EXCHANGE AGREEMENT
THIS
EXCHANGE AGREEMENT MADE
this
17th
day of
October 2005 by and among CALI
HOLDINGS, INC., formerly known as TS&B Holdings, Inc.
(“CALI”),
a Utah
corporation with offices at 0000 Xxxxxxxxx Xx., Xxxxxxx, XX 00000 AND
SOVEREIGN
EXPLORATION ASSOCIATES INTERNATIONAL, INC.
(“SEAI”),
a
Pennsylvania corporation with offices at 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0X,
Xxxxxxx, Xxxxxxxxxxxx, 00000.
WHEREAS,
SEAI
owns
100% of the capital stock of Artifact Recovery & Conservation, Inc. ("ARC")
and Sea Research, Inc. ("SRI") (jointly and severally, the “Subsidiaries”) which
are in the marine recovery and exploration business and have certain contracts
with and rights from various governments to discover, recover, and salvage
wrecks (collectively “Business”) and are desirous of expanding said Business
through an investment and exchange with CALI,
(the
“Exchange”); and
WHEREAS, CALI
is a
publicly traded investment holding company and interested in an Exchange with
SEAI;
and
WHEREAS,
the
respective representatives of CALI
and
SEAI
have had
certain discussions regarding this Exchange for the purpose of exclusively
conducting Business which the Parties now wish to reduce to writing in this
Agreement.
NOW,
THEREFORE IN CONSIDERATION OF THE MUTUAL PROMISES, REPRESENTATIONS, AND
COVENANTS CONTAINED HEREIN, AND OTHER GOOD AND VALUABLE CONSIDERATION, THE
PARTIES AGREE AS FOLLOWS:
Article
1.
Exchange.
At
Closing, CALI
shall
receive One Hundred Percent (100%) percent of the capital stock or units in
SEAI
in
exchange for Ninety Percent (90%) of the capital stock in CALI;
based
on the following outline (the “Exchange”). The Parties agree that the matters
set forth below are required to effectuate the Exchange:
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a)
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The
Parties understand and agree that there is a current Amended Reg.
E.
Offering outstanding for CALI., and upon completion of the current
Offering, but in no event later than April 1, 2006, CALI shall reverse
split (“RS”) the common shares so that SEAI
has 90% ownership of CALI through the common shares or the Class
A and
Class C Preferred Shares. The Parties understand that the exact amount
of
Class A and Class C Preferred shares to be issued to SEAI for the
90%
control depends on the calculation of the reverse split in this provision
Art. 1(a).
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b)
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It
is understood by the Parties that CALI
currently has Executive Management contracts in effect for Xxxxx
X.
Xxxxxxx and Xxxxxxx Xxxxxxxxx (jointly “Management”)
and a Consulting contract in place for KMA Capital Partners Ltd.
(KMA).
As part of the Closing of this Agreement, said Executive Management
contracts and KMA
consulting contract will be extinguished pursuant to the termination
agreement in Exhibit A. Effective as of the Closing, CALI
shall
terminate or assign its building and equipment leases of the Orlando
office.
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CALI
Initials______
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SEAI
Initials _____
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SEAI
Initials_____
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1
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c)
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A
provision of the termination agreement in Exhibit A will be that
in
consideration for the termination of the CALI
management
and the KMA Contracts,
SEAI
shall pay to “Management”
and KMA
the sum of Six hundred thousand Dollars and no/100 $600,000) (“Sum”).
Three hundred thousand and no/100 dollars ($300,000) shall be payable
by
wire transfer on October 17, 2005 and the balance of $300,000 payable
by
wire transfer on or before March 30, 2006, evidenced by a
Note.
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d)
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Simultaneous
with the Closing of this Agreement, CALI
shall enter into an agreement with SEAI
that,
at a minimum, results in twenty percent (20%) of the net recovery
from the
ship wrecks identified in the SEAI
governmental contracts, licenses, permits or finder’s fees to be
distributed directly to SEAI.
A
draft of said Revenue Agreement is attached hereto as Exhibit
B.
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e)
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Currently
as a 40 Act company, CALI
has an independent Board of Directors with six (6) total members;
four (4)
of the six (6) members are independent and management comprises the
two
non-independent members. Upon closing, the board shall tender their
resignations within 30 days in substantially the same form as Exhibit
C.
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f)
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The
Parties acknowledge and agree that CALI
has entered into a $500,000 financing agreement with SEAI.
A
copy of the Note and Loan Agreement for that financing are attached
hereto
as Exhibit D. In the event that this Agreement does not close,
CALI
shall assign the Note and Loan Agreement to SEAI.
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g)
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At
the time of closing, CALI
shall have divested all its portfolio companies in existence at the
time
of execution of this Agreement, with the exception of Gulf Coast
Records
LLC (GCR), which shall be divested by CALI
upon the filing of a Form SB-2 for GCR. A Form SB-2 is being prepared
for
GCR, and as part of the Closing of this Agreement, CALI
shall provide to SEAI
a
full Release from any and all liability from GCR or its members,
in
substantially the form attached hereto as Exhibit E. All, CALI
portfolio companies (active or inactive) are listed in CALI’s
Form 10K of June 30, 2005. The attached Xxxx of Sale and related
documents
in Exhibit F shall divest CALI of all said portfolio
companies.
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h)
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Subsequent
to the execution of this Agreement and prior to Closing, SEAI
shall approve all CALI
Press Releases.
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Article
2.
Closing;
Ongoing Due Diligence & Contingency;.
The
Closing shall take place at the offices of CALI
on
October 17, 2005, or at such other time and place as the Parties mutually agree
upon (the “Closing”). At Closing, the Parties shall deliver all information and
documents necessary or reasonably required by the Parties to fulfill their
respective obligations hereunder. In the event any information or documents
are
lacking at the Closing, the Parties shall close and supply said information
and
documents, not more than ten (10) days after closing.
The
Parties agree that between the date of execution of this Agreement and the
Closing they shall conduct such further due diligence as they deem in their
sole
discretion to be reasonably necessary for Closing. In the event either party
refuses or fails to close as a result of said ongoing due diligence, then this
Agreement shall be null and void and without any liability whatsoever to either
Party.
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CALI
Initials______
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SEAI
Initials _____
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SEAI
Initials_____
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2
Further,
in the event the Closing does not occur by October 17, 2005, this Agreement
shall be null and void without further force and effect and without liability
to
any party and without Notice to either party and simply shall occur by the
passage of time.
Article
3.
Continuing
Warranties of SEAI.
SEAI
hereby
agrees, warrants and represents to CALI:
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a)
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That
SEAI
owns 100% of capital stock of its
Subsidiaries.
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b)
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That
the total amount of all issued and outstanding stock or units of
SEAI
at
the date of this Agreement is One Million (1,000,000) units. Further,
SEAI,
and its Subsidiaries are duly incorporated and in good standing as
corporations under the laws of the jurisdictions of their
incorporation.
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c)
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There
is no preferred stock or units of SEAI
or
the Subsidiaries issued or outstanding or authorized. Further, there
are
no warrants, options, convertible stock, bonds, derivatives, debentures,
or other similar financial obligations or instruments of SEAI
or
the Subsidiaries, authorized.
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d)
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There
is no accrued, unpaid or deferred, compensation, benefits, notes,
or loans
due owners, officers, members, employees, or directors of SEAI
or
its Subsidiaries as of Closing, except as set forth on the financial
statements.
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e)
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It
is understood and acknowledged by the Parties that SEAI
was formed in October 2005 and therefore does not have any balance
sheet,
related consolidated statements of profit and loss and cash flows
for any
applicable year (the “SEAI Financial Statements”). In addition, attached
hereto and made a part hereof as Exhibit G, is a complete and accurate
list of any and all contracts or commitments (written or oral) of
the
Subsidiaries in excess of Five Thousand dollars ($5,000.00) USD in
the
aggregate.
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f)
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that
SEAI
has good and marketable title to its Assets (subject to liabilities)
with
value of at least the value of the assets divested as set forth in
Ex J
Form 10K..
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g)
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That
SEAI
or
its Subsidiaries have all right, title and interest in and to, any
and all
Intellectual Property (IP) related to SEAI
and the subsidiaries or the treasure hunting, marine exploration,
and
archeological businesses in any format whatsoever, including but
not
limited to all publishing and media rights, images, websites, digital
images, books, film, movies, television, scripts, and writings of
any
kind, and displays, and merchandise any and all sales, marketing
&
distribution rights and revenue of any kind and nature; EXCEPT the
personal story of Xxxxx X. Xxxxxxxxxxx with regard to its Subsidiaries.
The Owners of SEAI
shall execute a Consent to this Agreement and Sale and further said
Consent shall contain the transfer and conveyance of such IP rights
to the
Subsidiaries. A copy of said Consent is attached hereto as Exhibit
H.
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CALI
Initials______
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SEAI
Initials _____
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SEAI
Initials_____
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3
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h)
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Further,
the rights conveyed hereby through the transfer of the capital stock
or
units of SEAI
or
the Subsidiaries include but are not limited to the rights and permits
to
the wrecks.
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i)
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There
are no claims, demands, tax proceedings, other proceedings, delinquencies,
administrative proceedings, defaults, obligations, suits, threats
of suit,
seizure, or foreclosure, including but not limited to defaults under
any
vendor agreements or leases against the Subsidiaries except as set
forth
on Exhibit I. Further, the Subsidiaries are duly licensed or contracted
with the Kingdom of Spain or its governmental subdivisions to conduct
Business.
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j)
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The
Subsidiaries shall from and after the date of this Agreement maintain
in
good standing at all times without interruption any governmental
licenses
or contracts required for Business.
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Article
4.
Continuing
Warranties of CALI.
CALI
hereby
agrees, warrants and represents to SEAI:
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a)
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That
the total amount of all issued and outstanding stock or units of
CALI
at
the date of this Agreement is approximately Two Billion Five Hundred
Million (2,000,000,000) common shares. Further, CALI
is
duly incorporated and in good standing as a corporation under the
laws of
the jurisdiction of its
incorporation.
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b)
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Other
than Class A and Class C preferred stock, CALI
has no preferred stock issued or outstanding or authorized. Presently,
there are Three Million Seven Hundred Twenty Five Thousand (3,725,000)
shares of Class A preferred stock issued and outstanding and Ten
Million
(10,000,000.00) shares of
Class C preferred stock issued and outstanding. Further, there are
no
warrants, options, convertible stock, bonds, derivatives, debentures,
or
other similar financial obligations or instruments of CALI,
authorized, except as set forth on the financial
statements.
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c)
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There
is no accrued, unpaid or deferred, compensation, benefits, notes,
or loans
due officers, employees, or directors as of the Closing, except as
set
forth on the financial statements, and except the current payroll
due as
of the Closing.
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d)
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The
balance sheet and financial statements of CALI,
as
set forth in Exhibit J, the Form 10K for June 30, 2005, are complete
and
accurately reflect the financial condition of the CALI
and there are no material adverse changes in the business of the
CALI
since the date of said statements that has not already been disclosed
in
writing. In addition, attached hereto and made a part hereof as Exhibit
K,
is a complete and accurate list of any and all contracts or commitments
notes payable(written or oral) of CALI
in
excess of Five Thousand dollars ($5,000.00) USD in the aggregate,
not
otherwise set forth on said Form 10K (Exhibit
J).
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CALI
Initials______
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SEAI
Initials _____
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SEAI
Initials_____
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4
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e)
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That
CALI
has good and marketable title to assets set forth on said balance
sheet
and financial statements, and that the assets are free and clear
of all
liens, liabilities encumbrances and charges, except those liabilities
set
forth on the financial statements.
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f)
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There
are no claims, demands, tax proceedings, other proceedings, delinquencies,
administrative proceedings, defaults, obligations, suits, threats
of suit,
seizure, or foreclosure, including but not limited to defaults under
any
vendor agreements or leases against CALI
not otherwise set forth on Exhibit J (Form
10K).
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g)
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That
the CALI
Board has passed all necessary resolutions to approve and effectuate
this
Agreement, and that shareholders of CALI have approved such resolutions
unless By-laws do not require shareholder approval The Board resolutions
and documents reflecting the shareholders’ vote are is attached hereto as
Exhibit L.
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h)
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That
CALI
has taken or will take the actions required under Art. 1(g) of this
Agreement to file the Form SB-2 for GCR and that CALI
will, as soon as practicable after filing such form, divest CALI
of
GCR.
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Article
5.
Indemnification
and Hold Harmless.
SEAI
shall
indemnify, defend and hold harmless CALI
against
any and all undisclosed liabilities of SEAI
and its
Subsidiaries not set forth in this Agreement or the Exhibits provided herewith
for one (1) year from the date of Closing. CALI
Management shall indemnify and hold harmless SEAI
and its
Subsidiaries for one (1) year from the date of Closing from any and liability
from portfolio companies divested under Art. 1(g), and as security for this
indemnity, Management shall collateralize its equity position in CALI
as
against this indemnification. These indemnifications, duties to defend and
hold
harmless shall survive the Closing for a period of one (1) year.
Article
6.
Default
and Cure.
In the
event a Party to this Agreement, fails or refuses to perform its respective
obligations under this Agreement in a timely manner, then one Party may give
Notice hereunder to the defaulting Party of default hereunder (“Default
Notice”). Said Default Notice shall set forth with sufficient specificity and
particularity the details of said default. The Party to whom said Default Notice
is given shall have Thirty (30) days from the date of the delivery of the
Default Notice to either (a) cure the deficiencies set forth in the Default
Notice or (b) give written Reply to the Notice setting forth with particularity
the reasons for the nonexistence of default or inability to cure the default(s).
In the event the default(s) is not cured and the Parties cannot resolve their
dispute through negotiations within Thirty (30) days of the Reply, then the
Parties shall submit the dispute to binding arbitration under this
Agreement.
Article
7.
Term,
Termination and Effective Date.
The
effective date of this Agreement shall be from and after execution. This
Agreement shall remain in full force and effect, unless terminated by mutual
agreement of the Parties or terminated by the passage of time under Article
2.
Article
8.
Legal
Counsel.
Both
Parties hereby acknowledge and agree they had full opportunity to seek legal
counsel of their own choosing prior to execution of this Agreement.
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CALI
Initials______
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SEAI
Initials _____
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SEAI
Initials_____
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5
Article
9.
Securities
Laws and Regulation and Taxation.
Both
Parties hereby agree and acknowledge that the transfer of securities pursuant
to
this Agreement shall constitute an exempt isolated transaction and the
securities received in such transfer and exchange do not have to be registered
under federal or State securities laws and regulations. Further, it is the
express intent of the Parties that this Agreement, and the transactions
contemplated by it, be treated as tax free to the extent possible under the
IRS
Code of 1986 (and regulations thereto).
The
Parties agree that certificates evidencing Stock acquired hereunder, constitutes
“restricted stock” as that term is defined under Rule 144 promulgated under the
Securities and Exchange Act of 1933, as amended (“1933 Act”), and shall bear the
a Legend substantially similar to the following:
THESE
SECURITIES ARE NOT REGISTERED UNDER THE 1933 ACT OR ANY STATE SECURITIES ACT.
THEY MAY NOT BE TRANSFERRED FOR VALUE UNLESS AND UNTIL THEY ARE REGISTERED
UNDER
ALL SUCH APPLICABLE ACTS OR SUCH TRANSFER SATISFIES APPLICABLE REGISTRATION
EXEMPTIONS THEREUNDER THE COMPANY WILL NOT TRANSFER THESE SECURITIES ON ITS
BOOKS AND RECORDS WITHOUT AN OPINION OF COUNSEL, SATISFACTORY IN FORM AND
SUBSTANCE TO COUNSEL FOR THE COMPANY, THAT SUCH TRANSFER DOES NOT VIOLATE THE
1933 ACT OR ANY STATE SECURITIES LAWS.
Further,
in the event that CALI
determines that an Informational Statement is required or desired in connection
with this Exchange, then said Statement shall be filed not more than ninety
(90)
days after Closing.
Article
10.
Brokers
and Indemnity.
Both
Parties hereby acknowledge and agree that there are no brokers, agents, or
finders entitled to compensation or commission upon the Closing of this
Agreement, except Xxx Xxxxxxx. Subsequent to the Closing Xxx Xxxxxxx shall
be
paid $12,000 in free trading stock of CALI.
SEAI
Inc.
shall indemnify and hold harmless CALI
for any
and all liability against a claim arising from a broker or agent.
Article
11.
Costs.
The
Parties shall bear their own legal and other costs in connection with the making
and Closing of this Agreement.
Article
12.
STANDARD
TERMS and CONDITIONS and EXHIBITS.
THE
PARTIES AGREE EXHIBIT M ATTACHED HERETO ON STANDARD TERMS AND CONDITIONS ARE
DEEMED PART OF THIS AGREEMENT FOR ALL PURPOSES AS THOUGH FULLY SET FORTH HEREIN.
FURTHER, THE PARTIES AGREE AND ACKNOWLEDGE THAT ANY OTHER EXHIBITS, ATTACHMENTS,
OR SCHEDULES THAT ARE MADE A PART OF THIS AGREEMENT OR PROVIDED IN CONNECTION
WITH THIS AGREEMENT ARE DEEMED TO BE A PART OF THIS AGREEMENT FOR ALL
PURPOSES.
IN
WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS EXCHANGE AGREEMENT TO BE EXECUTED
IN THEIR NAMES AND/OR BY AND THROUGH THEIR PROPERLY AND DULY AUTHORIZED
REPRESENTATIVES ON THE DATE FIRST ABOVE WRITTEN.
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CALI
Initials______
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SEAI
Initials _____
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SEAI
Initials_____
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6
SEAI:
Sovereign
Exploration Associates International, Inc. as 100% owner of ARC and
SRI
By:
______________________________
Xxxxxx
Xxxx, duly authorized
Chief
Executive Officer
CALI:
CALI Holdings,
Inc.
By:
_________________________
Xxxxx
X.
Xxxxxxx
President
CONSENTS
The
undersigned hereby Consent to the terms and conditions of the above Agreement
as
such provisions apply to the undersigned.
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Management
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Xxxxx
X. Xxxxxxx
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Xxxxxxx
Xxxxxxxxx
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KMA
Capital Partners, Ltd.
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Xxxxx
X. Xxxxxxxxx
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Its
General Partner
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CALI
Initials______
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SEAI
Initials _____
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SEAI
Initials_____
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7
