violate any provision of
PolarShield's articles of incorporation or bylaws. PolarShield has taken all
actions required by law, its articles of incorporation, or otherwise to
authorize the execution and delivery of this Agreement. PolarShield has full
power, authority, and legal right and has taken all action required by law, its
articles of incorporation, and otherwise to consummate the transactions herein
contemplated.
Section 1.02 Capitalization. The authorized capitalization of PolarShield
consists of (a) 25,000,000 shares of common stock, $0.001 par value, of which
5,676,385 shares are currently issued and outstanding and (b) 5,000,000 shares
of preferred stock, $0.01 par value, of which 1,629,550 shares (the "Preferred
Stock") are currently issued and outstanding and convertible into shares of
common stock as set forth in Schedule 1.02(b) of the PolarShield Schedules. All
issued and outstanding shares are legally issued, fully paid, and non-assessable
and not issued in violation of the preemptive or other rights of any person.
Section 1.03 Subsidiaries and Predecessor Corporations. PolarShield does
not have any predecessor corporation(s) or subsidiaries, and does not own,
beneficially or of record, any shares of any other corporation, except as
disclosed in Schedule 1.03. For purposes hereinafter, the term "PolarShield"
also includes those subsidiaries, if any, set forth on Schedule 1.03.
Section 1.04 Financial Statements.
(a) Included in the PolarShield Schedules are (i) the unaudited
balance sheets and the related statements of operations of PolarShield as
of and for the quarter ended June 30, 2000, and (ii) the audited balance
sheet of PolarShield as of December 31, 1999, and the related audited
statements of operations, stockholders' equity and cash flows for the
fiscal year ended December 31, 1999, together with the notes to such
statements and the opinion of Xxx Xxxxxxx & Associates, independent
certified public accountants, with respect thereto.
(b) All such financial statements have been prepared in accordance
with generally accepted accounting principles. The PolarShield balance
sheets present a true and fair view as of the dates of such balance sheets
of the financial condition of PolarShield. PolarShield did not have, as of
the dates of such balance sheets, except as and to the extent reflected or
reserved against therein, any liabilities or obligations (absolute or
contingent) which should be reflected in the balance sheets or the notes
thereto, prepared in accordance with generally accepted accounting
principles, and all assets reflected therein are properly reported and
present fairly the value of the assets of PolarShield in accordance with
generally accepted accounting principles.
(c) PolarShield has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties), except for taxes accrued but not yet due and
payable.
(d) PolarShield has filed all state, federal or local income and/or
franchise tax returns required to be filed by it from inception to the date
hereof. Each of such income tax returns reflects the taxes due for the
period covered thereby, except for amounts which, in the aggregate, are
immaterial.
(e) The books and records, financial and otherwise, of PolarShield are
in all material respects complete and correct and have been maintained in
accordance with good business and accounting practices.
(f) All of PolarShield's assets are reflected on its financial
statements, and, except as set forth in the PolarShield Schedules or the
financial statements of PolarShield or the notes thereto, PolarShield has
no material liabilities, direct or indirect, matured or unmatured,
contingent or otherwise.
Section 1.05 Information. The information concerning PolarShield set forth
in this Agreement and in the PolarShield Schedules is complete and accurate in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading. In
addition, PolarShield has fully disclosed in writing to Xaibe (through this
Agreement or the PolarShield Schedules) all information relating to matters
involving PolarShield or its assets or its present or past operations or
activities which (i) indicated or may indicate, in the aggregate, the existence
of a greater than $5,000 liability or diminution in value, (ii) have led or may
lead to a competitive disadvantage on the part of PolarShield or (iii) either
alone or in aggregation with other information covered by this Section,
otherwise have led or may lead to a material adverse effect on the transactions
contemplated herein or on PolarShield, its assets, or its operations or
activities as presently conducted or as contemplated to be conducted after the
Closing Date, including, but not limited to, information relating to
governmental, employee, environmental, litigation and securities matters and
transactions with affiliates.
Section 1.06 Options or Warrants. Except as set forth in Schedule 1.06,
there are no existing options, warrants, calls, or commitments of any character
relating to the authorized and unissued PolarShield common stock, except
options, warrants, calls or commitments, if any, to which PolarShield is not a
party and by which it is not bound.
Section 1.07 Absence of Certain Changes or Events. Except as set forth in
this Agreement or the PolarShield Schedules, since June 30, 2000:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of PolarShield or
(ii) any damage, destruction, or loss to PolarShield (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets, or condition of PolarShield;
(b) PolarShield has not (i) amended its articles of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed, or agreed to purchase or redeem, any
of its capital stock; (iii) waived any rights of value which in the
aggregate are outside of the ordinary course of business or material
considering the business of PolarShield; (iv) made any material change in
its method of management, operation or accounting; (v) entered into any
other material transaction other than sales in the ordinary course of its
business; (vi) made any accrual or arrangement for payment of bonuses or
special compensation of any kind or any severance or termination pay to any
present or former officer or employee; (vii) increased the rate of
compensation payable or to become payable by it to any of its officers or
directors or any of its salaried employees whose monthly compensation
exceeds $1,000; or (viii) made any increase in any profit sharing, bonus,
deferred compensation, insurance, pension, retirement, or other employee
benefit plan, payment, or arrangement made to, for, or with its officers,
directors, or employees;
(c) PolarShield has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability
(absolute or contingent) except as disclosed herein and except liabilities
incurred in the ordinary course of business; (ii) paid or agreed to pay any
material obligations or liability (absolute or contingent) other than
current liabilities reflected in or shown on the most recent PolarShield
balance sheet, and current liabilities incurred since that date in the
ordinary course of business and professional and other fees and expenses in
connection with the preparation of this Agreement and the consummation of
the transactions contemplated hereby; (iii) sold or transferred, or agreed
to sell or transfer, any of its assets, properties, or rights (except
assets, properties, or rights not used or useful in its business which, in
the aggregate have a value of less than $1,000), or canceled, or agreed to
cancel, any debts or claims (except debts or claims which in the aggregate
are of a value of less than $1,000); (iv) made or permitted any amendment
or termination of any contract, agreement, or license to which it is a
party if such amendment or termination is material, considering the
business of PolarShield; or (v) issued, delivered, or agreed to issue or
deliver any stock, bonds or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); and
(d) to the best knowledge of PolarShield, PolarShield has not become
subject to any law or regulation which materially and adversely affects, or
in the future may adversely affect the business, operations, properties,
assets, or condition of PolarShield.
Section 1.08 Title and Related Matters. PolarShield has good and marketable
title to all of its properties, inventory, interests in properties, and assets,
real and personal, which are reflected in the most recent PolarShield balance
sheet or acquired after that date (except properties, inventory, interests in
properties, and assets sold or otherwise disposed of since such date in the
ordinary course of business) free and clear of all liens, pledges, charges, or
encumbrances except (a) statutory liens or claims not yet delinquent; (b) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the properties subject
thereto or affected thereby or otherwise materially impair present business
operations on such properties; and (c) as described in the PolarShield
Schedules. Except as set forth in the PolarShield Schedules, PolarShield owns,
free and clear of any liens, claims, encumbrances, royalty interests, or other
restrictions or limitations of any nature whatsoever, any and all products it is
currently manufacturing, including the underlying technology and data, and all
procedures, techniques, marketing plans, business plans, methods of management,
or other information utilized in connection with PolarShield's business. Except
as set forth in the PolarShield Schedules, no third party has any right to, and
PolarShield has not received any notice of infringement of or conflict with
asserted rights of others with respect to any product, technology, data, trade
secrets, know-how, propriety techniques, trademarks, service marks, trade names,
or copyrights which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a materially adverse effect
on the business, operations, financial condition, income, or business prospects
of PolarShield or any material portion of its properties, assets, or rights.
