SUBSCRIPTION AGREEMENT
I. Subscription. Subject to the terms and conditions
hereof, the undersigned purchaser, DIRECT CAPITAL INVESTMENTS,
LTD. (hereinafter referred to as "DCI") hereby irrevocably
subscribes for and agrees to purchase 31,500,000 post-reverse
split shares of Common Stock (the "Shares") of GAVELLA CORP., a
Delaware corporation (hereinafter referred to as "Gavella"), for
which the DCI agrees to pay the following consideration which
totals $900,000:
A. Assignment simultaneous with the execution and delivery
of this Agreement (the "Closing") to Gavella of a promissory
note from 000 Xxxxxx Xxxxxx, LLC in the principal amount of
$770,000; and
B. Cash in the amount of $50,000 to be paid at Closing and
disbursed in accordance with instructions from Gavella's
current President.
C. Cash in the amount of $80,000 to be paid on or before
November 30, 2004.
II. Description of Shares All outstanding shares of Common
Stock of Gavella are, and the Shares offered hereby will be, when
issued, fully paid and non-assessable, par value $.001.
The shares of Common Stock and the Shares are not redeemable,
have no conversion rights, and carry no preemptive or other
rights to subscribe to or purchase additional shares in the event
of a subsequent offering.
III. Representations of DCI
a. The Shares are being offered and sold in reliance upon
the exemption provided under Section 4(2) and/or Rule 506 of
Regulation D of the Securities Act of 1933, as amended (the
"Securities Act), for offerings not involving any public
offering. Accordingly, DCI represents that the Shares are being
acquired by the DCI for investment and shall not be sold,
pledged, or otherwise transferred by DCI except upon the issuance
to Gavella of a favorable opinion of its counsel or submission to
Gavella of such other evidence satisfactory to counsel to
Gavella, in either case, to the effect that a proposed transfer
shall not be in violation of the Securities Act and applicable
state securities laws.
b. DCI hereby indemnifies and agrees to hold Gavella
harmless from all liability imposed upon Gavella by reason of any
sale, pledge, transfer or other disposition of the Shares by DCI
in such circumstances as to make the transaction in which the
Shares were issued to DCI no longer a transaction exempt from the
registration provisions of the Securities Act or the applicable
state securities laws.
c. DCI further agrees and consents to the placement of a
legend on the Shares, which legend shall be in the form
substantially as follows:
NOTICE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
(I) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER SAID ACT OR (ii) AN OPINION OF COMPANY
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
d. DCI represents that DCI is aware that no Federal or
State agency has made any finding or determination as to the
fairness for investment, nor any recommendation or endorsement of
the Shares.
e. DCI was not formed as a legal entity within the past
six (6) months, and was formed for business reasons other than
investment in the securities being offered herein and represents
and warrants that it is organized and domiciled in the State of
Israel.
f. DCI has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of an investment in the shares and has obtained sufficient
information from Gavella to evaluate the merits and risks of an
investment in Gavella. DCI has not utilized any person as a
"purchaser representative" as defined in Regulation D promulgated
by the Securities and Exchange Commission pursuant to the
Securities Act in connection with evaluating such merits and
risks.
g. DCI has relied solely upon DCI's own investigation in
making a decision to invest in Gavella.
h. DCI has received no representation or warranty from
Gavella or any of its officers, directors, employees or agents in
respect of DCI's investment in Gavella. DCI is not purchasing
the Shares as a result of or subsequent to: (I) any
advertisement, article, notice or other communication published
in any newspaper magazine or similar media or broadcast over
television, radio or the Internet; or (ii) any seminar or meeting
whose attendees have been invited by any general solicitation or
general advertising.
i. DCI has had full opportunity to ask questions and to
receive satisfactory answers concerning Gavella and other matters
pertaining to the investment and all such questions have been
answered to DCI's full satisfaction.
j. DCI has received for review Gavella's latest Form 10-
KSB, along with a copy of Gavella's most recent Form 10-QSB.
k. DCI has been provided an opportunity to obtain any
additional information concerning Gavella and all other
information to the extent Gavella possesses such information or
can acquire it without unreasonable effort or expense.
l. DCI understands that (I) the Shares have not been
registered under the Securities Act, or the securities laws of
any state in reliance on specific exemptions from registration;
(ii) no securities administrator of any state or the federal
government has recommended or endorsed this offering or made any
finding or determination relating to the fairness of an
investment in Gavella; and (iii) Gavella is relying on DCI's
representations and agreements for the purpose of determining
whether this transaction meets the requirements of the exemptions
afforded by the Securities Act and certain state securities laws.
