Exhibit 10.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
this 9th day of October 2003, by and among Prelude Ventures, Inc., a Nevada
corporation ("Prelude"); Alliance Petroleum Products Company, an Illinois
corporation ("Alliance"); and the persons listed in Exhibit A-1 hereof who are
the owners of record of all the issued and outstanding stock of Alliance who
execute and deliver the Agreement ("Alliance Stockholders"), based on the
following:
RECITALS
Prelude wishes to acquire all the issued and outstanding stock of
Alliance in exchange for stock of Prelude in a transaction intended to qualify
as a tax-free exchange pursuant to section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended. The parties intend for this Agreement to represent the
terms and conditions of such tax-free reorganization, which Agreement the
parties hereby adopt.
AGREEMENT
Based on the stated premises, which are incorporated herein by
reference, and for and in consideration of the mutual covenants and agreements
hereinafter set forth, the mutual benefits to the parties to be derived
herefrom, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, it is hereby agreed as follows:
ARTICLE I
EXCHANGE OF STOCK
1.01 Exchange of Shares. On the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as defined in Section 1.05
hereof), the Alliance Stockholders shall assign, transfer, and deliver to
Prelude, free and clear of all liens, pledges, encumbrances, charges,
restrictions, or claims of any kind, nature, or description, all 757,864 issued
and outstanding shares of common stock of Alliance (the "Alliance Shares") held
by Alliance Stockholders which shares shall represent all issued and outstanding
shares of Alliance common stock, and Prelude agrees to acquire such shares on
such date by issuing and delivering in exchange therefore an aggregate of
5,000,000 restricted shares of Prelude common stock, par value $0.001 per share,
(the "Prelude Common Stock") with an additional 5,000,000 shares of Prelude
voting capital stock to be issued to Worldlink International Network, Inc. upon
24 months from the date hereof. Such shares of Prelude Common Stock shall be
issued on a six and five nine seven one thousandths (6.597) for One (1) basis,
(for every 1 shares of Alliance, Alliance shareholders will receive 6.597 share
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of Prelude) based on the number of Alliance Shares held and as set forth
opposite the Alliance Stockholder's respective names in Exhibit A-1. All
5,000,000 shares of Prelude Common Stock to be issued and delivered pursuant to
this Agreement shall be appropriately adjusted to take into account any stock
split, stock dividend, reverse stock split, recapitalization, or similar change
in the Prelude Common Stock which may occur between the date of the execution of
this Agreement and the Closing Date.
1.02 Delivery of Certificates by Alliance Stockholders. The transfer of
Alliance Shares by the Alliance Stockholders shall be effected by the delivery
to Prelude at the Closing (as set forth in Section 1.05 hereof) of certificates
representing the transferred shares endorsed in blank or accompanied by stock
powers executed in blank, with all signatures guaranteed and if applicable all
necessary transfer taxes and other revenue stamps affixed and acquired at the
Alliance Stockholders' expense.
1.03 Operation as Wholly-Owned Subsidiary. After giving effect to the
transaction contemplated hereby, Prelude will own all the issued and outstanding
shares of Alliance and Alliance will be a wholly-owned subsidiary of Prelude
operation under the name Alliance Petroleum, Inc., or such other name as may be
acceptable to the Alliance board of directors.
1.04 Further Assurances. At the Closing and from time to time
thereafter, the Alliance Stockholders shall execute such additional instruments
and take such other action as Prelude may reasonably request, without undue cost
to the Alliance Stockholders in order to more effectively sell, transfer, and
assign clear title and ownership in the Alliance Shares to Prelude.
1.05 Closing and Parties. The Closing contemplated hereby shall be held
at a mutually agreed upon time and place on or before October 9, 2003, or on
another date to be agreed to in writing by the parties (the "Closing Date"). The
Agreement may be closed at any time following approval by a majority of the
shareholders of Prelude Common Stock as set forth in Section 4.02 hereof and the
Alliance Stockholders as set forth in Section 5.02. The Closing may be
accomplished by wire, express mail, overnight courier, conference telephone call
or as otherwise agreed to by the respective parties or their duly authorized
representatives.
1.06 Closing Events
(a) Prelude Deliveries. Subject to fulfillment or waiver of the
conditions set forth in Article IV, Prelude shall deliver to Alliance at Closing
all the following:
(i) A certificate of good standing from the secretary of State of
Nevada, issued as of a date within sixty days prior to the
Closing Date, certifying that Prelude is in good standing as a
corporation in the State of Nevada:
(ii) Incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of Prelude executing
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this Agreement and any other document delivered pursuant hereto
on behalf of Prelude;
(iii) Copies of the resolution of Prelude board of directors and
shareholder minutes or consents authorizing the execution and
performance of this Agreement and the contemplated transactions,
certified by the secretary or an assistant secretary of Prelude
as of the Closing Date;
(iv) The certificate contemplated by Section 4.02, duly executed
by the chief executive officer of Prelude;
(v) The certificate contemplated by Section 4.03, dated the
Closing Date, signed by the chief executive officer of Prelude;
(vi) Certificates for 5,000,000 shares of Prelude Common Stock in
the names of the Alliance Stockholders and in the amounts set
forth in Exhibit "A" and;
(vii) A minimum of $500,000, in total, in equity working capital
available from Prelude; and
(viii) Prelude shall enter in Consulting Agreements with New
Century Capital Consultants, Inc., Alpha Advisors, LLC, National
Securities Corporation and Commonwealth Partners NY LLC
In addition to the above deliveries, Prelude shall take all steps and
actions as Alliance and Alliance Stockholders may reasonably request or as may
otherwise be reasonably necessary to consummate the transactions contemplated
hereby.
(b) Alliance Deliveries. Subject to fulfillment or waiver of the
conditions set forth in Article V, Alliance and/or Alliance Stockholder's shall
deliver to Prelude at Closing all the following:
(i) A certificate of good standing from the secretary of State of
Illinois, issued as of a date within sixty days prior to the
Closing Date, certifying that Alliance is in good standing as a
corporation in the State of Illinois;
(ii) Incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of Alliance executing
this Agreement and any other document delivered pursuant hereto
on behalf of Alliance:
(iii) Copies of resolutions of the board of directors and of the
stockholders of Alliance authorizing the execution and
performance of this Agreement and the contemplated transactions,
certified by the secretary or an assistant secretary of Alliance
as of the Closing Dates;
(iv) The certificate contemplated by Section 5.03, executed by
the chief operating officer of Alliance;
(v) The certificate contemplated by Section 5.04, dated the
Closing Date, and signed by the chief operating officer of
Alliance;
(vi) The shareholder certificates contemplated by section.
