SECURITIES PURCHASE AGREEMENT
AND PLAN OF REORGANIZATION
THIS SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is entered into effective as of February 9, 2004 by and among
Xxxxxxx International, Inc. a Utah corporation (the "Company"), Quest Minerals &
Mining, Ltd., a Nevada corporation (the "Target"), Xxxxxxxxx Xxxxxxxxxx, an
individual ("Xxxxxxxxxx"), and the stockholders of Target (the "Selling
Stockholders") listed on Exhibit A attached hereto.
R E C I T A L S
A. The Company has authorized capital stock consisting of 40,000,000
shares of common stock ("Common Stock"), $0.001 par value, of which 40,000,000
shares are issued and outstanding.
B. Target has authorized capital stock consisting of 10,000,000 shares
of common stock, $0.001 par value, of which 5,175,000 shares (the "Target
Shares") are issued and outstanding and held by certain Selling Stockholders,
600,000 shares of Series A Preferred Stock, $0.001 par value ("Target Series A
Preferred Stock") of which 600,000 shares (the "Target Preferred Shares") are
issued and outstanding and are held by certain Selling Stockholders, and
9,400,000 shares of undesignated preferred stock, $0.001 par value, of which
none are issued and outstanding.
C. The Selling Stockholders wish to sell, and the Company wishes to
purchase, all of the Target Shares on the Closing Date (as defined below), in
exchange for 20,700,000 shares of the Company's Common Stock (the "Initial
Shares") and an additional 1,800,000 shares of the Company's Common Stock (the
"Additional Shares"), subject to and upon the terms hereinafter set forth. The
Initial Shares and the Additional Shares are collectively referred to as the
"Company Shares."
A G R E E M E N T
It is agreed as follows:
1. Securities Purchase and Reorganization
1.1 Agreement to Exchange Securities. Subject to the terms and
upon the conditions set forth herein, each Selling Stockholder agrees to sell,
assign, transfer and deliver to the Company, and the Company agrees to purchase
from each Selling Stockholder, the Target Shares owned by the respective Selling
Stockholder as set forth on Exhibit A attached hereto, in exchange for the
transfer, at the Closing, by the Company to each Selling Stockholder a pro rata
share of the Initial Shares, as determined herein. Each Selling Stockholder is
entitled to receive four (4) Company Shares for each Target Share owned by the
Selling Stockholder at the Closing. The number of Initial Shares that each
Selling Stockholder is entitled to receive at the Closing as determined
hereunder is set forth opposite each Selling Stockholder's name on Exhibit A.
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1.2 Agreement to Issue Additional Securities. Subject to the
terms and upon the conditions set forth herein, the Company agrees that, upon
the completion of the filing of the Amendment (as defined in Section 6.1) as
described in Section 6.1, the Company agrees to issue to each Selling
Stockholder, for no additional consideration, a pro rata share of the Additional
Shares, as determined herein. Each Selling Stockholder is entitled to receive
eight-twenty-thirds (8/23) of an Additional Share for each Target Share owned by
the Selling Stockholder at the Closing. The number of Additional Shares that
each Selling Stockholder is entitled to receive upon the completion of the
filing of the Amendment as determined hereunder is set forth opposite each
Selling Stockholder's name on Exhibit A.
1.2. Cancellation of 22,464,358 Shares. Xxxxxxxxxx shall, at
Closing, submit 22,464,358 shares of Common Stock to the Company (or its
transfer agent) for cancellation.
1.3. Instruments of Transfer.
(a) Target Shares. Each Selling Stockholder shall deliver to
the Company original certificates evidencing the Target Shares along with
executed stock powers, in form and substance satisfactory to the Company, for
purposes of assigning and transferring all of their right, title and interest in
and to the Target Shares. From time to time after the Closing Date, and without
further consideration, the Selling Stockholders will execute and deliver such
other instruments of transfer and take such other actions as the Company may
reasonably request in order to facilitate the transfer to the Company of the
securities intended to be transferred hereunder.
(b) The Initial Shares. The Company shall deliver to the
Selling Stockholders on the Closing Date original certificates evidencing the
Initial Shares, in form and substance satisfactory to the Selling Stockholders,
in order to effectively vest in the Selling Stockholders all right, title and
interest in and to the Initial Shares. From time to time after the Closing Date,
and without further consideration, the Company will execute and deliver such
other instruments and take such other actions as the Selling Stockholders may
reasonably request in order to facilitate the issuance to them of the Initial
Shares and, when authorized, the Additional Shares.
(c) The Xxxxxxxxxx Shares. Xxxxxxxxxx shall deliver the
certificate representing the 22,464,358 shares to be cancelled pursuant to
Section 1.2, along with irrevocable instructions to the Company's transfer
agent, jointly executed by Xxxxxxxxxx and the Company, to cancel the 22,464,358
shares represented by said certificate.
1.3 Closing. The closing ("Closing") of the exchange of the
Target Shares and the Initial Shares shall take place at the offices of Spectrum
Law Group, LLP, 0000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxx, XX 00000 concurrently with
the execution of this Agreement. The date on which the Closing takes place is
referred to herein as the "Closing Date." The Closing shall be effective as of
the execution of this Agreement.
1.4 Tax Free Reorganization. The parties intend that the
transaction under this Agreement qualify as a tax-free reorganization under
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
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2. Representations, Warranties and Covenants of the Selling
Stockholders. Each Selling Stockholder severally represents, warrants and
covenants to and with the Company with respect to himself, as follows:
2.1. Title to Shares. Each Selling Stockholder is the sole
record and beneficial owner of the Target Shares held by such Selling
Stockholder, free and clear of all liens, encumbrances, equities, assessments
and claims, and that there are no warrants, options, subscriptions, calls, or
other similar rights of any kind for the issuance or purchase of any of the
Target Shares or other securities of the Target held by such Selling
Stockholder. Upon delivery of the Target Shares by each Selling Stockholder and
payment of the Company Shares in full by the Company pursuant to this Agreement,
each Selling Stockholder will transfer to the Company valid legal title to the
Target Shares held by such Selling Stockholder, free and clear of all
restrictions, liens, encumbrances, equities, assessments and claims (other than
any restrictions, liens, encumbrances, equities, assessments or claims as may
arise from or as a result of (i) restrictions under applicable Federal and state
securities laws, and (ii) any act or omission of the Company).
2.2. Authority Relative to this Agreement. Each Selling
Stockholder has all requisite individual or corporate power and authority, as
the case may be, to enter into and to carry out all of the terms of this
Agreement and all other documents executed and delivered in connection herewith
(collectively, the "Documents"). All individual or corporate action, as the case
may be, on the part of each Selling Stockholder necessary for the authorization,
execution, delivery and performance of the Documents by such Selling Stockholder
has been taken and no further authorization on the part of such Selling
Stockholder is required to consummate the transactions provided for in the
Documents. When executed and delivered by each Selling Stockholder, the
Documents shall constitute the valid and legally binding obligation of such
Selling Stockholder, enforceable in accordance with their respective terms,
except as limited by applicable bankruptcy, insolvency reorganization and
moratorium laws and other laws affecting enforcement of creditor's rights
generally and by general principles of equity.
2.3. Securities Matters.
(a) Each Selling Stockholder understands that (i) the Company
Shares have not been registered or qualified under the Securities Act of 1933,
as amended (the "Securities Act") or any state securities or "blue sky" laws, on
the ground that the sale provided for in this Agreement and the issuance of the
securities hereunder is exempt from registration and qualification under
Sections 4(2) and 18 of the Securities Act, and (ii) the Company's reliance on
such exemptions is predicated on the each Selling Stockholder's representations
set forth herein.
