Exhibit 10.1
ASSET ACQUISITION AGREEMENT
DATE : March 28, 2006
BETWEEN : Rotary Engine, Inc., a Nevada corporation
0000 Xxxxxx Xxxxx, Xxxxx 0
Xxxxxxx Xxxxx, XX 00000 "REI"
AND : Rotary Engine Technologies, Inc., a Nevada corporation
0000 Xxxxxxxx Xxx, Xxxxx 000
Xxxx, XX 00000-0000 "RETI"
AND : Encompass Holdings, Inc., a Nevada corporation
0000 Xxxxxxxx Xxx, Xxxxx 000
Xxxx, XX 00000-0000 "Encompass"
AND : Xxxxx Xxxxxx, Xxxxx Xxxxxx and Xxxxxxx Xxxxxx
0000 Xxxxxx Xxxxx, Xxxxx 0
Xxxxxxx Xxxxx, XX 00000 "Xxxxxx-Xxxxxx-Xxxxxx"
RECITALS
A. REI owns, maintains or controls certain assets, as more particularly
described in this Agreement, including, but not limited to, inventory and
intellectual property.
B. RETI, a second-tier subsidiary of Encompass, desires to acquire
those certain assets of REI, and REI desires to sell such assets.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, it is agreed as follows:
1. ORGANIZATION OF RETI.
1.1 ISSUANCE OF CAPITAL STOCK. For good and valuable
consideration to be determined by its directors, RETI shall issue to REI such
shares of RETI common stock ("RETI Shares") so that Xtreme Engines, Inc.
("Xtreme Engines") shall hold 51% of the issued and outstanding RETI Shares and
REI shall hold 49% of the issued and outstanding RETI Shares.
1.2 ELECTION OF DIRECTORS OF RETI/APPOINTMENT TO ENCOMPASS
BOARD OF DIRECTORS. The Board of Directors of RETI shall consist of five (5)
members, of which three (3) shall be selected by Xtreme Engines, and two (2)
shall be selected by REI. In addition, within six (6) months of the Closing Date
of this Agreement, Xxxxx Xxxxxx shall have the option to accept an appointment
to the Board of Directors of Encompass, so long as the Consulting Agreement with
RETI referred to in Section 8 of this Agreement is still in full force and
effect.
1.3 BUY-SELL RESTRICTIONS.
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1.3.1 SALE BY REI In the event REI wishes to accept a
bona fide offer from a third party ("Third Party Offer") to purchase any of
their respective RETI Shares, they shall deliver a notice ("Sale Notice") to
Xtreme Engines stating the terms and conditions of the Third Party Offer, which
Sale Notice shall include, without limitation, the name of the proposed bona
fide purchaser, the purchase price, the payment terms and the number of shares
proposed to be purchased. Xtreme Engines shall have the first right to purchase
the RETI Shares covered by the Sale Notice on the same terms and conditions as
set forth in the Sale Notice. Xtreme Engines shall have thirty (30) days from
the date of receipt of the Sale Notice to elect, by written notice to REI to
purchase the RETI Shares covered by the Sale Notice. In the event Xtreme Engines
elects not to purchase the RETI Shares covered by the Sale Notice, REI may sell
the RETI Shares to the bona-fide purchaser on the original terms and conditions
set forth in the Sale Notice.
1.3.2 SALE BY XTREME ENGINES. In the event Xtreme
Engines wishes to accept a Third Party Offer to purchase any of its RETI Shares,
Xtreme Engines shall deliver a Sale Notice to REI in the same manner as
described in Section 1.3.1 above. REI shall have the right, exercisable for a
period of thirty (30) days from the date of receipt of the Sale Notice to elect,
by written notice, to participate in the Xtreme Engines sale on the same terms
and conditions as set forth in the Sale Notice. To the extent that REI exercises
such right of participation, the number of RETI Shares which Xtreme Engines may
sell pursuant to such Third Party Offer shall be correspondingly reduced. The
right of participation by REI shall be subject to the following terms and
conditions: (a) REI may sell all or any part of that number of RETI Shares equal
to the product obtained by multiplying (i) the aggregate number of RETI Shares
covered by the Sale Notice by (ii) a fraction the numerator of which is the
number of RETI Shares held by REI and the denominator of which is the combined
number of RETI Shares held by REI and Xtreme Engines.