Section 1.09 Litigation and Proceedings. Except as set forth in the
PolarShield Schedules, there are no actions, suits, proceedings, or
investigations pending or, to the knowledge of PolarShield after reasonable
investigation, threatened by or against PolarShield or affecting PolarShield or
its properties, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind. PolarShield does not have any knowledge of any material default on its
part with respect to any judgment, order, injunction, decree, award, rule, or
regulation of any court, arbitrator, or governmental agency or instrumentality
or of any circumstances which, after reasonable investigation, would result in
the discovery of such a default.
Section 1.10 Contracts.
(a) Except as included or described in the PolarShield Schedules,
there are no "material" contracts, agreements, franchises, license
agreements, debt instruments or other commitments to which PolarShield is a
party or by which it or any of its assets, products, technology, or
properties are bound other than those incurred in the ordinary course of
business (as used in this Agreement, a "material" contract, agreement,
franchise, license agreement, debt instrument or commitment is one which
(i) will remain in effect for more than six (6) months after the date of
this Agreement or (ii) involves aggregate obligations of at least fifty
thousand dollars ($50,000));
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which PolarShield is a party or by which its
properties are bound and which are material to the operations of
PolarShield taken as a whole are valid and enforceable by PolarShield in
all respects, except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally;
(c) PolarShield is not a party to or bound by, and the properties of
PolarShield are not subject to any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any judgment,
order, writ, injunction, decree, or award which materially and adversely
affects, the business operations, properties, assets, or condition of
PolarShield; and
(d) Except as included or described in the PolarShield Schedules or
reflected in the most recent PolarShield balance sheet, PolarShield is not
a party to any oral or written (i) contract for the employment of any
officer or employee which is not terminable on 30 days, or less notice;
(ii) profit sharing, bonus, deferred compensation, stock option, severance
pay, pension benefit or retirement plan, (iii) agreement, contract, or
indenture relating to the borrowing of money, (iv) guaranty of any
obligation, other than one on which PolarShield is a primary obligor, for
the borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties of obligations which, in the aggregate do
not exceed more than one year or providing for payments in excess of
$25,000 in the aggregate; (vi) collective bargaining agreement; or (vii)
agreement with any present or former officer or director of PolarShield.
Section 1.11 Material Contract Defaults. PolarShield is not in default in
any material respect under the terms of any outstanding contract, agreement,
lease, or other commitment which is material to the business, operations,
properties, assets or condition of PolarShield and there is no event of default
in any material respect under any such contract, agreement, lease, or other
commitment in respect of which PolarShield has not taken adequate steps to
prevent such a default from occurring.
Section 1.12 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
an event of default under, or terminate, accelerate or modify the terms of any
material indenture, mortgage, deed of trust, or other material contract,
agreement, or instrument to which PolarShield is a party or to which any of its
properties or operations are subject.
Section 1.13 Governmental Authorizations. Except as set forth in the
PolarShield Schedules, PolarShield has all licenses, franchises, permits, and
other governmental authorizations that are legally required to enable it to
conduct its business in all material respects as conducted on the date hereof.
Except for compliance with federal and state securities and corporation laws, as
hereinafter provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental body
is required in connection with the execution and delivery by PolarShield of this
Agreement and the consummation by PolarShield of the transactions contemplated
hereby.
Section 1.14 Compliance With Laws and Regulations. Except as set forth in
the PolarShield Schedules, to the best of its knowledge PolarShield has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of PolarShield or except to the extent that noncompliance
would not result in the occurrence of any material liability for PolarShield.
Section 1.15 Insurance. All of the properties of PolarShield are fully
insured for their full replacement cost.
Section 1.16 Approval of Agreement. The board of directors of PolarShield
has authorized the execution and delivery of this Agreement by PolarShield and
has approved this Agreement and the transactions contemplated hereby, and will
recommend to the PolarShield Shareholders that the Exchange be accepted by them.
Section 1.17 Material Transactions or Affiliations. Set forth in the
PolarShield Schedules is a description of every contract, agreement, or
arrangement between PolarShield and any predecessor and any person who was at
the time of such contract, agreement, or arrangement an officer, director, or
person owning of record, or known by PolarShield to own beneficially, 5% or more
of the issued and outstanding common stock of PolarShield and which is to be
performed in whole or in part after the date hereof or which was entered into
not more than three years prior to the date hereof. Except as disclosed in the
PolarShield Schedules or otherwise disclosed herein, no officer, director, or 5%
shareholder of PolarShield has, or has had since inception of PolarShield, any
known interest, direct or indirect, in any transaction with PolarShield which
was material to the business of PolarShield. There are no commitments by
PolarShield, whether written or oral, to lend any funds, or to borrow any money
from, or enter into any other transaction with, any such affiliated person.
Section 1.18 Labor Relations. PolarShield has not had work stoppage
resulting from labor problems. To the knowledge of PolarShield, no union or
other collective bargaining organization is organizing or attempting to organize
any employee of PolarShield.
Section 1.19 PolarShield Schedules. PolarShield has delivered to Xaibe the
following schedules, which are collectively referred to as the "PolarShield
Schedules" and which consist of separate schedules dated as of the date of
execution of this Agreement, all certified by the chief executive officer of
PolarShield as complete, true, and correct as of the date of this Agreement in
all material respects:
(a) a schedule containing complete and correct copies of the articles
of incorporation, and bylaws of PolarShield in effect as of the date of
this Agreement;
(b) a schedule containing the financial statements of PolarShield
identified in paragraph 1.04(a);
(c) a Schedule 1.19(c) containing a list indicating the name and
address of each shareholder of PolarShield together with the number of
shares owned by him, her or it;
(d) a schedule containing a description of all real property owned by
PolarShield, together with a description of every mortgage, deed of trust,
pledge, lien, agreement, encumbrance, claim, or equity interest of any
nature whatsoever in such real property;
(e) copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which
PolarShield carries on or proposes to carry on its business (except those
which, in the aggregate, are immaterial to the present or proposed business
of PolarShield);
(f) a schedule listing the accounts receivable and notes and other
obligations receivable of PolarShield as of June 30, 2000, or thereafter
other than in the ordinary course of business of PolarShield, indicating
the debtor and amount, and classifying the accounts to show in reasonable
detail the length of time, if any, overdue, and stating the nature and
amount of any refunds, set offs, reimbursements, discounts, or other
adjustments, which are in the aggregate material and due to or claimed by
such debtor;
(g) a schedule listing the accounts payable and notes and other
obligations payable of PolarShield as of June 30, 2000, or that arose
thereafter other than in the ordinary course of the business of
PolarShield, indicating the creditor and amount, classifying the accounts
to show in reasonable detail the length of time, if any, overdue, and
stating the nature and amount of any refunds, set offs, reimbursements,
discounts, or other adjustments, which in the aggregate are material and
due to or claimed by PolarShield respecting such obligations;
(h) a schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or
condition of PolarShield since June 30, 2000, required to be provided
pursuant to section 1.07 hereof; and
(i) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the PolarShield
Schedules by Sections 1.01 through 1.18.
PolarShield shall cause the PolarShield Schedules and the instruments and
data delivered to Xaibe hereunder to be promptly updated after the date hereof
up to and including the Closing Date.
It is understood and agreed that not all of the schedules referred to above
have been completed or are available to be furnished by PolarShield. PolarShield
shall have until October 16, 2000 to provide such schedules. If PolarShield
cannot or fails to do so, or if Xaibe acting reasonably finds any such schedules
or updates provided after the date hereof to be unacceptable according to the
criteria set forth below, Xaibe may terminate this Agreement by giving written
notice to PolarShield within five (5) days after the schedules or updates were
due to be produced or were provided. For purposes of the foregoing, Xaibe may
consider a disclosure in the PolarShield Schedules to be "unacceptable" only if
that item would have a material adverse impact on the financial statements
listed in Section 1.04(a), taken as a whole.