(b) Each Selling Stockholder acknowledges that an investment
in the Company involves an extremely high degree of risk, lack of liquidity and
substantial restrictions on transferability and that such Selling Stockholder
may lose his, her or its entire investment in the Company Shares.
(c) The Company has made available to each Selling
Stockholder or the advisors of any such Selling Stockholder the opportunity to
obtain information to evaluate the merits and risks of the investment in the
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Company Shares, and each Selling Stockholder has received all information
requested from the Company. Each Selling Stockholder has had an opportunity to
ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Company Shares and the business, properties,
plans, prospects, and financial condition of the Company and to obtain
additional information as such Selling Stockholder has deemed appropriate for
purposes of investing in the Company Shares pursuant to this Agreement.
(d) Each Selling Stockholder, personally or through advisors,
has expertise in evaluating and investing in private placement transactions of
securities of companies in a similar stage of development to the Company and has
sufficient knowledge and experience in financial and business matters to assess
the relative merits and risks of an investment in the Company. In connection
with the purchase of the Company Shares, each Selling Stockholder has relied
solely upon independent investigations made by such Selling Stockholder and has
consulted such Selling Stockholder's own investment advisors, counsel and
accountants. Each Selling Stockholder has adequate means of providing for
current needs and personal contingencies, has no need for liquidity, and can
sustain a complete loss of the investment in the Company Shares.
(e) The Company Shares which the Company is to issue
hereunder will be acquired for each Selling Stockholder's own account, for
investment purposes, not as a nominee or agent, and not with a view to or for
sale in connection with any distribution of the Company Shares in violation of
applicable securities laws.
(f) Each Selling Stockholder understands that no federal or
state agency has passed upon the Company Shares or made any finding or
determination as to the fairness of the investment in the Company Shares.
(g) Each Selling Stockholder is an "Accredited Investor" as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
Each Selling Stockholder acknowledges that the Company Shares may be purchased
only by persons who come within the definition of an "Accredited Investor" as
that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
(h) No Selling Stockholder has received any general
solicitation or general advertising concerning the Company Shares, nor is any
Selling Stockholder aware of any such solicitation or advertising.
(i) Each Selling Stockholder understands that the Company
Shares will be characterized as "restricted" securities under federal securities
laws inasmuch as they are being acquired in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act only in certain limited
circumstances. Each Selling Stockholder agrees that such Selling Stockholder
will not sell all or any portion of the Company Shares except pursuant to
registration under the Securities Act or pursuant to an available exemption from
registration under the Securities Act. Each Selling Stockholder understands and
acknowledges that all certificates representing the Company Shares shall bear
the following legend or a legend of similar import and that the Company shall
refuse to transfer the Company Shares except in accordance with such
restrictions:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER CERTAIN STATE SECURITIES LAWS. NO SALE OR
TRANSFER OF THESE SHARES MAY BE MADE IN THE ABSENCE OF (1) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (2) AN
OPINION OF COUNSEL THAT REGISTRATION UNDER THE ACT OR UNDER
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED SALE OR TRANSFER."
2.4. Full Disclosure. No representations or warranties made by
any Selling Stockholder in this Agreement, in any of the exhibits or schedules
attached to this Agreement, or in the schedules attached hereto, or in any other
statements furnished or to be furnished by the such Selling Stockholder to the
Company pursuant to this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary to make any statement contained
herein or therein not misleading. Copies of all documents heretofore or
hereafter delivered or made available to the Company by any Selling Stockholder
pursuant hereto were or will be complete and accurate records of such documents.
3. Representations, Warranties and Covenants of the Target and the
Selling Stockholders. The Target and each Selling Stockholder jointly and
severally represents, warrants and covenants to the Company as follows
(exceptions to the following representations and warranties shall be set forth
on Schedules 3.1 through 3.22, which collectively are referred to as the
"Disclosure Schedule"):
3.1. Authority Relative to this Agreement. The Target has all
requisite corporate power and authority to enter into and to carry out all of
the terms of this Agreement and all other documents executed and delivered in
connection herewith (collectively, the "Documents"). All corporate action on the
part of the Target necessary for the authorization, execution, delivery and
performance of the Documents by the Target has been taken and no further
authorization on the part of the Target is required to consummate the
transactions provided for in the Documents. When executed and delivered by the
Target, the Documents shall constitute the valid and legally binding obligation
of the Target, enforceable in accordance with their respective terms, except as
limited by applicable bankruptcy, insolvency reorganization and moratorium laws
and other laws affecting enforcement of creditor's rights generally and by
general principles of equity.
3.2. Capitalization of the Target. The authorized capital
stock of the Target consists of 10,000,000 shares of common stock, $0.001 par
value (the "Target Common Stock"), of which 5,175,000 shares are issued and
outstanding, 600,000 shares of Target Series A Preferred Stock, $0.001 par value
(the "Target Series A Preferred Stock") of which 600,000 shares are issued and
outstanding, and 9,400,000 shares of undesignated preferred stock, $0.001 par
value, of which none are issued and outstanding. All issued and outstanding
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shares of Target Common Stock and Target Series A Preferred Stock are duly
authorized, validly issued, fully paid and nonassessable, and are held of record
by the Selling Stockholders. There are no outstanding options, warrants, rights,
subscriptions, calls, contracts or other agreements to issue, purchase or
acquire, or securities convertible into, shares of capital stock or other
securities of any kind representing an ownership interest in the Target other
than the Target Series A Preferred Stock, and no Selling Stockholder is a party
to any proxy, voting trust or other agreements with respect to the voting of the
Target Common Stock.
3.3. Subsidiaries. Set forth on Schedule 3.3 is a complete
listing of any stock or equity interests, direct or indirect, of the Target in
any other firm, corporation, association or business organization (each of which
is referred to herein individually as a "Subsidiary" and collectively as the
"Subsidiaries"). The Target is the sole record owner of all of the issued and
outstanding capital stock of any such Subsidiaries, free and clear of all liens,
encumbrances, equities, assessments and claims. All of the issued and
outstanding shares of capital stock of each such Subsidiary are duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding options,
warrants, rights, subscriptions, calls, contracts or other agreements to
purchase or acquire, or securities convertible into, shares of capital stock or
other securities of any kind representing an ownership interest in any such
Subsidiaries, and neither the Target nor any Selling Stockholder is a party to
any proxy, voting trust or other agreements with respect to the voting of the
capital stock of any such Subsidiaries.
3.4. Organization and Standing. The Target and each of the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state or jurisdiction of incorporation and is
duly qualified or registered to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned or leased by it makes
such qualification necessary and where the failure to be so qualified would have
a material adverse effect on the Target and the Subsidiaries, taken as a whole.
The Target and each of the Subsidiaries has the full corporate power and
authority to own or lease and operate its properties and to carry on its
business as now being conducted.