2. AGREEMENT TO SELL AND PURCHASE. Subject to the terms and conditions
set forth in this Agreement, REI hereby agrees to sell and RETI agrees to
purchase certain assets of REI, as described in Section 3 of this Agreement.
3. ASSETS SOLD. The assets sold pursuant to this Agreement (all of
which are collectively referred to herein as the "Assets"), wherever located,
shall be those to be described on Schedule 3.1 at such time as the Assets are
identified after the completion of the appraisal referred to in Section 3.1 of
this Agreement. The Assets shall be listed in Schedule 3.1 without regard to
value. The Assets shall be congregated by REI at the warehouse facility at 0000
Xxxxx Xxxxx, Xxxxxxx, XX.
3.1 TRANSFER OF ASSETS. To the extent any of the Assets are
not owned, as of the date of this Agreement, by REI , REI and
Xxxxxx-Xxxxxx-Xxxxxx shall, jointly or severally, as the case may be, transfer
and assign all right, title and interest in and to the Assets to RETI, free and
clear of all liens and encumbrances. Such transfer and assignment shall occur
prior to the transfer of title referred to in Section 10.1 of this Agreement.
3.2 APPRAISAL OF ASSETS. RETI shall undertake to have the
Assets appraised by an independent appraiser as soon as practicable after the
effective date of this Agreement. REI shall
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provide a list to RETI of any Assets which are not at the aforementioned
warehouse facility and shall provide access to the Assets for purposes of the
appraisal.
3.3 LIENS AND ENCUMBRANCES. The Assets shall be free and clear
of all liens and encumbrances. In the event any of the Assets are determined by
REI not to be free and clear of liens and encumbrances, the amount of any such
liens and encumbrances shall be deducted from the Purchase Price as defined in
Section 4 of this Agreement.
4. PURCHASE PRICE. The Purchase Price ("Purchase Price") for the Assets
shall be paid by Encompass through the issuance to REI of a Non-Negotiable
Convertible Promissory Note to be dated April 3, 2006 in the principal amount of
$2,960,000.00, in the form attached hereto as Exhibit "A" and incorporated by
reference ("Encompass Note"). The Encompass Note shall be convertible into
common stock of Encompass ("Encompass Shares") with a market value not to exceed
$2,960,000.00 based on the closing bid price of the Encompass Shares as quoted
on the OTC Bulletin Board on the Closing Date, as defined in Section 10 of this
Agreement. REI and RETI acknowledge that the Purchase Price has been determined
by multiplying the estimated value of the Assets of $5,800,000.00 by 51%. The
Encompass Note shall be issued hereunder in payment of the Purchase Price upon
the signing of this Agreement.
5. RESTRICTIONS ON ENCOMPASS SHARES. REI acknowledges and agrees that
the certificates evidencing any and all of the Encompass Shares to be issued
pursuant the exercise of the conversion privileges of the Encompass Note shall
include a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED WITHOUT
A VIEW TO DISTRIBUTION AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT AND UNDER ANY APPLICABLE
SECURITIES LAWS, OR AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SUCH SALE OR OFFER
6. ENCOMPASS PURCHASE OF CERTAIN OTHER ASSETS. Encompass has acquired
previously certain other equipment from REI, as described in Schedule 6.1
attached hereto and incorporated by reference for a purchase price of $45,000.
Encompass has paid the sum of $37,850.27 against the said purchase price. The
balance of said purchase price of $7,149.73, less any other yet to be determined
expenses incurred by Encompass in connection with the assets referred to in this
Section 6, shall be paid by a check issued by RETI to REI on the Closing Date
referred in Section 10 of this Agreement.
Page 3. Asset Acquisition Agreement
7. OPERATING BUDGET FOR RETI.Xxxxx Xxxxxx and Xxxxx Xxxxxx shall
prepare a proposed operating budget for RETI, including the requirements for
capital acquisitions, for the succeeding twelve months, which budget will be
subject to the approval of RETI. Upon approval of the budget, RETI shall become
responsible for providing all operating funds described in the budget.