Section 1.20 Valid Obligation. This Agreement and all agreements and other
documents executed by PolarShield in connection herewith constitute the valid
and binding obligation of PolarShield, enforceable in accordance with its or
their terms, except as may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF XAIBE
As an inducement to, and to obtain the reliance of PolarShield and the
PolarShield Shareholders, except as set forth in the Xaibe Schedules (as
hereinafter defined), Xaibe represents and warrants as follows:
Section 2.01 Organization. Xaibe is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada and has the
corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets, to carry on its business in
all material respects as it is now being conducted, and except where failure to
be so qualified would not have a material adverse effect on its business, there
is no jurisdiction in which it is not qualified in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification. Included in the Xaibe Schedules are complete and
correct copies of the certificate of incorporation and bylaws of Xaibe as in
effect on the date hereof. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
violate any provision of Xaibe's certificate of incorporation or bylaws. Xaibe
has taken all action required by law, its certificate of incorporation, its
bylaws, or otherwise to authorize the execution and delivery of this Agreement,
and Xaibe has full power, authority, and legal right and has taken all action
required by law, its certificate of incorporation, bylaws, or otherwise to
consummate the transactions herein contemplated.
Section 2.02 Capitalization. Xaibe's authorized capitalization consists of
40,000,000 shares of common stock, par value $0.001 of which 6,400,000 shares
are issued and outstanding (the "Original Xaibe Shares"). Following consummation
of the transactions contemplated hereby, including the issuance of shares
pursuant to the Exchange, Xaibe will have no more than 12,076,385 shares of
common stock outstanding, including shares issuable pursuant to the exercise of
outstanding warrants and options, but excluding shares issuable upon conversion
of the Preferred Stock. All issued and outstanding shares are legally issued,
fully paid, and non-assessable and not issued in violation of the preemptive or
other rights of any person.
Section 2.03 Subsidiaries and Predecessor Corporations. Xaibe does not have
any predecessor corporation(s) or subsidiaries, and does not own, beneficially
or of record, any shares of any other corporation, except as disclosed in
Schedule 2.03. For purposes hereinafter, the term "Xaibe" also includes those
subsidiaries, if any, set forth on Schedule 2.03.
Section 2.04 Securities Filings; Financial Statements.
(a) Xaibe filed a Registration Statement on Form 10-SB which became
effective on December 13, 1999 (the "SEC Effective Date"). Since the SEC
Effective Date, Xaibe has filed on a timely basis all reports (the "SEC
Reoprts") required to be filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange of 1934 (the "Exchange Act"),
and has heretofore delivered to PolarShield, in the form filed with the
Commission, (i) all quarterly and annual reports on Forms 10-QSB and 10-KSB
filed since the SEC Effective Date, (iii) all other reports filed by Xaibe
with the SEC since SEC Effective Date and (iv) all comment letters from the
SEC with respect to the SEC Reports. The SEC Reports (i) were prepared in
accordance with the requirements of the Exchange Act or the Securities Act
of 1933 (the "Securities Act"), as appropriate, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Included in the Xaibe Schedules are (i) the unaudited balance
sheets of Xaibe and the related statements of operations and cash flows as
of and for the three months and six months ended March 31, 2000 and (ii)
the audited balance sheet of Xaibe as of October 31, 1999, and the related
audited statement of operations, stockholders' equity and cash flows for
the period from July 17, 1998 (inception) to October 31, 1999, together
with the notes to such statements and the opinion of Xxxxx Loss,
independent certified public accountants, with respect thereto, all as set
forth in the SEC Reports.
(c) All such financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved. The Xaibe balance sheets present fairly as
of their respective dates the financial condition of Xaibe. As of the date
of such balance sheets, except as and to the extent reflected or reserved
against therein, Xaibe had no liabilities or obligations (absolute or
contingent) which should be reflected in the balance sheets or the notes
thereto prepared in accordance with GAAP, and all assets reflected therein
are properly reported and present fairly the value of the assets of Xaibe,
in accordance with generally accepted accounting principles. The statements
of operations, stockholders' equity and cash flows reflect fairly the
information required to be set forth therein by GAAP.
(d) Xaibe has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties), except for taxes accrued but not yet due and
payable.
(e) Xaibe has timely filed all state, federal or local income and/or
franchise tax returns required to be filed by it from inception to the date
hereof. Each of such income tax returns reflects the taxes due for the
period covered thereby, except for amounts which, in the aggregate, are
immaterial.
(f) The books and records, financial and otherwise, of Xaibe are in
all material aspects complete and correct and have been maintained in
accordance with good business and accounting practices.
(g) All of Xaibe's assets are reflected on its financial statements,
and, except as set forth in the Xaibe Schedules or the financial statements
of Xaibe or the notes thereto, Xaibe has no material liabilities, direct or
indirect, matured or unmatured, contingent or otherwise.
Section 2.05 Information. The information concerning Xaibe set forth in
this Agreement and the Xaibe Schedules is complete and accurate in all material
respects and does not contain any untrue statements of a material fact or omit
to state a material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading. In addition, Xaibe has
fully disclosed in writing to PolarShield (through this Agreement or the Xaibe
Schedules) all information relating to matters involving Xaibe or its assets or
its present or past operations or activities which (i) indicated or may
indicate, in the aggregate, the existence of a greater than $5,000 liability or
diminution in value, (ii) have led or may lead to a competitive disadvantage on
the part of Xaibe or (iii) either alone or in aggregation with other information
covered by this Section, otherwise have led or may lead to a material adverse
effect on the transactions contemplated herein or on Xaibe, its assets, or its
operations or activities as presently conducted or as contemplated to be
conducted after the Closing Date, including, but not limited to, information
relating to governmental, employee, environmental, litigation and securities
matters and transactions with affiliates.
Section 2.06 Options or Warrants. There are no existing options, warrants,
calls, or commitments of any character relating to the authorized and unissued
stock of Xaibe, except options, warrants, calls or commitments, if any, to which
Xaibe is not a party and by which it is not bound.
Section 2.07 Absence of Certain Changes or Events. Except as set forth
herein or permitted in writing by PolarShield, since the date of the most recent
Xaibe balance sheet:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets or condition of Xaibe or (ii) any
damage, destruction or loss to Xaibe (whether or not covered by insurance)
materially and adversely affecting the business, operations, properties,
assets or condition of Xaibe;
(b) Xaibe has not (i) amended its certificate of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make any payment of
dividends or distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed, or agreed to purchase or redeem, any
of its capital stock; (iii) waived any rights of value which in the
aggregate are outside of the ordinary course of business or material
considering the business of Xaibe; (iv) made any material change in its
method of management, operation, or accounting; (v) entered into any
transactions or agreements other than in the ordinary course of business;
(vi) made any accrual or arrangement for or payment of bonuses or special
compensation of any kind or any severance or termination pay to any present
or former officer or employee; (vii) increased the rate of compensation
payable or to become payable by it to any of its officers or directors or
any of its salaried employees whose monthly compensation exceed $1,000; or
(viii) made any increase in any profit sharing, bonus, deferred
compensation, insurance, pension, retirement, or other employee benefit
plan, payment, or arrangement, made to, for or with its officers,
directors, or employees;
(c) Xaibe has not (i) granted or agreed to grant any options,
warrants, or other rights for its stock, bonds, or other corporate
securities calling for the issuance thereof; (ii) borrowed or agreed to
borrow any funds or incurred, or become subject to, any material obligation
or liability (absolute or contingent) except liabilities incurred in the
ordinary course of business; (iii) paid or agreed to pay any material
obligations or liabilities (absolute or contingent) other than current
liabilities reflected in or shown on the most recent Xaibe balance sheet
and current liabilities incurred since that date in the ordinary course of
business and professional and other fees and expenses in connection with
the preparation of this Agreement and the consummation of the transaction
contemplated hereby; (iv) sold or transferred, or agreed to sell or
transfer, any of its assets, properties, or rights (except assets,
properties, or rights not used or useful in its business which, in the
aggregate have a value of less than $1000), or canceled, or agreed to
cancel, any debts or claims (except debts or claims which in the aggregate
are of a value less than $1000); (v) made or permitted any amendment or
termination of any contract, agreement, or license to which it is a party
if such amendment or termination is material, considering the business of
Xaibe; or (vi) issued, delivered or agreed to issue or deliver, any stock,
bonds, or other corporate securities including debentures (whether
authorized and unissued or held as treasury stock), except in connection
with this Agreement; and
(d) to the best knowledge of Xaibe, it has not become subject to any
law or regulation which materially and adversely affects, or in the future,
may adversely affect, the business, operations, properties, assets or
condition of Xaibe.
