SHARE EXCHANGE AGREEMENT
Agreement dated as of November 13, 2001, between
Xxxxxxxxxxxxxx.Xxx, Inc., a corporation organized under the laws
of the State of Texas, ("SHOK"), and GulfTex Energy Corporation,
a corporation organized under the laws of the State of Texas
("GULF").
The parties agree as follows:
1. The Transaction
1.1. Tender and Exchange. Subject to the terms and conditions of
this Agreement, at the Closing to be held as provided in Section
2.1, SHOK shall tender 1 share of common stock of SHOK (the "SHOK
Shares") to GULF, and GULF shall receive the SHOK Shares from
SHOK, free and clear of all encumbrances other than restrictions
imposed by Federal and State securities laws. In exchange, GULF
shall tender to SHOK and SHOK shall receive from GULF 100% of the
outstanding common stock of GULF.
2. The Closing.
2.1. Place and Time. The closing of the instant transaction (the
"Closing") shall take place at the offices of Xxxxxxx & Xxxxxxxx,
Ltd., located at 000 X. Xxxxxxx Xxxx., Xxxxx 000, Xxx Xxxxx,
Xxxxxx no later than the close of business (Pacific Time) on
September 6, 2001, or at such other place, date and time as the
parties may agree in writing.
2.2. Deliveries by GULF. At the Closing, GULF shall deliver the
following to SHOK:
a. A certificate representing the GULF Shares registered in the
name of SHOK (without any legend or other reference to any
Encumbrance other than those required by federal and or state
securities law).
b. The documents contemplated by Section 3.
c. All other documents, instruments and writings required by
this Agreement to be delivered by GULF at the Closing and any
other documents or records relating to GULF's business reasonably
requested by SHOK in connection with this Agreement.
2.3. Deliveries by SHOK. At the Closing, SHOK shall deliver the
following to GULF:
a. The SHOK Shares as contemplated by section 1 in a form to be
issued to GULF.
b. The documents contemplated by Section 4.
c. The resignations of the officers and directors of
Xxxxxxxxxxxxxx.Xxx, Inc., and resolutions appointing directors
nominated by GULF.
d. Certificates from the Directors of SHOK representing
collectively 7,147,500 shares of common stock of SHOK, endorsed
for cancellation, together with a resolution from the Board of
Directors of SHOK returning to these Directors the fixed assets
of SHOK in exchange for return of these shares.
e. Resolutions from the Board of Directors of SHOK authorizing
a 20.61:1 split of the Company's common stock and the change of
the name of the Company to "GulfTex Energy Corp."
f. Documents evidencing the cancellation or satisfaction in
full of all debts of SHOK.
g. All other documents, instruments and writings required by
this Agreement to be delivered by SHOK at the Closing and any
other documents or records relating to SHOK's business reasonably
requested by SHOK in connection with this Agreement.
2.4. Escrow Agents. Xxxxxxx & Xxxxxxxx, Ltd., shall serve as the
escrow agent. All shares and any funds that are to be exchanged
as part of this Agreement shall be deposited with the Escrow
Agent. At the Closing, assuming that all obligations of each
party have been fulfilled, the Escrow Agent shall complete the
transfer of all property in his possession in accordance with the
terms of this Agreement.
3. Conditions to SHOK's Obligations.
The obligations of SHOK to effect the Closing shall be subject to
the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by SHOK:
3.1. No Injunction. There shall not be in effect any injunction,
order or decree of a court of competent jurisdiction that
prevents the consummation of the transactions contemplated by
this Agreement, that prohibits SHOK's acquisition of the GULF
Shares or that will require any divestiture as a result of SHOK's
acquisition of the GULF Shares or that will require all or any
part of the business of SHOK to be held separate and no
litigation or proceedings seeking the issuance of such an
injunction, order or decree or seeking to impose substantial
penalties on SHOK or GULF if this Agreement is consummated shall
be pending.
3.2. Representations, Warranties and Agreements. The
representations and warranties of GULF set forth in this
Agreement shall be true and complete in all material respects as
of the Closing Date as though made at such time, (b) GULF shall
have performed, and complied in all material respects with the
agreements contained in this Agreement required to be performed
and complied with by it at or prior to the Closing and (c) SHOK
shall have received a certificate to that effect signed by an
authorized representative of GULF. In addition, GULF represents
and warrants that it will prepare and file any and all filings
with the SEC necessary in connection with this Agreement.
3.3. Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental Bodies
necessary for the consummation of SHOK's acquisition of the GULF
Shares shall have been obtained and shall be in full force and
effect.
4. Conditions to GULF's Obligations.
The obligations of GULF to effect the Closing shall be subject to
the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by GULF:
4.1. No Injunction. There shall not be in effect any injunction,
order or decree of a court of competent jurisdiction that
prevents the consummation of the transactions contemplated by
this Agreement, that prohibits SHOK's acquisition of the GULF
Shares or GULF's receipt of the SHOK Shares or that will require
any divestiture as a result of SHOK's acquisition of the Shares
or GULF's acquisition of the SHOK Shares or that will require all
or any part of the business of SHOK or GULF to be held separate
and no litigation or proceedings seeking the issuance of such an
injunction, order or decree or seeking to impose substantial
penalties on SHOK or GULF if this Agreement is consummated shall
be pending.
4.2. Representations, Warranties and Agreements. The
representations and warranties of SHOK set forth in this
Agreement shall be true and complete in all material respects as
of the Closing Date as though made at such time, (b) SHOK shall
have performed and complied in all material respects with the
agreements contained in this Agreement required to be performed
and complied with by it at or prior to the Closing and (c) GULF
shall have received a certificate to that effect signed by an
authorized representative of SHOK.
4.3. Legal Opinion. GULF shall have received an opinion from
appropriate counsel to SHOK dated the Closing Date, to the effect
that SHOK is a corporation duly organized, validly existing and
in good standing under the laws of the State of Utah and has the
requisite power and authority to own, lease and operate its
properties and corporate power to carry on its business as now
being conducted; all of the outstanding shares of SHOK are duly
and validly issued, fully paid and non-assessable and the
issuance of such shares has complied with the applicable Federal
and State securities laws and the regulations promulgated
thereunder; SHOK is duly qualified and in good standing as a
domestic corporation and is authorized to do business in all
states or other jurisdictions in which such qualification or
authorization is necessary and there has not been any claim by
any other state of jurisdiction to the effect that SHOK is
required to qualify or otherwise be authorized to do business as
a foreign corporation therein; all persons who have executed or
will execute this Agreement on behalf of SHOK or its Shareholders
have been duty authorized to do so; to the best knowledge of such
counsel there is no action, suit or proceeding and no
investigation by any governmental agency pending or threatened
against SHOK or the assets or business of SHOK that could have a
materially adverse effect on the financial condition of SHOK or
GULF.
4.4. Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental Bodies
necessary for the consummation of SHOK's acquisition of the GULF
Shares and GULF's acquisition of the SHOK Shares shall have been
obtained and shall be in full force and effect.
5. Representations and Warranties of GULF.
GULF represents and warrants to SHOK that, to the knowledge of
GULF (which limitation shall not apply to Section 5.3), and
except as set forth in the GULF Disclosure Letter:
5.1. Organization of GULF; Authorization. GULF is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Texas with full corporate power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all
necessary corporate action of GULF. This Agreement constitutes a
valid and binding obligation of GULF enforceable against it in
accordance with its terms.
5.2. Capitalization. The authorized capital stock of GULF
consists of 100,000,000 shares of common stock, $5.00 par value,
and 1,000 shares of preferred stock, $0.01 par value. As of the
Closing Date, no common or preferred shares were outstanding. No
shares have been registered under state or federal securities
laws. As of the Closing Date, all of the issued and outstanding
shares of common stock of GULF are validly issued, fully paid and
nonassessable.