8. MANAGEMENT OR CONSULTING AGREEMENTS. Upon the execution of this
Agreement, RETI shall enter into a consulting agreement ("Consulting Agreement")
with Xxxxx Xxxxxx and an employment agreement ("Employment Agreement") with
Xxxxx Xxxxxx. Each agreement shall have the following material provisions:
o The term shall be for (sixty) 60 months from the date
of execution, subject to automatic annual renewals
unless terminated for cause upon 60 days written
notice;
o Initial annual compensation shall be $60,000;
o Annual compensation shall be increased to $120,000 at
such time as Aqua Xtremes, Inc., the parent company
of RETI, shall have either (a) delivered a minimum of
three hundred (300) Xboards(TM) per month to
customers for a period of two (2) consecutive months;
or (b) completed production, sale and delivery of one
of the RETI engines; or (c) the completed sale and
delivery of three thousand (3,000) 407 or 814 Wankel
engines.
Upon the execution of the Consulting Agreement, Encompass shall issue
its common stock to Xxxxx Xxxxxx, pursuant to a currently effective registration
statement on Form S-8, in an amount equal to $100,000, based on the closing bid
price as quoted on the OTC Bulletin Board on the proposed date of issuance of
the common stock hereunder.
9. APPROVAL ON MANUFACTURING OF RETI PRODUCTS. So long as REI is a
shareholder of RETI, the manufacture of any and all products to be developed by
RETI shall require the consent and approval of REI. However, such consent and
approval shall be exercised in a commercially reasonable manner consistent with
good business practices and may not be arbitrarily or unreasonably withheld. If
any such consent or approval is withheld, REI shall specify to the board of
directors of RETI, in writing, the reasons for the withholding of such consent
and approval.
10. CLOSING DATE AND CLOSING. This Agreement shall be closed at the
offices of Encompass or such other place as is mutually agreed upon by the
parties hereto. The Closing Date ("Closing Date") will be the date on which this
Agreement is executed by the parties. On the Closing Date, the parties, among
other things, shall do the following:
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10.1 TRANSFER OF TITLE. REI shall transfer to RETI all of the
Assets being sold pursuant to this Agreement by Xxxx of Sale, in the form
attached hereto as Exhibit "B", or other documents of transfer, each in a form
acceptable to RETI, containing warranties of title, free and clear of liens,
encumbrances and security interests.
10.2 POSSESSION. REI shall deliver possession of the Assets to
RETI.
10.3 DELIVERY OF CHECK. RETI shall deliver payment to REI of
the amount owing pursuant to Section 6 of this Agreement.
10.4 DELIVERY OF ENCOMPASS NOTE. Encompass shall deliver the
Encompass Note to REI.
10.5 MISCELLANEOUS. The parties hereto shall do all other
things at the Closing to consummate and effectuate this Agreement and all other
agreements, covenants and conditions set forth herein and therein.
10.6 FURTHER ACTS. If, at any time after the Closing Date, any
further action by any of the Parties to this Agreement is necessary or desirable
to carry out the purposes of this Agreement and/or to vest in RETI, or its
designee, full title to the Assets, such party shall take all such necessary or
desirable action to cause such action to be taken.
11. REPRESENTATIONS AND WARRANTIES BY REI. REI represents and warrants
to RETI as of the effective date of this Agreement and as of the Closing Date as
follows:
11.1 CORPORATE EXISTENCE. REI is now and on the Closing Date
will be a corporation, duly organized, validly existing and good standing under
the laws of the State of Nevada. REI has all requisite corporate power and
authority to own and operate the Assets, and to carry on its business as now
being conducted.
11.2 AUTHORIZATION. The execution, delivery and performance of
this Agreement has been duly authorized and approved by the Board of Directors
of REI, and this Agreement constitutes a valid and binding agreement of REI in
accordance with its terms.
11.3 NO CHANGE OF CONTROL OF REI. At all times from the date
of this Agreement forward, there shall not occur any change in control of REI
and consequently, the current ownership of the controlling voting equity
securities of REI shall continue to be held by Xxxxx Xxxxxx and Xxxxx Xxxxxx.