Section 2.08 Title and Related Matters. Xaibe has good and marketable title
to all of its properties, inventory, interest in properties, and assets, real
and personal, which are reflected in the most recent Xaibe balance sheet or
acquired after that date (except properties, inventory, interest in properties,
and assets sold or otherwise disposed of since such date in the ordinary course
of business), free and clear of all liens, pledges, charges, or encumbrances
except (a) statutory liens or claims not yet delinquent; (b) such imperfections
of title and easements as do not and will not materially detract from or
interfere with the present or proposed use of the properties subject thereto or
affected thereby or otherwise materially impair present business operations on
such properties; and (c) as described in the Xaibe Schedules. Except as set
forth in the Xaibe Schedules, Xaibe owns, free and clear of any liens, claims,
encumbrances, royalty interests, or other restrictions or limitations of any
nature whatsoever, any and all products it is currently manufacturing, including
the underlying technology and data, and all procedures, techniques, marketing
plans, business plans, methods of management, or other information utilized in
connection with Xaibe's business. Except as set forth in the Xaibe Schedules, no
third party has any right to, and Xaibe has not received any notice of
infringement of or conflict with asserted rights of others with respect to any
product, technology, data, trade secrets, know-how, propriety techniques,
trademarks, service marks, trade names, or copyrights which, individually or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a materially adverse effect on the business, operations, financial
condition, income, or business prospects of Xaibe or any material portion of its
properties, assets, or rights.
Section 2.09 Litigation and Proceedings. There are no actions, suits,
proceedings or investigations pending or, to the knowledge Xaibe after
reasonable investigation, threatened by or against Xaibe or affecting Xaibe or
its properties, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind except as disclosed in Schedule 2.09. Xaibe has no knowledge of any default
on its part with respect to any judgement, order, writ, injunction, decree,
award, rule or regulation of any court, arbitrator, or governmental agency or
instrumentality or any circumstance which after reasonable investigation would
result in the discovery of such default.
Section 2.10 Contracts.
(a) Xaibe is not a party to, and its assets, products, technology and
properties are not bound by, any material contract, franchise, license
agreement, agreement, debt instrument or other commitments whether such
agreement is in writing or oral, except as disclosed in Schedule 2.10.
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which Xaibe is a party or by which its properties are
bound and which are material to the operations of Xaibe taken as a whole
are valid and enforceable by Xaibe in all respects, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally;
(c) Xaibe is not a party to or bound by, and the properties of Xaibe
are not subject to any contract, agreement, other commitment or instrument;
any charter or other corporate restriction; or any judgment, order, writ,
injunction, decree, or award which materially and adversely affects, the
business operations, properties, assets, or condition of Xaibe; and
(d) Except as included or described in the Xaibe Schedules or
reflected in the most recent Xaibe balance sheet, Xaibe is not a party to
any oral or written (i) contract for the employment of any officer or
employee which is not terminable on 30 days, or less notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance pay, pension
benefit or retirement plan, (iii) agreement, contract, or indenture
relating to the borrowing of money, (iv) guaranty of any obligation, other
than one on which Xaibe is a primary obligor, for the borrowing of money or
otherwise, excluding endorsements made for collection and other guaranties
of obligations which, in the aggregate do not exceed more than one year or
providing for payments in excess of $5,000 in the aggregate; (vi)
collective bargaining agreement; or (vii) agreement with any present or
former officer or director of Xaibe.
Section 2.11 Material Contract Defaults. Xaibe is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets or condition of Xaibe and there is no event of default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which Xaibe has not taken adequate steps to prevent such a default
from occurring.
Section 2.12 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
a default under, or terminate, accelerate or modify the terms of, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which
Xaibe is a party or to which any of its assets or operations are subject.
Section 2.13 Governmental Authorizations. Xaibe has all licenses,
franchises, permits, and other governmental authorizations, that are legally
required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with federal and
state securities or corporation laws, as hereinafter provided, no authorization,
approval, consent or order of, or registration, declaration or filing with, any
court or other governmental body is required in connection with the execution
and delivery by Xaibe of this Agreement and the consummation by Xaibe of the
transactions contemplated hereby.
Section 2.14 Compliance With Laws and Regulations. To the best of its
knowledge, Xaibe has complied with all applicable statutes and regulations of
any federal, state, or other applicable governmental entity or agency thereof,
except to the extent that noncompliance would not materially and adversely
affect the business, operations, properties, assets or condition of Xaibe or
except to the extent that noncompliance would not result in the occurrence of
any material liability. This compliance includes, but is not limited to, the
filing of all reports to date with federal and state securities authorities.
Section 2.15 Insurance. All of the properties of Xaibe are fully insured
for their full replacement cost.
Section 2.16 Approval of Agreement. The board of directors of Xaibe has
authorized the execution and delivery of this Agreement by Xaibe. No approval of
the shareholders of Xaibe is required to carry out the transactions contemplated
by this Agreement.
Section 2.17 Continuity of Business Enterprises. Xaibe has no commitment or
present intention to liquidate PolarShield or sell or otherwise dispose of a
material portion of PolarShield's business or assets following the consummation
of the transactions contemplated hereby.
Section 2.18 Material Transactions or Affiliations. Except as disclosed
herein and in the Xaibe Schedules, there exists no contract, agreement or
arrangement between Xaibe and any predecessor and any person who was at the time
of such contract, agreement or arrangement an officer, director, or person
owning of record or known by Xaibe to own beneficially, 5% or more of the issued
and outstanding common stock of Xaibe and which is to be performed in whole or
in part after the date hereof or was entered into not more than three years
prior to the date hereof. Neither any officer, director, nor 5% shareholder of
Xaibe has, or has had since inception of Xaibe, any known interest, direct or
indirect, in any such transaction with Xaibe which was material to the business
of Xaibe. Xaibe has no commitment, whether written or oral, to lend any funds
to, borrow any money from, or enter into any other transaction with, any such
affiliated person.
Section 2.19 Labor Relations. Xaibe has not had work stoppage resulting
from labor problems. To the knowledge of Xaibe, no union or other collective
bargaining organization is organizing or attempting to organize any employee of
Xaibe.