3.5. No Default or Legal Restrictions. Neither the Target nor
any of the Subsidiaries is in violation of its articles of incorporation, bylaws
or other governing documents. Neither the Target nor any of the Subsidiaries is
in default under, or in breach of any term or provision of, any contract,
agreement, lease, license, commitment, mortgage, indenture, bond, note,
instrument or other obligation set forth on Schedule 3.22 (each a "Contract")
where such default or breach would have a material adverse effect on the Target
and the Subsidiaries, taken as a whole. The execution and delivery of this
Agreement by the Target and the Selling Stockholders and the consummation of the
transactions contemplated hereby do not and will not violate the articles of
incorporation, bylaws or other governing documents of the Target or any of the
Subsidiaries, and, except where any such conflict, breach, default or violation
would not have a material adverse effect on the Target and the Subsidiaries,
taken as a whole, the execution and delivery of this Agreement by the Target and
the Selling Stockholders and the consummation of the transactions contemplated
hereby do not and will not (a) conflict with or result in any breach of (or
create in any party the right to accelerate, terminate, modify or cancel) any
terms, conditions or provisions of, or constitute a default under, or require
the consent of any party to, or result in the imposition of any lien or
encumbrance upon any asset or property of the Target or any of the Subsidiaries
pursuant to the terms and conditions of, any Contract to which the Target or any
Selling Stockholder or any of the Subsidiaries is now a party or by which any of
them or any of their respective properties, assets or rights may be bound or
affected, (b) violate any provision of any law, rule or regulation of any
administrative agency or governmental body, or any order, writ, injunction or
decree of any court, administrative agency, governmental body or arbitrator, or
(c) require any filing with, or license, permit, consent or other governmental
approval of, any federal, state or local governmental body or governmental
agency (including, without limitation, the Securities and Exchange Commission,
other than the filing of a From D and similar state securities laws filings.)
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3.6. Compliance with Law. Neither the Target nor any of the
Subsidiaries is in violation of any federal, state, local or foreign law,
ordinance, regulation, judgment, decree, injunction or order of any court or
other governmental entity. The Target and the Subsidiaries have procured and are
currently in possession of all licenses, permits and other governmental
authorizations required by federal, state or local laws for the operation of the
business of the Target and the Subsidiaries in each jurisdiction in which the
Target or any of the Subsidiaries is currently conducting business, where the
failure to possess such licenses, permits and authorizations would have a
material adverse effect on the Target and the Subsidiaries, taken as a whole,
and there is no basis for revoking any such license, permit or other
authorization. Except as otherwise disclosed on Schedule 3.6, such licenses are
in full force and effect and there is no basis for any fines, penalties, or
revocation of such licenses.
3.7. Financial Statements.
(a) The Target is currently having an accounting firm
authorized to practice before the Securities and Exchange Commission conduct an
audit of the balance sheet of the Target, including its Subsidiaries, as of
December 31, 2003 and the related statements of operations, shareholders' equity
and cash flows for the period from inception through December 31, 2003 (the
"Target Audited Financial Statements"), and such audit shall be completed in
sufficient time to have the Target Financial Statements to be filed as an
exhibit to the amendment of the Current Report on Form 8-K described in Section
6.4 hereof. The Target Audited Financial Statements will be true and accurate,
in accordance with the books and records of Target. Except as disclosed therein,
the Target Financial Statements (i) will be in accordance with the books and
records of the Target and will be prepared in conformity with generally accepted
accounting principles ("GAAP") consistently applied for all periods, and (ii)
will fairly present the financial position of the Target as of the respective
dates thereof, and the results of operations, and changes in shareholders'
equity and changes in cash flow for the periods then ended, all in accordance
with GAAP consistently applied for all periods.
(b) Except as set forth on the Target Financial Statements,
the Target has no debt, liability or obligations of any nature, whether accrued,
absolute, contingent, or otherwise, whether due or to become due and whether or
not the amount hereof is readily ascertainable, that will not be reflected as a
liability in the Target Financial Statements or except for liabilities incurred
by the Target in the ordinary course of business, consistent with past practices
which are not otherwise prohibited by, or in violation of, or which will not
result in a breach of, the representations, warranties, and covenants of the
Target contained in this Agreement. There will be no material loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5 ("FAS
No. 5") issued by the Financial Accounting Standards Board (the "FASB") which
will not be adequately provided for in the Target Financial Statements as
required by FAS No. 5.
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3.8. Absence of Undisclosed Liabilities. The Target does not
have any material liabilities, obligations or claims of any kind whatsoever
which are required to be set forth in financial statements prepared in
accordance with GAAP, whether secured or unsecured, accrued or unaccrued, fixed
or contingent, matured or unmatured, direct or indirect, contingent or otherwise
and whether due or to become due (referred to herein individually as a
"Liability" and collectively as "Liabilities"), other than (a) Liabilities that
are reserved for or disclosed in the Latest Reviewed Financial Statements, (b)
Liabilities that are set forth on Schedule 3.8, (c) Liabilities incurred by the
Target in the ordinary course of business after the date of the Latest Financial
Statements (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law), or (d) Liabilities for Contracts (other than
any express executory obligations that might arise due to any default or other
failure of performance by the Target prior to the Closing Date).
3.9. Absence of Material Adverse Changes. Since the date of
the Latest Reviewed Financial Statements, there has not been any (a) material
adverse change in the business, operations, properties, condition (financial or
otherwise) of the Target and the Subsidiaries, (b) damage, destruction or loss,
whether covered by insurance or not, materially and adversely affecting the
business, properties or condition (financial or otherwise) of the Target and the
Subsidiaries, taken as a whole, or (c) change by the Target or any of the
Subsidiaries in accounting methods or principles used for financial reporting
purposes, except as required by a change in generally accepted accounting
principles and concurred with by the Target's independent certified public
accountants.
3.10. Real Property.
(a) Schedule 3.10 contains a list of all real property owned
by or leased to the Target or any of the Subsidiaries. Neither the Target nor
any Selling Stockholder has received any notification that there is any
violation of any law, ordinance or regulation with respect to such real property
that would result in a material fine or penalty or the abatement of which would
require a material capital expenditure.
(b) The Target or the applicable Subsidiary has good and
marketable title to all real property indicated on Schedule 3.10 as owned by the
Company or any of the Subsidiaries, subject to (i) easements, servitudes and
rights-of-way of record or in actual or apparent use, (ii) any state of facts
that a visual inspection might reveal, (iii) rights of the public in any portion
of the premises that may fall in any public street, way or alley, (iv) zoning
laws, building laws and building restrictions of record, (v) liens for current
taxes not yet due and payable or being contested in good faith by appropriate
proceedings, (vi) liens imposed by law incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers,
materialmen and the like, (vii) liens or imperfections of title that do not
materially detract or interfere with the present use or value of such real
property, and (viii) mortgages, liens, encumbrances, claims or restrictions, if
any, that do not materially detract from or interfere with the present use or
value of such real property.
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(c) There are no pending or threatened condemnation
proceedings relating to any real property owned by or leased to the Target or
any of the Subsidiaries, or other matters affecting materially or adversely the
current use, occupancy, or value of any such real property.
(d) There are no leases, subleases, licenses, material
concessions, or other material agreements, written or oral granting to any party
or parties the right of use or occupancy of any portion of any real property
owned by the Target or any of the Subsidiaries.
(e) There are no outstanding options or rights of first
refusal to purchase any of the real property owned by the Target or any of the
Subsidiaries, or any portion thereof or interest therein.
(f) The leases relating to the real property leased by the
Target or any of the Subsidiaries are valid and in full force and there does not
exist any default thereunder that materially detracts from or interferes with
the present use or value of such real property.
3.11. Tangible Personal Property.
(a) The Target and each of the Subsidiaries has good and
marketable title to all tangible personal property it purports to own as of the
date of the Latest Reviewed Financial Statements (except for personal property
sold or otherwise disposed of since the date of the Latest Reviewed Financial
Statements in the ordinary course of business), free and clear of all mortgages,
liens, encumbrances, claims or restrictions other than (i) liens for current
taxes not due and payable or being contested in good faith by appropriate
proceedings, (ii) liens imposed by law and incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers,
materialmen and the like, and (iii) mortgages, liens, encumbrances, claims or
restrictions, if any, that do not materially detract from or interfere with the
present use or value of such personal property.