5.3. No Conflict as to GULF. Neither the execution and delivery
of this Agreement nor the consummation of the sale of the GULF
Shares to SHOK will (a) violate any provision of the certificate
of incorporation or by-laws of GULF or (b) violate, be in
conflict with, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default)
under any agreement to which GULF is a party or (c) violate any
statute or law or any judgment, decree, order, regulation or rule
of any court or other Governmental Body applicable to GULF.
5.4. Ownership of GULF Shares. The delivery of certificates to
SHOK provided in Section 2.2 and the delivery of certificates to
GULF as provided in Section 2.3 will result in SHOK's immediate
acquisition of record and beneficial ownership of all the common
shares of GULF, free and clear of all Encumbrances subject to
applicable State and Federal securities laws. There are no
outstanding options, rights, conversion rights, agreements or
commitments of any kind relating to the issuance, sale or
transfer of any Equity Securities or other securities of GULF.
5.5. No Conflict as to GULF and Subsidiaries. Neither the
execution and delivery of this Agreement nor the consummation of
the acquisition of the GULF Shares to SHOK will (a) violate any
provision of the certificate of incorporation or by-laws (or
other governing instrument) of GULF or any of its Subsidiaries or
(b) violate, or be in conflict with, or constitute a default (or
an event which, with notice or lapse of time or both, would
constitute a default) under or result in the termination, of, or
accelerate the performance required by, or excuse performance by
any Person of its obligations under, or cause the acceleration of
the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any Encumbrance upon any property
or assets of GULF or any of its Subsidiaries under, any material
agreement or commitment to which GULF or any of its Subsidiaries
is a party or by which any of their respective property or assets
is bound, or to which any of the property or assets of GULF or
any of its Subsidiaries is subject, or (c) violate any statute or
law or any judgment, decree, order, regulation or rule of any
court or other Governmental Body applicable to GULF or any of its
Subsidiaries except, in the case of violations, conflicts,
defaults, terminations, accelerations or Encumbrances described
in clause (b) of this Section 5.5, for such matters which are not
likely to have a material adverse effect on the business or
financial condition of GULF and its Subsidiaries, taken as a
whole.
5.6. Consent and Approvals of Governmental Authorities. Except
with respect to applicable State and Federal securities laws, no
consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Body is required to be made
or obtained by GULF or any of its Subsidiaries in connection with
the execution, delivery and performance of this Agreement by GULF
or the consummation of the acquisition of the GULF Shares.
5.7. Other Consents. No consent of any Person is required to be
obtained by GULF prior to the execution, delivery and performance
of this Agreement or the consummation of the acquisition of the
GULF Shares to SHOK, including, but not limited to, consents from
parties to leases or other agreements or commitments, except for
any consent which the failure to obtain would not be likely to
have a material adverse effect on the business and financial
condition of GULF.
5.8. Financial Statements. GULF has delivered to SHOK
consolidated balance sheets of GULF and its Subsidiaries as at
July 31, 2001, and statements of income and changes in financial
position for the period then ended. Such GULF Financial
Statements and notes fairly present the consolidated financial
condition and results of operations of GULF and its Subsidiaries
as at the respective dates thereof and for the periods therein.
5.9. Title to Properties. Either GULF or one of its Subsidiaries
owns all the material properties and assets that they purport to
own (real, personal and mixed, tangible and intangible),
including, without limitation, all the material properties and
assets reflected in the GULF Financial Statements (except for
property sold since the date of the GULF Financial Statements in
the ordinary course of business or leased under capitalized
leases), and all the material properties and assets purchased or
otherwise acquired by GULF or any of its Subsidiaries since the
date of the GULF Financial Statements. All properties and assets
reflected in the GULF Financial Statements are free and clear of
all material Encumbrances and are not, in the case of real
property, subject to any material rights of way, building use
restrictions, exceptions, variances, reservations or limitations
of any nature whatsoever except, with respect to all such
properties and assets, (a) mortgages or security interests shown
on the GULF Financial Statements as securing specified
liabilities or obligations, with respect to which no default (or
event which, with notice or lapse of time or both, would
constitute a default) exists, and all of which are listed in the
GULF Disclosure Letter, (b) mortgages or security interests
incurred in connection with the purchase of property or assets
after the date of the GULF Financial Statements (such mortgages
and security interests being limited to the property or assets so
acquired), with respect to which no default (or event which, with
notice or lapse of time or both, would constitute a default)
exists, (c) as to real property, (i) imperfections of title, if
any, none of which materially detracts from the value or impairs
the use of the property subject thereto, or impairs the
operations of GULF or any of its Subsidiaries and (ii) zoning
laws that do not impair the present or anticipated use of the
property subject thereto, and (d) liens for current taxes not yet
due. The properties and assets of GULF and its Subsidiaries
include all rights, properties and other assets necessary to
permit GULF and its Subsidiaries to conduct GULF's business in
all material respects in the same manner as it is conducted on
the date of this Agreement.
5.10. Buildings, Plants and Equipment. The buildings, plants,
structures and material items of equipment and other personal
property owned or leased by GULF or its Subsidiaries are, in all
respects material to the business or financial condition of GULF
and its Subsidiaries, taken as a whole, in good operating
condition and repair (ordinary wear and tear excepted) and are
adequate in all such respects for the purposes for which they are
being used. GULF has not received notification that it or any of
its Subsidiaries is in violation of any applicable building,
zoning, anti-pollution, health, safety or other law, ordinance or
regulation in respect of its buildings, plants or structures or
their operations, which violation is likely to have a material
adverse effect on the business or financial condition of GULF and
its Subsidiaries, taken as a whole or which would require a
payment by GULF or SHOK or any of their subsidiaries in excess of
$2,000 in the aggregate, and which has not been cured.
5.11. No Condemnation or Expropriation. Neither the whole nor
any portion of the property or leaseholds owned or held by GULF
or any of its Subsidiaries is subject to any governmental decree
or order to be sold or is being condemned, expropriated or
otherwise taken by any Governmental Body or other Person with or
without payment of compensation therefore, which action is likely
to have a material adverse effect on the business or financial
condition of SHOK and its Subsidiaries, taken as a whole.
5.12. Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or
Governmental Body pending or threatened in writing against or
involving GULF or any of its Subsidiaries which is likely to have
a material adverse effect on the business or financial condition
of GULF, SHOK, or any of their Subsidiaries, taken as whole, or
which would require a payment by GULF or its subsidiaries in
excess of $2,000 in the aggregate or which questions or
challenges the validity of this Agreement. Neither GULF nor any
or its Subsidiaries is subject to any judgment, order or decree
that is likely to have a material adverse effect on the business
or financial condition of GULF, SHOK or any of their
Subsidiaries, taken as a whole, or which would require a payment
by GULF or its subsidiaries in excess of $2,000 in the aggregate.