Section 2.20 Xaibe Schedules. Xaibe has delivered to PolarShield the
following schedules, which are collectively referred to as the "Xaibe Schedules"
and which consist of separate schedules, which are dated the date of this
Agreement, all certified by the chief executive officer of Xaibe to be complete,
true, and accurate in all material respects as of the date of this Agreement:
(a) a schedule containing complete and accurate copies of the
certificate of incorporation and bylaws of Xaibe as in effect as of the
date of this Agreement;
(b) a schedule containing the financial statements of Xaibe identified
in paragraph 2.04(b);
(c) a Schedule 2.20(c) containing a list indicating the name and
address of each shareholder of Xaibe together with the number of shares
owned by him, her or it;
(d) a schedule containing a description of all real property owned by
Xaibe, together with a description of every mortgage, deed of trust,
pledge, lien, agreement, encumbrance, claim, or equity interest of any
nature whatsoever in such real property;
(e) copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which
Xaibe carries on or proposes to carry on its business (except those which,
in the aggregate, are immaterial to the present or proposed business of
Xaibe);
(f) a schedule listing the accounts receivable and notes and other
obligations receivable of Xaibe as of June 30, 2000, or thereafter other
than in the ordinary course of business of Xaibe, indicating the debtor and
amount, and classifying the accounts to show in reasonable detail the
length of time, if any, overdue, and stating the nature and amount of any
refunds, set offs, reimbursements, discounts, or other adjustments which
are in the aggregate material and due to or claimed by such debtor;
(g) a schedule listing the accounts payable and notes and other
obligations payable of Xaibe as of June 30, 2000, or that arose thereafter
other than in the ordinary course of the business of Xaibe, indicating the
creditor and amount, classifying the accounts to show in reasonable detail
the length of time, if any, overdue, and stating the nature and amount of
any refunds, set offs, reimbursements, discounts, or other adjustments,
which in the aggregate are material and due to or claimed by Xaibe
respecting such obligations;
(h) a schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or
condition of Xaibe since June 30, 2000, required to be provided pursuant to
section 2.07 hereof; and
(i) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the Xaibe
Schedules by Sections 2.01 through 2.19.
Xaibe shall cause the Xaibe Schedules and the instruments and data
delivered to PolarShield hereunder to be promptly updated after the date hereof
up to and including the Closing Date.
It is understood and agreed that not all of the schedules referred to above
have been completed or are available to be furnished by Xaibe. Xaibe shall have
until October 16, 2000 to provide such schedules. If Xaibe cannot or fails to do
so, or if PolarShield acting reasonably finds any such schedules or updates
provided after the date hereof to be unacceptable according to the criteria set
forth below, PolarShield may terminate this Agreement by giving written notice
to Xaibe within five (5) days after the schedules or updates were due to be
produced or were provided. For purposes of the foregoing, PolarShield may
consider a disclosure in the Xaibe Schedules to be "unacceptable" only if that
item would have a material adverse impact on the financial statements listed in
Section 2.04(b), taken as a whole.
Section 2.21 Bank Accounts; Power of Attorney. Set forth in Schedule 2.21
is a true and complete list of (a) all accounts with banks, money market mutual
funds or securities or other financial institutions maintained by Xaibe within
the past twelve (12) months, the account numbers thereof, and all persons
authorized to sign or act on behalf of Xaibe, (b) all safe deposit boxes and
other similar custodial arrangements maintained by Xaibe within the past twelve
(12) months, and (c) the names of all persons holding powers of attorney from
Xaibe or who are otherwise authorized to act on behalf of Xaibe with respect to
any matter, other than its officers and directors, and a summary of the terms of
such powers or authorizations.
Section 2.22 Valid Obligation. This Agreement and all agreements and other
documents executed by Xaibe in connection herewith constitute the valid and
binding obligation of Xaibe, enforceable in accordance with its or their terms,
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and subject to the
qualification that the availability of equitable remedies is subject to the
discretion of the court before which any proceeding therefor may be brought.
ARTICLE III
PLAN OF EXCHANGE
Section 3.01 The Exchange. On the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3.03), each
PolarShield Common Shareholder who shall elect to accept the exchange offer
described herein (the "Accepting Common Shareholders"), shall assign, transfer
and deliver, free and clear of all liens, pledges, encumbrances, charges,
restrictions or known claims of any kind, nature, or description, the number of
shares of common stock of PolarShield set forth on Schedule 1.19(c) attached
hereto, in the aggregate constituting 100% of the issued and outstanding shares
of common stock of PolarShield held by each of such shareholders; the objective
of such Exchange being the acquisition by Xaibe of 100% of the issued and
outstanding common stock of PolarShield. In exchange for the transfer of such
securities by the PolarShield Shareholders, Xaibe shall issue to the PolarShield
Shareholders an aggregate of 5,676,385 shares of common stock of Xaibe (the
"Common Exchange Shares"). In the event the Exchange is consummated, as provided
in Section 5.05, but less than 100% of the common stock of PolarShield is
delivered to Xaibe, the number of Common Exchange Shares issuable by Xaibe to
the Accepting Common Shareholders as described above shall be reduced
proportionately. At the Closing, each Accepting Common Shareholder shall, on
surrender of his certificate or certificates representing such PolarShield
shares to Xaibe or its registrar or transfer agent, be entitled to receive a
certificate or certificates evidencing his proportionate interest in the Common
Exchange Shares. Upon consummation of the transaction contemplated herein,
assuming participation by all of the PolarShield Shareholders, all of the shares
of common stock of PolarShield shall be held by Xaibe.
Section 3.02 Anti-Dilution. The number of shares of Xaibe common stock
issuable upon exchange pursuant to Section 3.01 shall be appropriately adjusted
to take into account any other stock split, stock dividend, reverse stock split,
recapitalization, or similar change in the Xaibe common stock which may occur
between the date of the execution of this Agreement and the Closing Date.
Section 3.03 Closing. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date") but not later than October 31, 2000, subject
to the right of Xaibe or PolarShield to extend such Closing Date by up to an
additional sixty (60) days. Such Closing shall take place at a mutually
agreeable time and place.
Section 3.04 Closing Events. At the Closing, Xaibe, PolarShield and each of
the PolarShield Common Shareholders shall execute, acknowledge, and deliver (or
shall ensure to be executed, acknowledged, and delivered) any and all
certificates, opinions, financial statements, schedules, agreements,
resolutions, rulings or other instruments required by this Agreement to be so
delivered at or prior to the Closing, together with such other items as may be
reasonably requested by the parties hereto and their respective legal counsel in
order to effectuate or evidence the transactions contemplated hereby.
Section 3.05 Termination.
(a) This Agreement may be terminated by the board of directors of
either Xaibe or PolarShield at any time prior to the Closing Date if:
(i) there shall be any actual or threatened action or proceeding
before any court or any governmental body which shall seek to
restrain, prohibit, or invalidate the transactions contemplated by
this Agreement and which, in the judgement of such board of directors,
made in good faith and based upon the advice of its legal counsel,
makes it inadvisable to proceed with the Exchange; or
(ii) any of the transactions contemplated hereby are disapproved
by any regulatory authority whose approval is required to consummate
such transactions (which does not include the SEC) or in the judgement
of such board of directors, made in good faith and based on the advice
of counsel, there is substantial likelihood that any such approval
will not be obtained or will be obtained only on a condition or
conditions which would be unduly burdensome, making it inadvisable to
proceed with the Exchange.
In the event of termination pursuant to this paragraph (a) of Section 3.05,
no obligation, right or liability shall arise hereunder, and each party
shall bear all of the expenses incurred by it in connection with the
negotiation, drafting, and execution of this Agreement and the transactions
herein contemplated.
(b) This Agreement may be terminated by the board of directors of
Xaibe at any time prior to the Closing Date if:
(i) there shall have been any change after the date of the latest
balance sheet of PolarShield in the assets, properties, business, or
financial condition of PolarShield, which could have a materially
adverse effect on the financial statements of PolarShield listed in
Section 1.04(a) taken as a whole, except any changes disclosed in the
PolarShield Schedules;
(ii) the board of directors of Xaibe determines in good faith
that one or more of Xaibe's conditions to Closing has not occurred,
through no fault of Xaibe.
