AGREEMENT AND PLAN OF REORGANIZATION
AMONG
QUAZON CORP.,
SCIENTIFIC ENERGY, INC.,
AND THE SHAREHOLDERS OF
SCIENTIFIC ENERGY, INC.
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization is entered into on this 6th day
of June, 2001, by and among Quazon Corp., a Nevada corporation, (hereinafter
"Quazon"), Scientific Energy, Inc., a Utah corporation (hereinafter
"Scientific"), and all of the shareholders of Scientific (hereinafter referred
to as "Scientific Stockholders").
RECITAL:
Scientific Stockholders own all of the issued and outstanding capital
stock of Scientific . Quazon desires to acquire all of the issued and
outstanding common voting stock of Scientific, making Scientific a
wholly-owned subsidiary of Quazon, and Scientific Stockholders desire to make
an exchange of all of their common voting shares of Scientific solely for
voting shares of Quazon's common stock to be exchanged as set out herein.
In connection with Quazon's acquisition of Scientific, the Scientific
Stockholders are also acquiring additional stock ownership of Quazon through a
private purchase of approximately 1,658,820 shares of Quazon common stock
simultaneously with the closing of Quazon's acquisition of Scientific. As a
result of the private stock purchase as well the issuance of shares of Quazon
common stock to the Scientific Stockholders in connection with Quazon's
acquisition of Scientific, the Scientific Stockholders will collectively own
21,658,820 shares, or approximately 80.2%, of the 27,000,000 shares of Quazon
common stock to be issued an outstanding immediately following the closing of
Quazon's acquisition of Scientific and the closing of the private stock
purchase. As a related component of these interdependent, integrated
transactions, two additional purchasers are simultaneously purchasing an
aggregate of an additional 1,400,000 shares of issued and outstanding Quazon
common stock from Quazon stockholders. As a result of all of the foregoing,
immediately after the consummation of the foregoing interdependent, integrated
transactions, the purchasers of Quazon common stock from Quazon and existing
Quazon stockholders will own an aggregate of 23,058,820, or 85.4%, of the
27,000,000 shares of Quazon common stock then issued and outstanding.
NOW, THEREFORE, for the mutual promises of the parties and for other
consideration described herein, the parties agree as follows:
AGREEMENT
1. Plan of Reorganization. Scientific Stockholders are the owners of
all of the issued and outstanding common voting stock of Scientific. A list
naming the Scientific Stockholders and describing their ownership of
Scientific Shares is attached hereto as Exhibit "A". It is the intention of
the parties hereto that all of the issued and outstanding shares of common
voting stock of Scientific ("Scientific Shares") shall be acquired by Quazon
in exchange solely for Quazon voting common stock. It is the intention of the
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parties that this transaction qualify as a tax-free reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and
related sections thereunder.
2. Exchange of Shares. Quazon and Scientific Stockholders agree that
all of the issued and outstanding Scientific Shares shall be exchanged with
Quazon for 20,000,000 shares of voting common stock of Quazon ("Quazon
Shares"), representing approximately seventy-four and one-tenth percent
(74.1%) of the shares of common stock of Quazon to be issued and outstanding
immediately following the exchange of shares. Immediately following the
Closing, there shall be issued and outstanding a total of approximately
27,000,000 shares of Quazon common stock, of which 20,000,000 shares (74.1%)
shall be acquired by the Scientific Stockholders pursuant to this Agreement,
another 1,658,820 shares (6.1%) will be acquired by the Scientific
Stockholders pursuant to a Stock Purchase Agreement, 1,400,000 shares (5.19%)
shall be acquired by associates of the Scientific Stockholders pursuant to
another Stock Purchase Agreement, and the remaining 3,941,180 shares (14.6%)
shall be owned by other shareholders, assuming no additional issuances of
shares by either Quazon or Scientific prior to the Closing. Quazon Shares
will, on the Closing Date, as hereafter defined, be delivered to Scientific
Stockholders in exchange for their Scientific Shares. Scientific Stockholders
agree that they will hold the Quazon Shares for investment purposes and not
for further public distribution without registration under applicable
securities laws or pursuant to an available exemption therefrom.
3. Delivery of Shares. On the Closing Date, Scientific Stockholders
will deliver certificate(s) representing their Scientific Shares duly endorsed
so as to make Quazon the sole owner thereof, free and clear of all liens,
claims and encumbrances. On such Closing Date, delivery of the Quazon Shares,
which will be appropriately restricted as to transfer, will be made to
Scientific Stockholders as set forth herein.
4. Representations of Scientific. Scientific hereby represents and
warrants that, effective this date and the Closing Date, the representations
listed below are true and correct:
(a) Ownership of Scientific Shares. Scientific Stockholders are the
record and beneficial owners of all of the issued and outstanding shares of
common stock of Scientific, and each Scientific Stockholder owns the shares
indicated on the attached Exhibit A;
(b) Status of Scientific Shares. The Scientific Shares constitute
validly authorized and issued common voting shares of Scientific common stock,
fully-paid and nonassessable.
(c) Scientific Financial Statements. Scientific, incorporated on May
30, 2001, has had no activities other than the issuance of common stock in
consideration of the transfer to it of rights to certain intellectual
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properties. The financial statements of Scientific prepared as of May 30, 2001
("Scientific Financial Statements") to be delivered to Quazon within five days
after the date of this Agreement, will be complete, accurate and fairly
present the financial condition of Scientific as of the date thereof and the
results of its operations for the period(s) covered.
At Closing there shall be no material liabilities, either fixed or
contingent, not reflected in the Scientific Financial Statements other than
contracts or obligations incurred in the ordinary and usual course of
business; and no such contracts or obligations incurred in the usual course of
business constitute liens or other liabilities which, if disclosed, would
materially alter the financial condition of Scientific as reflected in such
financial statements unless otherwise disclosed in Schedule 4(c).