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In addition to the above deliveries, Alliance shall take all steps and
actions as Prelude may reasonably request or as may otherwise be reasonably
necessary to consummate the transactions contemplated hereby.
1.07 Termination
(a) This Agreement may be terminated by the board of directors of
either Prelude or Alliance at any time prior to the Closing Date if:
(i) There shall be any actual or threatened action of proceeding
before any court or any governmental body which shall seek to
restrain, prohibit, or invalidate the transaction contemplated by
this Agreement and which, in the reasonable judgment of such
board of directors, made in good faith and based upon the advice
of its legal counsel, makes it inadvisable to proceed with the
transactions contemplated by this Agreement;
(ii) Any of the transactions contemplated hereby are disapproved
by any regulatory authority whose approval is required to
consummate such transactions or in the reasonable judgment of
such board of directors, made in good faith and based on the
advice of counsel, there is substantial likelihood that any such
approval will not be obtained or will be obtained only on a
condition or conditions which would be unduly burdensome, making
it inadvisable to proceed with the exchange;
In the event of termination pursuant to this paragraph (a) of Section
1.07, no obligation, right, or liability shall arise hereunder, and each party
shall bear all of the expenses incurred by it in contemplated hereby.
(b) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of Prelude if (i) shareholders of
Prelude owning more than five percent (5%) of the issued and outstanding shares
of Prelude Common Stock perfect their dissenter's rights with respect to the
approval of this Agreement and the transactions contemplated hereby, (ii)
Alliance shall fail to comply in any material respect with any of its covenants
or agreements contained in this Agreement or if any of the representations or
warranties of Alliance contained herein shall be inaccurate in any material
respect or (iii) Prelude determines that there has been or is likely to be any
material adverse change in the financial or legal condition of Alliance . In the
event of termination pursuant to this paragraph (b) of this Section 1.07, no
obligation, right, remedy, or liability shall arise hereunder. All parties shall
bear their own costs incurred in connection with the negotiation, preparation,
and execution of this Agreement and the transactions contemplated hereby.
(c) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of Alliance if (i) shareholders of
Alliance owning more than five percent (5%) of the issued and outstanding shares
of Alliance Shares perfect their dissenter's rights with respect to the approval
of this Agreement and the transactions contemplated herby, (ii) Prelude shall
fail to comply in any material respect with any of its covenants or agreements
contained in this Agreement or if any of the representations or warranties of
Prelude contained herein shall be inaccurate in any material respect, or
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(iii) Alliance determines that there has been or is likely to be any adverse
change in the financial or legal condition of Prelude. In the event of
termination pursuant to this paragraph (c) of this Section 1.07, no obligation,
right, remedy, or liability shall arise hereunder. All parties shall each bear
their own costs incurred in connection with the negotiation, preparation, and
execution of this Agreement and the transactions contemplated hereby.
ARTICLE II
REPRESENTATION, COVENANTS, AND WARRANTIES OF PRELUDE
As an inducement to, and to obtain the reliance of Alliance and/or
Alliance shareholders, Prelude represents and warrants as follows:
2.01 Organization. Prelude is, and will be on the Closing Date, 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 and will be 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, and there are no other jurisdictions in which it is
not so qualified in which the character and location of the assets owned by it
or the nature of the material business transacted by it requires qualification,
except where failure to do so would not have a material adverse effect on its
business, operation, properties, assets or condition. 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 Prelude articles of incorporation or bylaws, or other
agreement to which it is a party or by which it is bound.
2.02 Approval of Agreement. Prelude has full power, authority, and
legal right and has taken, or will take, all action required by law, its
articles of incorporation, bylaws, and otherwise to execute and deliver this
Agreement and to consummate the transaction herein contemplated. The board of
directors of Prelude has authorized and approved the execution, delivery, and
performance of this Agreement and the transactions contemplated hereby; subject
to the approval of the Prelude shareholders and compliance with state and
federal corporate and securities laws.
2.03 Capitalization. The authorized capitalization of Prelude consists
of 100,000,000 shares, of common stock, $0.001 par value, of which approximately
15,000,000 shares are issued and outstanding and 10,000,000 shares of preferred
stock, $0.001 par value of which none are issued and outstanding. All issued and
outstanding shares of Prelude are legally issued, fully paid, and nonassessable
and not issued in violation of the preemptive or other right of any person.
There are no dividends or other amounts due or payable with respect to any of
the shares of capital stock of Prelude.
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2.04 Financial Statements.
(a) Included in the Schedules are the audited balance sheets of Prelude
as of December 31, 2002 and 2001, and the related statement of operations,
stockholder's equity (deficit), and cash flows for the fiscal year ended
December 31, 2002, and 2001, including the notes thereto, and the accompanying
report of XXXXXXX XXXXXX; independent certified public accountants. At or prior
to the Closing Date, Prelude shall deliver the un-audited balance sheet of
Prelude as of June 30, 2003, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the six months ended June 30,
2003, together with the notes thereto and representations by the principal
accounting and financial officer of Prelude to the effect that such financial
statements contain all adjustments (all of which are normal recurring
adjustments) necessary to present fairly the results of operations and financial
position for the periods and as of the dates indicated and such financial
statements shall not reflect any material changes since the December 31, 2002,
financial statements. All documents referred to herein are available as public
disclosure document pursuant to the Periodic Filing Requirements and as listed
on the XXXXX system of the SEC.
(b) The financial statements of Prelude delivered pursuant to Section
2.04(a) have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved as explained in
the notes to such financial statements. The Prelude financial statements present
fairly, in all material respects, as of their respective dates, the financial
position of Prelude. Prelude did not have, as of the date of any such financial
statements, except as and to the extent reflected or reserved against therein,
any liabilities or obligations (absolute or contingent) which should be
reflected therein in accordance with generally accepted accounting principles,
and all assets reflected therein presently fairly the assets of Prelude in
accordance with generally accepted accounting principles
(c) Prelude has filed or will file as the Closing Date all tax returns
required to be filed by it from inception to the Closing Date. All such returns
and reports are accurate and correct in all material respect. Prelude has no
material liabilities with respect to the payment of any federal, state, county,
local, or other taxes (including any deficiencies, interest, or penalties)
accrued for or applicable to the period ended on the date of the most recent
balance sheet of Prelude, except to the extent reflected on such balance sheet
and all such dates and years and periods prior thereto and for which Prelude may
at said date have been liable in its own right or as transferee of the assets
of, or as successor to, any other corporation or entity, except for taxes
accrued but not yet due and payable, and to the best knowledge of Prelude, no
deficiency assessment or proposed adjustment of any such tax return is pending,
proposed or contemplated. To the best knowledge of Prelude, none of such income
tax returns has been examined or is currently being examined by the Internal
Revenue Service and no deficiency assessment or proposed adjustment of any such
return is pending, proposed or contemplated. Prelude has not made any election
pursuant to the provisions of any applicable tax laws (other than elections that
relate solely to methods of accounting, depreciation, or amortization) that
would have a material adverse affect on Prelude, its financial condition, its
business as presently conducted or proposed to be conducted, or any of its
respective properties or material assets. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any tax
return of Prelude.