(iii) Xaibe takes the termination action specified in Section
1.18 as a result of PolarShield Schedules or updates thereto which
Xaibe finds unacceptable;
(iv) on or before October 31, 0000, Xxxxx notifies PolarShield
that Xaibe's investigation pursuant to Section 4.01 below has
uncovered information which it finds unacceptable by the same criteria
set forth in Section 1.19; or
(v) PolarShield shall fail to comply in any material respect with
any of its covenants or agreements contained in this Agreement or if
any of the representations or warranties of PolarShield contained
herein shall be inaccurate in any material respect, where such
noncompliance or inaccuracy has not been cured within ten (10) days
after written notice thereof.
If this Agreement is terminated pursuant to this paragraph (b) of Section
3.05, this Agreement shall be of no further force or effect, and no
obligation, right or liability shall arise hereunder, except that
PolarShield shall bear its own costs as well as the reasonable costs of
Xaibe in connection with the negotiation, preparation, and execution of
this Agreement and qualifying the offer and sale of securities to be issued
in the Exchange under the registration requirements, or exemption from the
registration requirements, of state and federal securities laws.
(c) This Agreement may be terminated by the board of directors of
PolarShield at any time prior to the Closing Date if:
(i) there shall have been any change after the date of the latest
balance sheet of Xaibe in the assets, properties, business or
financial condition of Xaibe, which could have a material adverse
effect on the financial statements of Xaibe listed in Section 2.04(b)
taken as a whole, except any changes disclosed in the Xaibe Schedules;
(ii) the board of directors of PolarShield determines in good
faith that one or more of PolarShield's conditions to Closing has not
occurred, through no fault of PolarShield;
(iii) PolarShield takes the termination action specified in
Section 2.20 as a result of Xaibe Schedules or updates thereto which
PolarShield finds unacceptable;
(iv) on or before October 31, 2000, PolarShield notifies Xaibe
that PolarShield's investigation pursuant to Section 4.01 below has
uncovered information which it finds unacceptable by the same criteria
set forth in Section 2.20; or
(v) Xaibe shall fail to comply in any material respect with any
of its covenants or agreements contained in this Agreement or if any
of the representations or warranties of Xaibe contained herein shall
be inaccurate in any material respect, where such noncompliance or
inaccuracy has not been cured within ten (10) days after written
notice thereof.
If this Agreement is terminated pursuant to this paragraph (c) of Section
3.05, this Agreement shall be of no further force or effect, and no
obligation, right or liability shall arise hereunder, except that Xaibe
shall bear its own costs as well as the reasonable costs of PolarShield and
its principal shareholders incurred in connection with the negotiation,
preparation and execution of this Agreement.
ARTICLE IV
SPECIAL COVENANTS
Section 4.01 Access to Properties and Records. Xaibe and PolarShield will
each afford to the officers and authorized representatives of the other full
access to the properties, books and records of Xaibe or PolarShield, as the case
may be, in order that each may have a full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other, and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of Xaibe or PolarShield, as
the case may be, as the other shall from time to time reasonably request.
Without limiting the foregoing, as soon as practicable after the end of each
fiscal quarter (and in any event through the last fiscal quarter prior to the
Closing Date), each party shall provide the other with quarterly internally
prepared and unaudited financial statements.
Section 4.02 Delivery of Books and Records. At the Closing, PolarShield
shall deliver to Xaibe the originals of the corporate minute books, books of
account, contracts, records, and all other books or documents of PolarShield now
in the possession of PolarShield or its representatives.
Section 4.03 Third Party Consents and Certificates. Xaibe and PolarShield
agree to cooperate with each other in order to obtain any required third party
consents to this Agreement and the transactions herein contemplated.
Section 4.04 Preferred Stock Conversion. Xaibe shall assume, honor and
carry out the obligations of PolarShield relating to the issuance of shares of
Common Stock upon conversion of the outstanding Preferred Stock of PolarShield
on the terms described in Schedule 1.02(b) attached hereto.
Section 4.05 Designation of Directors and Officers. On or before the
Closing Date, Xaibe shall secure the resignations of all current officers and
directors of Xaibe and shall appoint such officers and directors as PolarShield
shall designate.
Section 4.06 Exclusive Dealing Rights. Until 5:00 P.M. Houston Time on
October 31, 2000:
(a) In recognition of the substantial time and effort which Xaibe has
spent and will continue to spend in investigating PolarShield and its
business and in addressing the matters related to the transactions
contemplated herein, each of which may preempt or delay other management
activities, neither PolarShield, nor any of its officers, employees,
representatives or agents will directly or indirectly solicit or initiate
any discussions or negotiations with, or, except where required by
fiduciary obligations under applicable law as advised by counsel,
participate in any negotiations with or provide any information to or
otherwise cooperate in any other way with, or facilitate or encourage any
effort or attempt by, any corporation, partnership, person or other entity
or group (other than Xaibe and its directors, officers, employees,
representatives and agents) concerning any merger, sale of substantial
assets, sale of shares of capital stock, (including without limitation, any
public or private offering of the common stock of PolarShield) or similar
transactions involving PolarShield (all such transactions being referred to
as "PolarShield Acquisition Transactions"). If PolarShield receives any
proposal with respect to a PolarShield Acquisition Transaction, it will
immediately communicate to Xaibe the fact that it has received such
proposal and the principal terms thereof.
(b) In recognition of the substantial time and effort which
PolarShield has spent and will continue to spend in investigating Xaibe and
its business and in addressing the matters related to the transactions
contemplated herein, each of which may preempt or delay other management
activities, neither Xaibe, nor any of its officers, employees,
representatives or agents will directly or indirectly solicit or initiate
any discussions or negotiations with, or, except where required by
fiduciary obligations under applicable law as advised by counsel,
participate in any negotiations with or provide any information to or
otherwise cooperate in any other way with, or facilitate or encourage any
effort or attempt by, any corporation, partnership, person or other entity
or group (other than PolarShield and its directors, officers, employees,
representatives and agents) concerning any merger, sale of substantial
assets, sale of shares of capital stock, (including without limitation, any
public or private offering of the common stock of Xaibe) or similar
transactions involving Xaibe (all such transactions being referred to as
"Xaibe Acquisition Transactions"). If Xaibe receives any proposal with
respect to a Xaibe Acquisition Transaction, it will immediately communicate
to PolarShield the fact that it has received such proposal and the
principal terms thereof.
Section 4.07 Actions Prior to Closing.
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the Xaibe Schedules or PolarShield Schedules or
as permitted or contemplated by this Agreement, Xaibe (subject to paragraph
(d) below) and PolarShield respectively, will each:
(i) carry on its business in substantially the same manner as it
has heretofore;
(ii) maintain and keep its properties in states of good repair
and condition as at present, except for depreciation due to ordinary
wear and tear and damage due to casualty;
(iii) maintain in full force and effect insurance comparable in
amount and in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligations
under material contracts, leases, and instruments relating to or
affecting its assets, properties, and business;
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws and
all rules, regulations, and orders imposed by federal or state
governmental authorities.
(b) From and after the date of this Agreement until the Closing Date
and except as permitted or contemplated by this Agreement, neither Xaibe
nor PolarShield will:
(i) make any changes in their articles or certificate of
incorporation or bylaws;
(ii) take any action described in Section 1.07 in the case of
PolarShield, or in Section 2.07, in the case of Xaibe (all except as
permitted therein or as disclosed in the applicable party's
schedules);
(iii) enter into or amend any contract, agreement, or other
instrument of any of the types described in such party's schedules,
except that a party may enter into or amend any contract, agreement,
or other instrument in the ordinary course of business involving the
sale of goods or services; or
(iv) sell any assets or discontinue any operations, sell any
shares of capital stock (other than as contemplated herein) or conduct
any similar transactions other than in the ordinary course of
business.