(d) Litigation. Scientific is not a party to or the subject of any
pending litigation, claims or governmental investigation or proceeding, and
there are no lawsuits, claims, assessments, investigations or similar matters,
to the best knowledge of Scientific, threatened or contemplated against or
affecting Scientific, its management or its assets, except as disclosed in
writing on Schedule 4(d).
(e) Good Standing. As of the Closing Date, Scientific will be in
good standing in Utah, and will be in good standing and duly qualified to do
business in each jurisdiction where required to be so qualified except where
the failure to so qualify would not have a material adverse effect on the
business of Scientific.
(f) Tax Returns. Scientific has filed all governmental, tax or
related returns and reports due or required to be filed and has paid or
accrued all taxes or assessments which have become due as of Closing (except
as disclosed in the Scientific Financial Statements) or has filed extensions
with regard thereto.
(g) No Breach of Contract. Scientific has not breached, nor is there
any pending claim that Scientific has breached, or to the knowledge of
management of Scientific, there are no threatened claims that Scientific has
breached, any of the terms or conditions of any agreements, contracts or
commitments to which it is a party or by which it or its assets are bound.
The execution or performance hereof will not violate any provisions of
applicable law or any agreement to which Scientific is subject.
(h) Subsidiaries. Scientific has no subsidiary corporations.
(i) Corporate Records. The corporate financial records, minute books
and other documents and records of Scientific shall be made available to
Quazon and its representatives, accountants, and attorneys at times and
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places mutually agreeable to the parties prior to the Closing, in order to
make such due diligence investigation of the assets, liabilities, and the
business of Scientific as Quazon may deem necessary or advisable.
(j) Due Authorization. The execution of this Agreement has been duly
authorized by all appropriate and necessary action.
(k) Capital Stock. The authorized capitalization of Scientific is as
set forth in the Scientific Financial Statements. Scientific has only the
capital stock authorized as set forth in the Scientific Financial Statements
and all outstanding shares have been duly authorized, validly issued and are
fully paid and nonassessable with no personal liability attaching to the
ownership thereof. There are no outstanding unexpired convertible securities,
warrants or options outstanding which may cause authorized but unissued shares
to be issued to any person.
(l) No Material Adverse Changes. Scientific shall continue to do
business in the ordinary course, and there shall not be any material adverse
changes in the financial condition of Scientific except changes arising in the
ordinary course of business, which changes will in no event materially and
adversely affect the financial position of Scientific as disclosed in the
Scientific Financial Statements.
5. Representations of Scientific Stockholders. The Scientific
Stockholders hereby represent and warrant that, effective this date and the
Closing Date, the representations listed below are true and correct:
(a) Scientific Shares Free from Liens. The Scientific Shares are
presently (and will be at the Closing) free from all claims, liens, or other
encumbrances, and at the Closing Date, Scientific Stockholders will have good
title and the unqualified right to transfer and dispose of the Scientific
Shares.
(b) Scientific Stockholders to Receive Restricted Quazon Shares. The
Quazon Shares are being acquired by the Scientific Stockholders for investment
and not with a view to the public resale or distribution thereof. The
Scientific Stockholders are aware that the Quazon Shares are "restricted
securities" as that term is defined in Rule 144 or the General Rules and
Regulations under the Securities Act of 1933. The Scientific Stockholders
will not sell, transfer or otherwise dispose of the Quazon Shares except in
compliance with the Securities Act of 1933 and any applicable state securities
registration laws.
(c) Scientific Representations. All representations and warranties
made herein by Scientific are true to the best knowledge and information of
the Scientific Stockholders.
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6. Representations of Quazon. Quazon hereby represents and warrants
that, effective this date and the Closing Date, the representations listed
below are true and correct:
(a) Shares Validly Issued and Free of Liens. As of the Closing Date,
the Quazon Shares to be delivered to the Scientific Stockholders will be duly
authorized and will constitute valid and legally issued shares of common stock
of Quazon, fully-paid and nonassessable, free and clear of all claims, liens
and encumbrances, and the Quazon Shares will be legally equivalent in all
respects to the common stock of Quazon to be issued and outstanding as of the
date of the Closing.
(b) Due Authorization. The officers of Quazon are duly authorized to
execute this Agreement and have taken all action required by law, applicable
agreements and governing corporate instruments to properly and legally execute
this Agreement. The execution hereof and performance hereunder will not
violate the provisions of Quazon's Articles of Incorporation or By-laws and
will not constitute a material breach of any agreement to which Quazon is a
party.
(c) No Violation of Preemptive Rights. The shares being acquired by
Purchasers hereunder have not been issued by Quazon in violation of any
preemptive right or other rights of any person.
(d) Shareholders' List. The stockholders' list of Quazon attached
hereto as Schedule 6(d) is a true and accurate copy thereof as of the date
indicated thereon. The Transfer Agent retains in safekeeping all certificates
that have been or should be canceled on the registration of transfer thereof.