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2.05 Outstanding Warrants and Options. Prelude has no existing
Warrants, options, calls, or commitments of any nature relating to the
authorized and un-issued Prelude Common Stock.
2.06 Information. The information concerning Prelude set forth in this
Agreement is complete and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under which
they were made, not misleading. Prelude shall cause the schedules delivered by
it pursuant hereto and the instruments delivered to Alliance hereunder to be
updated after the date hereof up to and including the Closing Date.
2.07 Absence of Certain Changes or Events. Except as set forth in this
Agreement or the schedules hereto, since the date of the most recent Prelude
balance sheet described in Section 2.04 and included in the information referred
to in Section 2.06.
(a) There has not been (i) any material adverse change in the business,
operations, properties, level of inventory, assets, or condition of Prelude or
(ii) any damage, destruction, or loss to Prelude (whether or not covered by
insurance) materially and adversely affecting the business, operations,
properties, assets, or conditions of Prelude;
(b) Prelude has not (i) amended its articles of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are extraordinary
or material considering the business of Prelude; (iv) made any material change
in its method of management, operation, or accounting; (v) entered into any
other material transactions; (vi) made any accrual or arrangement for or payment
of bonuses or special compensation of any kind or any severance or termination
pay to any present or former officer or employee; (vii) increased the rate of
compensation payable or to become payable by it to any of its officers or
directors or any of its employees whose monthly compensation exceeds $1,000; or
(viii) made any increase in any profit-sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment, or
arrangement made to, for, or with its officers, directors, or employees;
(c) Prelude has not (i) granted or agreed to grant any options,
warrants, or other rights for its stocks, bonds, or other corporate securities
calling for the issuance thereof; (ii) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability (absolute
or contingent) except liabilities incurred in the ordinary course of business;
(iii) paid any material obligation or liability (absolute or contingent) other
than current liabilities reflected in or shown on the most recent Prelude
balance sheet and current liabilities incurred since that date in the ordinary
course of business; (iv) sold or transferred, or agreed to sell or transfer, any
of its material assets, properties, or rights (except assets, properties, or
rights not unused or un-useful in its business which, in the aggregate have a
value of less than $5,000 or canceled, or agreed to cancel, any debts or claims
(except debts and claims which in the aggregate are of a value of less than
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$5,000; (v) made or permitted any amendment or termination of any contract,
agreement, or license to which it is a party if such amendment or termination is
material, considering the business of Prelude; or (vi) issued, delivered, or
agreed to issue or deliver any stock, bonds, or other corporate securities
including debentures (whether authorized and un-issued or held as treasury
stock); and
(d) To the best knowledge of Prelude, it has not become subject to any
law or regulation which materially and adversely affects, or in the future would
be reasonably expected to adversely affect, the business, operations,
properties, assets, or condition of Prelude.
2.08 Litigation and Proceeding. There are no material actions, suits,
or administrative or other proceedings pending or, to the knowledge of Prelude,
threatened by or against Prelude or adversely affecting Prelude or its
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
Prelude does not have any knowledge of any default on its part with respect to
any default on its part with respect to any judgment, order, writ, injunction,
decree, award, rule, or regulation of any court, arbitrator, or governmental
agency or instrumentality.
2.09 Compliance With Laws and Regulations. Prelude has complied with
all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
(i) could not materially and adversely affect the business, operations,
properties, assets, or conditions of Prelude or (ii) could not result in the
occurrence of any material liability for Prelude. To the best knowledge of
Prelude, the consummation of this transaction will comply with all applicable
statures and regulations, subject to the preparation and filing of any forms
required by state and federal securities laws.
2.10 Material Contract Defaults. Prelude is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets, or condition of Prelude, and there is no event of default in any
material respect under any such contract, agreement, lease, or other commitment
in respect of which Prelude has not taken adequate steps to prevent such a
default from occurring.
2.11 No Conflict With Other Instrument. The execution of this Agreement
and the consummation of the transactions contemplated by this Agreement will not
result in the breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust, or other
material contract, agreement, or instrument to which Prelude is a party or to
which any of its properties or operations are subject.
2.12 Subsidiary. Prelude does not own, beneficially or of record, any
equity securities in any other entity, other than Tri-State Acquisition Corp.
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2.13 Prelude Schedules. Prelude has delivered to Alliance the following
schedules, which are collectively referred to as the "Prelude Schedules" and
which consist of the following separate schedules dated as of the date of
execution of this Agreement, all certified by a duly authorized officer of
Prelude as complete, true and accurate:
(a) A schedule including copies of the articles of incorporation and
bylaws of Prelude in effect as of the date of this Agreement;
(b) A schedule containing copies of resolutions adopted by the board of
directors of Prelude approving this Agreement and the transactions herein
contemplated;
(c) A schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or condition of
Prelude since the most recent Prelude balance sheet, required to be provided
pursuant to Section 2.04 hereof,
(d) A schedule setting forth the financial statements required pursuant
to Section 2.04(a) hereof; and
(e) A schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the Prelude Schedules
by Sections 2.01 through 2.12.
Prelude shall cause the Prelude Schedules and the instruments delivered
to Alliance hereunder to be updated after the date hereof up to and including a
specified date not more than three business days prior to the Closing Date. Such
updated Prelude Schedules, certified in the same manner as the original Prelude
Schedules, shall be delivered prior to and as a condition precedent to the
obligation of the Alliance to close.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF ALLIANCE
As an inducement to, and to obtain the reliance of, Prelude, Alliance
represents and warrants as follows:
3.01 Organization. Alliance is, and will be on the Closing Date, a
corporation duly organized, validly existing, and in good standing under the
laws of the state of Illinois and has the corporate power and is and will be
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, and there are no other jurisdictions in which it is
not so qualified in which the character and location of the assets owned by it
or the nature of the material business transacted by its requires qualification,
except where failure to do so would not have a material adverse effect on its
business, operations, properties, assets or conditions of Alliance . The
execution and delivery of this Agreement does not, and the consummation of the
transaction contemplated by this Agreement in accordance with the terms hereof
will not, violate any provision of Alliance's memorandum or articles of
incorporation, or other material agreement to which it is a party or by which it
is bound.