(c) Any other provision of this Agreement notwithstanding, on or prior
to the Closing Date, PolarShield shall be permitted, in its sole
discretion, to (i) enter into leases and other agreements in the ordinary
course of business and (ii) change its banking affiliation, including any
bank with which it has established a line of credit.
(d) In light of the fact that PolarShield's shareholders will control
Xaibe as a result of the Exchange, from and after the date of this
Agreement until the Closing Date, Xaibe shall take no action which is
material to its business without the prior written approval of PolarShield,
which PolarShield may give or withhold in its sole discretion after
consultation with Xaibe.
Section 4.08 Sales Under Rule 144 or 145,If Applicable.
(a) Xaibe will use its best efforts to at all times comply with the
reporting requirements of the Exchange Act, including timely filing of all
periodic reports required under the provisions of the Exchange Act and the
rules and regulations promulgated thereunder.
(b) Upon being informed in writing by any such person holding
restricted stock of Xaibe that such person intends to sell any shares under
Rule 144, Rule 145 or Regulation S promulgated under the Securities Act
(including any rule adopted in substitution or replacement thereof), Xaibe
will certify in writing to such person that it has filed all of the reports
required to be filed by it under the Exchange Act to enable such person to
sell such person's restricted stock under Rule 144, 145 or Regulation S, as
may be applicable in the circumstances, or will inform such person in
writing that it has not filed any such report or reports.
(c) If any certificate representing any such restricted stock is
presented to Xaibe's transfer agent for registration of transfer in
connection with any sale theretofore made under Rule 144, 145 or Regulation
S, provided such certificate is duly endorsed for transfer by the
appropriate person(s) or accompanied by a separate stock power duly
executed by the appropriate person(s) in each case with reasonable
assurances that such endorsements are genuine and effective, and is
accompanied by an opinion of counsel satisfactory to Xaibe and its counsel
that the stock transfer has complied with the requirements of Rule 144, 145
or Regulation S, as the case may be, Xaibe will promptly instruct its
transfer agent to register such shares and to issue one or more new
certificates representing such shares to the transferee and, if appropriate
under the provisions of Rule 144, 145 or Regulation S, as the case may be,
free of any stop transfer order or restrictive legend. The provisions of
this Section 4.08 shall survive the Closing and the consummation of the
transactions contemplated by this Agreement.
Section 4.09 Indemnification.
(a) PolarShield hereby agrees to indemnify Xaibe and each of the
officers, agents and directors of Xaibe as of the date of execution of this
Agreement against any loss, liability, claim, damage, or expense
(including, but not limited to, any and all expense whatsoever reasonably
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever), to which it or they may
become subject arising out of or based on any inaccuracy appearing in or
misrepresentations made under Article I of this Agreement. The
indemnification provided for in this paragraph shall survive the Closing
and consummation of the transactions contemplated hereby and termination of
this Agreement.
(b) Xaibe hereby agrees to indemnify PolarShield and each of the
officers, agents, and directors of PolarShield and each of the PolarShield
Shareholders as of the date of execution of this Agreement against any
loss, liability, claim, damage, or expense (including, but not limited to,
any and all expense whatsoever reasonably incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or
any claim whatsoever), to which it or they may become subject arising out
of or based on any inaccuracy appearing in or misrepresentation made under
Article II of this Agreement. The indemnification provided for in this
paragraph shall survive the Closing and consummation of the transactions
contemplated hereby and termination of this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF XAIBE
The obligations of Xaibe under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.01 Accuracy of Representations and Performance of Covenants. The
representations and warranties made by PolarShield in this Agreement were true
when made and shall be true at the Closing Date with the same force and effect
as if such representations and warranties were made at and as of the Closing
Date (except for changes therein permitted by this Agreement). PolarShield shall
have performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by PolarShield prior to or at the
Closing. Xaibe shall be furnished with a certificate, signed by a duly
authorized executive officer of PolarShield and dated the Closing Date, to the
foregoing effect.
Section 5.02 Officer's Certificate. Xaibe shall have been furnished with a
certificate dated the Closing Date and signed by a duly authorized officer of
PolarShield to the effect that no litigation, proceeding, investigation, or
inquiry is pending, or to the best knowledge of PolarShield threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement, or, to the extent not disclosed in
the PolarShield Schedules, by or against PolarShield, which might result in any
material adverse change in any of the assets, properties, business, or
operations of PolarShield.
Section 5.03 No Material Adverse Change. Prior to the Closing Date, there
shall not have occurred any change in the financial condition, business, or
operations of PolarShield nor shall any event have occurred which, with the
lapse of time or the giving of notice, is determined to be unacceptable using
the criteria set forth in Section 1.19.
Section 5.04 Good Standing. Xaibe shall have received a certificate of good
standing from the State of Nevada, dated as of a date within ten days prior to
the Closing Date certifying that PolarShield is in good standing as a
corporation in the State of Nevada.
Section 5.05 Approval by PolarShield Shareholders. The Exchange shall have
been approved, and shares delivered in accordance with Section 3.01, by the
holders of not less than eighty percent (80%) of the outstanding common stock of
PolarShield, unless a lesser number is agreed to by Xaibe, all of which
shareholders shall have certified that they meet the definition of "accredited
investors" under the Securities Act.
Section 5.06 No Governmental Prohibition. No order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 5.07 Consents. All consents, approvals, waivers or amendments
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of Xaibe and PolarShield after the Closing Date on the basis as
presently operated shall have been obtained.
Section 5.08 Other Items.
(a) Xaibe shall have received a list of PolarShield's shareholders
containing the name, address, and number of shares held by each PolarShield
shareholder as of the date of Closing, certified by an executive officer of
PolarShield as being true, complete and accurate; and
(b) Xaibe shall have received such further opinions, documents,
certificates or instruments relating to the transactions contemplated
hereby as Xaibe may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF POLARSHIELD
AND THE POLARSHIELD SHAREHOLDERS
The obligations of PolarShield and the PolarShield Shareholders under this
Agreement are subject to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 6.01 Accuracy of Representations and Performance of Covenants. The
representations and warranties made by Xaibe in this Agreement were true when
made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Additionally, Xaibe shall have performed and complied with all covenants and
conditions required by this Agreement to be performed or complied with by Xaibe
and shall have satisfied the conditions described below prior to or at the
Closing:
(a) Immediately prior to the Closing, Xaibe shall have no more than an
aggregate of 6,400,000 shares of common stock issued and outstanding or
issuable pursuant to outstanding warrants and options.
(b) All required applications and filings with governmental and
regulatory agencies shall have been made and all necessary governmental and
regulatory approvals shall have been obtained.
PolarShield shall have been furnished with certificates, signed by duly
authorized executive officers of Xaibe and dated the Closing Date, to the
foregoing effect.
Section 6.02 Officer's Certificate. PolarShield shall have been furnished
with certificates dated the Closing Date and signed by duly authorized executive
officers of Xaibe, to the effect that no litigation, proceeding, investigation
or inquiry is pending, or to the best knowledge of Xaibe threatened, which might
result in an action to enjoin or prevent the consummation of the transactions
contemplated by this Agreement or, to the extent not disclosed in the Xaibe
Schedules, by or against Xaibe, which might result in any material adverse
change in any of the assets, properties or operations of Xaibe.
Section 6.03 No Material Adverse Change. Prior to the Closing Date, there
shall not have occurred any change in the financial condition, business or
operations of Xaibe nor shall any event have occurred which, with the lapse of
time or the giving of notice, is determined to be unacceptable using the
criteria set forth in Section 2.20.
