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Exhibit 10.01
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT ("Agreement") is entered into effective this 3rd
day of January, 2000, by and between XXXXXX INDUSTRIES, INC., a Utah
corporation, in good standing, with offices at 00 X. Xxxxx Xxx. #000,
Xxxxxxxx, XX 00000 ("Buyer") and each of the undersigned partners (the
"Partners") of VISTA PHOTOGRAPHIC & VIDEO GROUP, LTD., a Texas limited
partnership, in good standing, with offices at 0000 Xxxxxxx Xxxx Xxxxxx, XX
00000 (the "Partnership"), based on the following:
PREMISES
A. The Partnership is a business with assets which include (i) a going-
concern business in the video production and Internet media streaming
industries, (ii) video production equipment, (iii) customer accounts and
relationships with respect to the foregoing business, (iv) office furniture
and fixtures, and (v) certain cash and accounts receivable as per Schedule
1.01 (the "Assets").
B. Each of the Partners desires to contribute his entire respective ownership
interest (the "Partnership Interest") in the Partnership to Buyer in exchange
for shares of the common stock, $0.001 par value, of Buyer (the "Common
Stock"), and other good and valuable consideration as set forth herein.
C. The Partners are the only partners of the Partnership, and no other person
or entity has an interest in the Partnership or in the respective Partnership
Interests of the Partners.
D. The parties have reached an agreement as to the terms of the foregoing
contribution of the Partnership Interests and desire to set forth in this
Agreement the details of those terms.
AGREEMENT
NOW THEREFORE, based on the above premises and in consideration of the mutual
covenants, representations, and warranties set forth below and the mutual
benefits to be derived from the transactions contemplated by this Agreement,
it is agreed as follows:
ARTICLE I
CONTRIBUTION OF PARTNERSHIP INTERESTS, TERMINATION OF THE PARTNERSHIP, AND
CERTAIN RELATED MATTERS
Section 1.01 Contribution. In consideration for the issuance of an aggregate
number of shares of Common Stock (the "Shares"), which collectively shall
represent at least twenty-five percent (25.00%) of the total outstanding
shares of Common Stock of Buyer on a fully diluted basis as of the time at
which the contribution of the Partnership Interests and the issuance of the
Shares becomes effective (the "Closing"), and after giving effect to the
funding contemplated under Section 1.05, and other good and valuable
consideration, each of the Partners agrees to contribute and assign to Buyer,
and Buyer hereby agrees to accept, and does hereby accept, the Partnership
Interest of such Partner. The shares of Common Stock issuable hereunder shall
be allocated in accordance with Schedule 1.03.
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Section 1.02 Termination of Partnership; Assumption of Partnership
Obligations. Buyer and each of the Partners hereby agree that all of the
assets and liabilities of any kind, arising at any time before or after the
Closing, of the Partnership shall become the assets and liabilities of Buyer,
and the separate existence of the Partnership shall hereafter cease and be
deemed to be a part of Buyer. Schedule 1.02 contains a description of certain
material liabilities of the Partnership. At the time of the Closing, Buyer
shall cause the indebtedness of the Partnership to Xxxxx Fargo and certain of
the Partners, in the principal amounts set forth in Schedule 1.02, together
with all outstanding interest thereon, to be paid in full, except for an
aggregate $150,000 which is owed to Messrs. Xxxxxx, Xxxxxx and Xxxxxx (the
"Partner Debt"). As part of the foregoing, Buyer shall pay at Closing
$50,000 to Xx. Xxxxxx and $25,000 to Xx. Xxxxxx as partial repayment for
amounts owed to them by the Partnership. Buyer shall assume the obligation
for payment of the Partner Debt by issuing promissory notes (the "Partner
Notes") in the principal amount of $50,000 to each of the foregoing Partners.
The principal balances of the Partner Notes shall bear interest at a rate per
annum equal to the prime rate (as published in the Wall Street Journal) plus
1% (adjusted at the end of each calendar month), and accrued interest shall be
payable monthly. Payments of outstanding principal under the Partner Notes
will be made within thirty (30) days of the end of each fiscal quarter of the
Buyer until the Partner Notes are paid in full. Such payments of principal
will be paid on a pro rata basis to each of the three Partners from the
quarterly net profits earned by Buyer, calculated in accordance with generally
accepted accounting principals consistently applied, as set forth in Buyer's
SEC Documents (as defined below). The Partner Notes shall be secured by the
Assets. If the contribution of the Partnership Interests should not close for
any reason, regardless of fault, all shares of Common Stock that have been
registered to the Partners shall be canceled.
Section 1.03 Instruments of Conveyance and Transfer. The Partners and Buyer
agree to deliver at Closing:
(a) the Partners shall deliver such instruments of conveyance and transfer,
in form satisfactory to Buyer and its counsel, as shall be effective to vest
in Buyer marketable title to the Partnership Interests; and
(b) Buyer agrees to deliver certificates for the Common Stock of Buyer, in
such amounts and to such order as requested by the Partners and as set forth
on Schedule 1.03 hereto, which will collectively represent 25% of the total
outstanding shares as of the date of the Closing (after giving effect to the
funding contemplated under Section 1.05). The Partners acknowledge that the
issuance of such shares is not being registered under the Securities Act of
1933, as amended (the "Securities Act") or any state securities laws, and that
such shares will be "restricted securities" for purposes of Rule 144
promulgated under the Securities Act.
Section 1.04 Further Assurances. Upon execution of this Agreement, the
Partners shall give to Buyer and to Buyer's representatives, auditors, and
counsel full access during normal business hours to all of the assets and
documents relating to the Partnership as Buyer may reasonably request.
Promptly upon execution of this Agreement, the Partners shall use their
reasonable efforts to obtain all consents (including, without limiting the
generality of the foregoing, consents of any governmental agencies) necessary
to the assignment and transfer to Buyer to effect the contributions set out in
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Section 1.01. After the Closing, and at Buyer's request and without further
consideration, the Partners agree to execute and deliver at their own expense
such other instruments of transfer and take such other action as Buyer
reasonably may require to more effectively transfer, and put Buyer in
possession of the Partnership Interests. If by the Closing any contracts or
rights have not been transferred to Buyer effectively, because of the non-
consent of a third party, the Partners agree to seek to obtain such consent
promptly. If any such consents are unobtainable, and the parties nonetheless
agree to proceed with the Closing, the Partners agree to use their best
commercial efforts to provide Buyer with the benefits of the contracts and
rights, if any, in some other manner.