5.13. Absence of Certain Changes. Except as set forth in
Section 5.13 of the GULF Disclosure Letter, since the date of the
GULF Financial Statements, neither GULF nor any of its
Subsidiaries has, other than for the transactions provided
herein;
a. suffered the damage or destruction of any of its properties
or assets (whether or not covered by insurance) which is
materially adverse to the business or financial condition of GULF
and its Subsidiaries, taken as a whole, or made any disposition
of any of its material properties or assets other than in the
ordinary course of business;
b. made any change or amendment in its certificate of
incorporation or by-laws, or other governing instruments;
c. issued or sold any Equity Securities or other securities,
acquired, directly or indirectly, by redemption or otherwise, any
such Equity Securities, reclassified, split-up or otherwise
changed any such Equity Security, or granted or entered into any
options, warrants, calls or commitments of any kind with respect
thereto;
d. organized any new Subsidiary or acquired any Equity
Securities of any Person, or any equity or ownership interest in
any business;
e. borrowed any funds or incurred, or assumed or become subject
to, whether directly or by way of guarantee or otherwise, any
obligation or liability with respect to any such indebtedness for
borrowed money;
f. paid, discharged or satisfied any material claim, liability
or obligation (absolute, accrued, contingent or otherwise), other
than in the ordinary course of business;
g. prepaid any material obligation having a maturity of more
than 90 days from the date such obligation was issued or
incurred;
h. canceled any material debts or waived any material claims or
rights, except in the ordinary course of business;
i. disposed of or permitted to lapse any rights to the use of
any material patent or registered trademark or copyright or other
intellectual property owned or used by it;
j. granted any general increase in the compensation of officers
or employees (including any such increase pursuant to any
employee benefit plan);
k. purchased or entered into any contract or commitment to
purchase any material quantity of raw materials or supplies, or
sold or entered into any contract or commitment to sell any
material quantity of property or assets, except (i) normal
contracts or commitments for the purchase of, and normal
purchases of, raw materials or supplies, made in the ordinary
course business, (11) normal contracts or commitments for the
sale of, and normal sales of, inventory in the ordinary course of
business, and (iii) other contracts, commitments, purchases or
sales in the ordinary course of business;
l. made any capital expenditures or additions to property,
plant or equipment or acquired any other property or assets
(other than raw materials and supplies) at a cost in excess of
$25,000 in the aggregate;
m. written off or been required to write off any notes or
accounts receivable in an aggregate amount in excess of $2,000;
n. written down or been required to write down any inventory in
an aggregate amount in excess of $ 2,000;
o. entered into any collective bargaining or union contract or
agreement; or
p. other than in the ordinary course of business, incurred any
liability required by generally accepted accounting principles to
be reflected on a balance sheet and material to the business or
financial condition of GULF and its subsidiaries taken as a
whole.
5.14. No Material Adverse Change. Since the date of the GULF
Financial Statements, there has not been any material adverse
change in the business or financial condition of GULF.
5.15. Contracts and Commitments. Except as set forth in
Section 5.15 of the GULF Disclosure Letter, neither GULF nor any
of its Subsidiaries is a party to any:
a. Contract or agreement (other than purchase or sales orders
entered into in the ordinary course of business) involving any
liability on the part of GULF or one of its Subsidiaries of more
than $25,000 and not cancelable by GULF or the relevant
Subsidiary (without liability to GULF or such Subsidiary) within
60 days;
b. Except with respect to the lease on its business location,
lease of personal property involving annual rental payments in
excess of $25,000 and not cancelable by GULF or the relevant
Subsidiary (without liability to GULF or such Subsidiary) within
90 days;
c. Except with respect to the options referenced above,
Employee bonus, stock option or stock purchase, performance unit,
profit sharing, pension, savings, retirement, health, deferred or
incentive compensation, insurance or other material employee
benefit plan (as defined in Section 2(3) of ERISA) or program for
any of the employees, former employees or retired employees of
GULF or any of its Subsidiaries;
d. Commitment, contract or agreement that is currently expected
by the management of GULF to result in any material loss upon
completion or performance thereof;
e. Contract, agreement or commitment that is material to the
business of GULF and its Subsidiaries, taken as a whole, with any
officer, employee, agent, consultant, advisor, salesman, sales
representative, value added reseller, distributor or dealer; or
f. Employment agreement or other similar agreement that
contains any severance or termination pay, liabilities or
obligations.
All such contracts and agreements are in full force and effect.
Neither GULF nor any or its Subsidiaries is in breach of, in
violation of or in default under, any agreement, instrument,
indenture, deed of trust, commitment, contract or other
obligation of any type to which GULF or any of its Subsidiaries
is a party or is or may be bound that relates to the business of
GULF or any of its Subsidiaries or to which any of the assets or
properties of GULF or any of its Subsidiaries is subject, the
effect of which breach, violation or default is likely to
materially and adversely affect the business or financial
condition of GULF and its Subsidiaries, taken as a whole. SHOK
has not guaranteed or assumed and specifically does not guarantee
or assume any obligations of GULF or any of its Subsidiaries.
5.16. Labor Relations. Neither GULF nor any of its
Subsidiaries is a party to any collective bargaining agreement.
Except for any matter which is not likely to have a material
adverse effect on the business or financial condition of GULF and
its Subsidiaries, taken as a whole, (a) GULF and each of its
Subsidiaries is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair
labor practice, (b) there is no unfair labor practice complaint
against GULF or any of its Subsidiaries pending before the
National Labor Relations Board, (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened
against GULF or any of its Subsidiaries, (d) no representation
question exists respecting the employees of GULF or any of its
Subsidiaries, (e) neither GULF nor any of its Subsidiaries has
experienced any strike, work stoppage or other labor difficulty,
and (f) no collective bargaining agreement relating to employees
of GULF or any of its Subsidiaries is currently being negotiated.
5.17. Employee Benefit Plans. Section 5.17 of the GULF
Disclosure Letter contains a list of all material employee
pension and welfare benefit plans covering employees of GULF and
its Subsidiaries. No listed plan is (1) a multi-employer plan as
defined in Section 3(37) of ERISA, or (2) a defined benefit plan
as defined in Section 3(35) of ERISA, any listed individual
account pension plan is duly qualified as tax exempt under the
applicable sections of the Code, each listed benefit plan and
related funding arrangement, if any, has been maintained in all
material respects in compliance with its terms and the provisions
of ERISA and the Code, and the GULF Disclosure Letter also lists
all material management incentive plans and all material
employment contracts or severance arrangements pertaining to one
or more specific employees.
5.18. Compliance with Law. The operations of GULF and its
Subsidiaries have been conducted in accordance with all
applicable laws and regulations of all Governmental Bodies having
jurisdiction over them, except for violations thereof which are
not likely to have a material adverse effect on the business or
financial condition of GULF and its Subsidiaries, taken as a
whole, or which would not require a payment by GULF or its
Subsidiaries in excess of $2,000 in the aggregate, or which have
been cured. Neither GULF nor any of its Subsidiaries has received
any notification of any asserted present or past failure by it to
comply with any such applicable laws or regulations. GULF and its
Subsidiaries have all material licenses, permits, orders or
approvals from the Governmental Bodies required for the conduct
of their businesses, and are not in material violation of any
such licenses, permits, orders and approvals. All such licenses,
permits, orders and approvals are in full force and effect, and
no suspension or cancellation of any thereof has been threatened.
5.19. Tax Matters.
a. GULF and each of its Subsidiaries (1) (except with respect
to its 1999 tax return, as to which an extension has been or may
be appropriately filed) has filed all nonconsolidated and
noncombined Tax Returns and all consolidated or combined Tax
Returns that include only GULF and/or its Subsidiaries and not
Seller or its other Affiliates (for the purposes of this Section
5.18, such tax Returns shall be considered non-consolidated and
non-combined Tax Returns) required to be filed through the date
hereof and has paid any Tax due through the date hereof with
respect to the time periods covered by such non-consolidated and
non-combined Tax Returns and shall timely pay any such Taxes
required to be paid by it after the date hereof with respect to
such Tax Returns and (2) shall prepare and timely file all such
non-consolidated and non-combined Tax Returns required to be
filed after the date hereof and through the Closing Date and pay
all Taxes required to be paid by it with respect to the periods
covered by such Tax Returns; (B) all such Tax Returns filed
pursuant to clause (A) after the date hereof shall, in each case,
be prepared and filed in a manner consistent in all material
respects (including elections and accounting methods and
conventions) with such Tax Return most recently filed in the
relevant jurisdiction prior to the date hereof, except as
otherwise required by law or regulation. Any such Tax Return
filed or required to be filed after the date hereof shall not
reflect any new elections or the adoption of any new accounting
methods or conventions or other similar items, except to the
extent such particular reflection or adoption is required to
comply with any law or regulation.