All of such canceled certificates have on their face in conspicuous permanent
ink or perforations the word "canceled." All stock certificates issued to
date and all unissued blank certificates are sequentially numbered. All of
such certificates are accounted for as either canceled and in the possession
of the Transfer Agent, outstanding, or unissued. To the best of Quazon's
knowledge, except for securities broker-dealers, clearing agencies, securities
depositories, banks, or other securities industry entities registered with the
SEC whose regular business consists of holding securities beneficially owned
by others, each stockholder listed on such stockholders' list is the
beneficial owner thereof, and such stockholder is not a party to, and such
stockholder's stock is not subject to, any agreement, understanding,
power-of-attorney, or other arrangement of any kind with any person who is an
affiliate of Quazon or acting in concert with such affiliate under which such
affiliate or person acting in concert with such affiliate has or shares
investment or voting power over such securities, except that Quazon is aware
that Xxxx Xxxxxxx has agreed to sell 2,258,820 shares of Quazon common stock
to persons affiliated with Scientific, and Xxxxx Xxxxxxxx, Xxxxxx Xxxxxxx,
Xxxx Xxxxxxxx and B. Xxxxx Xxxxxx have collectively agreed to sell an
aggregate of 800,000 shares of Quazon common stock to certain persons known by
the Scientific Stockholders.
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(e) Agreements to Issue Additional Shares. There are no present
agreements to issue any additional shares of any class of stock of Quazon
other than as provided for herein, and none shall be entered into prior to
closing.
(f) Present Officers and Directors. Xxxxx Xxxxxxx, Xxxx Xxxxxxx, and
Xxxxx Xxxxxx are the only directors of Quazon. The present officers are:
President-Xxxxx Xxxxxxx, Vice President-Xxxx Xxxxxxx, Secretary-Xxxxx Xxxxxx,
and Treasurer-Xxxxx Xxxxxx.
(g) Agreements to Elect Officers and Directors. There are no
agreements, other than as described herein, to elect any officers or directors
of Quazon.
(h) Qualification of Corporation. Quazon is a corporation duly
organized, validly existing, and in good standing under the laws of the state
of Nevada and has the corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances
and orders of public authorities to own all of its properties and assets and
to carry on its business in all material respects as it is now being
conducted, including qualification to do business as a foreign corporation in
the state of Utah and in all other states in which the character and location
of the assets owned by it or the nature of the business transacted by it
requires qualification and where failure to qualify would not have a
materially adverse effect on Quazon. Included in the Quazon Schedules are
complete and correct copies of the articles of incorporation and bylaws of
Quazon as in effect on the date hereof (including all amendments). The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of the Quazon articles of incorporation
or bylaws.
(i) Reports; Financial Statements. Since the date of filing of the
Quazon registration statement on Form 10SB on April 22, 1999, Quazon and its
subsidiaries have filed all forms, reports, statements and other documents
required to be filed with (A) the Securities and Exchange Commission (the
"SEC") including, (1) all Annual Reports on Form 10-KSB, (2) all Quarterly
Reports on Form 10-QSB, (3) all proxy, information or consent solicitation
statements relating to meetings of stockholders or consents in lieu thereof
(whether annual or special), (4) all Current Reports on Form 8-K and (5) all
other reports, schedules, registration statements or other documents
(collectively referred to as the "Quazon SEC Reports") and (B) any applicable
state or provincial securities authorities and all forms, reports, statements
and other documents required to be filed with any other applicable federal,
state, or provincial regulatory authorities, except where the failure to file
any such forms, reports, statements or other documents would not have a
material adverse effect. The Quazon SEC Reports, including all Quazon SEC
Reports filed after the date of this Agreement and prior to the Closing,
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(x) were or will be prepared in accordance with the requirements of applicable
Law (including, with respect to Quazon SEC Reports, the Exchange Act, and the
rules and regulations of the SEC thereunder applicable to such Quazon SEC
Reports) and (y) did not at the time they were filed, or will not at the time
they are filed, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they are made, not misleading.
(j) Financial Condition. The present financial condition of Quazon
has not changed materially from that described in Quazon's quarterly report on
Form 10-QSB for the period ended March 31, 2001. Quazon shall have no assets
and no liabilities as of the closing.
(k) Business Plans. Quazon presently has no specific type of
business in which it engages, and Quazon has no commitments or agreements to
merge with or acquire any other business, assets, or other company or to be
acquired by any other business or company, other than as provided for herein.
(l) Contracts. Quazon is not a party to or subject to any employment
contracts, lease agreements or any other contracts or agreements of any type
or nature.
(m) Litigation. No lawsuit, threats of lawsuits or other contingent
liabilities against Quazon or affecting Quazon exist.
(n) Tax Returns. Quazon has filed all state, federal, and local
income tax returns required to be filed by it from inception to the date
hereof, with the exception of tax returns not yet due, and has properly
accrued any liabilities for any taxes for any period prior to the date hereof.
(o) Books and Records. The books and records, financial and
otherwise, of Quazon are in all material respects complete and correct and
have been made and maintained in accordance with sound business and
bookkeeping practices and, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of Quazon. Quazon has
maintained a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions have been and are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit the preparation of financial
statements in conformity with generally accepted accounting principles or any
other criteria applicable to such statements and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals, and appropriate action is taken with respect to any differences.
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(p) No Violation of Other Agreements. 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 any event of default under, any material indenture, mortgage, deed
of trust, or other material contract, agreement, or instrument to which Quazon
is a party or to which any of its properties or operations are subject.
(q) Governmental Authorizations. Quazon holds all licenses,
franchises, permits, and other governmental authorizations which are legally
required to enable Quazon to conduct its business in all material respects as
conducted on the date hereof.
(r) Compliance with Laws. Quazon has complied with all applicable
U.S. and foreign statutes and regulations of any federal, state, provincial,
or other governmental entity or agency thereof, except to the extent that
noncompliance would not materially and adversely affect the business,
operations, properties, assets, or condition of Quazon or except to the extent
that noncompliance would not result in any material liability for Quazon.