Section 6.04 Good Standing. PolarShield shall have received a certificate
of good standing from the Secretary of State of the State of Colorado or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that Xaibe is in good standing as a corporation in the State of
Colorado and has filed all tax returns required to have been filed by it to date
and has paid all taxes reported as due thereon.
Section 6.05 No Governmental Prohibition. No order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 6.06 Consents. All consents, approvals, waivers or amendments
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of Xaibe and PolarShield after the Closing Date on the basis as
presently operated shall have been obtained.
Section 6.07 Other Items. PolarShield shall have received further opinions,
documents, certificates, or instruments relating to the transactions
contemplated hereby as PolarShield may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Brokers. Xaibe and PolarShield agree that, except as set out
on Schedule 7.01 attached hereto, there were no finders or brokers involved in
bringing the parties together or who were instrumental in the negotiation,
execution or consummation of this Agreement. Xaibe and PolarShield each agree to
indemnify the other against any claim by any third person other than those
described above for any commission, brokerage, or finder's fee arising from the
transactions contemplated hereby based on any alleged agreement or understanding
between the indemnifying party and such third person, whether express or implied
from the actions of the indemnifying party.
Section 7.02 Governing Law. This Agreement shall be governed by, enforced,
and construed under and in accordance with the laws of the United States of
America and, with respect to the matters of state law, with the laws of the
State of Texas, without giving effect to principles of conflicts of law
thereunder. Each of the parties (a) irrevocably consents and agrees that any
legal or equitable action or proceedings arising under or in connection with
this Agreement shall be brought exclusively in the federal courts of the United
States, and (b) by execution and delivery of this Agreement, irrevocably submits
to and accepts, with respect to any such action or proceeding, generally and
unconditionally, the jurisdiction of the United States District Court in
Houston, Texas, and irrevocably waives any and all rights such party may now or
hereafter have to object to such jurisdiction.
Section 7.03 Notices. Any notice or other communications required or
permitted hereunder shall be in writing and shall be sufficiently given if
personally delivered to it or sent by telecopy, overnight courier or registered
mail or certified mail, postage prepaid, addressed as follows:
If to Xaibe, to: Xaibe, Inc.
c/o Sandringham Investments Limited
000 Xxxxx Xxxxx Xxxxx
Xxxx Xxxxxx Xxxxxx, XX X0X 0X0 Xxxxxx
Attn: Xxx Xxxxxxx
If to PolarShield, to: PolarShield, Inc.
00000 X.X. Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxx
With copies to: Vanderkam & Xxxxxxx
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx Xxxxxxx, Esq.
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given (i) upon receipt, if personally delivered, (ii) on
the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if
transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3)
days after mailing, if sent by registered or certified mail.
Section 7.04 Attorney's Fees. In the event that either party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the prevailing party shall be reimbursed by the
losing party for all costs, including reasonable attorney's fees, incurred in
connection therewith and in enforcing or collecting any judgement rendered
therein.
Section 7.05 Confidentiality. Each party hereto agrees with the other that,
unless and until the transactions contemplated by this Agreement have been
consummated, it and its representatives will hold in strict confidence all data
and information obtained with respect to another party or any subsidiary thereof
from any representative, officer, director or employee, or from any books or
records or from personal inspection, of such other party, and shall not use such
data or information or disclose the same to others, except (i) to the extent
such data or information is published, is a matter of public knowledge, or is
required by law to be published; or (ii) to the extent that such data or
information must be used or disclosed in order to consummate the transactions
contemplated by this Agreement. In the event of the termination of this
Agreement, each party shall return to the other party all documents and other
materials obtained by it or on its behalf and shall destroy all copies, digests,
work papers, abstracts or other materials relating thereto, and each party will
continue to comply with the confidentiality provisions set forth herein.
Section 7.06 Public Announcements and Filings. Unless required by
applicable law or regulatory authority, none of the parties will issue any
report, statement or press release to the general public, to the trade, to the
general trade or trade press, or to any third party (other than its advisors and
representatives in connection with the transactions contemplated hereby) or file
any document, relating to this Agreement and the transactions contemplated
hereby, except as may be mutually agreed by the parties. Copies of any such
filings, public announcements or disclosures, including any announcements or
disclosures mandated by law or regulatory authorities, shall be delivered to
each party at least one (1) business day prior to the release thereof.
Section 7.07 Schedules; Knowledge. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 7.08 Third Party Beneficiaries. This contract is strictly between
Xaibe and PolarShield, and, except as specifically provided, no director,
officer, stockholder (other than the PolarShield Shareholders), employee, agent,
independent contractor or any other person or entity shall be deemed to be a
third party beneficiary of this Agreement.
Section 7.09 Expenses. Subject to Sections 3.05 and 7.04 above, whether or
not the Exchange is consummated, each of Xaibe and PolarShield will bear their
own respective expenses, including legal, accounting and professional fees,
incurred in connection with the Exchange or any of the other transactions
contemplated hereby.
Section 7.10 Entire Agreement. This Agreement represents the entire
agreement between the parties relating to the subject matter thereof and
supersedes all prior agreements, understandings and negotiations, written or
oral, with respect to such subject matter.
Section 7.11 Survival; Termination. The representations, warranties, and
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for a period of two years.
Section 7.12 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 7.13 Amendment or Waiver. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may by amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance may be extended by a writing
signed by the party or parties for whose benefit the provision is intended.
Section 7.14 Best Efforts. Subject to the terms and conditions herein
provided, each party shall use its best efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by it under this
Agreement so that the transactions contemplated hereby shall be consummated as
soon as practicable. Each party also agrees that it shall use its best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective this Agreement and the transactions contemplated
herein.
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement
to be executed by their respective officers, hereunto duly authorized, as of the
date first-above written.
ATTEST: XAIBE, INC.
BY:
--------------------------------- -------------------------------------
Secretary or Assistant Secretary President
ATTEST: POLARSHIELD, INC.
BY:
--------------------------------- -------------------------------------
Secretary or Assistant Secretary President
Schedule 1.02(b)
Preferred Stock Conversion Rights
Within forty-five (45) days following the later of (i) closing of an
initial public offering by PolarShield or the acquisition of PolarShield for
stock by a public company, or (ii) the first published quote with respect to the
common stock of Xaibe (the "First Quote"), each holder of Preferred Stock will
have the right to elect:
(a) to convert each share of Preferred Stock into 1.15 shares of
Common Stock of Xaibe, which shares of Common Stock will be subject to a
"lock-up" for a period of eighteen (18) months following conversion;
(b) to convert each share of Preferred Stock, with a designated value
of $1.15 per share, into a number of shares of Xaibe Common Stock at a
conversion price equal to fifty percent (50%) of the closing bid price of
the Xaibe Common Stock on the thirtieth (30th) calendar day (or the next
trading day if the 30th calendar day is a Saturday, Sunday, holiday or
other day on which U.S. markets are not open) following the First Quote,
which shares of Common Stock will be subject to a "lock-up" for a period of
twelve (12) months following conversion [Example, if a holder owns 10,000
shares of Preferred Stock, with a designated value of $10,000, and the
Xaibe Common Stock is trading at $1.00 per share on the 30th day following
the First Quote, the Preferred Stock will be convertible, at $0.50 per
share, into 20,000 shares of Xaibe Common Stock]; or
(c) to demand redemption of each share of Preferred Stock at a price
equal to $1.15 per share.
In the event that a holder of shares of Preferred Stock fails to provide an
election to PolarShield by the forty-fifth (45th) following the First Quote, all
shares of Preferred Stock held by that holder will be convertible in accordance
with paragraph (b) above.