Section 1.05 Funding of Buyer's Business. Buyer agrees to demonstrate to the
Partner's full satisfaction, funding commitments for a minimum of $1,000,000
to be invested in the equity of Buyer at Closing (the "Equity Financing").
Buyer covenants and agrees to use the proceeds from the Equity Financing in a
manner consistent with Schedule 1.05 hereto. In order to ensure that Buyer
uses the proceeds in such a manner, the entire net proceeds of the Equity
Financing shall be placed into an interest bearing checking account with Xxxxx
Fargo Bank, or another mutually agreed upon bank, which shall require the
joint signatures of the President of Buyer and the Partners' Representative
(as defined in Section 1.06 below) for any withdrawal, encumbrance or other
transfer of any amounts (including accrued interest) from or to the account to
be effected. Buyer shall not allow any liens to be placed upon the account or
the proceeds therein.
1.06 Partners' Agent as Partners Representative. Each of the Partners shall
enter into a Shareholders Agreement at the Closing (the "Shareholders
Agreement"), which shall govern all matters relating to the voting rights of
the Partners with respect to their respective shares of Common Stock. The
Shareholders Agreement shall provide for the election, appointment and
replacement of one of the Partners as a representative of the Partners with
respect to all matters between Buyer and such Partners under this Agreement
(the "Partners' Representative"). The Partners' Representative will also
serve as one of the representatives of the Partners on the Board of Directors,
in accordance with Section 4.05 hereof. The Partners hereby designate the
Partners' Agent elected pursuant to the Shareholders' Agreement from time to
time to serve as their sole and exclusive agent with respect to their rights
under this Agreement and the other documents executed at Closing (the "Closing
Papers"), except for rights as shareholders or as parties to the Shareholders'
Agreement. Whenever the Partners are entitled to receive a report, exercise a
right, enforce an obligation or otherwise pursue a right under this Agreement
or any Closing Paper, the Partners' Agent shall have the sole and exclusive
authority and responsibility to receive such report, exercise such right,
enforce such obligation or otherwise pursue such right. A Majority in
Interest (as defined below) of the Partners may at any time and from time to
time, remove the Partners' Agent and elect a new Person to serve as the
Partners' Agent under this Agreement. Mr. Xxxxx Xxxxxx has been appointed
under the Shareholders' Agreement to serve as the Partners' Agent until such
time as it resigns or is removed as such by a Majority in Interest of the
Partners. Xx. Xxxxxx and any subsequent Partners' Agent shall execute an
addendum to the Shareholders' Agreement, agreeing to be bound thereto as the
"Partners' Agent" under such agreement. A "Majority In Interest" of the
Partners shall mean, as of a specific time, the Partners holding greater than
fifty percent (50%) of the outstanding Shares.
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Section 1.07 Closing. The Closing of the contributions provided for in
Section 1.01 shall take place at a mutually convenient time and place on
January 14, 2000, or such later date as is mutually agreed upon in writing by
both Buyer and the Partners (the "Closing Date").
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE PARTNERS
Each of the Partners, jointly and not severally, represents, warrants, and
covenants as follows:
Section 2.01 Approval of Agreements. Such Partner has the full and proper
authority to execute and deliver this Agreement, and no other authorization or
approval is required for such Partner to execute and deliver this Agreement.
Section 2.02 Condition of Assets. The Assets are in operating condition and
in a good state of maintenance and repair. The Partners promise to cause the
Partnership to maintain the Assets in good operating order and in a good state
of health, maintenance and repair through the Closing. Allowances will,
however, be made by Buyer for ordinary wear and tear incurred during normal
operation by the Partnership.
Section 2.03 Taxes. The Partners agree that all taxes and assessments, if
any, with respect to the Assets covered by this Agreement will be prorated as
of the Closing Date, and allocated amongst thereon a pro rata basis in
accordance with Schedule 1.03. Any existing tax liens or any tax liens which
may arise as a result of any activity of the Partners conducted prior to
Closing, will be the sole and absolute responsibility of the Partners, and
allocated amongst them a pro rata basis in accordance with Schedule 1.03.
Section 2.04 Title to Assets; Partnership Interests.
(a) The Partnership has good and marketable title to the Assets free and
clear of all liens and encumbrances, except: (i) any liens, claims, and
encumbrances disclosed in Schedule 1.02; and (ii) imperfections of title and
encumbrances, disclosed to Buyer before Closing, that are not substantial in
character, amount, extent, or that do not materially lessen the value of or
interfere with the present use of the Assets; and
(b) Such Partner has good and marketable title to its respective
Partnership Interest, free and clear of all liens and encumbrances.
Section 2.05 Litigation. Such Partner knows of no litigation, proceeding, or
governmental investigation that is pending or threatened against or relating
to the Partnership or the transactions contemplated by this Agreement. As far
as such Partner knows, no basis exists for any such action. If any litigation
or proceeding arises, to which Buyer is involuntarily made a party, as a
result of any inaction, activities, or actions of such Partner occurring prior
to or including the Closing, such Partner shall indemnify and hold Buyer
harmless from all damages, claims, and expenses (including attorney fees)
resulting from the litigation or proceeding.
Section 2.06 Expenses and Taxes of Transactions Contemplated by this
Agreement. Except as provided in Section 8.12, the Partner will pay:
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(a) all of its own expenses; and
(b) all taxes payable by such Partner in connection with the sales,
assignments, transfers, conveyances, and deliveries made pursuant to this
Agreement.
Section 2.07 Disclosure. No representation or warranty by the Partner
contained in this Agreement, any written certificate, list or other instrument
furnished or to be furnished Buyer pursuant hereto or in connection with the
transaction contemplated by this Agreement contains or will contain any untrue
statement of a material fact. Nor does, or will, any representation, warranty,
or instrument omit to state a material fact necessary in order to make the
statements and information contained therein not misleading or necessary in
order to provide Buyer with full and proper information as to the Partnership.
Section 2.08 Financial Statements.
(a) Included in Schedule 2.08 are the unaudited balance sheet of the
Partnership as of September 30, 1999, and the related statements of
operations, cash flows and partners' equity for the period from inception to
September 30, 1999, including the notes thereto and representations by the
general partner of the Partnership to the effect that such financial
statements contain all adjustments (all of which are normal recurring
adjustments) necessary to present fairly the results of operations and
financial position for the periods and as of the dates indicated.