b. All consolidated or combined Tax Returns (except those
described in subparagraph (a) above) required to be filed by any
person through the date hereof that are required or permitted to
include the income, or reflect the activities, operations and
transactions, of GULF or any of its Subsidiaries for any taxable
period have been timely filed, and the income, activities,
operations and transactions of GULF and Subsidiaries have been
properly included and reflected thereon. GULF shall prepare and
file, or cause to be prepared and filed, all such consolidated or
combined Tax Returns that are required or permitted to include
the income, or reflect the activities, operations and
transactions, of GULF or any Subsidiary, with respect to any
taxable year or the portion thereof ending on or prior to the
Closing Date, including, without limitation, GULF's consolidated
federal income tax return for such taxable years. GULF will
timely file a consolidated federal income tax return for the
taxable year ended July 31, 2000 and such return shall include
and reflect the income, activities, operations and transactions
of GULF and Subsidiaries for the taxable period then ended, and
hereby expressly covenants and agrees to file a consolidated
federal income tax return, and to include and reflect thereon the
income, activities, operations and transactions of GULF and
Subsidiaries for the taxable period through the Closing Date. All
Tax Returns filed pursuant to this subparagraph (b) after the
date hereof shall, in each case, to the extent that such Tax
Returns specifically relate to GULF or any of its Subsidiaries
and do not generally relate to matters affecting other members of
GULF's consolidated group, be prepared and filed in a manner
consistent in all material respects (including elections and
accounting methods and conventions) with the Tax Return most
recently filed in the relevant jurisdictions prior to the date
hereof, except as otherwise required by law or regulation. GULF
has paid or will pay all Taxes that may now or hereafter be due
with respect to the taxable periods covered by such consolidated
or combined Tax Returns.
c. Neither GULF nor any of its subsidiaries has agreed, or is
required, to make any adjustment (x) under Section 481(a) of the
Code by reason, of a change in accounting method or otherwise or
(y) pursuant to any provision of the Tax Reform Act of 1986, the
Revenue Act of 1987 or the Technical and Miscellaneous Revenue
Act of 1988.
d. Neither GULF nor any of its Subsidiaries or any predecessor
or Affiliate of the foregoing has, at any time, filed a consent
under Section 341(f)(1) of the Code, or agreed under Section
341(f)(3) of the Code, to have the provisions of Section
341(f)(2) of the Code apply to any sale of its stock.
e. There is no (nor has there been any request for an)
agreement, waiver or consent providing for an extension of time
with respect to the assessment of any Taxes attributable to GULF
or its Subsidiaries, or their assets or operations and no power
of attorney granted by GULF or any of its Subsidiaries with
respect to any Tax matter is currently in force.
f. There is no action, suit, proceeding, investigation, audit,
claim, demand, deficiency or additional assessment in GULF,
pending or threatened against or with respect to any Tax
attributable to GULF, its Subsidiaries or their assets or
operations.
g. Except as set forth in the GULF Disclosure Letter, all
amounts required to be withheld as of the Closing Date for Taxes
or otherwise have been withheld and paid when due to the
appropriate agency or authority.
h. No property of GULF is "tax-exempt use property" within the
meaning of Section 168(h) of the Code nor property that GULF
and/or its Subsidiaries will be required to treat as being owned
by another person pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to SHOK true and
complete copies of all income Tax Returns (or with respect to
consolidated or combined returns, the portion thereof) and any
other Tax Returns requested by SHOK as may be relevant to GULF,
its Subsidiaries, or their assets or operations for any and all
periods ending after July 31, 2001, or for any Tax years which
are subject to audit or investigation by any taxing authority or
entity.
j. There is no contract, agreement, plan or arrangement
including but not limited to the provisions of this Agreement,
covering any employee or former employee of GULF or its
Subsidiaries that, individually or collectively, could give rise
to the payment of any amount that would not be deductible
pursuant to Section 280G or 162 of the Code.
5.20. Environmental Matters.
a. At all times prior to the date hereof, GULF and its
Subsidiaries have complied in all material respects with
applicable environmental laws, orders, regulations, rules and.
ordinances relating to the Properties (as hereinafter defined),
the violation of which would have a material adverse effect on
the business or financial condition of GULF and its Subsidiaries,
taken as a whole, or which would require a payment by GULF or its
Subsidiaries in excess of $2,000 in the aggregate, and which have
been duly adopted, imposed or promulgated by any legislative,
executive, administrative or judicial body or officer of any
Governmental Body.
b. The environmental licenses, permits and authorizations that
are material to the operations of GULF and its Subsidiaries,
taken as a whole, are in full force and effect.
c. Neither GULF nor any of its Subsidiaries has released or
caused to be released on or about the properties currently owned
or leased by GULF or any of its Subsidiaries (the "Properties")
any (i) pollutants, (ii) contaminants, (iii) "Hazardous
Substances," as that term is defined in Section 101(14) of the
Comprehensive Environmental Response Act, as amended or (iv)
"Regulated Substances," as that term in defined in Section 9001
of the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq., as amended, which would be required to be
remediated by any governmental agency with jurisdiction over the
Properties under the authority of laws, regulations and
ordinances as in effect and currently interpreted on the date
hereof, which remediation would have a material adverse effect on
the business or financial condition of GULF and its Subsidiaries,
taken as a whole.
5.21. Absence of Certain Commercial Practices. Neither GULF
nor any of its Subsidiaries has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of
property, however characterized, to any finder, agent, government
official or other party, in the United States or any other
country, which is in any manner related to the business or
operations of GULF or its Subsidiaries, which GULF or one of its
Subsidiaries knows or has reason to believe to have been illegal
under any federal, state or local laws of the United States or
any other country having jurisdiction; and neither GULF nor any
of its Subsidiaries has participated, directly or indirectly, in
any boycotts or other similar practices affecting any of its
actual or potential shareholders in violation of any applicable
law or regulation.
5.22. Transactions with Directors and Officers. Except as set
forth in Section 5.22 of the GULF Disclosure Letter, GULF and its
Subsidiaries do not engage in business with any Person in which
any of GULF's directors or officers has a material equity
interest. No director or officer of GULF owns any property, asset
or right which is material to the business of GULF and its
Subsidiaries, taken as a whole.
5.23. Borrowing and Guarantees. Except as set forth in
Section 5.23 of the GULF Disclosure Letter, GULF and its
Subsidiaries (a) do not have any indebtedness for borrowed money,
(b) are not lending or committed to lend any money (except for
advances to employees in the ordinary course of business), and
(c) are not guarantors or sureties with respect to the
obligations of any Person.
6. Representations and Warranties of SHOK.
SHOK represents and warrants to GULF that, to the Knowledge of
SHOK (the requirement of knowledge shall not apply to Section
6.3), and except as set forth in the SHOK Disclosure Letter:
6.1. Organization of SHOK; Authorization. SHOK is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Texas with full corporate power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all
necessary corporate action of SHOK. This Agreement constitutes a
valid and binding obligation of SHOK, enforceable against it in
accordance with its terms.
6.2. Capitalization. The authorized capital stock of SHOK
consists of 100,000,000 shares of common stock, $0.001 par value
and 50,000,000 shares of Preferred Stock, $0.001 par value. As of
the Closing Date, 8,504,300 shares of common stock and no shares
of preferred stock of SHOK were issued and outstanding. No shares
have been registered under state or federal securities laws. As
of the Closing Date, all of the issued and outstanding shares of
common stock of SHOK are validly issued, fully paid and
nonassessable.
6.3. No Conflict as to SHOK. Neither the execution and delivery
of this Agreement nor the consummation of the sale of the SHOK
Shares to GULF will (a) violate any provision of the certificate
of incorporation or by-laws of SHOK, or (b) violate, be in
conflict with, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default)
under any agreement to which SHOK is a party or (c) violate any
statute or law or any judgment, decree, order, regulation or rule
of any court or other Governmental Body applicable to SHOK.
6.4. Ownership of SHOK Shares. The delivery of certificates to
GULF provided in Section 2.3 will result in GULF's immediate
acquisition of record and beneficial ownership of one (1) share
of common stock of SHOK, free and clear of all encumbrances other
than as required by Federal and State securities laws. There are
no outstanding options, rights, conversion rights, agreements or
commitments of any kind relating to the issuance, sale or
transfer of any Equity Securities or other securities of SHOK.