11.4 CONDITION OF ASSETS. The Assets are being delivered in
their current condition, "as is".
Page 5. Asset Acquisition Agreement
11.5 TITLE. REI owns absolute, clear and unencumbered title to
the Assets, and the same are now free and clear of all mortgages, liens,
pledges, security interests or encumbrances of any nature whatsoever. On the
Closing Date, the same shall be conveyed to RETI free and clear of all
mortgages, liens, pledges, security interests and encumbrances of any nature
whatsoever..
11.6 NO APPROVAL OR NOTICES REQUIRED; NO CONFLICTS. The
execution, delivery and performance of this Agreement and each of the other
agreements, exhibits and documents referred to herein or necessary to effectuate
this Agreement (collectively, the "Documents" or individually, the "Document"),
by REI and the consummation of the transactions contemplated hereby or thereby
will not:
11.6.1 Constitute a violation of any provision of
applicable law;
11.6.2 Require any consent, approval, permit or
authorization of any person or governmental authority;
11.6.3 Result in a breach of or a default under, with
or without the giving of notice or lapse of time, acceleration or termination
of, or the creation in any party of the right to accelerate, terminate, modify
or cancel any agreement or other restriction, encumbrance, obligation or
liability to which REI is a party or by which it is bound or to which any of the
Assets are subject; or
11.6.4 LEGAL PROCEEDINGS; CLAIMS. There are no
claims, actions, suits, arbitrations, proceedings or investigations pending or
threatened against REI, before or by any governmental or nongovernmental
department, commission, board, bureau, agency or instrumentality, whether
federal, state, local or foreign, or any other person, and there are no
outstanding or unsatisfied judgments, orders, decrees or stipulations to which
REI is a party, which relate to either the Assets or the transaction
contemplated herein, or which would alone or in the aggregate have a material
adverse effect upon the Assets..
11.7 ACCURACY OF REPRESENTATIONS AND WARRANTIES. No
representation or warranty made or to be made by REI in this Agreement or in any
other Document furnished or to be furnished from time to time in connection
herewith, contains or will contain any misrepresentation of a material fact or
omits or will omit to state any material fact necessary to make the statements
herein or therein not misleading. There is no fact known to REI or Shareholders
which would materially adversely affect, or which would, in the future,
materially adversely affect, the business, prospects, assets, property or
condition (financial or otherwise) of REI's Business which has not been set
forth in this Agreement, except those facts concerning general economic,
legislative, regulatory, or other matters such as may generally impact all
businesses of the type operated by REI.
Page 6. Asset Acquisition Agreement
12. COVENANTS. RETI and REI each covenant and agree with the other to
perform and observe the following covenants:
12.1 ACCESS TO PREMISES AND INFORMATION. At reasonable times
before the Closing Date, REI will provide RETI and its representatives with
reasonable access during business hours to the Assets, titles, contracts, and
records of REI and furnish such additional information as RETI from time to time
may reasonably request.
12.2 ADVICE OF CLAIMS. From the effective date of this
Agreement to and including the Closing Date, REI will promptly advise RETI in
writing of the commencement or threat of any claims, litigation or proceedings
against or affecting REI or the Assets, or any event that makes or is likely to
make any representation or warranty untrue, of which REI or Xxxxx Xxxxxx or
Xxxxx Xxxxxx have notice or knowledge.
12.3 COOPERATION. RETI and REI will fully cooperate with each
other and with the each other's counsel and accountants in connection with any
steps required to be taken as part of its obligations under this Agreement. Each
will use its best efforts to cause all conditions to this Agreement to be
satisfied as promptly as possible and to obtain all consents and approvals
necessary for its due and punctual performance of this Agreement and for the
satisfaction of the conditions hereof on its part to be satisfied. Neither RETI
or REI shall undertake any course of action inconsistent with this Agreement or
which would make any representations, warranties or agreements made by it in
this Agreement untrue or render any conditions precedent to this Agreement
unable to be satisfied at or prior to the Closing Date.