(b) All leases relating to personal property are valid and in
full force and there does not exist any default thereunder where such default
would materially detract from or interfere with the present use or value of such
personal property.
3.12. Intellectual Property Rights. Schedule 3.12 contains a
list of all patents, trademarks, trade names, corporate names, service marks,
computer software, customer lists, processes, know-how and trade secrets
(collectively, the "Intellectual Property") used in or necessary for the conduct
of the business of the Target or any of the Subsidiaries as currently conducted.
The Target and each of the Subsidiaries owns, or is licensed to use, all of the
Intellectual Property. No claim has been asserted or threatened by any person
with respect to the use of such Intellectual Property or challenging or
questioning the validity or effectiveness of any such license or agreement with
respect thereto, and the use of such Intellectual Property by the Target and the
Subsidiaries do not infringe on the rights of any other person.
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3.13. Taxes.
(a) The Target and the Subsidiaries have filed all material
returns, declarations, reports, claims for refund, or information returns or
statements relating to any Federal, State, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, custom duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty or addition thereto
whether disputed or not (individually, a "Tax" and, collectively, "Taxes"), and
further including any schedule or attachment thereto, and any amendment thereof,
that the Target and the Subsidiaries were required to file under any Federal,
State, local, or foreign laws (individually, a "Tax Return" and, collectively,
"Tax Returns"). All such Tax Returns were correct and complete in all material
respects. All Taxes owed by the Target and the Subsidiaries have been paid when
due or adequate provision has been made therefore in the applicable financial
statements. There are no security interests or liens on any of the assets or the
stock or other securities of the Target or the Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) The Target and the Subsidiaries have withheld and paid
all Taxes required by law to have been withheld and paid in connection with
amounts paid or owing to any employee, commissioned agent, creditor,
stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax liability
of, or attributable to, the Target or the Subsidiaries (including, without
limitation, any dispute or claim with respect to any jurisdiction in which the
Target or Subsidiaries do not currently file Tax Returns) either (i) claimed or
raised by any authority in writing, or (ii) as to which the Target, the
Subsidiaries or any Selling Stockholder has knowledge.
(d) Neither the Target nor any of the Subsidiaries have
waived or extended any statute of limitations in respect of any assessment or
collection of Taxes or any alleged, proposed or actual deficiency in Taxes or
agreed to any extension of time with respect to the filing of any Tax Return.
(e) Neither the Target nor any of the Subsidiaries have filed
a consent under Section 341(f) of the Internal Revenue Code (the "Code").
(f) Neither the Target nor any of the Subsidiaries have made
any payments, or is obligated to make payments, and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code.
(g) Neither the Target nor any of the Subsidiaries have any
liability for the Taxes of any person or entity other than the Target and the
Subsidiaries (i) under Section 1.1502-6 of the Treasury Regulations (or any
similar provision of State, local or foreign law), (ii) as a transferee or
successor, (iii) by contract, or (iv) otherwise.
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3.14. Litigation. Other than as set forth on Schedule 3.14,
there is no legal, administrative, arbitration or other proceeding, suit, claim
or action of any nature or investigation, review or audit of any kind pending or
threatened against or involving the Target or any of the Subsidiaries or their
assets or properties.
3.15. Employee Benefit Plans.
(a) The Target and the Subsidiaries have complied in all
material respects with all applicable laws relating to the employment of labor,
including, without limitation, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and those relating to wage, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity and the payment of withholding taxes, including income and social
security taxes, and has withheld (and paid over to the appropriate authorities)
all amounts required by law or agreement to be held from the wages or salaries
of its employees.
(b) With respect to each employee welfare benefit plan of the
Target or any of the Subsidiaries, as defined in Section 3(1) of ERISA (a
"Welfare Plan"), and any deferred benefit plan of the Target or any of the
Subsidiaries, as defined in Section 3(2) of ERISA (a "Pension Plan"), there are
no actions, suits or investigations or claim pending or to the best of Seller's
knowledge, threatened with respect to the assets thereof, other than routine
claims for benefits.
(c) Neither the Target nor any of the Subsidiaries has made
contributions to or currently has any obligation to contribute to (or any other
liability, including any potential liability) with respect to any Welfare or
Pension Plan under which any employee was or may be entitled to any benefit that
is a "Multiemployer Plan" as defined in Section 4001 of ERISA or any
"Multiemployer Plan" within the meaning of Section 3(37) of ERISA. In addition,
there are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the Target or any of the
Subsidiaries.
3.16. Environmental and Safety Laws.
(a) The Target and the Subsidiaries have complied with all
Environmental Requirements (as defined below) and all health and safety laws,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice has been filed or commenced against the Target and the
Subsidiaries alleging any failure to so comply, except in each case where the
failure to comply would not have a material adverse effect on the Target and the
Subsidiaries, taken as a whole. The Target and the Subsidiaries have obtained
and been in compliance with all of the terms and conditions of all permits,
licenses and other authorizations that are required under, and has complied with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables that are contained in, all
Environmental Requirements and health and safety laws, except in each case where
the failure to comply would not have a material adverse effect on the Target and
the Subsidiaries, taken as a whole.
(b) The Target and the Subsidiaries have no liability for,
and have not handled or disposed of, any Hazardous Substance (as defined below),
arranged for the disposal of any Hazardous Substance, exposed any employee or
11
other individual to any Hazardous Substance, or owned or operated any property
or facility in any manner that could form the basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against the Target and the Subsidiaries giving rise to any liability for
damage to any site, location or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual, or for any
reason under any Environmental Requirement or health and safety law, except
where any such liability would not have a material adverse effect on the Company
and the Subsidiaries, taken as a whole.
(c) None of the following exists at any real property or
facility owned or operated by the Target or the Subsidiaries: (i) underground
storage tanks, (ii) asbestos-containing materials in any form or condition,
(iii) materials or equipment containing polychlorinated biphenyls, or (iv)
landfills, surface impoundments or disposal areas.
(d) "Environmental Requirements" means all applicable
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises and similar items, or
all governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states or political subdivisions thereof
and all applicable judicial, administrative and regulatory decrees, judgments,
and orders that are adopted and in effect as of the Closing and that relate to
the protection of human health or the environment, including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
investigation and remediation of emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pollutants, contaminants
or hazardous or toxic substances, materials or wastes whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of chemical substances, materials or wastes, whether
solid, liquid or gaseous in nature.
(e) The term "Hazardous Substances" shall include without
limitation: (i) those substances included within the definition of "Hazardous
Substances," "Hazardous Materials," "Toxic Substances" or "Solid Waste" in
CERCLA (42 U.S.C. sections 9601 et seq.), RCRA (42 U.S.C. sections 6901 et
seq.), the Hazardous Materials Transportation Action (49 U.S.C. Sections 1801 et
seq.) and the TSCA (15 U.S.C. sections 2601 et seq.) and the regulations
promulgated thereunder; (ii) those substances listed in the United States
Department of Transportation Table of Hazardous Materials (49 CFR 172.101 and
amendments thereto); and (iii) such other substances, materials and wastes that,
prior to or as of the Closing, are classified as hazardous or toxic under
federal, state or local laws or regulations and that are regulated as such under
such laws.