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3.02 Approval of Agreement. Alliance has full power, authority, and
legal right and has taken, or will take, all action required by law, its
articles of incorporation, memorandum, or otherwise to execute and deliver this
Agreement and to consummate the transactions herein contemplated. The board of
directors of Alliance have authorized and approved the execution, delivery, and
performance of this Agreement and the transactions contemplated hereby; subject
to the approval of the Alliance Stockholders and compliance with provincial and
federal corporate and securities laws.
3.03 Capitalization. The authorized capitalization of Alliance consists
of 100,000,000 shares. Consisting of 50,000,000 shares of common stock, no par
value, of which as of the date hereof 757,864 shares are issued and outstanding.
All issued and outstanding shares of Alliance are legally issued, fully paid,
and non-assessable and not issued in violation of the preemptive or other right
of any person. There are no dividends or other amounts due or payable with
respect to any of the shares of capital stock of Alliance.
3.04 Financial Statements.
(a) Included in Schedule 3.04 are the un-audited balance sheet of
Alliance as of December 31, 2002 and 2001 and the related statements of
operations, cash flows, and stockholders' equity, for the past five years, and
the accompanying reports of , independent certified general accountants. At or
prior to the Closing Date, Alliance shall deliver the un-audited balance sheet
of Alliance as of June 30, 2002, and the related statements of operations,
stockholders' equity (deficit), as cash flows for the six months ended June 30,
2002, together with the notes thereto and representations by the chief operation
officer of Alliance to the effect that such financial statements contain all
adjustments (all of which are normal recurring adjustments) necessary to present
fairly the results of operations and financial position for the periods and as
the dates indicated.
(b) The audited financial statements delivered pursuant to Section
3.04(a) have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved. The financial
statements of Alliance present fairly, as of their respective dates, the
financial position of Alliance. Alliance did not have, as of the date of any
such balance sheets, except as and to the extent reflected or reserved against
therein, any liabilities or obligations (absolute or contingent) which should be
reflected in any financial statements or the notes thereto prepared in
accordance with generally accepted accounting principles, and all assets
reflected therein present fairly the assets of Alliance, in accordance with
generally accepted accounting principles. The statements of revenue and expenses
and cash flows present fairly the financial position and result of operations of
Alliance as of their respective dates and for the respective periods covered
thereby.
(c) Alliance has filed or will file as the Closing Date all tax returns
required to be filed by it from inception to the Closing Date. All such returns
and reports are accurate and correct in all material respect. Alliance has no
material liabilities with respect to the payment of any federal, provincial,
county, local, or other taxes (including and deficiencies, interest, or
penalties) accrued for or applicable to the period ended on the date of the most
recent balance sheet of Alliance, except to the extent reflected on such balance
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sheet and all such dates and years and periods prior thereto and for which
Alliance may at said date have been liable in its own right or as transferee of
the assets of, or as successor to, any other corporation or entity, except for
taxes accrued but not yet due and payable, and to the best knowledge of Alliance
, no deficiency assessment or proposed adjustment of any such tax return is
pending, proposed or contemplated. To the best knowledge of Alliance, none of
such income tax returns has been examined or is currently being examined by the
Internal Revenue Service and no deficiency assessment or proposed adjustment of
any such return is pending, proposed or contemplated. Alliance has not made any
election pursuant to the provisions of any applicable tax laws (other than
elections that relate solely to methods of accounting, depreciation, or
amortization) that would have a material adverse affect on Alliance, its
financial condition, its business as presently conducted or proposed to be
conducted, or any of its respective properties or material assets. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any tax return of Alliance.
3.05 Outstanding Warrants and Options. Alliance has no existing
warrants, options, calls, or commitments relating to the authorized and
un-issued Alliance Common Stock.
3.06 Information. The information concerning Alliance set forth in this
Agreement and in the schedules delivered by Alliance pursuant hereto is complete
and accurate in all material respects and does not contain any untrue statement
of a material fact of omit to state a material fact required to make the
statements made, in light of the circumstances under which they were made, not
misleading. Alliance shall cause the schedules delivered by Alliance pursuant
hereto to Prelude hereunder to be updated after the date hereof up to and
including the Closing Date.
3.07 Absence of Certain Changes or Events. Except as set forth in this
Agreement or The schedules hereto, since the date of the most recent Alliance
balance sheet described in Section 3.04 and included in the information referred
to in Section 3.06.
(a) There have not been (i) any material adverse change in the
business, operations, properties, level of inventory, assets, or condition of
Alliance or (ii) any damage, destruction, or loss to Alliance materially and
adversely affecting the business, operations, properties, assets, or conditions
of Alliance;
(b) Alliance has not (i) amended its articles of incorporation or
memorandum; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are extraordinary
and material considering the business of Alliance; (iv) made any material change
in its method of accounting; (v) entered into any other material transactions
other than those contemplated by this Agreement; (vi) made any material accrual
or material arrangement for or payment of bonuses to an officer or employee; or
(vii) made any material increase in any profit-xxxxxx, bonus, deferred
compensation, insurance, pension, retirement, or other employee benefit plan,
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payment, or arrangement made to, for, or with their officers, directors, or
employees;
(c) Alliance has not (i) granted or agreed to grant any option,
warrants, or other rights for its stocks, bonds, or other corporate securities
calling for the issuance thereof; (ii) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability (absolute
or contingent) except liabilities incurred in the ordinary course of business;
(iii) paid any material obligation or liability (absolute or contingent) other
than current liabilities reflected in or shown on the most recent Alliance
balance sheet and current liabilities incurred since that date in the ordinary
course of business; (iv) sold or transferred, or agreed to sell or transfer, any
of its material assets, properties, or rights, or agreed to cancel, any material
debts or claims; (v) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such amendment or
termination is material, considering the business of Alliance ; or (vi) issued,
delivered, or agreed to issue or deliver any stock, bonds, or other corporate
securities including debentures (whether authorized and un-issued or held as
treasury stock): and
(d) To the best knowledge of Alliance, it has not become subject to any
law or regulation, which materially and adversely affects, or in the future
would be reasonably expected to adversely affect, the business, operation,
properties, assets, or conditions of Alliance.
3.08 Title and Related Matters. Except as provided herein or disclosed
in the most recent Alliance balance sheet and the notes therein, Alliance has
good and marketable title to all of its properties, inventory, interests in
properties, technology, whether patented or un-patented, and assets, which are
reflected in the most recent Alliance balance sheet or acquired after that date
(except properties, interests in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business), free and clear
of all mortgages, liens, pledges, charges, or encumbrances, except (i) statutory
liens or claims not yet delinquent; and (ii) such imperfections of title and
casements as do not, and will not, materially detract from, or interfere with,
the present or proposed use of the properties subject thereto or affected
thereby or otherwise materially impair present business operations on such
properties. To the best knowledge of Alliance, its technology does not infringe
on the copyright, patent, trade, secret, know-how, or other proprietary right of
any other person or entity and comprises all such rights necessary to permit the
operation of the business of Alliance as now being conducted or as contemplated.
3.09 Litigation and Proceedings. Except as otherwise disclosed in
Schedule 3.09, there are no material actions, suits, or proceedings pending or,
to the knowledge of Alliance, threatened by or against Alliance or adversely
affecting Alliance, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind. Alliance does not have any knowledge of any default on its part with
respect to any judgment, order, writ, injunction, decree, award, rule, or
regulation of any court, arbitrator, or governmental agency or instrumentality.
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3.10 Material Contract Defaults. Alliance is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets, or condition of Alliance, and there is no event of default or other
event which, with notice or lapse of time or both, would constitute a default in
any material respect under any such contract, agreement, lease, or other
commitment in respect of which Alliance has not taken adequate steps to prevent
such a default from occurring.
3.11 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which Alliance is
a party or to which any of its properties or operations are subject.
3.12 Governmental Authorization. Alliance has all licenses, franchises,
permits, and other governmental authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date of this Agreement. Except for compliance with federal and state securities
and corporation laws, as hereinafter provided, no authorization, approval,
consent, or order of, or registration, declaration, or filing with, any court or
other governmental body is required in connection with the execution and
delivery by Alliance of this Agreement and the consummation by Alliance of the
transactions contemplated hereby.
3.13 Compliance With Laws and Regulations. Alliance has complied with
all applicable statutes and regulations of any federal, 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 conditions of Alliance or except to the extent that noncompliance
would not result in the occurrence of any material liability for Alliance. To
the best of knowledge of Alliance, the consummation of this transaction will
comply with all applicable statutes and regulations, subject to the preparation
and filing of any forms required by state and federal security laws.
3.14 Subsidiary. Alliance does not own, beneficially or of record, any
equity Securities in any other entity.
3.15 Alliance Schedules. Alliance has delivered to Prelude the
following schedules, which are collectively referred to as the "Alliance
Schedules" and which consist of the following separate schedules dated as of the
date of execution of this Agreement, all certified by the chief executive
officer of Alliance as complete, true, and accurate:
(a) A schedule including copies of the memorandum and articles of
Incorporation of Alliance and all amendments thereto effect as of the date of
this Agreement;
20
(b) A schedule containing copies of resolution adopted by the board of
directors of Alliance approving this Agreement and the transactions herein
contemplated as referred to in Section 3.02;
(c) A schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or condition of
Alliance since the most recent Alliance balance sheet, required to be provided
pursuant to Section 3.04 hereof;
(d) A schedule setting forth the financial statements required pursuant
to Section 3.04 (a) hereof; and
(e) A schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the Alliance Schedules
by Sections 3.01 through 3.14. Alliance shall cause the Alliance Schedules and
the instruments delivered to Prelude hereunder to be updated after the date
hereof up to end including a specified date not more than three business days
prior to the Closing Date. Such updated Alliance Schedules, certified in the
same manner as the original Alliance Schedules, shall be delivered prior to and
as a condition precedent to the obligation of Prelude to close.
ARTICLE IV
CONDITIONS PRECEDENT TO OBLIGATIONS OF ALLIANCE
The obligations of Alliance under this Agreement are subject to the
satisfaction of Alliance, at or before the Closing Date, of the following
conditions;
4.01 Shareholder Approval. Prelude shall call and hold a meeting of its
shareholders, or obtain the written consent of a majority of its shareholders,
to approve the transactions contemplated by this agreement including the
acquisition of Alliance through the issuance of Prelude Common Stock of all of
the issued and outstanding Alliance Shares.
4.02 Accuracy of Representation. The representations and warranties
made by Prelude in this Agreement were true when made and shall be true at the
closing Date with the same force and affect as if such representations and
warranties were made at and as of the Closing Date (except for changes therein
permitted by this Agreement), and Prelude shall have performed or complied with
all covenants and conditions required by this Agreement to be performed or
complied with by Prelude prior to or at the Closing. Alliance shall be furnished
with certificates, signed by duly authorized officers of Prelude and dated the
Closing Date, to the foregoing effect.
4.03 Officer's Certificates. Alliance shall have been furnished with
certificates dated the Closing Date and signed by the duly authorized chief
executive officer of Prelude to the effect that to such officers best knowledge
no litigation, proceeding, investigation, or inquiry is pending or, to the best
knowledge of Prelude threatened, which might result in an action to enjoin or
prevent the consummation of the transactions contemplated by this Agreement.
Furthermore, based on certificates of good standing, representations of
21
government agencies, and Prelude own documents and information, the certificate
shall represent, to the best knowledge of the officer, that:
(a) This Agreement has been duly approved by Prelude board of directors
and shareholders and has been duly executed and delivered in the name and on
behalf of Prelude by its duly authorized officers pursuant to, and in compliance
with, authority granted by the board of directors of Prelude pursuant to a
unanimous consent;
(b) There has been no material adverse changes in Prelude up to and
including the date of the certificate;
(c) All conditions required by this Agreement has been met, satisfied,
or performed by Prelude;
(d) All authorizations, consents, approvals, registrations, and/or
filings with any governmental body, agency, or court required in connection with
the execution and delivery of the documents by Prelude have been obtained and
are in full force and effect or, if not required to have been obtained, will be
in full force and effect by such time as may be required; and
(e) There is no material action, suit, proceeding, inquiry, or
investigation at law or in equity by any public board or body pending or
threatened against Prelude, wherein an unfavorable decision, ruling, or finding
could have an adverse effect on the financial condition of Prelude, the
operation of Prelude, or the acquisition and reorganization contemplated herein,
or any agreement or instrument by which Prelude is bound or in any way contests
the existence of Prelude.
4.04 No Material Adverse Change. Prior to the Closing Date, there shall
not have occurred any material adverse change in the financial condition,
business, or operations of Prelude, 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 Prelude.
4.05 Good Standings. Alliance shall have received a certificate of good
standing from the secretary of state of Nevada, dated as of the date within five
days prior to the Closing Date, certifying that Prelude is in good standing as a
corporation in the State of Nevada.
4.06 Other Items. Alliance shall have received such further documents,
certificates, or instruments relating to the transactions contemplated hereby as
Alliance may reasonably request.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF PRELUDE
The obligations of Prelude under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions;
5.01 Shareholder Approval. Prelude shall call and hold a meeting of its
shareholders, or obtain through a majority written consent of its shareholders,
22
whereby the shareholders of Prelude authorize and approve this Agreement and the
transactions contemplated hereby.
5.02 Alliance Shareholders. Holders of all of the issued and
outstanding Alliance Shares shall agree to this Agreement and the exchange of
shares contemplated by this Agreement.
5.03 Accuracy of Representations. The representations and warranties
made by Alliance and the Alliance Stockholders in this Agreement were true when
made and shall be true at the Closing Date with the same force and affect as if
such representations and warranties were made at and as of the Closing Date
(except for changes therein permitted by this Agreement), and Alliance shall
have performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by Alliance prior to or at the
Closing. Prelude shall be furnished with a certificate, signed by a duly
authorized officer of Alliance and dated the Closing Date, to the foregoing
effect.
5.04 Officer's Certificates. Prelude shall have been furnished with
certificates dated the Closing Date and signed by the duly authorized chief
operating officer of Alliance to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of Alliance,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement. Furthermore,
these certificates shall represent, to the best knowledge of the officer, that:
(a) This Agreement has been duly approved by Alliance's board of
directors and shareholders and has been duly executed and delivered in the name
and on behalf of Alliance by its duly authorized officers pursuant to, and in
compliance with, authority granted by the board of directors of Alliance
pursuant to a unanimous consent of its board of directors and a majority vote of
its stockholders:
(b) Except as provided or permitted herein, there have been no material
adverse changes in Alliance up to and including the date of the certificate;
(c) All authorizations, consents, approvals, registrations, and/or
filing with any governmental body agency, or court required in connection with
the execution and delivery of the documents by Alliance have been obtained and
are in full force and effect or, if not required to have been obtained will be
in full force and effect by such time as may be required: and
(d) Except as otherwise disclosed in Schedule 3.08, there is no
material action, suit, proceeding, inquiry, or investigation at law or in equity
by any public board or body pending or threatened against Alliance, wherein an
unfavorable decision, ruling, or finding would have an adverse affect on the
financial condition of Alliance, the operation of Alliance, or the acquisition
and reorganization contemplated herein, or any material agreement or instrument
by which Alliance is bound or would in any way contest the existence of Alliance
..
5.05 No Material Adverse Change. Prior to the Closing Date, there shall
not have occurred any material adverse change in the financial condition,
business or operations of Alliance, nor shall any event have occurred which,
23
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 Alliance.
5.06 Good Standings. Prelude shall have received a certificate of good
standing from the appropriate authority, dated as of a date within five days
prior to the Closing Date, certifying that Alliance is in good standing as a
corporation in the state of Illinois.
5.07 Other Items. Prelude shall have received such further documents,
certificates, or instruments relating to the transactions contemplated hereby as
Prelude may reasonably request.
ARTICLE VI
SPECIAL COVENANTS
6.01 Activities of Prelude and Alliance
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the respective schedules to be delivered by Prelude
and Alliance pursuant hereto or as permitted or contemplated by this Agreement,
Prelude and Alliance will each:
(i) Carry on its business in substantially the same manner as it
has heretofore;
(ii) Maintain in full force and effect insurance comparable in
amount and in scope of coverage to that now maintained by it;
(iii) Perform in all material respects all of its obligations
under material contracts, leases, and instruments relating to or
affecting its assets, properties, and business;
(iv) Use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain
its relationships with its material suppliers and customers;
(v) Duly and timely file for all taxable periods ending on or
prior to the Closing Date all federal, state, county, and local
tax returns required to be filed by or on behalf of such entity
or for which such entity may be held responsible and shall pay,
or cause to pay, all taxes required to be shown as due and
payable on such returns, as well as all installments of tax due
and payable during the period commencing on the date of this
Agreement and ending on the Closing Date; and
(vi) Fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state
laws and all rules, regulations, and orders imposed by federal or
state governmental authorities.
(b) From and after the date of this Agreement and except as provided
herein until the Closing Date, Prelude and Alliance will not:
(i) Make any change in its articles of incorporation or bylaws;
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(ii) Enter into or amend any material contract, agreement, or
other instrument of any of the types described in such party's
schedules, except that a party may enter into or amend any
contract, agreement, or other instrument in the ordinary course
of business; and Enter into any agreement for the sale of
Alliance or Prelude securities without the prior approval of the
other party.
6.02 Access to Properties and Records. Until the Closing Date, Alliance
and Prelude will afford to the other party's officers and authorized
representatives full access to the properties, books, and records of the other
party in order that each party may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of Alliance or Prelude
and will furnish the other party with such additional financial and other
information as to the business and properties of Alliance or Prelude as each
party shall from time to time reasonably request.
6.03 Indemnification by Alliance. Alliance will indemnify and hold
harmless Prelude and its directors and officers, and each person, if any, who
controls Prelude within the meaning of the Securities Act, from and against any
and all losses, claims, damages, expenses, liabilities, or actions to which any
of them may become subject under applicable law (including the Securities Act
and the Securities Exchange Act) and will reimburse them for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any claims or actions, whether or not resulting in liability, insofar
as such losses, claims, damages, expenses, liabilities, or actions arise out of
or are based upon any untrue statement or alleged untrue statement of material
fact contained in any application or statement filed with a governmental body or
arising out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary in order to
make the statements therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing by Alliance expressly for use therein. The
indemnity agreement contained in this Section 6.03 shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
Prelude and shall survive the consummation of the transactions contemplated by
this Agreement for a period of six months.
6.04 Indemnification by Prelude. Prelude will indemnify and hold
harmless Alliance, the Alliance Stockholders, Alliance's directors and officers,
and each person, if any, who controls Alliance within the meaning of the
Securities Act, from and against any and all losses, claims, damages, expenses,
liabilities, or actions to which any of them may become subject under applicable
law (including the Securities Act and the Securities Exchange Act) and will
reimburse them for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any claims or actions, whether or not
resulting in liability, insofar as such losses, claims, damages, expenses,
liabilities, or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any application or
statement filed with a governmental body or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary in order to make the statements therein not
25
misleading, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing by Prelude
expressly for use therein. The indemnity agreement contained in this Section
6.04 shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of Alliance and shall survive the
consummation of the transactions contemplated by this Agreement for a period of
six months.
6.05 The Acquisition of Prelude Common Stock. Prelude and Alliance
understand and agree that the consummation of this Agreement including the
issuance of the Prelude Common Stock to Alliance in exchange for the Alliance
shares as contemplated hereby, constitutes the offer and sale of securities
under the Securities Act and applicable state statutes. Prelude and Alliance
agree that such transactions shall be consummated in reliance on exemptions from
the registration and prospectus delivery requirements of such statutes that
depend, among other items, on the circumstances under which such securities are
acquired.
(a) In order to provide documentation for reliance upon exemption from
the registration and prospectus delivery requirements for such transactions, the
signing of this Agreement and the delivery of appropriate separate
representations shall constitute the parties acceptance of, and concurrence in,
the following representations and warranties:
(i) The Alliance Stockholders acknowledge that neither the SEC
nor the securities commission of any state or other federal
agency has made any determination as to the merits of acquiring
Prelude Common Stock, and that this transaction involves certain
risks.
(ii) The Alliance Stockholders have received and read the
Agreement and understand the risks related to the consummation of
the transactions herein contemplated.
(iii) Alliance Stockholders have such knowledge and experience in
business and financial matters that they are capable of
evaluating each business.
(iv) Alliance Stockholders have been provided with copies of all
materials and information requested by them or their
representatives, including any information requested to verify
any information furnished (to the extent such information is
available or can be obtained without unreasonable effort or
expense), and the parties have been provided the opportunity for
direct communication regarding the transactions contemplated
hereby.
(v) All information which the Alliance Stockholders have provided
to Prelude or their representatives concerning their suitability
and intent to hold shares in Prelude following the transactions
contemplated hereby is complete, accurate, and correct.
(vi) The Alliance Stockholders have not offered or sold any
securities of Prelude or interest in this Agreement and have no
present intention of dividing the Prelude Common Stock or
Alliance Shares to be received or the rights under this Agreement
26
with others or of reselling or otherwise disposing of any portion
of such stock or rights, either currently or after the passage of
a fixed or determinable period of time or on the occurrence or
nonoccurrence of any predetermined event or circumstance.
(vii) The Alliance Stockholders understand that the Prelude
Common Stock has not been registered, but is being acquired by
reason of a specific exemption under the Securities Act as well
as under certain state statutes for transactions not involving
any public offering and that any disposition of the subject
Prelude Common Stock may, under certain circumstances, be
inconsistent with this exemption and may make Alliance or Prelude
an "underwriter", within the meaning of the Securities Act. It is
understood that the definition of "underwriter" focuses upon the
concept of "distribution" and that any subsequent disposition of
the subject Prelude Common Stock can only be effected in
transactions, which are not considered distributions. Generally,
the term "distribution" is considered synonymous with "public
offering" or any other offer or sale involving general
solicitation or general advertising. Under present law, in
determining whether a distribution occurs when securities are
sold into the public market, under certain circumstances one must
consider the availability of public information regarding the
issuer, a holding period for the securities sufficient to assure
that the persons desiring to sell the securities without
registration first bear the economic risk of their investment,
and a limitation on the number of securities which the stock
holder is permitted to sell and on the manner of sale, thereby
reducing the potential impact of the sale on the trading markets.
These criteria are set forth specifically in Rule 144 promulgated
under the Securities Act, and, after two years after the date the
Prelude Common Stock or Alliance Shares are fully paid for, as
calculated in accordance with Rule 144(d), sales of securities in
reliance upon Rule 144 can only be made in limited amounts in
accordance with the terms and conditions of that rule. After two
years from the date the securities are fully paid for, as
calculated in accordance with Rule 144(d), they can generally be
sold without meeting those conditions, provided the holder is not
(and has not been for the preceding three months) an affiliate of
the issuer.
(viii) The Alliance Stockholders acknowledge that the shares of
Prelude Common Stock, must be held and may not be sold,
transferred, or otherwise disposed of for value unless they are
subsequently registered under the Securities Act or an Exemption
from such registration is available. Prelude is not under any
obligation to register the Prelude Common Stock under the
Securities Act. If Rule 144 is available after two years and
prior to three years following the date the shares are fully paid
for, only routine sales of such Prelude Common Stock in limited
27
amounts can be made in reliance upon Rule 144 in accordance with
the terms and conditions of that rule. Prelude is not under any
obligation to make Rule 144 available except as set forth in this
Agreement and in the event Rule 144 is not available, compliance
with Regulation A or some other disclosure exemption may be
required before Alliance Stockholders can sell, transfer, or
otherwise dispose of such Prelude Common Stock without
registration under the Securities Act. Subject to compliance with
federal and state securities laws, Prelude registrar and transfer
agent will maintain a stop transfer order against the
registration and transfer of the Prelude Common Stock held by
Alliance Stockholders and the certificates representing the
Prelude Common Stock will bear a legend in substantially the
following form so restricting the sale of such securities:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED ("ACT"), AND MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (II) TO THE EXTENT
APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (III) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT IS AVAILABLE."
(ix) Subject to compliance with federal and state securities
laws, Prelude may refuse to register further transfers or
resale's of the Prelude Common Stock in the absence of
compliance with Rule 144 unless the Alliance Stockholders
furnish Prelude with an opinion of counsel reasonably
acceptable to Prelude stating that the transfer is proper.
Further, unless such opinion states that the shares of Prelude
Common Stock are free of any restrictions under the Securities
Act, Prelude may refuse to transfer the securities to any
transferee who does not furnish in writing to Prelude the same
representations and agree to the same conditions with respect
to such Prelude Common Stock as set forth herein. Prelude may
also refuse to transfer the Prelude Common Stock if any
28
circumstances are present reasonably indicating that the
transferee's representations are not accurate.
(b) In connection with the transaction contemplated by this Agreement,
Alliance and Prelude shall each file with the assistance of the other and their
respective legal counsel, such notices, applications, reports, or other
instruments as may be deemed by them to be necessary or appropriate in an effort
to document reliance on such exemptions, and the appropriate regulatory
authority in the states where the Alliance Stockholders reside unless an
exemption requiring no filing is available in such jurisdictions, all to the
extent and in the manner as may be deemed by such parties to be appropriate.
(c) In order to more fully document reliance on the exemptions as
provided herein, Alliance, the Alliance Stockholders, and Prelude shall execute
and deliver to the other, at or prior to the Closing, such further letters of
representation, acknowledgment, suitability, or the like as Prelude or Alliance
and their respective counsel may reasonably request in connection with reliance
on exemptions from registration under such securities laws.
(d) The Alliance Stockholders acknowledge that the basis for relying on
exemptions from registration or qualification are factual, depending on the
conduct of the various parties, and that no legal opinion or other assurance
will be required or given to the effect that the transactions contemplated
hereby are in fact exempt from registration or qualification.
6.06 Prelude Liabilities. Immediately prior to the Closing Date,
Prelude shall have no material assets and no liabilities in excess of $1,000 and
all expenses related to this Agreement or otherwise shall have been paid.
6.07 Sales of Securities Under Rule 144, If Applicable.
(a) Prelude will use its best efforts to at all times satisfy the
current public information requirements of Rule 144 promulgated under the
Securities Act so that its shareholders can sell restricted securities that have
been held for two years or more or such other restricted period as required by
Rule 144 as it is from time to time amended.
(b) Upon being informed in writing by any person holding restricted
stock of Prelude as of the date of this Agreement that such person intends to
sell any shares under rule 144 promulgated under the Securities Act (including
any rule adopted in substitution or replacement thereof), Prelude will certify
in writing to such person that it is compliance with rule 144 current public
information requirement to enable such person to sell such person's restricted
stock under rule 144, as may be applicable under the circumstances.
(c) If any certificate representing any such restricted stock is
presented to Prelude transfer agent for registration or transfer in connection
with any sales theretofore made under Rule 144, provided such certificate is
duly endorsed for transfer by the appropriate person(s) or accompanied by a
separate stock power duly executed by the appropriate person(s) in each case
with reasonable assurances that such endorsements are genuine and effective, and
is accompanied by an opinion of counsel satisfactory to Prelude and its counsel
that such transfer has complied with the requirements of Rule 144, as the case
29
may be, Prelude will promptly instruct its transfer agent to register such
transfer and to issue one or more new certificates representing such shares to
the transferee and, if appropriate under the provisions of rule 144, as the case
may be, free of any stop transfer order or restrictive legend. The provisions of
this Section 6.07 shall survive the Closing and the consummation of the
transactions contemplated by this Agreement for a period of two years.
(d) The shareholders of Prelude as of the date of this Agreement, as
well as those receiving Prelude Common Stock pursuant to this Agreement, are
intended third-party beneficiaries of this Section 6.07.
6.08 New Board of Directors and Officers. Upon closing of the
transactions contemplated by this Agreement and the simultaneous Agreement with
Tri-State Stores, Inc., GMG Partners LLC, and SASCO Springfield Auto Supply
Company ("TSG"), the current board of directors and officers of Prelude shall
resign and in their place nominees of TSG and Alliance shall be appointed,
subject to the approval of the suitability and qualifications of such nominees.
6.09 Prelude Capitalization. For a period of eighteen months from the
Closing Date, Prelude will not engage in any reverse split of its issued and
outstanding Common Stock without the prior written approval of the holders of a
majority in interest of the issued and outstanding Prelude Common Stock on the
date of this Agreement, other than a secondary offering of common stock in order
to raise working capital.
ARTICLE VII
MISCELLANEOUS
7.01 Brokers. Except as provided herein, Prelude and Alliance agree
that there were no finders or brokers involved in bringing the parties together
or who were instrumental in the negotiation, execution, or consummation of this
Agreement. Further, Prelude and Alliance each agree to indemnify the other
against any claim by any third person for any commission, brokerage, or finder's
fee or other payment with respect to this Agreement or the transactions
contemplated hereby based on any alleged agreement or understanding between such
party and such third person, whether express or implied, from the actions of
such party.
The covenants set forth in this section shall survive the Closing Date
and the consummation of the transactions herein contemplated.
7.02 No Representation Regarding Tax Treatment. No representation or
warranty is being made by any party to any other regarding the treatment of this
transaction for federal or state income taxation. Each party has relied
exclusively on its own legal, accounting, and other tax adviser regarding the
treatment of this transaction for federal and state income taxes and on
representation, warranty, or assurance from any other party or such other
party's legal, accounting, or other adviser.
30
7.03 Governing Law. This Agreement shall be governed by, enforced and
constructed under and in accordance with the laws of the State of Nevada.
7.04 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if personally delivered, if sent by
facsimile or telecopy transmission or other electronic communication confirmed
by registered or certified mail, postage prepaid, or if sent by prepaid
overnight courier addressed as follows:
If to Prelude Ventures, Inc.:
If to Alliance Petroleum, Inc.:
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices, hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered or sent by facsimile or
telecopy transmission or other electronic communication, or one day after the
date so sent by overnight courier.
7.05 Attorney's Fees. In the event that any party institutes any action
or suit to enforce this Agreement or to secure relief from any default hereunder
or breach hereof, the breaching party or parties shall reimburse the
non-breaching party or parties from all costs, including reasonable attorneys
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
7.06 Schedules / Knowledge. Whenever in any section of this Agreement
reference is made to information set forth in the schedules provided by Prelude
or Alliance such reference is to information specifically set forth in such
schedules and clearly marked to identify the section of this Agreement to which
the information relates. Whenever any representation is made to the "knowledge"
of any party, it shall be deemed to be a representation that no officer or
director of such party, after reasonable investigation, has any knowledge of
such matters.
7.07 Entire Agreement. This Agreement represents the entire agreement
between the parties relating to the subject matter hereof. All previous
agreements between the parties, whether written or oral, have been merged into
this Agreement. The Agreement alone fully and completely expresses the agreement
of the parties relating to the subject matter hereof. There are no other courses
of dealing, understandings, agreements, representations, or warranties, written
or oral, except as set forth herein.
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7.08 Survival Termination. The representations, warranties, and
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for a period of six months
from the Closing Date, unless otherwise provided herein.
7.09 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
7.10 Amendment or Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law, or in equity, and such remedies may be enforced concurrently, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance thereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended.
[Signature Page to Agreement Follows]
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IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly authorized,
as of the date first above written.
PRELUDE VENTURES, INC.
A Nevada Corporation
By: __________________________
Xxxxxxx Sarvuicci,
President
ALLIANCE PETROLEUM PRODUCTS COMPAMY
An Illinois Corporation
By: __________________________
President
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Exhibit A-1
Stockholders of Alliance Petroleum, Inc.
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