(b) Within 60 days of the Closing, the Partnership shall provide the
Company an audited balance sheet of the Partnership as of December 31, 1999,
and the related statements of operations cash flows, and partners' equity for
the period from inception to December 31, 1999.
(c) The audited financial statements delivered pursuant to paragraph (b)
above will be prepared in accordance with United States generally accepted
accounting principles consistently applied throughout the periods involved and
be audited by certified public accountants licensed to practice in the United
States and before the Securities and Exchange Commission (the "SEC"). The
audited financial statements will be presented in accordance with the
requirements of Regulation S-X promulgated by the SEC regarding the form and
content of and requirements for financial statements to be filed with the SEC.
(d) The books and records, financial and otherwise, of the Partnership are
in all material respects complete and correct and have been maintained in
accordance with sound business and bookkeeping practices so as to accurately
and fairly reflect, in reasonable detail, the transactions of and dispositions
of the assets of the Partnership.
(e) The Partnership has filed or will have filed as of the Closing Date all
tax returns required to be filed by it from inception to the Closing Date.
All such returns and reports are accurate and correct in all material
respects. Proper and accurate amounts of taxes have been withheld by or on
behalf of the Partnership with respect to all material compensation paid to
employees of the Partnership for all periods ending on or before the date
hereof, and all deposits required with respect to compensation paid to such
employees have been made, in complete compliance with the provisions of all
material accrual or material arrangement for or payment of bonuses or special
compensation applicable federal, state, and local tax and other laws.
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Section 2.09 Employee Relations. The Partnership and Partners have complied
in all material respects with all applicable laws, rules, and regulations that
relate to salaries, wages, hours, harassment, disabled access, overtime
compensation, employee privacy rights, occupational health and safety and
discrimination in employment and collective bargaining and to the operation of
its business and is not liable for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing, except as set forth
on the financial statements attached as Schedule 2.08 hereto.
Section 2.10 Acquisition of the Buyer's Common Stock. The Buyer and the
Partners understand and agree that the consummation of this Agreement
including the issuance of the Common Stock to the Partners in exchange for
their respective interests in the Partnership as contemplated hereby,
constitutes an offer and sale of securities under the Securities Act and
applicable state statutes. The Buyer and the Partners agree that such
transactions shall be consummated in reliance on exemptions from the
registration and prospectus delivery requirements of such statutes which
depend, among other items, on the circumstances under which such securities
are acquired.
(a) The Partner acknowledges that neither the SEC nor the securities
commission of any state or other federal agency has made any determination as
to the merits of acquiring the Common Stock, and that this transaction
involves certain risks.
(b) The Partner has no present intention of dividing the Shares to be
received or the rights under this Agreement with others or of reselling or
otherwise disposing of any portion of such stock or rights.
(c) The Partners understand that the Shares have not been registered, but
are being acquired by reason of a specific exemption under the Securities Act
as well as under certain state statutes for transactions not involving any
public offering and that any disposition of the subject Shares must be made in
compliance with the applicable rules and regulations of the Securities Act.
(d) The Partners acknowledge that the Shares must be held and may not be
sold, transferred, or otherwise disposed of for value unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available.
Section 2.11 Information. The Partner has been furnished all documents
relating to the business, finances and operations of the Buyer which the
Partner requested from Buyer and has been able to evaluate the risks and
merits associated with an investment in the Common Stock to its satisfaction.
The Partner has been afforded the opportunity to ask questions of Buyer's
representatives concerning Buyer in making the decision to acquire the Common
Stock, and such questions have been answered to its satisfaction.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF BUYER
Buyer represents, warrants and covenants as follows:
Section 3.01 Organization. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Utah. Buyer has
the corporate power and is authorized under all applicable laws to own or
lease all of its property and equipment and to carry on its business in all
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material respects as it is now being conducted. The execution of this
Agreement and the consummation of the transactions required by this Agreement
in accordance with the Agreement's terms does not violate any provision of
Buyer's articles of incorporation or bylaws. Buyer has the power and
authority to execute, deliver and perform this Agreement. This Agreement has
been duly executed and delivered by Buyer and is a valid and binding
obligation of Buyer, enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, reorganization and related laws and
general principals of equity.
Section 3.02 Subsidiaries. Schedule 3.02 hereto sets forth each subsidiary
of Buyer, showing the jurisdiction of its incorporation or organization. Each
subsidiary is validly existing and in good standing under the laws of the
state or other jurisdiction of its incorporation and has the requisite
corporate power to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted. All of the outstanding
shares of capital stock of each subsidiary have been duly authorized and
validly issued, and are fully paid and nonassessable and are owned by Buyer.
Section 3.03 Approval of Agreements. Buyer has the corporate power and
authority to execute, deliver and perform its obligations under this
Agreement. Buyer has obtained all necessary corporate and other approvals in
order to authorize the execution and delivery of this Agreement by Buyer and
the performance of the transactions contemplated pursuant to this Agreement,
except that Buyer must obtain shareholder approval for an amendment to its
certificate of incorporation (the "Certificate of Amendment") to increase the
number of authorized shares of Common Stock in order to issue the Shares. At
the Closing, Buyer shall deliver to the Partners a copy of any Board of
Directors or shareholder resolutions granting authorizations and approvals for
the transactions contemplated by this Agreement.
Section 3.04 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, or
constitute an event of default under, (a) any applicable laws, rules or
regulations to which Buyer or its businesses are subject, or (b) any material
indenture, mortgage, deed of trust, or other material contract, agreement, or
instrument to which the Buyer is a party or to which any of Buyer's properties
or operations are subject.
Section 3.05 SEC Documents. Buyer has filed with the Securities and
Exchange Commission (the "SEC") all reports, statements, schedules and other
documents (collectively, the "SEC Documents") required to be filed by it
pursuant to the Securities Act and the Securities Exchange Act of 0000 (xxx
"Xxxxxxxx Xxx"). Since December 31, 1998, all SEC Documents required to be
filed were timely filed, except for those listed on Schedule 3.05 hereto. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated thereunder, and
none of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements included
in the SEC Documents (the "Financial Statements") complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Except (i) as may be
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indicated in the notes to the Financial Statements or (ii) in the case of the
unaudited interim statements, as permitted by Form 10-Q under the Exchange
Act, the Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied and fairly present in all
material respects the financial position of Buyer and its subsidiaries as of
the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
recurring year-end adjustments and footnotes). Except as set forth in the
Financial Statements filed with the SEC prior to the date hereof, neither
Buyer nor any of its subsidiaries has any liabilities, whether absolute,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such Financial Statements, (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such Financial Statements, which liabilities and obligations
referred to in clauses (i) and (ii), individually or in the aggregate, are not
material to the financial condition or operating results of Buyer or any of
its subsidiaries and (iii) liabilities and obligations incurred in connection
with this Agreement.