(s) Transactions with Affiliates. The Quazon SEC Reports set forth a
description of every material contract, agreement, or arrangement between
Quazon and any person who is or has ever been an officer, director or promoter
of Quazon or person owning of record, or known by Quazon to own beneficially,
5% or more of the issued and outstanding common stock of Quazon and which is
to be performed in whole or in part after the date hereof or was entered into
within three years before the date hereof. In all of such circumstances, the
contract, agreement, or arrangement was for a bona fide business purpose of
Quazon, and the amount paid or received, whether in cash, in services, or in
kind, is, has been during the full term thereof, and is required to be during
the unexpired portion of the term thereof, no less favorable to Quazon than
terms available from otherwise unrelated parties in arm's length transactions.
Except as disclosed in the Quazon SEC reports or in Schedule 3(s) hereto or
otherwise disclosed herein, no officer or director of Quazon or 5% shareholder
of Quazon has, or has had during the preceding three years or such shorter
period as Quazon has been in existence, any interest, directly or indirectly,
in any material transaction with Quazon. Schedule 3(s) hereto also includes a
description of any commitment by Quazon, whether written or oral, to lend any
funds to, borrow any money from, or enter into any other material transaction
with, any such affiliated person.
(t) Certain Business Practices. None of Quazon, or any directors,
officers, agents or employees of Quazon has used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
initiating or maintaining a trading market in Quazon's securities, or any
political activity, made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political
9
parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any other unlawful payment.
(u) Minute Book. The minute book of Quazon contains, and will contain
at the Closing Date, evidence of the due election and incumbency of the board
of directors and officers of Quazon executing this Agreement or any document,
certificate, or other instrument executed in order to consummate the
transactions herein contemplated together with an accurate and complete record
of the proceeds of all meeting of directors, committees thereof, or
stockholders and all written consents in lieu thereof.
(v) Compliance with Securities Laws, Rules, and Regulations. All
securities of Quazon issued since its inception, consisting solely of common
voting stock, have been issued pursuant to and in compliance with applicable
federal and state laws, rules, and regulations; specifically, all offers and
sales of shares of common voting stock were made pursuant to exemptions from
the registration requirements of Section 5 of the Securities Act, and pursuant
to available exemptions provided by applicable state securities laws. Quazon
has made all the required filings with any federal or state regulatory agency
regarding the offer and sale of all issued and outstanding shares of common
voting stock.
(w) Information Supplied. Without limiting any of the representations
and warranties contained herein, the representations and warranties contained
in this Agreement and the information set forth in the Disclosure Schedules is
complete and accurate and does not contain any untrue statement of material
fact, or omit a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such statements
are or were made, not misleading.
(x) EBB Listing. The Quazon common stock will be, on the Closing Date,
traded in the over-the-counter market on the Nasdaq OTC Electronic Bulletin
Board, and Quazon will not have received any notice from Nasdaq or the
National Association of Securities Dealers Inc. ("NASD") that it intends to
delist, suspend, or remove the Quazon Common Stock from the EBB.
(y) Public Trading Activity. To the best knowledge of Quazon, neither
Quazon nor any other person, has at any time during the past year or currently
has any agreement, plan, or arrangement to at any time in the future (i)
submit or publish or cause to be submitted or published, directly or
indirectly, any quotation for the common stock of Quazon on behalf of Quazon
or any of its affiliates; or (ii) provide to any securities broker-dealer any
incentive or inducement, financial or otherwise, to publish quotations for the
common stock of Quazon at any specific or minimum prices or amounts or to
execute any specific transactions in such common stock, other than usual and
customary commissions and markups.
(z) Tradability of Outstanding Stock. To the best of Quazon's knowledge,
to the extent applicable, Quazon has complied with the securities laws of each
and every jurisdiction in which a shareholder resided as of the date such
shareholder purchased securities from Xxxxxx,
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and such shares purchased from Quazon (unless approximately restricted) can be
resold without restriction (except for any applicable control restrictions) by
such shareholder in said jurisdiction immediately after the closing as herein
contemplated.
(aa) Equity Vehicle. Quazon acknowledges that Scientific Stockholders'
purpose in entering into this Agreement is to obtain an ownership interest in
an investment vehicle to enhance Scientific's opportunities to raise equity
capital to assist in the growth of its operations, and Quazon represents and
warrants that Quazon knows of no reason, other than requirements of federal,
state, and provincial securities law, which would inhibit or impair the
ability of Quazon to raise equity capital by way of additional stock sales or
for a liquid market to develop in such common stock by trading in the over the
counter securities market, free from illegal influence or manipulation.
Quazon knows of no reason why immediately after the transaction herein
contemplated, Quazon would be restricted by any contract, understanding,
commitment, obligation, course of dealing, representation, or other
arrangement by either Quazon or by which Quazon is bound, in Quazon's choice
of:
(i) broker-dealer to market or underwrite its securities;
(ii) attorney to assist in Quazon's compliance with all securities laws
and other legal affairs;
(iii) accountant to audit, review or compile the financial statements
of Quazon;
(iv) director, officer, employee or agent; or
(v) the price at which it may offer its securities for sale to the
open market, to any existing shareholder, or to any person or which would
restrict the number, type or value of any securities to be sold by Quazon
after the closing as herein contemplated.
(bb) Acquisition of Controlling Interest. The provisions of sections
78.378 to 78.3793 or the Nevada Revised Statutes relating to the acquisition
of a controlling interest in a Nevada corporation are inapplicable to Quazon
or the transaction contemplated by this Agreement.
(cc) Worldwide Web Communications. Neither Quazon, nor, to the best
knowledge of Quazon, any other person associated with or acting on behalf of
Quazon, has at any time during the preceding year posted, either in his, her,
or its name or under any pseudonym, whether or not accompanied by personally
identifiable information, any statement, comment, or other communication on
any worldwide web or internet chat room, bulletin board, or other forum,
whether or not access is or purports to be restricted, respecting Quazon, its
business or financial condition, prospects, management or opportunities or its
securities or effecting transactions therein, except public releases by Quazon
duly authorized by its officers or directors. Quazon has not at any time
during the preceding year maintained an internet web site.
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7. Closing Date. The Closing Date herein referred to shall be upon
such date as the parties hereto may mutually agree upon but shall be held on
or prior to June 8, 2001 unless mutually agreed to be held at a later date.
At the Closing, Scientific Stockholders will be deemed to have accepted
delivery of the certificates of Quazon Shares issued in their names, and in
connection therewith will make delivery of all of his Scientific Shares to
Quazon. Certain exhibits or schedules referred to in this Agreement may be
delivered subsequent to the Closing Date upon the mutual agreement of the
parties.
8. Conditions Precedent to the Obligations of Scientific and
Scientific Stockholders. All obligations of Scientific and Scientific
Stockholders under this Agreement are subject to the fulfillment, prior to or
as of the Closing Date, of each of the following conditions:
(a) Accuracy of Representations. The representations and warranties
made by Quazon in this Agreement were true when made and shall be true as of
the closing.
(b) No Material Adverse Change. Prior to the closing, there shall
not have occurred any material adverse change in the financial condition,
business, or operations of Quazon nor shall any event have occurred which,
with the lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business, or operations of
Quazon.
(c) Release. Each director and officer of Quazon shall have
delivered to Scientific an instrument, in form and substance satisfactory to
Scientific, dated the Closing Date, releasing Quazon and Scientific from any
and all claims of such director, or officer against Quazon, and any and all
obligations of Quazon to such director or officer.
(d) Termination of Related Party and Other Agreements. Scientific
shall have received satisfactory evidence that all existing agreements between
Quazon and any stockholder, any relative of any director, officer, broker,
underwriter, employee, agent or any stockholder, and any affiliates of the
stockholder shall have been canceled effective prior to the Closing.
(e) Maintenance of Listing. Quazon shall have maintained its listing
on the NASDAQ EBB.
(f) Absence of Regulatory Conditions. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transaction contemplated hereby by and governmental
entity in connection with the grant of a regulatory approval necessary, in the
reasonable business judgment of Quazon, to the continuing operation of the
current or future business of the combined enterprises, which imposes any
condition or restriction upon Quazon or its proposed future business or
operations which, in the reasonable business
12
judgment of Purchasers, would be materially burdensome in the context of the
transactions contemplated by this Agreement.
(g) Absence of Regulatory Enforcement. Quazon shall not have
received notice of or otherwise have knowledge of any pending inquiry, matter
under investigation, formal order of investigation, or other possible
enforcement action from the SEC or any provincial or state securities or other
regulatory authority involving or possibly involving, whether or not actually
threatened, any violation of any law administered by such agency or authority
by either Quazon or any of its present or former affiliates or persons acting
in concert with any of them.
(h) Performance. As of the Closing Date, Quazon shall have performed and
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
(i) Unanimous Board Approval of Changes in Quazon's Officers and
Directors. The current Quazon Board of Directors shall unanimously approve
changes in the Quazon Board of Directors to be designated by Scientific
Energy, Inc. pursuant to Section 11(a) of this Agreement.
(j) Other Items. Quazon shall have taken or performed any and all
actions to be taken by it pursuant to this Agreement, and Scientific shall
have received such further documents, certificates, or instruments relating to
the transactions contemplated hereby as Scientific may reasonably request.
9. Conditions Precedent to the Obligations of Quazon. All
obligations of Quazon under this Agreement are subject to the fulfillment,
prior to or at the Closing on the Closing Date, of each of the following
conditions:
(a) Accuracy of Representations. the representations and warranties by
Scientific and Scientific Stockholders contained in this Agreement or in any
certificate or document delivered to Quazon pursuant to the provisions hereof
shall be true at and as of the time of Closing as though such representations
and warranties were made at and as of such time.
(b) Performance. Scientific and Scientific Stockholders shall have
performed and complied with all covenants, agreements, and conditions required
by this Agreement to be performed or complied with by them prior to or at the
Closing, including the delivery of the stock of Scientific being acquired
hereunder.
(c) Investment Letters. Scientific Stockholders shall deliver to Quazon
a letter commonly known as an "investment letter" agreeing that the Quazon
Shares are being acquired for investment purposes. The form of said letter is
attached hereto as Exhibit "B".
13
10. Deliveries by Quazon. Within ten (10) days following the closing,
Quazon shall deliver to Scientific originals or true and correct copies of all
of the following, to the extent entered into or binding upon Quazon since
December 31, 1999:
(a) Written contracts relating to stockholders, directors, officers,
employees, and agents;
(b) Written contracts relating to any agreement with a securities
broker or underwriter concerning holding, selling, marketing, or otherwise
buying or selling stock or other securities of Quazon;
(c) All correspondence or other communications between Quazon and
attorneys engaged by Quazon;
(d) All correspondence or other communications between Quazon and
accountants engaged by Quazon;
(e) All correspondence or other communications between Quazon and any
other professional or agent of Quazon not specified in subparagraphs (c)
through (d) above;
(f) The list of stockholders as of a date within 10 days prior to the
date of this Agreement, showing, in alphabetical order, each stockholder's
name, address, number of shares owned, the denomination, date, and number of
shares of each certificate and any stop transfer instructions lodged against
any such certificates;
(g) A transaction register from Quazon's duly constituted and
appointed transfer agent setting forth the details of all issuances of stock
issued within three years prior to the date of this Agreement, indicating in
the case of each certificate the date of issuance, certificate number, number
of shares, registered owner, and whether such certificate constitutes an
original issuance or the transfer of outstanding stock, indicating, in the
case of transfers, the number of the certificate from which such stock was
transferred;
(h) All subscription or stock purchase agreements, investment
letters, and other assurances provided by Quazon stockholders documenting the
availability of an exemption from registration under federal and state
securities laws for the original issuance of certificates for all stock issued
within three years prior to the date of this Agreement, together with a
memorandum of Quazon's counsel setting forth the factual basis and related
legal analysis for relying on such exemptions from the registration provisions
of such laws;
(i) A schedule from the Nasdaq EBB or other reliable source of all
market transactions in Quazon's stock since December 31, 2000, showing the
date of the trade, the number of shares traded, and the purchase price for the
shares;
14
(j) All filings, notices, or other communications (except for those
publicly available on the SEC's XXXXX system) between Quazon and the SEC, the
NASD, Nasdaq, or NASD Regulation, Inc.;
(k) All filings, notices, or other communications between Quazon and
any state securities commission, state corporations commission, or similar
agency; and
(l) All filings with any non-United States securities commission,
non-United States corporations commission, Canadian province, or similar
authority.
11. Additional Covenants. The parties make the following additional
covenants:
(a) Reorganization of the Board. In connection with the acquisition of
Scientific by Quazon, the board of directors of Quazon shall be reorganized to
consist of the designees of Scientific, to become effective subject to
compliance with section 14(f) of the Exchange Act. In order to effectuate
such reorganization, Sellers shall use their best efforts to assure that
Quazon shall either (a) cause its current directors to tender their
resignations as directors, effective upon acceptance by the board of
directors, so the other directors can accept each such resignation and appoint
a designee of Scientific, to fill the resulting vacancy in a series, so that
the entire board of directors can be changed without the necessity of holding
a stockholder meeting, or (b) elect new directors by majority written consent
of the stockholders. The Scientific Stockholders and/or Scientific shall be
responsible for preparing and filing such reports and notices of the foregoing
as may be required under section 14(f) of the Exchange Act. Between the
Closing and the time the newly appointed directors take office as directors in
accordance with the provisions of section 14(f) of the Exchange Act, Quazon
shall not engage in any business; enter into any contract, agreement,
commitment, undertaking; waive any right, remedy, or other thing of value; do
any other thing of any other thing of any nature whatsoever without the
consent of the Scientific Stockholders or Scientific.
(b) Possible Additional Company Reports or Amendments or Comments
Thereon. If, at any time after the closing, any governmental authority
requires Quazon to respond to staff inquiries, comments, requirements, or
questions relating to matters which occurred prior to the execution of this
Agreement and which do not relate to the execution of this Agreement or to the
acquisition of Scientific, or to file any additional periodic reports under
Sections 13, 14, or 15(d) of the Exchange Act for which Quazon was responsible
for matters occurring prior to the date of this Agreement, then the directors
of Quazon, by approving this Agreement, jointly and severally agree to pay the
costs of Quazon's accountants, attorneys, and other advisors in completing
such reports. At the closing, the officers and directors of Quazon shall each
deliver his or her personal undertaking to participate, assist, and cooperate
in such efforts without compensation.
(c) Public Announcements. Neither Party shall issue any press release or
otherwise make any public statements with respect to the transactions
15
covered by this Agreement without the approval of the other Party. Any press
release announcing the execution and delivery of this Agreement shall be a
joint press release of the Parties.
(d) Access and Information.
(i) Quazon shall: (A) afford Scientific and its employees, accountants,
consultants, legal counsel, agents, and other representatives (collectively,
the "Scientific Representatives") reasonable access at reasonable times, upon
reasonable prior notice, to the officers, directors, employees, agents,
properties, offices and other facilities of Quazon and to the books and
records thereof; and (B) furnish promptly to Scientific and Scientific
Purchasers Representatives such information concerning the business,
properties, contracts, records and personnel of Quazon (including, without
limitation, financial, operating and other data and information) as may be
reasonably requested, from time to time, by Scientific or such Scientific
Representatives.
(ii) Notwithstanding the foregoing provisions of this Section, no Party
shall be required to grant access or furnish information to the other Party to
the extent that such access to or the furnishing of such information is
prohibited by Law. No investigation by the Parties hereto made heretofore or
hereafter shall affect the representations and warranties of the Parties which
are herein contained and each such representation and warranty shall survive
such investigation.
(iii) The information received pursuant to this Section shall be
deemed to be "Confidential Information." Each Party hereto agrees that it will
treat in confidence all documents, materials and other Confidential
Information which it shall have obtained regarding the other Party during the
course of the negotiations leading to the consummation of the transactions
contemplated hereby (whether obtained before or after the date of this
Agreement), the investigation provided for herein and the preparation of this
Agreement and other related documents. Such documents, materials and other
Confidential Information shall not be communicated to any third Person (other
than to their respective counsel, accountants, financial advisors or lenders)
and shall not be used for any purpose to the detriment of the other Party. No
Party shall use any Confidential Information in any manner whatsoever except
solely for the purpose of evaluating a possible business relationship with the
other Party. No Party and no Purchasers or Quazon Representative will, during
the term of this Agreement or at any time during the two years thereafter,
irrespective of the time, manner, or cause of termination of this Agreement,
use, disclose, copy, or assist any other person or firm in the use,
disclosure, or copying of any documents, materials or other Confidential
Information of the other Party hereto.
(e) Form 8-K Report; Financial Statements of Scientific. Scientific
and Scientific Stockholders shall cause the new officers and directors of
Quazon designated by them to timely prepare and file, on behalf of Xxxxxx,
00
a Current Report on Form 8-K to report the closing. Audited financial
statements of significant subsidiaries, prepared in compliance with SEC
Regulation S-B are generally required to be filed as part of the Form 8-K
report or by amendment thereto no later than 60 days after the Form 8-K is
filed with the SEC. Scientific and Scientific Stockholders agree, to the
extent applicable, to cause the financial statements of Scientific to be
appropriately audited and filed timely with the SEC. 12.
Indemnification . Within the period provided in paragraph 13 herein and in
accordance with the terms of that paragraph, Scientific, the Scientific
Stockholders and Quazon shall indemnify and hold harmless each other at all
times after the date of this Agreement against and in respect of any
liability, damage or deficiency, all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses including attorney's fees incident
to any of the foregoing, resulting from any misrepresentations, breach of
covenant or warranty or nonfulfillment of any agreement on the part of such
party under this Agreement or from any misrepresentation in or omission from
any certificate furnished or to be furnished to a party hereunder.
13. Nature and Survival of Representations . All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing hereunder and the consummation of the transactions contemplated hereby
for one (1) year from the date hereof. All of the parties hereto are
executing and carrying out the provisions of this Agreement in reliance on the
representations, warranties and covenants and agreements contained in this
Agreement or at the Closing of the transactions herein provided for.
14. Documents at Closing. At the Closing, the following transactions
shall occur, all of such transactions being deemed to occur simultaneously:
(a) Scientific and/or Scientific Stockholders will deliver, or cause
to be delivered, to Quazon the following:
(1) stock certificate(s) for the shares of Scientific Stock
being exchanged hereunder, duly endorsed in blank.
(2) a certificate executed by the Scientific Stockholders to
the effect that all representations and warranties made by Scientific
and Scientific Stockholders under this Agreement are true and correct
as of the Closing, the same as though originally given to Quazon on
said date;
(3) a certificate from the State of Utah dated at or about the
date of the Closing to the effect that Scientific is in good standing
under the laws of Utah;
17
(4) an investment letter from each of the Scientific
Stockholders;
(5) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement.
(b) Quazon will deliver or cause to be delivered:
(1) stock certificates representing a total of 20,000,000
shares of Quazon common stock (representing approximately 74.1% of the
then outstanding common stock) issued in full consideration of the
exchange as described herein;
(2) a certificate of the President and Secretary of Quazon to
the effect that all representations and warranties of Quazon made under
this Agreement are reaffirmed on the Closing Date, the same as though
originally given to Scientific and the Scientific Stockholders on said
date;
(3) certified copies of resolutions by Quazon's Board of
Directors, including resignations of the current Quazon officers and
directors, and resolutions of the Quazon Stockholders authorizing this
transaction;
(4) a Certificate from the Secretary of State of Nevada dated
at or about the date of Closing that Quazon is in good standing under
the laws of said State;
(5) all corporate records of Quazon;
(6) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement, including the
turning over of control of any remaining corporate assets of Quazon.
15. Miscellaneous.
(a) Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of each of the parties and their respective successors,
heirs, devisees, transferees and assigns.
(b) Expenses. Each party shall be responsible to pay all of its own
expenses incurred in connection with this Agreement and all related documents
including, but not limited to, attorneys and accountants fees.
(c) Further Assurances and Additional Instruments. Upon the
reasonable request of any party at any time and from time to time
18
following the date of this Agreement, the other parties shall execute and
deliver such further executed stock powers, stock certificates, letters of
resignation, etc. as the requesting party or their counsel may reasonably
request in order to complete the transactions described in this Agreement, or
otherwise to fulfill the purpose and intent of this Agreement.
(d) Notices. Any notice, request, instruction or other document or
instrument required or permitted by this Agreement shall be in writing and
shall be given to the respective parties and shall be deemed to have been
given on the date when such notice, request, instruction or other document or
instrument is personally delivered or 48 hours after being sent by facsimile
or deposited with an overnight courier prepaid and addressed as follows:
In the case of Scientific Stockholders to:
Xxxx Xxxxxxxx
000 Xxxxx 000 Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Xxxx Xxxx
0000 Xxxxx #0
Xx Xxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxx, Xxxxx & Xxxxxxx
00 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
In the case of Scientific to:
Scientific Energy, Inc.
000 Xxxxx 000 Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx Xxxxxxxx
with a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxx, Xxxxx & Xxxxxxx
00 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
19
In the case of Quazon to:
Quazon Corp.
0000 Xxxxx Xxxxxxx Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxxx Xxxxxxx
with a copy to:
Xxxxxx X. Xxxxxxxxx, Esq.
00 Xxxx Xxxxx Xxxxxx, Xxxxx 0000X
Xxxx Xxxx Xxxx, Xxxx 00000
or to such other address as may be given by notice as provided herein.
(e) Headings. The underlined paragraph and subparagraph headings
used in this Agreement are for convenient reference only and are not intended
to affect the meaning or construction of any provision of this Agreement.
(f) Entire Agreement; Amendment. This Agreement and the related
documents and instruments called for herein comprise the entire agreements of
the parties and may not be amended or modified, except by written agreement of
the parties. No provision of the aforementioned agreements may be waived,
except in writing, and only in the specific instance and for the specific
purposes for which given.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when fully and properly executed, shall be deemed
to be an original.
(h) Default and Remedies; Arbitration. If any party defaults in the
performance of any term, covenant, condition or obligation under this
Agreement, the non-defaulting party may pursue any and all remedies available
to such party, subject to such claims being arbitrated as provided herein.
The rights and remedies provided herein are cumulative and not exclusive of
any other right or remedy provided by law.
(i) Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall as to such jurisdiction
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforcement of any such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties waive any provision of law which
renders any provision hereof prohibited or enforceable in any respect.
(j) Attorneys Fees. In the event it is necessary for any party
hereto to institute a proceeding in connection with this Agreement or breach
20
thereof, the prevailing party in such proceeding shall be entitled to
reimbursement for its reasonable attorneys costs, expenses and attorneys fees
incurred, including fees incurred on any appeal or review.
(k) Gender. In construing this instrument and whenever the context
hereof so requires, the masculine gender includes the feminine and neuter and
the singular includes the plural.
(l) Finder's Fee. Wasatch Consulting Group has acted as a finder in
this transaction. Certain shareholders of Quazon have entered into a separate
agreement with Wasatch Consulting Group acknowledging their responsibility to
pay a finders fee to Wasatch Consulting Group. No other person has acted as a
finder in this transaction. Each party hereto, jointly and severally, agrees
to indemnify and hold the other harmless against any claim or demand for
commissions or other compensation by any broker, finder or similar agent
claiming to have been employed by or on behalf of that party and to bear the
cost of attorneys' fees incurred by the other in defending any such claim.
(m) Arbitration. Any dispute or claim which arises out of or which
relates to this Agreement or to the interpretation or breach thereof shall be
resolved by arbitration in Salt Lake City, Utah in accordance with the then
effective commercial arbitration rules of the American Arbitration
Association, and any judgment upon the award rendered pursuant to such
arbitration may be entered in any court having jurisdiction thereof.
(n) Survival of Representations and Warranties. All representations,
warranties, agreements, covenants and obligations herein or in any schedule,
certificate or financial statement delivered by either party incident to the
transactions contemplated hereby are material, shall be deemed to have been
relied upon by the other party and shall survive the execution hereof for a
period of one (1) year from the date hereof regardless of any investigation
and shall merge in the performance of any obligation by any party hereto.
21
IN WITNESS WHEREOF, the parties have executed this Agreement
the day and year first above written.
QUAZON CORP.
/s/ Xxxxxx Xxxxxxx
By ____________________________
Xxxxxx Xxxxxxx, President
SCIENTIFIC ENERGY, INC.
/s/Xxxx X. Xxxxxxxx
By ____________________________
Its President
STOCKHOLDERS OF SCIENTIFIC ENERGY, INC.:
/s/ Xxxx X. Xxxxxxxx
_______________________________
Xxxx Xxxxxxxx
/s/ Xxxx Xxxx
_______________________________
Xxxx Xxxx
EXHIBIT "A"
LIST OF SCIENTIFIC ENERGY, INC. STOCKHOLDERS
No. of Shares
Shares of of Quazon Corp.
Scientific Energy Common Stock
Inc. Common Stock to be
Name and Address Stock Owned Issued in Exchange
------------------ ------------------- ------------------
1. Xxxx Xxxxxxxx 8,000,000 8,000,000
000 Xxxxx 000 Xxxx
Xxxx Xxxx Xxxx, Xxxx
00000
2. Xxxx Xxxx 12,000,000 12,000,000
0000 Xxxxx #0
Xx Xxxxx, Xxxxxxxxxx
00000
Total: 20,000,000 20,000,000
EXHIBIT "B"
INVESTMENT LETTER
TO THE BOARD OF DIRECTORS OF QUAZON CORP.
The undersigned hereby represents to Quazon Corp. (the "Company"), that
(1) the shares of the Company's common stock (the "Securities") which are
being acquired by the undersigned are being acquired for his own account and
for investment and not with a view to the public resale or distribution
thereof: (2) the undersigned will not sell, transfer or otherwise dispose of
the Securities except in compliance with the Securities Act of 1933, as
amended (the "Act"); and (3) he is aware that the Securities are "restricted
securities" as that term is defined in Rule 144 or the General Rules and
Regulations under the Act.
The undersigned further acknowledges that he has had an opportunity to
ask questions of and receive answers from duly designated representatives of
the Company concerning the terms and conditions pursuant to which the
Securities are being offered.
The undersigned acknowledges that he has been afforded an opportunity to
examine such documents and other information which he has requested for the
purpose of verifying the information.
The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
The undersigned further acknowledges that he is fully aware of the
applicable limitations on the resale of the Securities. These restrictions
for the most part are set forth in Rule 144. The Rule permits sales of
"restricted securities" upon compliance with the requirements of such Rule.
If the Rule is available to the undersigned, the undersigned may make only
routine sales of Securities, in limited amounts, in accordance with the terms
and conditions of that Rule.
The Company is the only person which may register its Securities under
the Act and it currently is not contemplating registering any of its
Securities. Furthermore, the Company has not made any representations,
warranties or covenants to the Purchaser regarding the registration of the
Securities or compliance with any exemption under the Act relating to any
resale of the Securities by the undersigned.
By reason of my knowledge and experience in financial and business
matters in general, and investments in particular, the undersigned is capable
of evaluating the merits and risks of an investment in the Securities.
The undersigned is capable of bearing the economic risks of an investment
in the securities, and fully understands the speculative nature of the
securities and the possibility of such loss.
Any and all certificates representing the Securities, and any and all
securities issued in replacement thereof or in exchange therefore, shall bear
the following legend (or a substantially similar legend), which the
undersigned has read and understands:
The shares represented by this Certificate have not been registered under
the Securities Act of 1933 (the "Act") and are "restricted securities" as that
term is defined in Rule 144 under the Act. The shares may not be offered for
sale, sold or otherwise transferred except pursuant to an effective
registration statement under the Act or pursuant to an exemption from
registration under the Act, the availability of which is to be established to
the satisfaction of the Company.
Very truly yours,
____________________________
Date: ______________, 2001