Nothing in this Agreement shall be deemed to be a representation
or warranty as to the tradability of any of the SHOK Shares under
Federal or any States' security laws.
6.5. No Conflict as to SHOK and Subsidiaries. Neither the
execution and delivery of this Agreement nor the consummation of
the of the instant agreement will (a) violate any provision of
the certificate of incorporation or by-laws (or other governing
instrument) of SHOK or any of its Subsidiaries or (b) violate, or
be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
performance required by, or excuse performance by any Person of
any of its obligations under, or cause the acceleration of the
maturity of any debt or obligation pursuant to, or result in the
creation or imposition of any Encumbrance upon any property or
assets of SHOK or any of its Subsidiaries under any material
agreement or commitment to which SHOK or any of its Subsidiaries
is a party or by which any of their respective property or assets
is bound, or to which any of the property or assets of SHOK or
any of its Subsidiaries is subject, or (c) violate any statute or
law or any judgment, decree, order, regulation or rule of any
court or other Governmental Body applicable to SHOK. or any of
its Subsidiaries except, in the case of violations, conflicts,
defaults, termination's, accelerations or Encumbrances described
in clause (b) of this Section 6.5, for such matters which are not
likely to have a material adverse effect on the business or
financial condition of SHOK and its Subsidiaries, taken as a
whole.
6.6. Consents and Approvals of Governmental Authorities. No
consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Body is required to be made
or obtained by SHOK or any of its Subsidiaries in connection with
the execution, delivery and performance of this Agreement by SHOK
or the consummation of the contemplated transaction.
6.7. Other Consents. No consent of any Person is required to be
obtained by SHOK to the execution, delivery and performance of
this Agreement or the consummation of the contemplated
transaction including, but not limited to, consents from parties
to leases or other agreements or commitments, except for any
consent which the failure to obtain would not be likely to have a
material adverse effect on the business and financial condition
of SHOK.
6.8. Financial Statements. SHOK has delivered to GULF
consolidated balance sheets of SHOK and its Subsidiaries as at
April 30, 2001, and statements of income and changes in financial
position for the period then ended. Such SHOK Financial
Statements and notes fairly present the consolidated financial
condition and results of operations of SHOK and its Subsidiaries
as at the respective dates thereof and for the periods therein.
6.9. Title to Properties. Either SHOK or one of its Subsidiaries
owns all the material properties and assets that they purport to
own (real, personal and mixed, tangible and intangible),
including, without limitation, all the material properties and
assets reflected in the SHOK Financial Statements and all the
material properties and assets purchased or otherwise acquired by
SHOK or any of its Subsidiaries since the date of the SHOK
Financial Statements. All properties and assets reflected in the
SHOK Financial Statements are free and clear of all material
Encumbrances and are not, in the case of real property, subject
to any material rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any nature
whatsoever except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the SHOK
Financial Statements as securing specified liabilities or
obligations, with respect to which no default (or event which,
with notice or lapse of time or both, would constitute a default)
exists, and all of which are listed in the SHOK Disclosure
Letter, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date
of the SHOK Financial Statements (such mortgages and security
interests being limited to the property or assets so acquired),
with respect to which no default (or event which, with notice or
lapse of time or both, would constitute a default) exists, (c) as
to real property, (i) imperfections of title, if any, none of
which materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of SHOK
or any of its Subsidiaries and (ii) zoning laws that do not
impair the present or anticipated use of the property subject
thereto, and (d) liens for current taxes not yet due. The
properties and assets of SHOK and its Subsidiaries include all
rights, properties and other assets necessary to permit SHOK and
its Subsidiaries to conduct SHOK's business in all material
respects in the same manner as it is conducted on the date of
this Agreement.
6.10. Buildings, Plants and Equipment. The buildings, plants,
structures and material items of equipment and other personal
property owned or leased by SHOK or its Subsidiaries are, in all
respects material to the business or financial condition of SHOK
and its Subsidiaries, taken as a whole, in good operating
condition and repair (ordinary wear and tear excepted) and are
adequate in all such respects for the purposes for which they are
being used. SHOK has not received notification that it or any of
its Subsidiaries is in violation of any applicable building,
zoning, anti-pollution, health, safety or other law, ordinance or
regulation in respect of its buildings, plants or structures or
their operations, which violation is likely to have a material
adverse effect on the business or financial condition of SHOK and
its Subsidiaries, taken as a whole or which would require a
payment by GULF or SHOK or any of their subsidiaries in excess of
$2,000 in the aggregate, and which has not been cured.
6.11. No Condemnation or Expropriation. Neither the whole nor
any portion of the property or leaseholds owned or held by SHOK
or any of its Subsidiaries is subject to any governmental decree
or order to be sold or is being condemned, expropriated or
otherwise taken by any Governmental Body or other Person with or
without payment of compensation therefore, which action is likely
to have a material adverse effect on the business or financial
condition of GULF and its Subsidiaries, taken as a whole.
6.12. Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or
Governmental Body pending or threatened in writing against or
involving SHOK or any of its Subsidiaries which is likely to have
a material adverse effect on the business or financial condition
of GULF, SHOK, or any of their Subsidiaries, taken as whole, or
which would require a payment by SHOK or its subsidiaries in
excess of $2,000 in the aggregate or which questions or
challenges the validity of this Agreement. Neither SHOK nor any
or its Subsidiaries is subject to any judgment, order or decree
that is likely to have a material adverse effect on the business
or financial condition of GULF, SHOK, or any of their
Subsidiaries, taken as a whole, or which would require a payment
by SHOK or its subsidiaries in excess of $2,000 in the aggregate.
6.13. Absence of Certain Changes. Except as set forth in
Section 6.13 of the SHOK Disclosure Letter, since the date of the
SHOK Financial Statements, neither SHOK nor any of its
Subsidiaries has, other than for the transactions provided
herein:
a. suffered the damage or destruction of any of its properties
or assets (whether or not covered by insurance) which is
materially adverse to the business or financial condition of SHOK
and its Subsidiaries, taken as a whole, or made any disposition
of any of its material properties or assets other than in the
ordinary course of business;
b. made any change or amendment in its certificate of
incorporation or by-laws, or other governing instruments;
c. issued or sold any Equity Securities or other securities,
acquired, directly or indirectly, by redemption or otherwise, any
such Equity Securities, reclassified, split-up or otherwise
changed any such Equity Security, or granted or entered into any
options, warrants, calls or commitments of any kind with respect
thereto;
d. organized any new Subsidiary or acquired any Equity
Securities of any Person, or any equity or ownership interest in
any business;
e. borrowed any funds or incurred, or assumed or become subject
to, whether directly or by way of guarantee or otherwise, any
obligation or liability with respect to any such indebtedness for
borrowed money;
f. paid, discharged or satisfied any material claim, liability
or obligation (absolute, accrued, contingent or otherwise), other
than in the ordinary course of business;
g. prepaid any material obligation having a maturity of more
than 90 days from the date such obligation was issued or
incurred;
h. canceled any material debts or waived any material claims or
rights, except in the ordinary course of business;
i. disposed of or permitted to lapse any rights to the use of
any material patent or registered trademark or copyright or other
intellectual property owned or used by it;
j. granted any general increase in the compensation of officers
or employees (including any such increase pursuant to any
employee benefit plan);
k. purchased or entered into any contract or commitment to
purchase any material quantity of raw materials or supplies, or
sold or entered into any contract or commitment to sell any
material quantity of property or assets, except (i) normal
contracts or commitments for the purchase of, and normal
purchases of, raw materials or supplies, made in the ordinary
course business, (ii) normal contracts or commitments for the
sale of, and normal sales of, inventory in the ordinary course of
business, and (iii) other contracts, commitments, purchases or
sales in the ordinary course of business;
l. made any capital expenditures or additions to property,
plant or equipment or acquired any other property or assets
(other than raw materials and supplies) at a cost in excess of
$2,000 in the aggregate;
m. written off or been required to write off any notes or
accounts receivable in an aggregate amount in excess of $2,000;
n. written down or been required to write down any inventory in
an aggregate amount in excess of $2,000;
o. entered into any collective bargaining or union contract or
agreement; or
p. other than in the ordinary course of business, incurred any
liability required by generally accepted accounting principles to
be reflected on a balance sheet and material to the business or
financial condition of SHOK and its subsidiaries taken as a
whole.