Section 3.06 Capitalization. The authorized and issued capital stock of
Buyer is as listed on Schedule 3.06. All such issued and outstanding shares
are, or will be when issued in accordance with this Agreement, duly authorized
and validly issued, fully paid and nonassessable. Buyer has reserved such
number of shares of Common Stock for issuance pursuant to its existing stock
option plans as is set forth on Schedule 3.06. The outstanding rights,
options, warrants, conversion rights or agreements for the purchase or
acquisition from Buyer of any shares of its capital stock are set forth on
Schedule 3.06. Except as described above, there are no other outstanding
warrants, options, conversion privileges, preemptive rights, or other rights
or agreements, to purchase or otherwise acquire or issue any equity securities
of Buyer. Buyer has not declared, paid, made or set aside or agreed, arranged
or committed to so do, any dividend, payment or distribution to its
shareholders.
Section 3.07 No Material Adverse Change. Since December 31, 1998, the
business of Buyer and each subsidiary has been operated in the ordinary course
and substantially consistent with past practice and there has not been any
material adverse change in the business, assets, financial condition, results
of operations, affairs or prospects of Buyer or any of its subsidiaries (a
"Material Adverse Change").
Section 3.08 Registration Rights. The only registration rights, including
piggyback rights, granted (or agreed to be granted) to any person or entity
other than the Partners' are set forth on Schedule 3.08. None of the
registration rights disclosed on Schedule 3.08 are senior in priority to the
registration rights provided for in this Agreement.
Section 3.09 Market for Common Stock. The Common Stock is quoted on the
over-the-counter market as quoted by the NASD's OTC Bulletin Board, and there
are no proceedings to revoke or suspend such listing. The transfer of the
Common Stock as contemplated hereby will not result in a violation of the NASD
rules and regulations.
Section 3.10 No Misrepresentation. No representation or warranty by Buyer
in this Agreement (including any Exhibit or Schedule hereto) and no statements
of Buyer contained in any document, certificate, schedule or other information
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furnished or to be furnished by or on behalf of Buyer pursuant to this
Agreement contains or shall contain any untrue statement of material fact or
omits or shall omit to state a material fact required to be stated therein or
necessary in order to make such statements, in light of the circumstances
under which they were made, not misleading. Except for the transactions
contemplated hereby, no event or circumstance has occurred or exists with
respect to Buyer or any of its subsidiaries or their respective business
affairs, assets, properties, prospects, operations or financial condition
which has not been publicly disclosed, but which, under applicable law, rule
or regulation, would be required to be disclosed by Buyer in a registration
statement filed on the date hereof by Buyer under the Securities Act with
respect to the primary issuance of the Company's securities. Buyer has
delivered true and complete copies of all documents requested by the
Purchasers.
Section 3.11 No Brokers or Finders. No person or entity has or will have,
as a result of any engagement or contractual obligation incurred by Buyer, any
right, interest or valid claim against any Partner for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, in
connection with the transactions contemplated by this Agreement.
Section 3.12 Information. Buyer has been furnished all documents relating
to the business, finances and operations of the Partnership which Buyer
requested from the Partnership and has been able to evaluate the risks and
merits associated with an investment in the Partnership Interests to its
satisfaction. Buyer has been afforded the opportunity to ask questions of the
Partnership's representatives concerning Partnership in making the decision to
acquire the Partnership Interests, and such questions have been answered to
its satisfaction. Buyer acknowledges that the value of the Partnership
Interests contributed by the Partners has been determined by Buyer's use of
projections of future results of the Partnership, and that there is no
guaranty that such results of the Partnership or any particular return on the
Partnership Interests will be achieved.
ARTICLE IV
SPECIAL COVENANTS
Section 4.01 Encumbrances. The Partners agree that between the date hereof
and the Closing, the Partners shall provide the Buyer with a list of all UCC-1
filings setting forth all encumbrances on the Assets.
Section 4.02 Access to Information. The Partners and Buyer agree that until
the Closing, during normal business hours, the Partners will afford Buyer, its
counsel and accountants with full access to the Partnership's records and
other data relating to its business as Buyer may reasonably request.
Section 4.03 Indemnification of Buyer. The Partners agree to defend and
indemnify Buyer against:
(a) All liabilities of the Partners which are not expressly assumed by
Buyer pursuant to this Agreement; and
(b) All proceedings, claims, and expenses incident to any of the foregoing,
provided, however, that if any of the foregoing are commenced against Buyer,
in respect of which Buyer proposes to demand indemnification, the Partners
shall be notified to that effect promptly. The Partners shall have the right
to assume entire control of the defense, compromise, or settlement thereof,
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including employment at its expense of counsel satisfactory to Buyer. In
connection with such defense, Buyer shall cooperate fully to make available to
the Partners all pertinent information under Buyer's control.
Section 4.04 Termination or Rescission of Agreement. If Buyer should become
aware of any undisclosed liens, liabilities, or encumbrances relating to the
Partnership Interests within the first six months subsequent to the Closing,
Buyer shall be permitted, at its option, to either (i) rescind this Agreement
and cancel all shares issued pursuant hereto; (ii) or reduce the number of
shares issued as part of the contribution of the Partnership Interests
affected thereby based on the proportion of the difference between the
undisclosed liability at Closing as it relates to the value of such shares at
Closing.
Section 4.05 Board of Directors. Upon Closing and until the Partners no
longer hold shares of Common Stock, the Majority in Interest of the Partners
may by notice in writing addressed to Buyer from time to time appoint one (1)
person to serve on the Board of Directors of Buyer. The Majority in Interest
of the Partners may remove the person representing them on the Board of
Directors, and shall have the sole right to appoint a person to fill any
vacancy created by the resignation, removal, incapacity or retirement of any
persons representing them on the Board of Directors by written notice to
Buyer. In the event the number of members of the Board of Directors shall be
increased, the Majority in Interest of the Partners shall be entitled to
designate such additional number of directors as is necessary to allow them to
designate and elect at least one-third of the members of the Board of
Directors (rounded up to the nearest whole number of directors). At least
one of the appointees of the Partners shall be the Partners' Representative.