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m. DCI has been urged to seek independent advice from
DCI's professional advisors relating to the suitability of an
investment in Gavella in view of DCI's overall financial needs
and with respect to the legal and tax implications of such
investment.
n. DCI hereby acknowledges and is aware that except for
any rescission rights that may be provided under applicable laws,
DCI is not entitled to cancel, terminate or revoke this
subscription.
o. DCI hereby acknowledges and is aware that, pursuant to
the attached Indenture, Xxxx of Sale and Assignment of Assets,
Properties and Business of Gavella Corp and the Assumption
Agreement, except for the following assets and liabilities,
Gavella shall have no other assets and liabilities at closing:
ASSETS
1. 3,000,000 post-reverse split shares of common stock of
Xxxxxxx Holdings, Inc. ("Xxxxxxx"), representing 20% of the
issued and outstanding share capital of Xxxxxxx on a fully
diluted basis
Simultaneously with Closing, Xxxxx X. Xxxxxxx shall directly or
indirectly contribute a 49% limited partnership interest in SVG
Properties, L.P. to Xxxxxxx in exchange for 12,000,000 post-
reverse split shares of Xxxxxxx common stock. At Closing there
shall be 15,000,000 shares of common stock outstanding in Xxxxxxx
on a fully-diluted basis; Gavella shall therefore own 3,000,000
shares of common stock, representing 20% of the outstanding stock
of Xxxxxxx on a fully-diluted basis and Xxxxx X. Xxxxxxx shall
own 12,000,000 shares of common stock, representing 80% of the
outstanding stock of Xxxxxxx.
Xxxxxxx shall own 100% of Spring Village Holdings, Inc. ("SVH").
SVH will own 80% of SVG Properties, L.P. ("SVG"). SVG owns the
Spring Village Apartment Complex. Immediately prior to closing,
SVG shall have distributed cash and/or promissory notes (the
"Distribution") to its then existing limited partners, in
proportion to their ownership, in an amount sufficient to reduce
the adjusted net book value of Xxxxxxx to approximately
$1,000,000, calculated assuming the real estate was valued at
$5,575,000, the appraised value of the real estate as of August
26, 2003, and after giving effect to this Subscription Agreement.
DCI hereby acknowledges receipt of the calculation of the
adjusted net book value of Xxxxxxx and has accepted the
calculation as fair and reasonable.
LIABILITIES
1. There shall be no liabilities of Gavella of any kind at
Closing other than a Promissory Note due to Xxxxxxx Holdings,
Inc. in the amount of $80,000 (the "Note"), provided however,
Gavella shall comply with all federal, state, local and NASD
rules and regulations and shall pay all costs related to
compliance with such rules and regulations for matters related to
this Agreement and with respect to all requirements of these
agencies post-closing.
-3-
IV. Accredited Investor. Under certain federal and state
securities laws, accredited investors may be excluded in
determining the number of investors to whom this offering may be
sold. If any of the following apply to DCI, DCI has initialed
the paragraph that applies:
The undersigned is:
A natural person whose individual net worth,
or joint net worth with that person's spouse, at the
time of his purchase exceeds $1,000,000.
A natural person who had an individual income
in excess of $200,000 in each of the two most recent
years, or joint income with that person's spouse in
excess of $300,000 in each of those years, and who has
a reasonable expectation of reaching the same income
level in the current year.
A corporation or partnership, not formed for
the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
An employee benefit plan within the meaning
of Title I of the Employment Retirement Income Security
Act of 1974 (ERISA), if the investment decision with
respect to this investment is made by a plan fiduciary
which is either a bank, insurance company, or
registered investment advisor, or if the employee
benefit plan has total assets in excess of $5,000,000.
A tax exempt organization as defined in
Section 501 (c)(3) of the Internal Revenue Code with
total assets in excess of $5,000,000.
A trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is
directed by a sophisticated person.
An entity in which all of the equity owners
are accredited investors.
A small business investment company licensed
by the U.S. Small Business Administration.
V. Representations by Gavella and Xxxxxxx
Gavella and Xxxxxxx, jointly and severally, represent and
warrant to DCI as follows:
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a. Organization and Qualification. Gavella and each of
Xxxxxxx, SVH and SVG (collectively, the "Subsidiaries") is a
corporation or limited partnership, as the case may be, duly
organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated, with full power
and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where
now owned, leased, used, operated and conducted. Each of Gavella
and its Subsidiaries is duly qualified as a foreign corporation
(or partnership in the case of SVG) to do business and is in good
standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such
qualification necessary. Other than Xxxxxxx, Gavella does not
own, directly or indirectly, any capital stock of any corporation
or any equity, profit sharing, participation or other interest in
any corporation, partnership, limited liability company, joint
venture or other entity.
b. Authorization; Enforcement. (i) Gavella and its
Subsidiaries have all requisite corporate power and authority to
enter into and perform this agreement and to consummate the
transactions contemplated hereby in accordance with the terms
hereof, (ii) the execution and delivery of this agreement by
Gavella and the consummation by it of the transactions
contemplated hereby have been duly authorized by Gavella's Board
of Directors and no further consent or authorization of any third
party, including without limitation the Board of Directors or
stockholders of Gavella, is required, (iii) this agreement has
been duly executed and delivered by Gavella by its authorized
representative, and such authorized representative is the true
and official representative with authority to sign this agreement
and the other documents executed in connection herewith and bind
Gavella accordingly, and (iv) this agreement constitutes a legal,
valid and binding obligation of Gavella enforceable against
Gavella in accordance with its terms. Each of the Subsidiaries
has full legal right and power and all authority required to
enter into, execute and deliver any agreements or instruments
contemplated by this agreement and to perform fully their
respective obligations hereunder and thereunder.
c. Capitalization. As of the date hereof, Gavella's
authorized capital consists of (a) 15,000,000 shares of common
stock, par value $0.001 per share, authorized (the "Common
Stock"), of which 7,000,000 shares are issued and outstanding,
including 250,000 shares which have been offered for purchase to
certain stockholders of the Company (said numbers does not
reflect the increase in the authorized stock or the 1:2 reverse
stock split which will become effective on or about November 19,
2004), (i) with each holder thereof being entitled to cast one
vote for each share held on all matters properly
submitted to the shareholders for their vote; and (ii) there
being no pre-preemptive rights and no cumulative voting; and
(b) no shares of preferred stock or any other class of security.
Gavella has no shares reserved for issuance pursuant to any stock
option plan or pursuant to securities exercisable for, or
convertible into or exchangeable for shares of Common Stock,
other than 125,000 options issued to each of the two officers and
directors of Gavella (the "Options"). All of the issued and
outstanding shares of capital stock of Gavella and its
Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of Gavella or its
Subsidiaries are subject to preemptive rights or any other
similar rights. There are (i) no outstanding options, warrants,
scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for any shares of
capital stock of Gavella or its Subsidiaries or arrangements by
which Gavella or its Subsidiaries is or may become bound to issue
additional shares of capital stock of Gavella or its
Subsidiaries, (ii) no agreements or arrangements under which
Gavella or its Subsidiaries is obligated to register the sale of
any of its or their securities under the 1933 Act and (iii) no
anti-dilution or price adjustment provisions contained in any
security issued by Gavella or its Subsidiaries (or in any
agreement providing any such rights). The Shares are free and
clear of all liens, encumbrances, objections, title defects,
security interest, pledges, mortgages, charges, claims, options,
preferential arrangements or restrictions of any kind, including
but not limited to any restriction on the use, voting, transfer
or other exercise of any attributes of ownership (collectively,
"Encumbrances"), other than those created by applicable federal
and state securities laws. Neither Gavella or its Subsidiaries is
a party to any agreement, voting trust, proxy, option, right of
first refusal or any other agreement or understanding with
respect to the Shares or its respective equity interests.
-5-
DCI acknowledges that 250,000 shares of common stock of
Gavella may be offered and sold to certain current stockholders
of Gavella. If said shares are purchased prior to November 19,
2004, the Options will be cancelled and have no further force and
effect; if said shares are not purchased prior thereto, the
Options will be exercised in their entirety. The proceeds from
the sale of these shares has been assigned to Xxxxxxx.
Upon the issuance of the Shares to DCI and the consummation
of the transactions contemplated herein, (i) DCI will own 90% of
the issued and outstanding share capital of Gavella on a fully-
diluted basis and (ii) each of Gavella and Xxxxx X. Xxxxxxx will
own 20% and 80%, respectively, of the issued and outstanding
share capital of Xxxxxxx on a fully-diluted basis, free and clear
of any Encumbrances, other than those created by applicable
federal and state securities laws.
d. No Conflicts. The execution, delivery and performance
of this Agreement by Gavella and the consummation by Gavella and
the Subsidiaries of the transactions contemplated hereby,
including without limitation the reverse stock splits to be
effected by both Gavella and Xxxxxxx and the Distribution, will
not (i) conflict with or result in a violation of any provision
of the Articles of Incorporation or By-laws of Gavella, Xxxxxxx
or SVH, respectively, or the partnership agreement of SVG or (ii)
violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license
or instrument to which Gavella or the Subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws
and regulations and regulations of any self-regulatory
organizations to which Gavella or the Subsidiaries or its
securities are subject) applicable to Gavella or the Subsidiaries
or by which any of its respective property or asset is bound or
affected. Neither Gavella nor any of its Subsidiaries is in
violation of its respective Articles of Incorporation, By-laws or
other organizational documents and neither Gavella nor any of the
Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put such parties in
default) under, and neither Gavella nor any of the Subsidiaries
has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which
Gavella or any of the Subsidiaries is a party or by which any
property or assets of Gavella or any of its Subsidiaries is bound
or affected. The businesses of Gavella and the Subsidiaries are
not being conducted in violation of any law, ordinance or
regulation of any governmental entity. Neither Gavella nor any
of the Subsidiaries is required to obtain any consent,
authorization or order of, or make any filing or registration
with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in
order for it to execute, deliver or perform any of its
obligations under this agreement. The execution and delivery by
Gavella of this agreement does not and will not, and the
consummation of the transactions contemplated hereby will not,
require any action by or in respect of, or filing with, any
governmental body, agency or governmental official, including
but not limited to the Securities and Exchange Commission
("Commission") and the National Association of Securities
Dealers ("NASD"), except such actions or filings that have been
undertaken or made prior to the date hereof and that will be in
full force and effect (or as to which all applicable waiting
periods have expired) on and as of the date hereof or which are
not required to be filed on or prior to the date hereof, other
than the submission of a Schedule 14C, an 8K, and the filing of
an amended and restated certificate of incorporation of Gavella.
Gavella is not in violation of the listing requirements of the
Over-the-Counter Bulletin Board (the "OTCBB") and does not
reasonably anticipate that the Common Stock will be delisted by
the OTCBB.
-6-
e. SEC Documents; Financial Statements. Gavella has
timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as
amended (the "1934 Act") (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein,
being hereinafter referred to herein as the "SEC Documents"). As
of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, 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. None of the statements made in
any such SEC Documents is, or has been, required to be amended or
updated under applicable law (except for such statements as have
been amended or updated in subsequent filings prior the date
hereof). Gavella has not received any communication from the
SEC, NASD or other regulatory agency with respect to the SEC
Documents, other than the comment letters from the SEC related to
Gavella's initial Form 10 filings. All the comments have been
adequately responded to by Gavella and the SEC has no further
comments with respect to any of the SEC Documents. As of their
respective dates, the financial statements of Gavella included in
the SEC Documents complied as to form in all material respects
with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the
consolidated financial position of Gavella and its consolidated
subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the financial
statements of Gavella included in the SEC Documents and as
otherwise disclosed in the SEC Documents, Gavella has no
liabilities, contingent or otherwise. As of the Closing, Gavella
will have no debts, liabilities, obligations, direct, indirect,
absolute or contingent, whether accrued, vested or otherwise,
whether known or unknown.
f. Absence of Litigation. There is no action, suit,
claim, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory
organization or body pending or, threatened against or affecting
any of Gavella or the Subsidiaries, or their respective officers,
directors, agents, representatives or otherwise. There are no
outstanding judgments or UCC financing instruments or UCCs filed
against Gavella.
-7-
g. Employees. Gavella does not (i) have any employees,
(ii) owe any compensation of any kind, deferred or otherwise, to
any person, including without limitation, agents,
representatives, consultants, accountants and attorneys, (iii)
have any written or oral employment agreement with any person
(iv) nor is it a party to or bound by any collective bargaining
agreement. There are no loans or other obligations payable to or
owing by Gavella to any stockholder, officer, director, agent,
representative, consultant, accountant, attorney or otherwise nor
are there any loans or debts payable or owing by any such persons
to Gavella or any guarantees by Gavella of any loan or obligation
of any nature to which any such person is a party, except for
$75,000 of promissory notes due to stockholders which are being
assumed by Xxxxxxx at Closing.
h. Patents, Copyrights, etc. Neither Gavella nor any of
its Subsidiaries owns, uses or possesses any licenses or rights
to use any patents, patent applications, patent rights,
inventions, know-how, trade secrets, trademarks, trademark
applications, service marks, service names, trade names and
copyrights ("Intellectual Property"). There is no claim or action
by any person pertaining to, or proceeding pending, or to
Gavella's knowledge threatened, which challenges the right of
Gavella or any of the Subsidiaries with respect to any
Intellectual Property.
i. No Contracts, Etc Gavella is not a party to any
contract, arrangement or agreement, whether oral or in writing,
including without limitation, loan agreements, credit lines,
promissory notes, mortgages, pledges, guarantees, security
agreements, factoring agreements, letters of credit, powers of
attorney or other arrangements to loan or borrow money or extend
credit, other than the $75,000 in promissory notes due to
stockholders and various loan agreements with Intelisys Aviation
Systems of America, Inc., all of which are being assumed by
Xxxxxxx at Closing.
j. Tax Status. Gavella, and the Subsidiaries have made or
filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to
which each is subject and have paid all taxes and other
governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and
declarations. There are no and will be no taxes due as a result
of the Distribution and any of the transactions contemplated by
this agreement. There are no unpaid taxes claimed to be due by
the taxing authority of any jurisdiction, and Gavella knows of no
basis for any such claim. Neither Gavella nor any of the
Subsidiaries has executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any
foreign, federal, state or local tax. None of Gavella's or any
of the Subsidiaries' tax returns is presently being audited by
any taxing authority. Xxxxxxx has assumed and shall pay any taxes
due by Gavella up to the day of closing and Gavella shall pay any
and all taxes for all periods commencing the day after closing.
k. Permits; Compliance. Each of Gavella and the
Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry
on its business as it is now being conducted (collectively, the
"Permits"), and there is no action pending or, to the knowledge
of Gavella, threatened regarding suspension or cancellation of
any of the Permits. Neither Gavella nor any of the Subsidiaries
is in conflict with, or in default or violation of, any of the
Permits. Neither Gavella nor any of the Subsidiaries has
received any notification with respect to possible conflicts,
defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations.
l. Environmental Matters. There are, with respect to
Gavella and the Subsidiaries or any predecessors thereof, no past
or present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws and neither Gavella
nor any of the Subsidiaries has received any notice with respect
to any of the foregoing, nor is any action pending or threatened
in connection with any of the foregoing. The term "Environmental
-8-
Laws" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
Other than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased
or used by Gavella or the Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by Gavella or the Subsidiaries. There are
no underground storage tanks on or under any real property owned,
leased or used by Gavella or the Subsidiaries.
m. Title to Property. Neither Gavella, nor any of the
Subsidiaries own any real or personal property, other than the
Spring Village Apartment Complex owned by SVG. The facilities
under lease by Gavella will be terminated as of the closing date
with no further liability or obligation to Gavella thereafter.
n. Internal Accounting Controls. Gavella and each of its
Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of Gavella's board of directors, to
provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability, (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. The books of
account, corporate records and minute books of Gavella are
complete and correct in all material respects. Complete and
accurate copies of all such books of account, corporate records
and minute books of Gavella and its Subsidiaries have been made
available to DCI and its representatives.
o. Disclosure. All information relating to or concerning
Gavella and the Subsidiaries set forth in this agreement and
otherwise in connection with the transactions contemplated hereby
is true and correct in all respects and Gavella has not omitted
to state any fact necessary in order to make the statements made
herein or therein, in light of the circumstances under which they
were made, not misleading. No event or circumstance has occurred
or exists with respect to Gavella or the Subsidiaries or its or
their business, properties, prospects, operations or financial
conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by Gavella but which
has not been so publicly announced or disclosed (assuming for
this purpose that Gavella's reports filed under the 1934 Act are
being incorporated into an effective registration statement filed
by Gavella under the 1933 Act).
p. No Improper Payments. Neither Gavella nor, to
Gavella's knowledge, any employee or agent of Gavella has made
any payments of funds of Gavella, or received or retained any
funds, in each case in violation of any law, rule or regulation
or of a character required to be disclosed by Gavella in any
of the SEC Documents.
q. Assets. As of the closing, Gavella will have no
assets other than 3,000,000 shares of Xxxxxxx, representing 20%
of the issued and outstanding share capital of Xxxxxxx on a fully-
diluted basis, and the Option.
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r. No Liabilities. There are no liabilities of Gavella of
any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, other
than the Note. As of the Closing, Gavella will not have any
debt, liability, or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, and whether due or to become
due, other than the Note.
s. No Dissenters' Rights. The purchase of the Shares by
DCI from Gavella will not give rise to any dissenting
shareholders' rights under the Delaware General Corporation Law,
the Articles of Incorporation or By-laws, or otherwise.
t. Prior Offerings. All issuances by Gavella of shares of
Common Stock in past transactions have been legally and validly
effected, and all of such shares of Common Stock are fully paid
and non-assessable, including without limitation the 250,000
shares of common stock to be sold on or prior to November 19,
2004. All of the offerings were conducted in strict accordance
with the requirements of Regulation D, Rules 504 and 506, as
applicable, in full compliance with the requirements of the 1933
Act and the 1934 Act, as applicable, and in full compliance with
and according to the requirements of the DGCL and the Articles of
Incorporation and By-laws of Gavella.
u. Anti-takeover Plan; State Takeover Statutes. Neither
Gavella nor any of the Subsidiaries has in effect any plan,
scheme, device or arrangement, commonly or colloquially known as
a "poison pill" or "anti-takeover" plan or similar plan, scheme,
device or arrangement. No other state takeover statute or
similar statute or regulation applies or purports to apply to
this agreement or the transactions contemplated hereby.
Effective at the Closing the current officers and directors
of Gavella will resign as officers and directors of Gavella,
provided, however that Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxxx shall
remain as directors until the tenth (10th) day after the filing
with the SEC and mailing to all holders of record of an
Information Statement pursuant to Section 14(f) of the 1934 Act
and Rule 14f-1 thereunder.
VI. Indemnification
Xxxxxxx shall indemnify and hold harmless Gavella, DCI and
its respective affiliates, officers, directors, stockholders,
employees and agents and the successors and assigns of all of
them (the "Indemnified Parties"), and shall reimburse the
Indemnified Parties for, any loss, liability, claim, damage,
expense (including, but not limited to, costs of investigation
and defense and attorneys' fees) (collectively, "Damages"),
arising from or in connection with (a) any inaccuracy or breach
of any of the representations and warranties, of Gavella or
Xxxxxxx in this agreement or in any certificate or document
delivered by Gavella or any of the Subsidiaries pursuant to this
agreement, or any actions, omissions or statements of fact
inconsistent with in any material respect any such representation
or warranty, (b) any failure by Gavella or any of the
Subsidiaries to perform or comply with any agreement, covenant or
obligation in this agreement or in any certificate or document
delivered prior to the closing or to be performed by or complied
with Gavella or the Subsidiaries prior to the closing, (c) any
claims made by a third party against Gavella or any of the
Subsidiaries based upon an obligation, act or omission of Gavella
or the Subsidiaries prior to the closing date, (d) any claims
made at any time arising out of, or in connection with, any
environmental laws or environmental conditions which are based
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upon conditions existing prior to the closing date, (e) taxes
attributable to Gavella or the Subsidiaries or the ownership of
their respective assets prior to the closing, (f) taxes
attributable to the conduct by Gavella or the Subsidiaries of its
respective business or their operation or ownership of its
assets, (g) any claims for severance or any other compensation
made by any employee, representative, officer, director or agent
of Gavella or any of the Subsidiaries, (h) any claim made at any
time by any governmental body in respect of the business of
Gavella or the Subsidiaries for all periods prior to the closing
date, (i) any debt, claim, liability or obligation of Gavella or
the Subsidiaries prior to the closing date or (k) any litigation,
action, claim, proceeding or investigation by any third party
relating to or arising out of the business or operations of
Gavella or the Subsidiaries prior to the closing date.
All representations, warranties, covenants and agreements of
the parties contained herein or in any other certificate or
document delivered pursuant hereto shall survive the closing for
three years from the closing date, except the representations and
warranties set forth in Section V (j) and (l) which shall survive
until the expiration of the applicable statute of limitations.
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VII. Acceptance of Subscription by Gavella
Gavella, in its sole discretion, reserves the right to reject any
Subscription Agreement.
Direct Capital Investments, Ltd. /s/ Xxxxx Xxxxxxxxxx
Signature
Print Name as it should appear
on the certificate
Set forth the State/Country
where Direct Capital TIN # N/A
Investments, Ltd is domiciled:
State of Israel Date November 9, 2004
Set forth an address for
purposes of correspondence.
000 Xxxxxx Xxxxxx
Xxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
City, State, Zip Code
ACCEPTED BY:
GAVELLA CORP.
BY: /s/ Xxxxx X. Xxxxxxx, President
AGREED TO BY:
XXXXXXX HOLDINGS, INC.
BY: /s/ Xxxxx X. Xxxxxxx, President
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