6.14. No Material Adverse Change. Since the, date of the SHOK
Financial Statements, there has not been any material adverse
change in the business or financial condition of SHOK and its
Subsidiaries taken, as a whole, other than changes resulting from
economic conditions prevailing in the United States precious
coins, collectibles and metals industry.
6.15. Contracts and Commitments. Except as set forth in
Section 6.15 of the SHOK Disclosure Letter, neither SHOK nor any
of its Subsidiaries is party to any:
a. Contract or agreement (other than purchase on sales orders
entered into in the ordinary course of business) involving any
liability on the part of SHOK or one of its Subsidiaries of more
than $2,000 and not cancelable by SHOK or the relevant Subsidiary
(without liability to SHOK or such Subsidiary) within 60 days;
b. Lease of personal property involving annual rental payments
in excess of $2,000 and not cancelable by SHOK or the relevant
Subsidiary (without liability to SHOK or such Subsidiary) within
90 days;
c. Employee bonus, stock option or stock purchase, performance
unit, profit-sharing, pension, savings, retirement, health,
deferred or incentive compensation, insurance or other material
employee benefit plan as defined in Section 2(3) of ERISA) or
program for any of the employees, former employees or retired
employees of SHOK or any of its Subsidiaries;
d. Commitment, contract or agreement that is currently expected
by the management of SHOK to result in any material loss upon
completion or performance thereof;
e. Contract, agreement or commitment that is material to the
business of SHOK and its Subsidiaries, taken as a whole, with any
officer, employee, agent, consultant, advisor, salesman, sales
representative , value added reseller, distributor or dealer; or
f. Employment agreement or other similar agreement that
contains any severance or termination pay, liabilities or
obligations.
All such contracts and agreements are in full force and effect.
Neither SHOK nor any or its Subsidiaries is in breach of, in
violation of or in default under, any agreement, instrument,
indenture, deed of trust, commitment, contract or other
obligation of any type to which SHOK or any of its Subsidiaries
is a party or is or may be bound as it relates to the business of
SHOK or any of its Subsidiaries or to which any of the assets or
properties of SHOK or any of its Subsidiaries is subject, the
effect of which breach, violation or default is likely to
materially and adversity affect the business or financial
condition of SHOK and its Subsidiaries, taken as a whole.
6.16. Labor Relations. Neither SHOK nor any of its
Subsidiaries is a party to any collective bargaining agreement.
Except for any matter which is not likely to have a material
adverse effect on the business or financial condition of SHOK and
its Subsidiaries, taken as a whole, (a) SHOK and each of its
Subsidiaries is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair
labor practice, (b) there is no unfair labor practice complaint
against SHOK or any of its Subsidiaries pending before the
National Labor Relations Board, (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened
against SHOK or any of its Subsidiaries, (d) no representation
question exists respecting the employees of SHOK or any of its
Subsidiaries, (e) neither SHOK nor any of its Subsidiaries has
experienced any strike, work stoppage or other labor difficulty,
and (f) no collective bargaining agreement relating to employees
of SHOK or any of its Subsidiaries is currently being negotiated.
6.17. Employee Benefit Plans. Section 6.17 of the SHOK
Disclosure Letter contains a list of all material employee
pension and welfare benefit plans covering employees of SHOK and
its Subsidiaries. No listed plan is (1) a multi-employer plan as
defined in Section 3(37) of ERISA, or (2) a defined benefit plan
as defined in Section 3(35) of ERISA, any listed individual
account pension plan is duly qualified as tax exempt under the
applicable sections of the Code, each listed benefit plan and
related funding arrangement, if any, has been maintained in all
material respects in compliance with its terms and the provisions
of ERISA and the Code, and the SHOK Disclosure Letter also lists
all material management incentive plans and all material
employment contracts or severance arrangements pertaining to one
or more specific employees.
6.18. Compliance with Law. The operations of SHOK and its
Subsidiaries have been conducted in accordance with all
applicable laws and regulations of all Governmental Bodies having
jurisdiction over them, except for violations thereof which are
not likely to have a material adverse effect on the business or
financial condition of SHOK and its Subsidiaries, taken as a
whole, or which would not require a payment by SHOK or its
Subsidiaries in excess of $2,000 in the aggregate, or which have
been cured. Neither SHOK nor any of its Subsidiaries has received
any notification of any asserted present or past failure by it to
comply with any such applicable laws or regulations. SHOK and its
Subsidiaries have all material licenses, permits, orders or
approvals from the Governmental Bodies required for the conduct
of their businesses, and are not in material violation of any
such licenses, permits, orders and approvals. All such licenses,
permits, orders and approvals are in full force and effect, and
no suspension or cancellation of any thereof has been threatened.
6.19. Tax Matters.
a. SHOK and each of its Subsidiaries (1) has filed all non-
consolidated and non-combined Tax Returns and all consolidated or
combined Tax Returns that include only SHOK and/or its
Subsidiaries and not Seller or its other Affiliates (for the
purposes of this Section 6.18, such tax returns shall be
considered non-consolidated and non-combined Tax Returns)
required to be filed through the date hereof and has paid any Tax
due through the date hereof with respect to the time periods
covered by such non-consolidated and non-combined Tax Returns and
shall timely pay any such Taxes required to be paid by it after
the date hereof with respect to such Tax Returns and (2) shall
prepare and timely file all such non-consolidated and non-
combined Tax Returns required to be filed after the date hereof
and through the Closing Date and pay all Taxes required to be
paid by it with respect to the periods covered by such Tax
Returns; (B) all such Tax Returns filed pursuant to clause (A)
after the date hereof shall, in each case, be prepared and filed
in a manner consistent in all material respects (including
elections and, accounting methods and conventions) with such Tax
Return most recently filed in the relevant jurisdiction prior to
the date hereof, except as otherwise required by law or
regulation. Any such Tax Return filed or required to be filed
after the date hereof shall not reflect, any new elections or the
adoption of any new accounting methods or conventions or other
similar items, except to the extent such particular reflection or
adoption is required to comply with any law or regulation.
b. All consolidated or combined Tax Returns (except those
described in subparagraph (a) above) required to be filed by any
person through the date hereof that are required or permitted to
include the income, or reflect the activities, operations and
transactions, of SHOK or any of its Subsidiaries for any taxable
period have been timely filed, and the income, activities,
operations and transactions of SHOK and Subsidiaries have been
properly included and reflected thereon. SHOK shall prepare and
file, or cause to be prepared and filed, all such consolidated or
combined Tax Returns that are required or permitted to include
the income, or reflect the activities, operations and
transactions, of SHOK or any Subsidiary, with respect to any
taxable yea or the portion thereof ending on or prior to the
Closing Date, including, without limitation, SHOK's consolidated
federal income tax return for such taxable years. SHOK will
timely file a consolidated federal income tax return for the
taxable year ended April 30, 2000 and such return shall include
and reflect the income, activities, operations and transactions
of SHOK and Subsidiaries for the taxable period then ended, and
hereby expressly covenants and agrees to file a consolidated
federal income tax return, and to include and reflect thereon the
income, activities, operations and transactions of SHOK and
Subsidiaries for the taxable period through the Closing Date. All
Tax Returns filed pursuant to this subparagraph (b) after the
date hereof shall, in each case, to the extent that such Tax
Returns specifically relate to SHOK or any of its Subsidiaries
and do not generally relate to matters affecting other members of
SHOK's consolidated group, be prepared and filed in a manner
consistent in all material respects (including elections and
accounting methods and conventions) with the Tax Return most
recently filed in the relevant jurisdictions prior to the date
hereof, except as otherwise required by law or regulation. SHOK
has paid or will pay all Taxes that may now or hereafter be due
with respect to the taxable periods covered by such consolidated
or combined Tax Returns.