Section 4.06 Future Issuances and Sales of Stock. Except as currently
provided by Buyer's stock option plans, Buyer may not authorize, issue or
sell, directly or through any subsidiary, any shares of capital stock or
securities or instruments convertible into such shares without the prior
written consent of the Majority Partners. In addition, Buyer shall not enter
into any merger or similar transaction in which Buyer is not the surviving
corporation without the prior written consent of the Majority Partners.
Section 4.07 Employees of the Business. After the Closing, Buyer will offer
employment to all of the current employees of the Partnership on terms that
are reasonably consistent with their terms of employment by the Partnership,
including without limitation any rights to employee benefits. Buyer
acknowledges, however, that one or more of the Partners may contact and
solicit Xxxx Xxxxx regarding possible employment with respect to another
business currently being pursued by them. Schedule 4.07 sets forth a list of
the employees of the Partnership and their current compensation as of the date
of this Agreement.
Section 4.08 Covenants of Buyer. Buyer hereby covenants that:
(a) Exchange Act Filings. Buyer shall use its best efforts to file in a
timely manner all reports and other documents required to be filed by it under
the Exchange Act, and, promptly upon filing, deliver copies of such reports to
each Partner. Buyer shall not terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the rules and
regulations promulgated thereunder would permit such termination.
(b) Use of Proceeds. Buyer shall use the net proceeds from the Equity
Financing in accordance with the provisions of Section 1.05.
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(c) Nasdaq Requirements. Buyer shall use its best efforts to continue to
meet all requirements necessary for inclusion of the Common Stock in the over-
the-counter market or any other market or exchange on which it subsequently
becomes listed or quoted.
(d) Removal of Legends. Any legend endorsed on a certificate pursuant to
the Shares being "restricted securities," and any related stop transfer
instructions with respect to any Shares shall be removed, and Buyer shall
within two (2) business days cause its transfer agent to issue promptly a
certificate without such legend to the holder thereof, if (i) such Shares
shall be registered under the Securities Act, (ii) such legend may be properly
removed under the terms of Rule 144 under the Securities Act or (iii) such
holder shall provide Buyer with an opinion of counsel, reasonably satisfactory
to Buyer, to the effect that a sale, transfer or assignment of such Shares may
be made pursuant to Rule 144(k) under the Securities Act.
(e) Within ten (10) calendar days from the date of this Agreement, Buyer
will have completed and filed with the Secretary of State of Utah the
Certificate of Amendment authorizing sufficient additional shares of Common
Stock to satisfy the obligations of Buyer under this Agreement (and any other
notes, instruments or agreements convertible into Common Stock) to issue such
stock. Buyer will promptly after the completion of such filing and at all
times thereafter take such actions as are necessary to reserve such number of
shares of Common Stock as are from time to time issuable under such notes,
instruments or agreements.
Section 4.09 Additional Information and Financial Statements. To the extent
required, the Buyer and the Partnership shall utilize their best efforts and
cooperate to provide the financial information necessary to present the pro
forma consolidated financial statements, including a pro forma consolidated
balance sheet, pro forma consolidated income statements, for all periods
required to be presented, including the notes thereto, and in the form and
manner required for use in the Form 8-K [Item 2. Acquisition or Disposition of
Assets and Item 7. Financial Statements and Exhibits] and/or any other
document required to be filed with the SEC, requiring the presentation of the
Buyer's financial statements under generally accepted accounting principles.
Section 4.10 Compliance with Federal and State Blue Sky Laws
(a) In connection with the transaction contemplated by this Agreement, the
Buyer and the Partners shall each file, with the assistance of the other and
their respective legal counsel, such notices, applications, reports, or other
instruments as may be deemed by them to be necessary or appropriate in an
effort to document reliance on such exemptions, and the appropriate regulatory
authority in the states where the Partners reside unless an exemption
requiring no filing is available in such jurisdictions, all to the extent and
in the manner as may be deemed by such parties to be appropriate.
(b) In order to more fully document reliance on the exemptions as provided
herein, the Buyer, the Partners, and the Partnership shall execute and deliver
to the other, at or prior to the Closing, such further letters of
representation, acknowledgment, suitability, or the like as the Buyer or the
Partnership and their respective counsel may reasonably request in connection
with reliance on exemptions from registration under such securities laws.
12
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are subject to the satisfaction,
before the Closing, of the following conditions:
(a) All proceedings taken by the Partners in connection with the
transactions contemplated by this Agreement and all instruments and documents
required in connections herewith shall be reasonably satisfactory in form and
substance to Buyer and its counsel;
(b) The representations and warranties of the Partners contained in this
Agreement and the information in all Schedules, certificates, documents, and
other writings delivered to Buyer shall be deemed to have been made and
delivered again at the Closing and all shall then be true and complete in all
material respects. The Partners shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or
complied with by them prior to or at Closing;
(c) There shall have been no Material Adverse Changes in the Partnership
Interests of the Partners to be contributed pursuant to this Agreement;
(d) The Partners shall have paid or made arrangements for payment at the
Closing, through payments into escrow or similar arrangements, of all
obligations, the repayment of which are secured by a lien, claim, or
encumbrance on any of the Partnership Interests to be conveyed or transferred
to Buyer; and
(e) The Partners shall not be a party to, or threatened with, any
litigation or proceeding relating to any transactions contemplated by the
Agreement that, in the good faith judgment of Buyer's counsel, would
materially affect the desirability of carrying out this Agreement from Buyer's
point of view.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERS
The obligations of the Partners under this Agreement are subject to the
satisfaction, before the Closing, of the following conditions:
(a) All proceedings taken by Buyer in connection with the transactions
contemplated by this Agreement and all instruments and documents required in
connections herewith shall be reasonably satisfactory in form and substance to
the Partners and their counsel;
(b) The representations and warranties of Buyer contained in this Agreement
and the information in all Schedules, certificates, documents, and other
writings delivered to delivered to the Partners pursuant hereto, including the
SEC Documents, shall be deemed to have been made again at the Closing and
shall then be true in all material respects;
(c) Buyer shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing;
13
(d) The Partners shall have been furnished with certificates of appropriate
officers of Buyer, dated the Closing date, certifying in such details as the
Seller may reasonably request to the fulfillment of the foregoing conditions;
(e) There shall have been no Material Adverse Changes in Buyer's assets or
properties, or the Common Stock (including without limitation any delisting or
suspension in the quoting thereof on the over-the-counter market or other
related proceedings with respect thereto) to be transferred pursuant to this
Agreement;
(f) Neither the Partners or Buyer shall be a party to, or threatened with,
any litigation or proceeding relating to any transactions contemplated by the
Agreement that, in the good faith judgment of the Partners' counsel, would
materially affect the desirability of carrying out this Agreement from the
Partners' point of view; and
(g) Buyer shall have completed, or at a minimum have received in escrow all
of the committed capital to be received in, the Equity Financing contemplated
under Section 1.05 of this Agreement.