3.17. Accounts Receivable. All accounts receivable that are reflected
on the Latest Reviewed Financial Statements or that have arisen since the date
of the Latest Reviewed Financial Statements (except such accounts receivable as
have been collected since the Latest Reviewed Financial Statements) in excess of
reserves for doubtful accounts are valid and enforceable claims and arise out of
bona fide transactions in the ordinary course of business in conformity with the
applicable purchase orders, agreements and specifications. Such accounts
receivable are subject to no valid defenses or offsets, except such discounts as
are customarily offered to customers in the ordinary course of business and
routine customer complaints or warranty demands that are not material in nature.
12
3.18. Inventory. All inventory of the Target and the
Subsidiaries, whether reflected on the Latest Reviewed Financial Statements or
otherwise, consists of a quality and quantity usable and salable in the ordinary
course of business. The value of all items of obsolete inventory and of
inventory of below standard quality has been written down to realizable market
value, and the value at which such inventory is carried reflects the Target's
normal inventory valuation policy of stating its inventory at the lower of cost
or market value, in each case in accordance with generally accepted accounting
principles.
3.19. Brokers or Finders. The Target and the Selling
Stockholders have engaged no broker, agent, finder or investment advisor in
connection with the transactions contemplated by this Agreement, and no broker,
agent or finder is entitled to any brokerage or finder's fee or other commission
in respect of this Agreement or the transactions contemplated hereby.
3.20. Employees.
(a) No executive, key employee or group of employees has any
plans to terminate employment with the Target or any of the Subsidiaries.
(b) Neither the Target nor any of the Subsidiaries is a party
to or bound by any collective bargaining agreement. Neither the Target nor any
of the Subsidiaries have experienced any strikes, grievances, claims of unfair
labor practices or other collective bargaining disputes since the organization
of the Target.
(c) Except as set forth on Schedule 3.20, neither the Target
nor any of the Subsidiaries is a party to, and/or is bound by, any employment
contract with any of its employees.
3.21. Insurance. The Target and the Subsidiaries are insured
under, or are the owners and beneficiaries under, as appropriate, the policies
listed in Schedule 3.21, copies of which policies of insurance have been
provided to the Company.
3.22. Contracts and Commitments; No Default.
(a) Except as set forth in Schedule 3.22, the Target:
(i) has no written or oral contract,
commitment, agreement or arrangement with any person which (A) requires payments
individually in excess of Twenty Five Thousand Dollars ($25,000) annually or in
excess of One Hundred Thousand Dollars ($100,000) over its term (including
without limitation periods covered by any option to extend or renew by either
party) and (B) is not terminable on thirty (30) days' or less notice without
cost or other Liability;
13
(ii) does not pay any person or entity cash
remuneration at the annual rate (including without limitation guaranteed
bonuses) of more than Fifty Thousand ($50,000) for services rendered;
(iii) is not restricted by agreement from
carrying on its businesses or any part thereof anywhere in the world or from
competing in any line of business with any person or entity;
(iv) is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any person or entity;
(v) is not party to any agreement, contract,
commitment or loan to which any of its directors, officers or shareholders or
any Affiliate (or former Affiliate) thereof is a party;
(vi) is not subject to any outstanding sales
or purchase contracts, commitments or proposals which is anticipated to result
in any loss upon completion or performance thereof;
(vii) is not party to any purchase or sale
contract or agreement that calls for aggregate purchases or sales in excess over
the course of such contract or agreement of One Hundred Thousand Dollars
($100,000) or which continues for a period of more than twelve months (including
without limitation periods covered by any option to renew or extend by either
party) which is not terminable on sixty (60) days' or less notice without cost
or other Liability at or any time after the Closing; and
(viii) has no distributorship, dealer,
manufacturer's representative, franchise or similar sales contract relating to
the payment of a commission.
(b) True and complete copies (or summaries, in the case of
oral items) of all items disclosed pursuant to this Section 3.22 have been made
available to the Company for review. Except as set forth in Schedule 3.22, all
such items are valid and enforceable by and against the Target in accordance
with their respective terms, the Target is not in breach, violation or default,
however defined, in the performance of any of its obligations thereunder, and no
facts and circumstances exist which, whether with the giving of due notice,
lapse of time, or both, would constitute such a breach, violation or default
thereunder or thereof; and to the best knowledge of the Target, no other parties
thereto are in breach, violation or default, however defined, thereunder or
thereof, and no facts or circumstances exist which, whether with the giving of
due notice, lapse of time, or both, would constitute such a breach, violation or
default thereunder or thereof.
3.23. Full Disclosure. No representations or warranties made
by the Target and the Selling Stockholders in this Agreement, in any of the
exhibits or schedules attached to this Agreement, or in the schedules attached
hereto, or in any other statements furnished or to be furnished by the Target
and the Selling Stockholders to the Company pursuant to this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary to make any statement contained herein or therein not misleading.
Copies of all documents heretofore or hereafter delivered or made available to
the Company by the Target and the Selling Stockholders pursuant hereto were or
will be complete and accurate records of such documents.
14
4. Representations, Warranties and Covenants of the Company. The
Company represents, warrants and covenants to Target and each of the Selling
Stockholders as follows.
4.1. Organization and Good Standing. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Utah and has full corporate power and authority to enter
into and perform its obligations under this Agreement.
4.2. Capitalization. The authorized capital stock of the
Company consists of 40,000,000 shares of Common Stock, $0.001 par value, of
which 40,000,000 shares are issued and outstanding. All issued and outstanding
shares of Common Stock immediately prior to the Closing are duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding options,
warrants, rights, subscriptions, calls, contracts or other agreements to issue,
purchase or acquire, or securities convertible into, shares of capital stock or
other securities of any kind representing an ownership interest in the Company.
4.3. Authority Relative to this Agreement. The Company has all
requisite corporate power and authority, to enter into and to carry out all of
the terms of the Documents. All corporate action on the part of the Company
necessary for the authorization, execution, delivery and performance of the
Documents by the Company has been taken and no further authorization on the part
of the Company is required to consummate the transactions provided for in the
Documents. When executed and delivered by the Company, the Documents shall
constitute the valid and legally binding obligation of the Company, enforceable
in accordance with their respective terms, except as limited by applicable
bankruptcy, insolvency reorganization and moratorium laws and other laws
affecting enforcement of creditor's rights generally and by general principles
of equity.
4.4. No Default or Legal Restrictions. The Company is not in
violation of its articles of incorporation, bylaws or other governing documents.
The Company is not in default under, or in breach of any term or provision of,
any contract, agreement, lease, license, commitment, mortgage, indenture, bond,
note, instrument or other obligation where such default or breach would have a
material adverse effect on the Company, taken as a whole. The execution and
delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby do not and will not violate the articles of
incorporation, bylaws or other governing documents of the Company, and, except
where any such conflict, breach, default or violation would not have a material
adverse effect on the Company, taken as a whole, the execution and delivery of
this Agreement by the Company and the consummation of the transactions
contemplated hereby do not and will not (a) conflict with or result in any
breach of (or create in any party the right to accelerate, terminate, modify or
cancel) any terms, conditions or provisions of, or constitute a default under,
or require the consent of any party to, or result in the imposition of any lien
or encumbrance upon any asset or property of the Company pursuant to the terms
and conditions of, any contract to which the Company is now a party or by which
any of them or any of their respective properties, assets or rights may be bound
or affected, (b) violate any provision of any law, rule or regulation of any
administrative agency or governmental body, or any order, writ, injunction or
decree of any court, administrative agency, governmental body or arbitrator, or
(c) require any filing with, or license, permit, consent or other governmental
approval of, any federal, state or local governmental body or governmental
agency (including, without limitation, the Securities and Exchange Commission,
other than the filing of a Form D and similar state securities laws filings).
15
4.5. Compliance with Law. The Company is not in violation of
any federal, state, local or foreign law, ordinance, regulation, judgment,
decree, injunction or order of any court or other governmental entity. The
Company has procured and are currently in possession of all licenses, permits
and other governmental authorizations required by federal, state or local laws
for the operation of the business of the Company in each jurisdiction in which
the Company is currently conducting business, where the failure to possess such
licenses, permits and authorizations would have a material adverse effect on the
Company, taken as a whole, and there is no basis for revoking any such license,
permit or other authorization. Such licenses are in full force and effect and
there is no basis for any fines, penalties, or revocation of such licenses.
4.6. SEC Reports. The Company has delivered to Target and the
Selling Stockholders its Annual Report on Form 10-KSB for the year ending
December 31, 2002, its Quarterly Report on Form 10-QSB for the period ending
March 31, 2003, its Quarterly Report on Form 10-QSB for the period ending June
30, 2003, its Quarterly Report on Form 10-QSB for the period ending September
30, 2003, its Definitive Information Statement dated January 7, 2004, and its
Current Report on Form 8-K dated January 23, 2004 (collectively, the "SEC
Reports"). The information in the SEC Reports is true and correct in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.7. Absence of Material Adverse Changes. Since the date of
the latest SEC Report, there has not been any (a) material adverse change in the
business, operations, properties, condition (financial or otherwise) of the
Company, (b) damage, destruction or loss, whether covered by insurance or not,
materially and adversely affecting the business, properties or condition
(financial or otherwise) of the Company, taken as a whole, or (c) change by the
Company in accounting methods or principles used for financial reporting
purposes, except as required by a change in generally accepted accounting
principles and concurred with by the Company's independent certified public
accountants.
4.8. Taxes.
(a) The Company has filed, or will file, all Tax Returns
relating to any Tax. All such Tax Returns were, or will be, correct and complete
in all material respects. All Taxes owed by the Company have been paid when due
or adequate provision has been made therefore in the applicable financial
statements. There are no security interests or liens on any of the assets or the
stock or other securities of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
16
(b) The Company has withheld and paid all Taxes required by
law to have been withheld and paid in connection with amounts paid or owing to
any employee, commissioned agent, creditor, stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax liability
of, or attributable to, the Company (including, without limitation, any dispute
or claim with respect to any jurisdiction in which the Company does not
currently file Tax Returns) either (i) claimed or raised by any authority in
writing, or (ii) as to which the Company has knowledge.
(d) The Company has not waived or extended any statute of
limitations in respect of any assessment or collection of Taxes or any alleged,
proposed or actual deficiency in Taxes or agreed to any extension of time with
respect to the filing of any Tax Return.
(e) The Company has not filed a consent under the Code.
(f) The Company has not made any payments, nor is it
obligated to make payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code.
(g) The Company does not have any liability for the Taxes of
any person or entity other than the Company (i) under Section 1.1502-6 of the
Treasury Regulations (or any similar provision of State, local or foreign law),
(ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.
4.9. Litigation. There is no legal, administrative,
arbitration or other proceeding, suit, claim or action of any nature or
investigation, review or audit of any kind pending or threatened against or
involving the Company or its assets or properties.
4.10. Contracts and Commitments; No Default.
(a) Except as set forth in Schedule 4.10, the
Company:
(i) has no written or oral contract,
commitment, agreement or arrangement with any person which (A) requires payments
individually in excess of Twenty Five Thousand Dollars ($25,000) annually or in
excess of One Hundred Thousand Dollars ($100,000) over its term (including
without limitation periods covered by any option to extend or renew by either
party) and (B) is not terminable on thirty (30) days' or less notice without
cost or other liability;
(ii) does not pay any person or entity cash
remuneration at the annual rate (including without limitation guaranteed
bonuses) of more than Fifty Thousand ($50,000) for services rendered;
(iii) is not restricted by agreement from
carrying on its businesses or any part thereof anywhere in the world or from
competing in any line of business with any person or entity;
17
(iv) is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any person or entity;
(v) is not party to any agreement, contract,
commitment or loan to which any of its directors, officers or shareholders or
any Affiliate (or former Affiliate) thereof is a party;
(vi) is not subject to any outstanding sales
or purchase contracts, commitments or proposals which is anticipated to result
in any loss upon completion or performance thereof;
(vii) is not party to any purchase or sale
contract or agreement that calls for aggregate purchases or sales in excess over
the course of such contract or agreement of One Hundred Thousand Dollars
($100,000) or which continues for a period of more than twelve months (including
without limitation periods covered by any option to renew or extend by either
party) which is not terminable on sixty (60) days' or less notice without cost
or other Liability at or any time after the Closing; and
(viii) has no distributorship, dealer,
manufacturer's representative, franchise or similar sales contract relating to
the payment of a commission.
(b) True and complete copies (or summaries, in the case of
oral items) of all items disclosed pursuant to this Section 4.10 have been made
available to the Target and the Selling Stockholders for review. Except as set
forth in Schedule 4.10, all such items are valid and enforceable by and against
the Company in accordance with their respective terms, the Company is not in
breach, violation or default, however defined, in the performance of any of its
obligations thereunder, and no facts and circumstances exist which, whether with
the giving of due notice, lapse of time, or both, would constitute such a
breach, violation or default thereunder or thereof; and to the best knowledge of
the Company, no other parties thereto are in breach, violation or default,
however defined, thereunder or thereof, and no facts or circumstances exist
which, whether with the giving of due notice, lapse of time, or both, would
constitute such a breach, violation or default thereunder or thereof.
4.11 Brokers or Finders. The Company has not dealt with any
broker or finder in connection with the transactions contemplated hereby. The
Company has not incurred, nor shall it incur, directly or indirectly, any
liability for any brokerage or finders' fees, agent commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
4.12 Full Disclosure. No representations or warranties made by
the Company in this Agreement, in any of the exhibits or schedules attached to
this Agreement, or in the schedules attached hereto, or in any other statements
furnished or to be furnished by the Company to the Target and the Selling
Stockholders pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make any statement
contained herein or therein not misleading. Copies of all documents heretofore
or hereafter delivered or made available to the Target and the Selling
Stockholders pursuant hereto were or will be complete and accurate records of
such documents.
18
5. Deliveries at Closing.
5.1 Company's Deliveries at Closing. At the Closing, the
Company shall deliver or cause to be delivered to Target and the Selling
Stockholders all of the following:
(a) Certificates representing the Initial Shares,
registered in the names of the Selling Stockholders;
(b) A certificate of an officer of the Company, in a
form and substance reasonably acceptable to the Target, dated as of the Closing
Date, certifying that (i) all representations and warranties of the Company made
herein are true and correct as of the Closing Date; and (ii) the Company has
performed and complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by the Company on or prior to the Closing.
(c) Certified resolutions of the Board of Directors
of the Company authorizing the consummation of the transactions contemplated by
this Agreement;
(d) Written resignations of the officers of the
Company effective as of the Closing Date in form satisfactory to Target and the
Selling Stockholders;
(e) Written resignations of the directors of the
Company to be effective as of effective date of the 14F Information Statement
(as defined in Section 6.3);
(f) A form of Amendment (as defined in Section 6.1);
(g) A Form D pursuant to Regulation D promulgated
under the Securities Act, the filing of which will be effected within fifteen
(15) days of the Closing;
(h) Any notices of sales required to be filed with
the applicable federal and state agencies, which will be filed within the
applicable periods therefor;
(i) A certificate of good standing of the Company
from the State of Nevada as of the most recent practicable date; and
(j) Such other documents and instruments as shall be
reasonably necessary to effect the transactions contemplated hereby.
5.2. Selling Stockholders' and Target's Deliveries at Closing.
At the Closing, the Selling Stockholders shall deliver or cause to be delivered
to the Company all of the following:
(a) Original certificates representing the Target Shares to
be exchanged pursuant to this Agreement;
19
(b) Stock Assignments Separate from Certificate in the form
and substance satisfactory to the Company and duly executed by each of the
Selling Stockholders regarding the Target Shares;
(c) A certificate of an officer of the Target, in a form and
substance reasonably acceptable to the Company, dated as of the Closing Date,
certifying that (i) all representations and warranties of the Target made herein
are true and correct as of the Closing Date; and (ii) the Target has performed
and complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by the Target on or prior to the Closing.
(d) A certificate of Xxxxxxx X. Xxxxxxx, as a representative
of the Selling Stockholders, in a form and substance reasonably acceptable to
the Company, dated as of the Closing Date, certifying that (i) all
representations and warranties of the Selling Stockholders made herein are true
and correct as of the Closing Date; and (ii) the Selling Stockholders have
performed and complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by the Selling Stockholders on or prior to the Closing.
(e) Certified resolutions of the Board of Directors of Target
authorizing the consummation of the transactions contemplated by this Agreement;
(f) A certificate of good standing of Target from the State
of California as of the most recent practicable date; and
(g) Such other documents and instruments as shall be
reasonably necessary to effect the transactions contemplated hereby.
6. Covenants.
6.1. Amendment to Articles of Incorporation. As soon as is
reasonably practicable following the Closing, the Company shall take such action
as is necessary to obtain the Company's stockholders' approval of an amendment
(the "Amendment") to the Articles of Incorporation in the form attached hereto
as Exhibit B (i) increasing the authorized Common Stock of the Company to
250,000,000 shares; (ii) authorizing 25,000,000 shares of undesignated preferred
stock for the Company; and (iii) changing the name of the Company to "Quest
Minerals & Mining, Ltd." (collectively, the "Proposed Actions"). The Company
shall cause an information statement on Schedule 14C (an "Information
Statement") with respect to the Proposed Actions to be filed with the Securities
and Exchange Commission no later than February 16, 2004. One business day after
expiration of the twenty calendar day period provided by Rule 14c-2(b)
promulgated under the Securities Exchange Act occurs, the Company shall file the
Amendment with the Secretary of State of Utah (the actual date of such filing
being referred to herein as the "Effective Date").
6.2. Form 8-K - Change in Accountants. The Company shall
prepare a Current Report on Form 8-K and cause such Current Report to be filed
with the Securities & Exchange Commission no later than 5 days following the
date on which there is any change in accountants for the Company and in
connection therewith obtain a letter from the outgoing accountants.
20
6.3. Information Statement on Form 14F. The Company shall
cause an information statement on Form 14F (the "14F Information Statement")
with respect to the resignation of the Company's directors described in Section
5.1(e) and the replacement of those directors to be filed with the Commission on
or before February 16, 2004.
6.4. Form 8-K - Change in Control. The Company shall prepare a
Current Report on Form 8-K regarding the change in control contemplated herein
and cause such Current Report to be filed with the Securities and Exchange
Commission no later than fifteen (15) days following the Closing Date. The
Company shall prepare an amendment to Current Report on Form 8-K containing the
Target Financial Statements described in Section 3.7 herein and cause such
amendment to be filed with the Securities and Exchange Commission no later than
seventy-five (75) days following the Closing Date.
6.5. Filings; Consents; Removal of Objections. Subject to the
terms and conditions herein provided, the parties hereto will use their best
efforts to take or cause to be taken all actions and do or cause to be done all
things necessary, proper or advisable under applicable laws to consummate and
make effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation obtaining all consents of any person or
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not in
limitation of the foregoing, it is the intent of the parties to consummate the
transactions contemplated herein at the earliest practicable time, and they
respectively agree to exert their best efforts to that end, including without
limitation: (i) the removal or satisfaction, if possible, of any objections to
the validity or legality of the transactions contemplated herein; and (ii) the
satisfaction of the conditions to consummation of the transactions contemplated
hereby.
6.6. Further Assurances; Cooperation; Notification.
(a) Each party hereto will, at and after the Closing, execute
and deliver such instruments and take such other actions as the other party or
parties, as the case may be, may reasonably require in order to carry out the
intent of this Agreement. Without limiting the generality of the foregoing, at
any time after the Closing, at the request of the Company and without further
consideration, the Target and the Selling Stockholders will execute and deliver
such instruments of sale, transfer, conveyance, assignment and confirmation and
take such action as the Company may reasonably deem necessary or desirable in
order to more effectively transfer, convey and assign to the Company, and to
confirm the Company's title to, the Target Shares.
(b) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the occurrence of any event
which it reasonably believes will or may result in a failure by such party to
satisfy the conditions and covenants specified in Articles 5 and 6 hereof.
21
6.7. Public Announcements. On or after the Closing Date, the
Company and the Target shall issue a press release (the "Press Release") in a
form and substance acceptable to both parties disclosing the execution of this
Agreement. Other than the Press Release, none of the parties hereto will make
any public announcement with respect to the transactions contemplated herein
without the prior consent of the other parties, which consent will not be
unreasonably withheld or delayed; provided, however, that any of the parties
hereto may at any time make any announcements which are required by applicable
law so long as the party so required to make an announcement promptly upon
learning of such requirement notifies the other parties of such requirement and
discusses with the other parties in good faith the exact proposed wording of any
such announcement.
6.9. Tax Matters; Cooperation and Records Retention. The
Target and the Company will (i) each provide the other with such assistance as
may reasonably be requested by any of them in connection with the preparation of
any Tax Return, audit or other examination by any taxing authority or judicial
or administrative proceedings relating to liability for Taxes, (ii) each retain
and provide the other with any records or other information which may be
relevant to such Tax Return, audit or examination, proceeding or determination,
and (iii) each provide the other with any final determination of such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax Return of the other for any period. Without limiting the
generality of the foregoing, the Target and the Company will retain, until the
applicable statutes of limitations (including all extensions) have expired,
copies of all Tax Returns, supporting work schedules and other records or
information which may be relevant to such Tax Returns for all Tax periods or
portions thereof ending on or before the Closing and will not destroy or
otherwise dispose of any such records without first providing the other party
with a reasonable opportunity to review and copy the same.
6.10 Negative Covenants. In addition to any other rights
provided by law, the Company shall not, without first obtaining the affirmative
vote or written consent of Halcyon, S.A., issue any additional capital stock of
the Company or any option, warrant, right, subscription, call, contract or other
agreement to issue, purchase or acquire, or securities convertible into, shares
of capital stock or other securities of any kind representing an ownership
interest in the Company.
6.11 Board Representation. The Company shall take all
necessary steps to have its board of directors consist of five (5) directors.
Halcyon, S.A. is entitled to nominate one (1) person for election to the
Company's Board of Directors. All Selling Stockholders agree to vote their
Company Shares to elect the nominee of Halcyon, S.A. to the Board. The Company
shall not change the authorized number of directors constituting its board of
directors from five (5) at any time prior to February 9, 2005.
7. Survival and Indemnification.
7.1. Survival. The representations and warranties of each
party hereto shall survive the execution of and delivery of this Agreement and
the consummation of the transactions contemplated hereby and the same shall be
effective for a period of one (1) year from the Closing Date and no longer. The
covenants and agreements contained in this Agreement shall survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and the same shall be effective in accordance with their
respective terms.
22
7.2. Mutual Indemnification. Subject to the limitations set
forth in this Article 7, each party each agrees to indemnify and save harmless
each other party from and against any and all losses, liabilities, expenses
(including, without limitation, reasonable fees and disbursements of counsel),
claims, liens, damages or other obligations whatsoever (collectively, "Claims")
that may actually and reasonably be payable by virtue of or which may actually
and reasonably result from the inaccuracy of any of their respective
representations or the breach of any of their respective warranties, covenants
or agreements made in this Agreement or in any certificate, schedule or other
instrument delivered pursuant to this Agreement; provided, however, that no
claim for indemnity may be made hereunder if the facts giving rise to such Claim
were in writing and known to the party seeking indemnification hereunder, such
facts constituted a breach of the conditions to closing of the party seeking
indemnification and the party seeking indemnification elected in any event to
consummate the transactions contemplated by this Agreement. In addition, to the
extent that applicable insurance coverage is available and paid to the party
seeking indemnification hereunder with respect to the Claim for which
indemnification is being sought, such amounts of insurance actually paid shall
be deducted from the amount of the Claim for which indemnification may be sought
hereunder and the indemnified party may recover only the amount of the loss
actually suffered by the party to be indemnified. To the extent that such
insurance payment is received subsequent to payment by the indemnifying party
hereunder, the indemnified party shall reimburse the indemnifying party, up to
the amount previously paid by the indemnifying party, for the amount of such
insurance payment.
7.3. Procedures for Indemnification. Each party agrees to give
each other party prompt written notice of any event or assertion of which it has
knowledge concerning any such Claim and as to which it may request
indemnification hereunder, and each party will cooperate with the other in
determining the validity of any such Claim. The indemnifying party hereunder
shall have the right to participate in, or control the defense of (with counsel
reasonably satisfactory to the indemnified party), any such Claim for which
indemnification has been requested hereunder. Each party agrees not to settle or
compromise any such Claim without the prior written consent of each other party.
The giving of notice to the indemnifying party as provided herein and the
opportunity to participate or control the defense of the Claim for which
indemnification is sought shall be a prerequisite to any obligation of the
indemnifying party to indemnify the indemnified party hereunder. Following
indemnification as provided hereunder, the indemnifying party shall be
subrogated to all rights of the indemnified party against all other parties with
respect to the Claim for which indemnification has been made.
7.4. Limitations on Indemnification. Notwithstanding the
provisions of Section 7.2 hereof, no claim for indemnification by any party
hereunder may be made unless the amount of the Claim for which indemnification
is sought exceeds $25,000. The maximum aggregate liability of the Target and the
Selling Stockholders to the Company for all claims arising under the Documents
shall equal the product of (i) the number of Company Shares and (b) the average
of the per share closing price of the Common Stock for the five-day period
preceding the day on which the liability becomes payable. In no event will the
aggregate amount payable by the Company pursuant to this Article 7 exceed
$500,000.
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8. Miscellaneous.
8.1. Cumulative Remedies. Any person having any rights under
any provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages by reason of any breach of any provision of
this Agreement, and to exercise all other rights granted by law, which rights
may be exercised cumulatively and not alternatively.
8.2. Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement and any of the rights, interests or obligations
hereunder may not be assigned by any of the parties hereto. All covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective permitted successors
and assigns of the parties hereto whether so expressed or not.
8.3. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement or the other documents.
8.4. Counterparts. This Agreement may be executed in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts when taken together will constitute one and
the same agreement.
8.5. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject matter
thereof, and supersedes all prior and contemporaneous agreements and
understandings.
8.6. Expenses and Attorney Fees. The Company, Target and the
Selling Stockholders shall each pay all of their respective legal and due
diligence expenses in connection with the transactions contemplated by this
Agreement, including, without limiting the generality of the foregoing, legal
and accounting fees.
8.7. Waiver of Conditions. At any time or times during the
term hereof, the Company may waive fulfillment of any one or more of the
conditions to its obligations in whole or in part, and Target or the Selling
Stockholders may waive fulfillment of any one or more of the foregoing
conditions to their obligation, in whole or in part, by delivering to the other
party a written waiver or waivers of fulfillment thereof to the extent specified
in such written waiver or waivers. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
8.8. Law Governing. This Agreement shall be construed and
interpreted in accordance with and governed and enforced in all respects by the
laws of the State of Utah.
24
8.9 Disputed Matters. Except as otherwise provided in this
Agreement, each party hereby agrees that any suit, action or proceeding arising
out of or relating to this Agreement shall be brought in either the United
States District Court for the Central District of California or a Superior Court
of the State of California in the County of Orange, and the parties hereby
irrevocably and unconditionally submit to the jurisdiction of such courts. The
parties hereby agree to waive trial by jury in any such suit, action or
proceeding. The parties irrevocably waive and agree not to raise any objection
any of them might now or hereafter have to the bringing of any such suit, action
or proceeding in any such court including, without limitation, any objection
that the place where such court is located is an inconvenient forum. Each party
agrees that any judgment or order against that party in any such suit, action or
proceeding brought in such a court shall be conclusive and binding upon that
party and consents to any such judgment or order being recognized and enforced
in the courts of its jurisdiction of incorporation or organization or any other
courts, by registration or entry of such judgment or order, by a suit, action or
proceeding upon such judgment or order, or any other means available for
enforcement of judgments or orders.
8.10. Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and disbursements
in addition to any other relief to which such party may be entitled.
8.11. Delivery by Fax. Delivery of an executed counterpart of
the Agreement or any exhibit attached hereto by facsimile transmission shall be
equally as effective as delivery of an executed hard copy of the same. Any party
delivering an executed counterpart of this Agreement or any exhibit attached
hereto by facsimile transmission shall also deliver an executed hard copy of the
same, but the failure by such party to deliver such executed hard copy shall not
affect the validity, enforceability or binding nature effect of this Agreement
or such exhibit.
8.12. Gender Neutral Pronouns. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the referenced person, persons, entity or entities
may require.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties to this Agreement has executed
or caused this Agreement to be executed as of the date first above written.
"COMPANY"
XXXXXXX INTERNATIONAL, INC.,
a Utah corporation
By: /s/ Xxxxxxxxx Xxxxxxxxxx
------------------------------------------
Xxxxxxxxx Xxxxxxxxxx, President
"TARGET" "SELLING STOCKHOLDERS"
QUEST MINERALS & MINING, LTD. Signatures Appear on Exhibit A
a Nevada corporation
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxx, President and
Chief Executive Officer
26
EXHIBIT A
SELLING STOCKHOLDERS
Signature of Selling Stockholder Initial Shares Additional Shares
---------------------------------------- -------------------------------------- --------------------------------------
/s/ Xxxxxx Xxxxxxxxxx, Xx. 10,304,000 896,000
---------------------------------------
Xxxxxx Xxxxxxxxxxx, Xx.
/s/ Xxxxxxx X. Xxxxxxx 10,304,000 896,000
---------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxx Xxxxxx 46,000 4,000
---------------------------------------
Xxxx Xxxxxx
/s/ Xxxxxxx Xxxxx 46,000 4,000
---------------------------------------
Xxxxxxx Xxxxx
27