c. Neither SHOK nor any of its Subsidiaries has agreed, or is
required, to make any adjustment (x) under Section 481(a) of the
Code by reason of a change in accounting method or otherwise or
(y) pursuant to any provision of the Tax Reform Act of 1986, the
Revenue Act of 1987 or the Technical and Miscellaneous Revenue
Act of 1988.
d. Neither SHOK nor any of its Subsidiaries or any predecessor
or Affiliate of the foregoing has, at any time, filed a consent
under Section 341(f)(1) of the Code, or agreed under Section
341(f)(3) of the Code, to have the provisions of Section
341(f)(2) of the Code apply to any sale of its stock.
e. There is no (nor has there been any request for an)
agreement, waiver or consent providing for an extension of time
with respect to the assessment of any Taxes attributable to SHOK
or its Subsidiaries, or their assets or operations and no power
of attorney granted by SHOK or any of its Subsidiaries with
respect to any Tax matter is currently in force.
f. There is no action, suit, proceeding, investigation, audit,
claim, demand, deficiency or additional assessment in GULF,
pending or threatened against or with respect to any Tax
attributable to SHOK, its Subsidiaries or their assets or
operations.
g. All amounts required to be withheld as of the Closing Date
for Taxes or otherwise have been withheld and paid when due to
the appropriate agency or authority.
h. No property of SHOK is "tax-exempt use property" within the
meaning of Section 168(h) of the Code nor property that SHOK
and/or its Subsidiaries will be required to treat as being owned
by another person pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to GULF true and
complete copies of all income Tax Returns (or with respect to
consolidated or combined returns, the portion thereof) and any
other Tax Returns requested by GULF as may be relevant to SHOK,
its Subsidiaries, or their assets or operations for any and all
periods ending after April 30, 1999, or for any Tax years which
are subject to audit or investigation by any taxing authority or
entity.
j. There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement,
covering any employee or former employee of SHOK or its
Subsidiaries that, individually or collectively, could give rise
to the payment of any amount that would not be deductible
pursuant to Section 280G or 162 of the Code.
6.20. Environmental Matters.
a. At all times prior to the date hereof, SHOK and its
Subsidiaries have complied in all material respects with
applicable environmental laws, orders, regulations, rules and
ordinances relating to the Properties (as hereinafter defined),
the violation of which would have a material adverse effect on
the business or financial condition of SHOK and its Subsidiaries,
taken as a whole, or which would require a payment by SHOK or its
Subsidiaries in excess of $2,000 in the aggregate, and which have
been duly adopted, imposed or promulgated by any legislative,
executive, administrative or judicial body or officer of any
Governmental Body.
b. The environmental licenses, permits and authorizations that
are material to the operations of SHOK and its Subsidiaries,
taken as a whole, are in full force and effect.
c. Neither SHOK nor any of its Subsidiaries has released or
caused to be released on or about the properties currently owned
or leased by SHOK or any of its Subsidiaries (the "Properties")
any (i) pollutants, (ii) contaminants, (iii) "Hazardous
Substances," as that term is defined in Section 101(14) of the
Comprehensive Environmental Response Act, as amended or (iv)
"Regulated Substances," as that term in defined in Section 9001
of the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq., as amended, which would be required to be
remediated by any governmental agency with jurisdiction over the
Properties under the authority of laws, regulations and
ordinances as in effect and currently interpreted on the date
hereof, which remediation would have a material adverse effect on
the business or financial condition of SHOK and its Subsidiaries,
taken as a whole.
6.21. Intentionally left blank
6.22. Absence of Certain Commercial Practices. Except as set
forth in Section 6.22 of the SHOK Disclosure Letter, neither SHOK
nor any of its Subsidiaries has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of
property, however characterized, to any finder, agent, government
official or other party, in the United States or any other
country, which is in any manner related to the business or
operations of SHOK or its Subsidiaries, which SHOK or one of its
Subsidiaries knows or has reason to believe to have been illegal
under any federal, state or local laws of the United States or
any other country having jurisdiction; and neither SHOK nor any
of its Subsidiaries has participated, directly or indirectly, in
any boycotts or other similar practices affecting any of its
actual or potential shareholders in violation of any applicable
law or regulation.
6.23. Transactions with Directors and Officers. Except as set
forth in Section 6.23 of the SHOK Disclosure Letter, SHOK and its
Subsidiaries do not engage in business with any Person in which
any of SHOK's directors or officers has a material equity
interest. No director or officer of SHOK owns any property, asset
or right which is material to the business of SHOK and its
Subsidiaries, taken as a whole.
6.24. Borrowing and Guarantees. Except as set forth in
Section 6.24 of the SHOK Disclosure Letter, SHOK and its
Subsidiaries (a) do not have any indebtedness for borrowed money,
(b) are not lending or committed to lend any money (except for
advances to employees in the ordinary course of business), and
(c) are not guarantors or Sureties with respect to the
obligations of any Person.
6.25. Purchase for Investment. Except as set forth in Section
6.25 of the SHOK Disclosure Letter, SHOK is obtaining the GULF
Shares solely for its own account for the purpose of investment
and not with a view to, or for sale in connection with, any
distribution of any portion thereof in violation of any
applicable securities law.
7. Access and Reporting; Filings With Governmental Authorities;
Other Covenants.
7.1. Access between the date of this Agreement and the Closing
Date. Each of GULF and SHOK shall (a) give to the other's
authorized representatives reasonable access to all of its
plants, offices, warehouse and other facilities and properties,
and to its books and records, (b) permit the other to make
inspections thereof, and (c) cause its officers and its advisors
to furnish the other with such financial and operating data and
other information with respect to the business and properties of
such party and its Subsidiaries and to discuss with such and its
authorized representatives its affairs and those of its
Subsidiaries, as the other may from time to time reasonably
request.
7.2. Exclusivity. From the date hereof until the earlier of the
Closing or the termination of this Agreement, SHOK shall not
solicit or negotiate or enter into any agreement with any other
Person with respect to or in furtherance of any proposal for a
merger or business combination involving, or acquisition of any
interest in, or (except in the ordinary course of business) sale
of assets by, SHOK, except for the exchange of the Shares as
contemplated herein.
7.3. Publicity. Between the date of this Agreement and the
Closing Date, SHOK and GULF shall discuss and coordinate with
respect to any public filing or announcement or any internal or
private announcement (including any general announcement to
employees) concerning the contemplated transaction.
7.4. Regulatory Matters. GULF and SHOK shall (a) file with
applicable regulatory authorities any applications and related
documents required to be filed by them in order to consummate the
contemplated transaction and (b) cooperate with each other as
they may reasonably request in connection with the foregoing.
7.5. Confidentiality. Prior to the Closing Date (or at any time
if the Closing does not occur) each of GULF and SHOK shall keep
confidential and not disclose to any Person (other than its
employees, attorneys, accountants and advisors) or use (except in
connection with the transactions contemplated hereby) all non-
public information obtained pursuant to Section 7.1. Following
the Closing, each of GULF and SHOK shall keep confidential and
not disclose to any Person (other than its employees, attorneys,
accountants and advisors) or use (except in connection. with
preparing Tax Returns and conducting proceeds relating to Taxes)
any nonpublic information relating to the other. This Section 7.5
shall not be violated by disclosure pursuant to court order or as
otherwise required by law, on condition that notice of the
requirement for such disclosure is given the other party prior to
making any disclosure and the party subject to such requirement
cooperates as the other may reasonably request in resisting it.