ARTICLE VII
REGISTRATION RIGHTS
Section 7.01 "Piggyback" Registrations.
(a) If Buyer decides to register any of its Common Stock (the "Registrable
Securities") under the Securities Act, on a form which is suitable for an
offering for cash of shares of Buyer held by third parties and which is not a
registration solely to implement an employee benefit plan or a transaction to
which Rule 145 or any other similar rule of the SEC is applicable or on Forms
S-4 or S-8 or any successor thereto, Buyer will promptly give written notice
to each Partner, and in any event no less than twenty (20) days prior to the
filing of the registration statement, and Buyer will use all reasonable
efforts to effect the registration under the Securities Act of all securities
that such Partner requests be included in such registration by a written
notice delivered to Buyer within fifteen (15) days after the notice given by
Buyer.
(b) If the registration involves an underwritten public offering, Buyer
will not be required to register securities in excess of the amount that the
principal underwriter reasonably and in good faith recommends may be included
in such offering (a "Cutback"). If such a Cutback occurs, the number of
shares that are entitled to be included in the registration and underwriting
shall first be allocated to Buyer for securities being sold for its own
account and thereafter shall be allocated (on a pro rata basis according to
Registrable Securities owned or obtainable by such Partner and any others
holding Registrable Securities) to the holders of Registrable Securities
requesting inclusion in the registration.
(c) If Buyer elects to terminate any registration filed under this Section
7.01, Buyer will have no obligation to register the securities sought to be
included by any Partner in such registration.
Section 7.02 Procedure for Registration. Whenever Buyer is required under
this Agreement to register Common Stock, it agrees to the following:
14
(a) Use all reasonable efforts to prepare promptly for filing with the SEC
a registration statement and such amendments and supplements thereto and other
filings as may be necessary to cause such registration statement to become
effective and to keep such registration statement effective and to comply with
the provisions of the Securities Act for the period necessary to complete the
proposed public offering;
(b) Furnish to each selling holder such copies of each preliminary and
final prospectus and such other documents as such holder may reasonably
request to facilitate the public offering of its Common Stock;
(c) Enter into any underwriting agreement with provisions reasonably
required by the proposed underwriter for the selling holders, if any; and
(d) Use all reasonable efforts to register or qualify the Common Stock
covered by the registration statement under the securities or "blue-sky" laws
of such jurisdictions as any selling holder may reasonably request, although
Buyer will not have to register in any states that require it to qualify to do
business or subject itself to general service of process, and Buyer will not
be required to register in more states than are necessary to permit the sale
of the securities.
Section 7.03 Indemnification. Subject to applicable law, Buyer will
indemnify each Partner and each person controlling any of them, against all
claims, losses, damages and liabilities, including legal and other expenses
reasonably incurred, arising out of any untrue or allegedly untrue statement
of a material fact contained in the registration statement, or any omission or
alleged omission to state a material fact required to be stated in the
registration statement or necessary to make the statements not misleading, or
arising out of any violation by Buyer of the Securities Act, any state
securities or "blue-sky" laws or any applicable rule or regulation. This
indemnification will not apply to any claims, losses, damages or liabilities
incurred by an Partner to the extent they may have been caused by an untrue
statement or omission based upon information furnished in writing to Buyer by
such Partner, or controlling person, respectively, expressly for use in the
registration statement. With respect to such untrue statement or omission in
the information furnished in writing to Buyer by an Partner, such person will
indemnify Buyer, its directors and officers, the other persons selling
securities under the registration statement and each person controlling any of
them against any losses, claims, damages, expenses or liabilities to which any
of them may become subject as a result of such untrue statement or omission
(including those incurred in connection with investigating or defending
against such claims), up to the aggregate net proceeds received by such
Partner in such offering.
Section 7.04 Obligations of the Partners and Others in a Registration. Each
Partner agrees timely to furnish such information regarding such person and
the securities sought to be registered and to take such other action as Buyer
may reasonably request in connection with the registration, qualification or
compliance activities taken by Buyer with respect to a registration in which
such Partner is participating. If a registration in which a Partner is
participating pursuant to this Article VII involves an underwriter, such
Partner agrees, upon the request of such underwriter, not to sell any
unregistered securities of Buyer for a period of days not to exceed one
hundred twenty (120) days, following the effective date of the registration
15
statement for such offering and to enter into an underwriting agreement with
such underwriters containing usual and customary terms and provisions.
Section 7.05 Fees and Expenses. If Buyer registers securities for a Partner
under this Article VII, all expenses of the registration and offering,
including federal and state registration and filing fees, printing expenses
(including such number of any preliminary and the final prospectus as may be
reasonably requested) and the fees and disbursements of counsel and of
independent accountants and other experts of Buyer, and the reasonable fees
and expenses of not more than one independent counsel for the Investors will
be borne by Buyer, except that each Partner will bear underwriting discounts
and commissions attributable to its securities being registered and transfer
taxes on shares being sold by it.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 No Representations Regarding Tax Treatment. No representation
or warranty is being made by either party to the other regarding the treatment
of the transactions contemplated hereby for federal or state income taxation.
Each party has relied exclusively on its own legal, accounting, and other tax
advisers regarding the treatment of this transaction for federal and state
income taxes and on no representation, warranty, or assurance from any other
party or such party's legal, accounting, or other adviser.
Section 8.02 Bulk Sale Law. If applicable, each Partner warrants that it
will comply with Article Six (6) of the Uniform Industry Code covering the
requirements of a bulk sale as in effect in the State of Texas.
Section 8.03 Governing Law. The Partners and Buyer intend that this
Agreement shall be governed by, enforced, and construed under and in
accordance with the laws of the State of Texas.
Section 8.04 Notices. Any notices or other communication required or
permitted by this Agreement must be in writing and shall be sufficiently given
if personally delivered to the other party, or, if sent by electronic
communication and confirmed by postage prepaid registered mail, certified
mail, or overnight courier addressed to such addresses as shall be furnished
in writing by any party in the manner for giving notices. Any such notice or
communication given in accordance with this section shall be deemed to have
been given as of the date personally delivered, or one day after the date when
sent by electronic communication and confirmed by registered mail, certified
mail, or overnight courier as outlined above.
Section 8.05 Attorney Fees. In the event that any party institutes any
action to enforce this Agreement or to secure relief from any breach, the
breaching party shall reimburse the nonbreaching party for all costs,
including reasonable attorney fees, incurred in connection therewith and in
enforcing or collecting any judgment.
Section 8.06 Schedules. Whenever in any section of this Agreement reference
is made to information set forth in the Schedules, such reference is to
information specifically set forth in such Schedules.
16
Section 8.07 Third Party Beneficiaries. This Agreement is solely between
Buyer and the Partners, and, no director, officer, stockholder, employee,
agent, independent contractor, or any other person or entity shall be deemed
to be a third party beneficiary of this Agreement.
Section 8.08 Entire Agreement. This Agreement represents the entire
agreement between Buyer and the Partners relating to the matters set forth
herein. All previous agreements between the parties, whether written or oral,
have been merged into this Agreement. This Agreement alone fully and
completely expresses the agreement of the parties relating to the matters set
forth herein. There are no other courses of dealing, understandings,
agreements, representations, or warrants, written or oral, except as set forth
in this Agreement.
Section 8.09 Survival; Termination. The representations, warranties, and
covenants of the Buyer and the Partners shall terminate on the Closing Date,
except that the covenants set forth in sections 1.01 through 1.05, sections
4.03 through 4.08, Article VII and Article VIII shall survive the Closing, and
those set forth in Articles II and III shall survive the Closing for a period
of twelve (12) months. The liability of any Partner with respect to matters
relating to this Agreement shall be limited to a return of the total
consideration received by such Partner at the Closing.
Section 8.10 Amendment of Waiver. Every right and remedy provided for in
this Agreement shall be cumulative with every other right and remedy, whether
conferred in this Agreement, at law, or in equity, and may be enforced
concurrently. 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
or thereafter occurring. At any time prior to the date of Closing, this
Agreement may be amended in writing signed by both Buyer and the Partners with
respect to any of the terms contained herein. 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 8.11 Assignments. No party may assign any of its rights or delegate
any of its obligations under this Purchase Agreement without the express
written consent of the other party.
Section 8.12 Expense of Transaction. Each party hereto shall bear its/his
own expenses in connection with the transaction described herein; provided,
however, that upon written demand of the Partners, Buyer shall pay to the
Partners an amount equal to $3,000, which shall be used to pay a portion of
the legal expenses incurred by the Partners with respect to the transactions
contemplated by this Agreement.
Section 8.13 Representation by Counsel. Buyer and each of the Partners
hereby represents, warrants, acknowledges and admits that (a) it has been
advised by counsel in the negotiation, execution and delivery of this
Agreement, and (b) it has made an independent decision to enter into this
Agreement and the other related documents hereto to which it is a party,
without reliance on any representation, warranty, covenant or undertaking by
the other parties, whether written, oral or implicit, other than as expressly
set out in this Agreement.
17
Section 8.14 Termination Rights. This Agreement may be terminated by either
the Partners or Buyer, if either such party is not then in default of its
obligations hereunder, upon written notice to the other upon the occurrence of
any of the following:
(a) If the Closing has not occurred on or before January 28, 1999;
(b) If either party defaults or otherwise breaches its obligations under
this Agreement and such default has not been cured within 30 days of written
notice of such default by the other party;
(c) By the Partners or Buyer if on the Closing Date any of the conditions
precedent to the obligations of the Partners or Buyer, respectively, set forth
in this Agreement have not been satisfied or waived by such party; or
(d) By mutual consent of the parties hereto.
IN WITNESS WHEREOF, the corporate party and the individual parties hereto have
caused this Agreement to be executed today, January 3, 2000.
ATTEST:
BUYER:
XXXXXX INDUSTRIES, INC., a Utah corporation
By: /S/ Xxxxxx Xxxxxx
By:/S/R. Xxx Xxxxxx
Its: President
18
PARTNER SIGNATURE PAGE
ATTEST: /S/Xxxx Xxxxxxxx
THE PARTNERS:
By:
/S/Xxxxxxxxxxx X. Xxxxxx
/S/G. Xxxxxxx Xxxxxx
/S/Xxxxxxxx X. Xxxxxx
/S/Xxxxxx Xxxxxx
/S/Xxxx X. Xxxx
/S/Xxxxxxx X. Xxxxxxxxxx
/S/Xxxxx Xxxx
/S/Xxxx Xxxxxx
/S/Xxxxx Xxxxxxx
/S/Xxxxxxxxxxx X. Xxxxxx , President,C2, INC., a Texas corporation,General
Partner of the Partnership
19
SCHEDULES
Schedule 1.01 Schedule of Certain Assets
Schedule 1.02 Schedule of Certain Liabilities
Schedule 1.03 Allocation of Common Stock
Schedule 1.05 Use of Proceeds
Schedule 2.08 Financial Statements
Schedule 3.02 Subsidiaries
Schedule 3.05 SEC Reports Not Timely Filed
Schedule 3.06 Capitalization
Schedule 3.08 Registration Rights
Schedule 4.07 Employees of the Partnership
Schedule 1.01
Schedule of Certain Assets (December 17, 1999)
Cash $ 21,311
Acct Receivable 36,763
Other Current Assets 14,635
Fixed Assets 161,599
Other Assets 3,500
---------
Total Assets $ 237,808
Schedule 1.02
Schedule of Certain Liabilities (December 17, 1999)
Accounts Payable $ 10,308
Credit Cards 381
Jobs Booked 10,500
Sales Tax Payable 3,091
Xxxxx Fargo 219,881
N/P Xxxxxx 50,000
N/P Xxxxxx 100,000
N/P Xxxxxx 75,000
----------
Total Liabilities $ 469,161
Schedule 1.03
Allocation of Shares
Partner: Shares: Percentage:
---------- ------------ -----------
C2, Inc. 932,617 2%
Xxxxxx 20,983,887 45%
Xxxxxx 16,320,802 35%
Slavin 4,196,778 9%
Xxxx 466,309 1%
Xxxxxxxxxx 466,309 1%
Xxxx 466,309 1%
Xxxxxx 466,309 1%
Xxxxxxx 2,331,543 5%
---------- -----
Total 46,630,863 100%
20
Schedule 1.05
Use of Proceeds
Proceeds (Net) $ (2,000,000)
Retirement of Debt - At closing 300,000
Equipment & Server
Upgrades - 1st Quarter 00 120,000
Leasehold Improvements - 1st Quarter 00 25,000
Office Equip & Furniture - 1st Quarter 00 25,000
Marketing Programs - 1st Quarter 00 125,000
Working Capital - 1st Quarter 00 250,000
Sales Equipment 5,000
-----------
Total 1st Quarter Use of Proceeds $ 825,000
Proceeds (Net) (1,175,000)
Marketing Programs - 2 nd Quarter 00 $ 25,000
Working Capital - 2 nd Quarter 00 100,000
Technical Sales Equip - 2 nd Quarter 00 15,000
Servers 20,000
Leasehold Improvements 25,000
Office equip and furn 25,000
-----------
Total 2 nd Quarter Use of Proceeds $ 210,000
Proceeds (Net) ( 965,000)
Marketing Programs - 3 rd Quarter 00 $ 25,000
Working Capital - 3 rd Quarter 00 25,000
Servers 30,000
Sales Equipment 15,000
-----------
Total 3 rd Quarter Use Of Proceeds $ 95,000
Proceeds (Net) ( 870,000)
Marketing Programs - 4 th Quarter 00 $ 25,000
Technical Sales Equip - 4 th Quarter 00 15,000
Equipment & Server
Upgrades - 4 th Quarter 00 10,000
Working Capital 4 th Quarter 00 25,000
-----------
Total 4 th Quarter Use of Proceeds $ 75,000
Proceeds (Net) ( 795,000)
21
Schedule 2.08
Financial Statements
Vista Balance Sheet as of September 30, 1999
Assets Sept. 30, 1999
Current Asset --------------
Checking/Savings -- Xxxxx Fargo $ 17,102.09
--------------
Total Checking/Savings 17,102.09
Accounts Receivable 47,430.28
--------------
Total Accounts Receivable 47,430.28
Other Current Assets
Employee Advance 2,550.71
Receivable from Photography 4,077.49
Xxxxx Cash 935.23
--------------
Total Other Current Assets 7,563.43
--------------
Total Current Assets 72,095.80
Fixed Assets
Capitalized Loan Cost 5,832.60
Leasehold improvements 13,236.52
Office Furniture & Equipment 31,693.50
Video Equipment 178,397.78
Accumulated depr. & amort. (78,001.00)
--------------
Total Fixed Assets 151,159.40
Other Assets
Wedding Equip. Receivable 7,500.00
Deposits 3,500.00
--------------
Total Other Assets 11,000.00
--------------
TOTAL ASSETS 234,255.20
==============
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable $ 17,052.68
--------------
Total Accounts Payable 17,052.68
Credit Cards
Xxxxx Fargo-Xxx Xxxxxx 500.00
Xxxxx Fargo-Xxxx Xxxx 0.01
Xxxxx Fargo-Xxxxx Xxxxxx (367.46)
--------------
Total Credit Cards 132.55
22
Schedule 2.08 (Continued)
Financial Statements
Vista Balance Sheet as of September 30, 1999
Current Liabilities [Continued] Sept. 30, 1999
--------------
Other Current Liabilities
Jobs booked/not done $ 18,900.00
Sales Tax payable 2,939.47
--------------
Total Other Current Liabilities 21,839.47
--------------
TOTAL CURRENT LIABILITIES 39,024.70
Long Term Liabilities
Xxxxx Fargo Credit Line 36,928.97
Notes Payable-Xxxxxx 25,000.00
Note Payable-Xxxxx Fargo 113,396.44
--------------
TOTAL LONG TERM LIABILITIES 175,325.41
--------------
TOTAL LIABILITIES 214,350.11
Equity
Paid-in capital, Xxxxxx 75,000.00
Opening Bal Equity (5,645.01)
Paid-in capital, Xxxxxx 75,000.00
Paid-in capital, Xxxxxx 150,000.00
Paid-in capital, Other 150.00
Retained Earnings (212,293.63)
Net Income (62,306.27)
--------------
TOTAL EQUITY 19,905.09
--------------
TOTAL LIABILITIES & EQUITY 234,255.20
==============
23
Schedule 3.02
Subsidiaries
XXXXXXXX'X PASTERIA, INC.(A Florida corporation)
NGU DISTRIBUTION, INC. (A Florida corporation)
TULIP BAKERY, INC. (A Florida corporation)
The three subsidiaries are wholly owned by the Company and have been inactive
since May of 1998 for XXXXXXXX'X and March of 1998 for NGU and TULIP.
The subsidiaries are currently shown as "administrative dissolution for annual
report" meaning the State of Florida has dissolved the subsidiaries because no
annual report has been filed with the state in 1998 or 1999.
The Company intends to dissolve the subsidiaries.
Schedule 3.05
SEC Reports Not Timely Filed
The Company was late filing the following reports in 1998 and 1999:
1998 10KSB Annual Report
1999 10QSB 1st Quarter Report
1999 10QSB 2nd Quarter Report
There was no adverse effect on the Company for the late filings. All required
filings were made and the Company sees no cause for any future late filings.
Schedule 3.06
Capitalization
The Company is authorized to issue 150,000,000 shares of Common Stock.
The Company had 54,330,688 shares issued and outstanding (on a fully diluted
basis) as of the last quarterly 10QSB filing made for the 3rd quarter ended
September 30, 1999. The Company intends to issued up to an additional
70,000,000 shares of Common Stock (on a fully diluted basis), primarily for
the settlement of debts on its balance sheet, which included 20,000,000 shares
of Common Stock issuable upon the exercise of stock options authorized under
the Company's 1999 Stock Option Plan.
At the time of the Closing, it is estimated that the total number of
outstanding shares of Common Stock will be approximately 135,000,000, which
will include shares issuable pursuant to the Equity Financing.
Schedule 3.08
Registration Rights
There are currently no registration rights granted to any future stock
issuance other than those described in Section 3.08 of the Agreeement.
24
Schedule 4.07
Employees of the Partnership
Employee Annual Salary Revenue Sharing (%) (1)
-------- ------------- ----------------------
Xxxxx Xxxxxxx $36,000 6.5%
Xxxx Xxxx $24,000 5.0%
Xxxx Xxxxx $24,000 4.0%
Xxx Xxxxxxx $24,000 7.5%
Xxxxxx Xxxxxx $22,500 2.0%
(1) The Partnership has a revenue sharing program to supplement its
employees' compensation, whereby the eligible employees receive a set
percentage of the gross profits of the Partnership, on a monthly basis.