13. CONDITIONS PRECEDENT TO OBLIGATIONS OF RETI. The obligations of
RETI to perform and observe the covenants, agreements and conditions hereof to
be performed and observed by it at or before the Closing Date shall be subject
to the satisfaction of the following conditions, any of which may be expressly
waived in writing by RETI:
13.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES; COMPLIANCE
WITH COVENANTS. The representations and warranties of REI contained herein,
including all Documents, shall have been true in all material respects when made
and shall be true in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of such date, except to the
extent that such representations and warranties are made as of a specified date,
in which case such representations and warranties shall be true as of the
specified date. REI shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants and conditions contained in this Agreement to be performed and
complied with by it or by them at or prior to the Closing Date.
13.2 LEGAL PROCEEDINGS. No order of any court or
administrative agency shall be in effect which enjoins, restrains or prohibits
consummation of this Agreement, and no litigation, investigation or
administrative proceeding shall be pending or threatened which would enjoin,
restrain or prohibit consummation of this Agreement.
Page 7. Asset Acquisition Agreement
13.3 TITLE. REI shall have delivered to RETI evidence
satisfactory to RETI establishing REI's good and marketable title to the Assets,
free and clear of all liens, mortgages, pledges, deeds of trust, security
interests, conditional sales agreements, charges, encumbrances and other adverse
claims or interests of any kind.
13.4 LIENS AND ENCUMBRANCES. All persons holding security
interests, liens, or encumbrances in or against any of the Assets shall have
released such liens, security interests and encumbrances.
13.5 APPROVALS AND CONSENTS. All approvals and consents from
third parties which are necessary for the consummation of the transactions
contemplated hereby shall have been obtained.
14. INDEMNIFICATION AND SURVIVAL.
14.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Agreement shall survive the Closing
Date of this Agreement. Any party learning of a misrepresentation or breach of
warranty under this Agreement shall as soon as practicable give notice in
writing thereof to all Parties to this Agreement.
14.2 INDEMNIFICATION OF RETI. REI agrees to defend, indemnify
and hold RETI, its successors and assigns harmless from and against:
14.2.1 Any and all claims, liabilities, and
obligations of any kind and description, contingent or otherwise, including
attorney's fees and expenses of litigation, known or unknown, arising out of or
related to, but not limited to, any taxes, interest and penalties assessed
against the Assets.
14.2.2 Any and all damages, claims, obligations or
deficiencies of any kind and description, contingent or otherwise, including
attorney's fees and expenses of litigation, known or unknown, resulting from any
misrepresentation, or covenant or nonfulfillment of any agreement on the part of
REI under this Agreement or under any Document.
14.2.3 If any claim is asserted against RETI which
would give rise to a claim by RETI against REI for indemnification under the
provisions of this Section 13, RETI shall promptly give written notice to REI
concerning such claim, and REI shall, at no expense to RETI, defend the claim,
to the point of nonappealable final judgment. If REI fails to take steps to
defend said claim within ten (10) days of RETI providing written notice of said
claim, or if REI fails to sooner defend said claim when the nature of the claim
or date of service requires immediate defensive action, or if REI at any time
abandons defense of such a claim, RETI may undertake or continue the defense of
any such claims, with counsel of its own choosing, and shall be entitled to
indemnity from REI for all costs of such defense, including but not limited to,
reasonable attorney's fees, court costs and incidental expenses of litigation.
If RETI becomes entitled to payment of indemnity pursuant to this section, REI
shall immediately pay to RETI the amount of said indemnity claim. RETI shall not
be entitled to indemnity from REI except for the obligations to defend set forth
in this section, unless and until RETI has actually paid a claim, debt or other
liability giving
Page 8. Asset Acquisition Agreement
rise to a right of indemnity under this section, or has incurred a legal
obligation to do so. In such event, RETI shall be entitled to interest from REI
at the rate of twelve (12%) percent per annum from the date of said payment
until the indemnity claim is paid.
15. MISCELLANEOUS PROVISIONS.
15.1 BENEFIT. This Agreement shall be binding upon and inure
to the benefit of the heirs, executors, administrators, successors and assigns
of REI, RETI, Encompass and Xxxxxx-Xxxxxx-Xxxxxx.
15.2 NOTICES. All notices, requests and other communications
hereunder ("Notices") shall be in writing and shall be deemed to have been duly
given if delivered by hand or by facsimile to an office of the addressee (and
marked in prominent lettering "URGENT") or, if mailed, seventy_two (72) hours
after being mailed, postage prepaid, by registered or certified mail, return
receipt requested to the applicable party(ies) at their address set forth above.
However, if any party shall have designated in the manner provided above a
different address by notice to the others, then notice shall be to the last
address so designated.
15.3 INTERPRETATION AND CONSTRUCTION. This Agreement was
prepared pursuant to and shall be construed in accordance with the laws of the
State of Nevada. The captions of the sections of this Agreement are inserted for
convenience only, and shall not be deemed to constitute a part of this
Agreement. Furthermore, any reference in this Agreement to "this Agreement" or
"Agreement" includes all of the Schedules, Exhibits and agreements, which have
been attached to this Agreement and which are all incorporated herein by
reference. In construing this Agreement, and whenever the context so requires,
the masculine gender includes the feminine and the neuter, and the singular
number includes the plural.
15.4 ARBITRATION. A dispute or claim which arises out of or
which relates to this agreement, or the breach or interpretation thereof, or to
the existence, validity, or scope of this agreement or the arbitration
agreement, shall be resolved by arbitration in accordance with the procedures
specified herein. The party desiring dispute resolution shall send written
notice to the other summarizing the dispute to be arbitrated and advising the
other party of the neutral arbitrator it has selected. Within fourteen days of
the receipt thereof, the other party shall also select a neutral arbitrator and
advise the initiating party of such selection and any additional controversies,
claims or defenses that it wishes to include as a part of the arbitration. If
the other party fails or refuses to designate its arbitrator within the initial
fourteen-day period above provided, upon the request of the initiating party,
and after a five-day notice of the request to the other party, the presiding
judge of Xxxxx County, State of Nevada shall designate such arbitrator. The two
arbitrators thus selected shall select a third arbitrator, but if those two are
unable within fourteen days to agree upon such third arbitrator, the presiding
judge of Xxxxx County, State of Nevada upon the request of either party, and
after a five-day notice of the request to the other party, shall designate a
third arbitrator.
15.5 ATTORNEY'S FEES. In the event the services of an attorney
at law are necessary to enforce any of the terms of this Agreement or to resolve
any disputes arising under this Agreement, including any arbitration proceeding,
the prevailing Party shall be entitled to recover
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its attorney's fees from the losing Party as determined in the appropriate trial
and/or appellate court, bankruptcy court or on a Petition for Review.
15.6 AMENDMENT. This Agreement may not be amended orally, but
only by instrument in writing, duly executed by all parties hereto.
15.7 ENTIRE AGREEMENT. This Agreement and other agreements or
Documents referred to herein set forth the entire understanding of the parties
hereto with respect to the matters provided herein and supersede all prior
agreements, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any of the parties or by any officer,
employer or representative of any party.
15.8 NON-WAIVER. Failure by any Party at any time to require
performance of another Party of any of the provisions hereof, shall in no way
affect any Party's rights hereunder to enforce the same, nor shall any such
waiver of any breach be held to be a waiver of any succeeding breach or a waiver
of this non-waiver clause.
15.9 EXPENSES. Each of the parties shall each pay their
respective expenses, including fees and expenses of legal counsel, investment
bankers, brokers, accountants or other representatives or consultants, in
connection with the transactions contemplated hereby, including without
limitation, the negotiation and preparation of this Agreement and the Documents
15.10 PUBLIC ANNOUNCEMENTS. No party to this Agreement shall
issue or approve a news release or other public announcement concerning the
transactions contemplated by this Agreement without the prior written consent of
the others as to the contents of the announcement and its release, which
approval shall not be unreasonably withheld.
15.11 ADVICE OF COUNSEL. This Agreement was prepared by the
Law Office of Xxxxxx X. Xxxxxxxxx on behalf of RETI and Encompass. REI and
Xxxxxx -Xxxxxx-Xxxxxx have been advised to retain their own legal counsel to
represent them in connection with this Agreement and REI and they have elected
not to seek the advice of their own legal counsel.
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15.12 EXECUTION IN COUNTERPARTS AND VIA FACSIMILE. This
Agreement may be executed in any number of counterparts, all of which together
shall constitute one original. This Agreement may be executed with signatures
transmitted among the parties by facsimiles, and no party shall deny the
validity of their signature or this Agreement or other Document signed and
transmitted via facsimile.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
ROTARY ENGINES, INC. ROTARY ENGINE TECHNOLOGIES, INC.
By: /s/ XXXXX XXXXXX By: /s/ XXXXXX X. XXXXXX
-------------------------- ---------------------------------
Per authority of the Board Title: Chief Executive Officer
of Directors ------------------------------
ENCOMPASS HOLDINGS, INC.
By: /s/ XXXXXX X. XXXXXX /s/ XXXXX XXXXXX
----------------------------- ------------------------------------
Title: Chief Executive Officer Xxxxx Xxxxxx
--------------------------
/s/ XXXXX XXXXXX
------------------------------------
Xxxxx Xxxxxx
/s/ XXXXXXX XXXXXX
------------------------------------
Xxxxxxx Xxxxxx
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Schedule 3.1
Assets Sold Pursuant to Section 3 of the Asset Acquisition Agreement
Any and all assets, of whatever kind and nature, located at or in the
warehouse facility located at 0000 Xxxxx Xxxxx, Xxxxxxx, Xxxxxxx, or at any
other location maintained by, or under the control, of Rotary Engine, Inc.
SCHEDULE 6.1
ASSETS PREVIOUSLY ACQUIRED BY ENCOMPASS HOLDINGS, INC.
DESCRIBED IN SECTION 6 OF THE ASSET ACQUISITION AGREEMENT
Tri-Core CNC
Lapper/Grinder CNC
Tooling for the above
Stone Table
Rockwell Hardness Tester
Dynameter
Miscellaneous tooling
EXHIBIT "A"
NON-NEGOTIABLE
CONVERTIBLE PROMISSORY NOTE
April 3, 2006. $2,960,000.00
FOR VALUE RECEIVED, ENCOMPASS HOLDINGS, INC. , a Nevada corporation
("Company"), promises to pay to the order of ROTARY ENGINE, INC., a Nevada
corporation ("Holder") the principal sum of Two Million Nine Hundred Sixty
Thousand Dollars ($2,960,000.00) with interest thereon at the rate of nine
percent (9%) per annum from the date hereof.
This Note is issued pursuant to the terms and conditions of the Asset
Acquisition Agreement dated March 28, 2006 of the Company, the Holder and others
are a party ("Acquisition Agreement").
1. PAYMENT TERMS. The whole sum of principal and accrued but unpaid
interest is due and payable on or about April 3, 2007 ("Maturity Date").
2. PREPAYMENT. This Note may be prepaid by the Company, in whole or
part at any time upon ten (10) days prior written notice to Holder ( "Notice
Period") which notice shall state the Company's intention to so prepay,
including a statement of the amount of such prepayment. Any such prepayment
shall first be applied to any accrued but unpaid interest with the balance to be
applied to principal. During the Notice Period, Holder may exercise the
conversion privilege of this Note as described herein.
3. CONVERSION BY HOLDER. At any time at the option of Holder and before
the Maturity Date, the principal amount and any unpaid interest may be converted
into shares of Common Stock of the Company ("Encompass Shares"). The number of
Encompass Shares into which the principal amount of this Note plus unpaid
interest can be converted shall be known as the "Conversion Amount". The
Conversion Amount shall be Encompass Shares with a market value not to exceed
$2,960,000.00 based on the closing bid price of the Common Stock of the Company
as quoted on the OTC Bulletin Board on the Closing Date as defined in the
Acquisition Agreement. Conversion shall be accomplished by Holder delivering
this Note marked "Cancelled" to the Company with the Notice of Conversion in the
form attached hereto as Exhibit "A" in exchange for a Common Stock certificate
of the Company representing the Encompass Shares.
4. CONVERSION UPON DEMAND OF COMPANY. Although conversion can occur at
any time at the option of the Holder, conversion must occur at the demand of the
Company upon ten (10) day's written notice at the time of any registered public
offering by the Company in an aggregate amount of no less than $10,000,000, or
upon any merger or acquisition to which the Company is a party.
Page 1 - Non-Negotiable Convertible Promissory Note
5. CONDITION UPON CONVERSION. The Encompass Shares shall not be issued
upon conversion of this Note unless such conversion and the issuance and
delivery of the Encompass Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, applicable state securities laws, the Securities Exchange Act of 1934,
the rules and regulations promulgated thereunder, and shall further be subject
to approval of counsel for the Company with respect to such compliance. Holder
acknowledges and agrees that the certificates evidencing the Encompass Shares
will include a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED WITHOUT A VIEW TO DISTRIBUTION AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER THE ACT AND UNDER ANY APPLICABLE SECURITIES LAWS, OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SUCH SALE OR OFFER.
6. DEFAULT. If the Company fails to make any payment within twenty (20)
days after payment is due, the entire unpaid principal balance and accrued
interest shall become immediately due, payable and collectible at the option of
the Holder. The Company waives demand for payment, presentment for payment,
notice of non-payment or dishonor. The Company consents to all extensions
without notice for any period or periods of time and partial payments before or
after the Maturity Date without prejudice to the Holder.
7. WAIVER. The Holder's failure to exercise any option or right given
by this Note shall not constitute a waiver of (a) the right to exercise the
option or right at any other time, or if there is any default or (b) this
non-waiver provision.
8. COLLECTION. The Company agrees to pay all costs and expenses of
collection, including, without limitation, the reasonable attorneys' fees, costs
and disbursements of the Holder, in the event any action, suit or proceeding is
brought by Holder to collect on this Note.
9. GOVERNING LAW. This Note has been executed and delivered in Nevada,
and shall be governed by and construed in accordance with the laws of the State
of Nevada and without regard to the law of conflicts of law. Holder agrees that
jurisdiction and venue for all actions to enforce this Note lie solely in State
of Nevada.
Page 2 - Non-Negotiable Convertible Promissory Note
10. NONNEGOTIABILITY. This Note is NOT NEGOTIABLE as that term may be
defined under the laws of the State of Nevada.
COMPANY: HOLDER:
ENCOMPASS HOLDINGS, INC. ROTARY ENGINE, INC.
By: /s/ XXXXXX X. XXXXXX /s/ XXXXX XXXXXX
------------------------------------------- ------------------------------
Xxxxxx X. Xxxxxx, Chief Executive Officer Xxxxx Xxxxxx, per authority of
the Board of Directors
Page 3 - Non-Negotiable Convertible Promissory Note
EXHIBIT "B"
TO
ASSET ACQUISITION AGREEMENT
DATED MARCH 28, 2006
XXXX OF SALE
The undersigned, Rotary Engine, Inc. a Nevada corporation, and Xxxxx
Xxxxxx; Xxxxx Xxxxxx; and Xxxxxxx Xxxxxx, jointly and severally, for good and
valuable consideration, and pursuant to the terms and condition of an Asset
Acquisition Agreement dated March 28, 2006, by and among the undersigned and
Rotary Engine Technology, Inc., a Nevada corporation and Encompass Holdings,
Inc., a Nevada corporation, hereby convey, transfer and assign Xtreme Engines,
Inc, all right, title and interest, in and to all Assets referred to in the
aforesaid Asset Acquisition Agreement. To have and to hold the same unto Xtreme
Engines, Inc., its administrators, successors and assigns forever.
And the undersigned do for themselves and their respective, executors,
administrators, successors and assigns, warrant and represent that the title to
be conveyed for the aforesaid Assets will be good, their transfer rightful and
free from any security interest or other lien or encumbrance.
Dated : March 28, 2006.
ROTARY ENGINE, INC.
By: /s/ XXXXX XXXXXX
-------------------------------
Xxxxx Xxxxxx, per authority of the
Board of Directors
/s/ XXXXX XXXXXX
----------------------------------------
Xxxxx Xxxxxx
/s/ XXXXX XXXXXX
----------------------------------------
Xxxxx Xxxxxx
/s/ XXXXXXX XXXXXX
----------------------------------------
Xxxxxxx Xxxxxx