If the Closing does not occur, each of GULF and SHOK shall return
to the other, or destroy, all information it shall have received
from the other in connection with this Agreement and the
transactions contemplated hereby, together with any copies or
summaries thereof or extracts therefrom. Each of GULF and SHOK
shall use their best efforts to cause their respective
representatives, employees, attorneys, accountants and advisors
to whom information is disclosed pursuant to Section 7.1 to
comply with the provisions of this Section 7.5.
8. Conduct of SHOK's Business Prior to the Closing.
8.1. Operation in Ordinary Course. Between the date of this
Agreement and the Closing Date, SHOK shall conduct its businesses
in all material respects in the ordinary course.
8.2. Business Organization. Between the date of this Agreement
and the Closing Date, SHOK shall (a) preserve substantially
intact the business organization of SHOK; and (b) preserve in all
material respects the present business relationships and good
will of SHOK and each of its Subsidiaries.
8.3. Corporate Organization. Except as required by GULF, between
the date of this Agreement and the Closing Date, SHOK shall not
cause or permit any amendment of its certificate of incorporation
or by-laws (or other governing instrument) and shall not:
a. issue, sell or otherwise dispose of any of its Equity
Securities, or create, sell or otherwise dispose of any options,
rights, conversion rights or other agreements or commitments of
any kind relating to the issuance, sale or disposition of any of
its Equity Securities;
b. create or suffer to be created any Encumbrance thereon, or
create, sell or otherwise dispose of any options, rights,
conversion rights or other agreements or commitments of any kind
relating to the sale or disposition of any Equity Securities;
c. reclassify, split up or otherwise change any of its Equity
Securities;
d. be party to any merger, consolidation or other business
combination;
e. sell, lease, license or otherwise dispose of any of its
properties or assets (including, but not limited to rights with
respect to patents and registered trademarks and copyrights or
other proprietary rights), in an amount which is material to the
business or financial condition of SHOK and its Subsidiaries,
taken as a whole, except in the ordinary course of business; or
f. organize any new Subsidiary or acquire any Equity Securities
of any Person or any equity or ownership interest in any
business.
8.4. Other Restrictions. Except as required by GULF, between the
date of this Agreement and the Closing Date, SHOK shall not:
a. borrow any funds or otherwise become subject to, whether
directly or by way of guarantee or otherwise, any indebtedness
for borrowed money;
b. create any material Encumbrance on any of its material
properties or assets;
c. except in the ordinary course of business, increase in any
manner the compensation of any director or officer or increase in
any manner the compensation of any class of employees;
d. create or materially modify any material bonus, deferred
compensation, pension, profit sharing, retirement, insurance,
stock purchase, stock option, or other fringe benefit plan,
arrangement (any other employee benefit plan as defined in
section 3(3) of ERISA);
e. make any capital expenditure or acquire any property or
assets;
f. enter into any agreement that materially restricts SHOK,
GULF or any of their Subsidiaries from carrying on business;
g. pay, discharge or satisfy any material claim, liability or
obligation, absolute, accrued, contingent or otherwise, other
than the payment discharge or satisfaction. in the ordinary
course of business of liabilities or obligations reflected in the
SHOK Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the date of the
SHOK Financial Statements; or
h. cancel any material debts or waive any material claims or
rights.
9. Definitions.
As used in this Agreement, the following terms have the meanings
specified or referred to in this Section 9.
9.1. "Business Day" - Any day that is not a Saturday or Sunday or
a day on which banks located in the City of New York are
authorized or required to be closed.
9.2. "Code" - The Internal Revenue Code of 1986, as amended.
9.3. "Disclosure Letter" - A letter dated the date of this
Agreement, executed by either GULF and SHOK, addressed and
delivered to the other and containing information required by
this Agreement and exceptions to the representations and
warranties under this Agreement.
9.4. "Encumbrances" - any security interest, mortgage, lien,
charge, adverse claim or restriction of any kind, including, but
not limited to, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of
ownership, other than a restriction on transfer arising under
Federal or state securities laws.
9.5. "Equity Securities" See Rule 3a11-l under the Securities
Exchange Act of 1934.
9.6. "ERISA" - The Employee Retirement Income Security Act of
1974, as amended.
9.7. "Governmental Body" - Any domestic or foreign national,
state or municipal or other local government or multi-national
body (including, but not limited to, the European Economic
Community), any subdivision, agency, commissioner authority
thereof.
9.8. "Knowledge" - Actual knowledge, after reasonable
investigation.
9.9. "Person" - Any individual, corporation, partnership, joint
venture, trust, association, unincorporated organization, other
entity, or Governmental Body.
9.10. "Subsidiary" - With respect to any Person, any
corporation of which securities having the power to elect a
majority of that corporation's Board of Directors (other than
securities having that power only upon the happening of a
contingency that has not occurred) are held by such Person or one
or more of its Subsidiaries.
10. Termination.
10.1. Termination. This Agreement may be terminated only as
follows:
a. Prior to Closing:
1. By GULF at any time, by notice to SHOK.
2. By written agreement of GULF and SHOK at any time.
3. By SHOK, by notice to GULF at any time, if one or more of
the conditions specified in Section 3 is not satisfied at the
time at which the Closing (as it may be deferred pursuant to
Section 2.1) would otherwise occur or if satisfaction of such a
condition is or becomes impossible.
4. By GULF, by notice to SHOK at any time, if one or more of
the conditions specified in Section 4 is not satisfied at the
time at which the Closing (as it may be deferred pursuant to
Section 2.1), would otherwise occur or if satisfaction of such a
condition is or becomes impossible.
b. By GULF or SHOK, by notice to the other at any time after
sixty days following the Closing.
10.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall terminate without
any liability or further obligation of any party to another.
Notwithstanding the remainder of this Section, if the termination
occurs after Closing, each party will cooperate in taking
whatever steps may be necessary to return GULF and SHOK to their
positions prior to the Closing, with all costs to be borne by
GULF.
11. Intentionally left blank.
12. Intentionally left blank.
13. Notices. All notices, consents, assignments and other
communications under this Agreement shall be in writing and shall
be deemed to have been duly given when (a) delivered by hand, (b)
sent by telex or facsimile (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt
requested, or (c) received by the delivery service (receipt
requested), in each case to the appropriate addresses, telex
numbers and facsimile numbers set forth below (or to such other
addresses, telex numbers and facsimile numbers as a party may
designate as to itself by notice to the other parties),
(a) If to SHOK:
Facsimile No.:
Attention:
With a copy to:
Xxxxx Law Group
0000 Xxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile No.:
Attention:
(b) If to GULF:
Facsimile No.:
Attention:
With a copy to:
Xxxxxxx & Xxxxxxxx, Ltd.
000 X. Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
14. Miscellaneous.
14.1. Expenses. Each party shall bear its own expenses
incident to the preparation, negotiation, execution and delivery
of this Agreement and the performance of its obligations
hereunder.
14.2. Captions. The captions in this Agreement are for
convenience of reference only and shall not be given any effect
in the interpretation of this agreement,
14.3. No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not
be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver must be in writing.
14.4. Exclusive Agreement; Amendment. This Agreement
supersedes all prior agreements among the parties with respect to
its subject matter with respect thereto and cannot be changed or
terminated orally.
14.5. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original,
but all of which together shall constitute the same instrument.
14.6. Governing Law. This Agreement and (unless otherwise
provided) all amendments hereof and waivers and consents
hereunder shall be governed by the internal law of the State of
Nevada, without regard to the conflicts of law principles thereof
14.7. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns, provided that neither party
may assign. its rights hereunder without the consent of the
other, provided that, after the Closing, no consent of GULF shall
be needed in connection with any merger or consolidation of SHOK
with or into another entity.
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto
duly authorized, and entered into as of the date first above
written.
Xxxxxxxxxxxxxx.Xxx, INC. GULFTEX ENERGY CORP.
By: By:
Its: Its:
