AGREEMENT
THIS AGREEMENT, (the "Agreement") made and entered into as of the first
day of October, 1999, by and between EMPIRIC ENERGY, INC., a Delaware
corporation having principal offices at 00000 Xxxxx Xxxxx, Xxxxx 000, Xxxxxx,
Xxxxx 00000-0000 ("Empiric"), and DAEDALUS BUILDING SYSTEMS, INC., a Delaware
corporation, having principal offices at 0000 Xxxxxxxx Xxxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000-0000 ("Daedalus").
WHEREAS, Empiric is a publicly held oil and gas exploration and
production company, having the authorized and presently issued and outstanding
capital structure as described and set forth in Exhibit "A" hereto; and
WHEREAS, the common stock of Empiric is registered under Section 12(b)
of the United States Securities and Exchange Act of 1934 (the "1934 Act") and is
currently traded in the Over-the-Counter Bulletin Board under the symbol "EMPE";
and
WHEREAS, Daedalus is a newly formed privately held entity which will
engage in the production, sale and assembly of manufactured dwelling units; and
WHEREAS, subject to the terms, conditions and provisions of this
Agreement, Empiric and Daedalus desire to enter into arrangements whereby, among
other things: (i) Daedalus will cause to be authorized and issued to parties
specified herein, certain of its capital stock and other securities, including
the issuance to Empiric of shares of Daedalus common stock and Daedalus Series
"A" common stock warrants; (ii) Empiric will designate, issue and deliver to
Daedalus shares of Empiric's Series "B" convertible preferred stock and certain
of Empiric's Series "F" common stock warrants; (iii) Empiric will cause a
portion of the shares of Daedalus common stock so received from Daedalus to be
distributed to the holders of Empiric's common stock; (iv) Daedalus will cause
its related company, The Daedalus Project, Inc., to issue and deliver to Empiric
certain shares of the common stock of The Daedalus Project, Inc.; and, (v) the
parties will cooperate fully in the preparation, filing and efforts to have
declared effective one or more registration statements with the United States
Securities and Exchange Commission (the "SEC") and all applicable State
securities regulatory authorities to enable the lawful issuance and distribution
of a portion of the Daedalus common stock to holders of common stock of Empiric
in compliance with the United States Securities Act of 1933 (the "1933 Act") and
applicable State regulatory authorities;
NOW THEREFORE, for and in consideration of the mutual agreements of the
parties, and upon and subject to the terms, conditions and provisions hereof,
all as herein set forth, it is agreed as follows:
1. Daedalus Corporate Action. As indicated in Exhibit "B", the capital
structure of Daedalus as set forth in its Certificate of Incorporation provides
for authorized capital stock consisting of 30,000,000 shares of common stock at
$0.01 par value per share and 3,000,000 shares of preferred stock, $1.00 par
value per share. Except for 250,000 shares of preferred stock designated as the
Series "A", and 1,000,000 shares of preferred stock designated as the Series "B"
preferred stock of Daedalus, both of which series have the terms, rights and
preferences set forth in Exhibit B, the remaining 1,750,000 shares of authorized
preferred stock of Daedalus shall be issuable in one or more other series and
shall bear the terms, rights, preferences and other features as shall be
determined and designated from time to time by the board of directors of
Daedalus.
As of October 1, 1999 and until Closing of this Agreement, Daedalus
will have issued and outstanding a total of approximately 8,500,000 shares of
common stock, 250,000 shares of its Series "A" Preferred Stock, and 1,000,000
shares of its Series "B" Preferred Stock.
2. Issuance of Securities to Empiric. Daedalus shall issue and deliver
or cause to be issued and delivered, to Empiric at the "Closing", hereinafter
defined, the following Daedalus securities:
A. 1,500,000 shares of Daedalus common stock having the features
described in Exhibit "B" hereto (the "Daedalus Common Stock");
B. 750,000 Series "A" Daedalus common stock warrants having the
features set forth in Exhibit "B" hereto (the "Daedalus
Warrants").
C. 250,000 shares of common stock of THE DAEDALUS PROJECT, INC.,
no par value.
3. Issuance of Securities to Daedalus. Empiric shall issue and deliver
to Daedalus at the "Closing" the following Empiric Securities:
A. $1,500,000 principal amount of Empiric Energy, Inc.
convertible preferred securities, with a conversion price of
$2.00 per share, convertible into 750,000 Common shares,
preferences and other features described and set forth in
Exhibit C hereto (the "Empiric Series "B" Stock"); and
B. 750,000 Series "F" Warrants to purchase shares of common stock
of Empiric, such warrants having the features set forth in
Exhibit D hereto (the "Empiric Series "F" Warrants").
C. If Empiric reprices any of its previously issued warrants or
issues new warrants at a purchase price less than $2.00 per
share, then the warrants issued to Daedalus shall be repriced
based upon a formula that decreases the price of Daedalus
warrants by the greater of the following:
(1) the same percentage of the decrease in the Empiric's
warrants, or
(2) the price of the newly issued warrants.
4. Empiric's Distribution of Daedalus Common Stock. Contemporaneously
with the "Closing", Empiric shall cause a total of at least 1,000,000 shares of
the Daedalus Common Stock it receives from Daedalus to be issued to holders of
common stock of Empiric in proportion to the number of shares of common stock of
Empiric then held by each of them bears to the total number of common shares of
Empiric then issued and outstanding. The total number of such shares
outstanding, and the number of shares held by each holder shall both be
determined as of a record date on or near the date of Closing which will be
established by the Board of Directors of Empiric.
To facilitate the distribution of at least 1,000,000 shares of Daedalus
Common Stock to the holders of common stock of Empiric, Empiric shall provide to
Daedalus a listing of names, addresses, social security or federal tax
identification numbers, and number of shares of Daedalus Common Stock to be
distributed to each holder of common stock of Empiric, and Daedalus shall issue
such total of at least 1,000,000 shares to the parties and in the appropriate
amounts as set forth in such listing. Thereupon, certificates representing such
Daedalus Common Stock shall be delivered to Empiric at the Closing in the form
of the remaining shares to and in the name of Empiric, which shares shall be
retained and held by Empiric as its sole property, and the remaining 1,000,000
shares to be distributed to Empiric common stock holders in accordance with such
listing, and Empiric will, promptly following the Closing, transmit certificates
representing such shares to the proper recipients and in the proper amounts in
accordance with the above.
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5. Daedalus Series "A" Convertible Preferred Stock. As of the date of
this Agreement Daedalus has created and designated a Series "A" Convertible
Preferred Stock consisting of a total of 250,000 shares of Preferred Stock
having the terms, rights and preferences set forth in Exhibit B hereto (the
"Daedalus Series A Preferred Stock"). The Daedalus Series "A" Preferred Stock
shall be issued to the persons or parties, and in the amounts, as set forth in
Exhibit E hereto.
6. Daedalus has Series "B" Convertible Preferred Stock. As of the date
of this Agreement Daedalus has created and designated a Series "B" Convertible
Preferred Stock consisting of a total of 1,000,000 shares of Preferred Stock of
Daedalus having the terms, rights and preferences set forth in Exhibit B hereto
(the "Daedalus Series "B" Preferred Stock"). The Daedalus Series "B" Preferred
Stock has been issued to the persons or parties, and in the amounts, as set
forth in Exhibit F hereto.
7. Registration. Promptly following the execution of this Agreement
both Empiric and Daedalus will undertake, and thereafter pursue with all
diligence, and in a fully cooperative fashion all efforts and steps necessary
for the preparation and filing with the SEC, and all applicable state securities
bodies in those states where legally required, one or more registration
statements (and/or, in the case of state compliance, applications, notifications
or other appropriate action) to enable the lawful distribution of at least
1,000,000 Daedalus Common Shares to holders of Empiric common stock as herein
provided. Such efforts and steps will include, without limitation, Daedalus
promptly causing independent certified public accountants selected and engaged
by it, to perform such audit and other work necessary to provide certified
financial statements with regard to the financial condition, operations, affairs
and otherwise of Daedalus as may be necessary for inclusion in or in support of
such registration process.
Empiric shall prepare and provide all financial and other information,
statements or data concerning Empiric and its condition, properties, management,
operations or otherwise as may be reasonably required in connection with or in
furtherance of such registration process.
In addition to registration of such at least 1,000,000 shares of
Daedalus common stock to be distributed to holders of Empiric common stock, such
registration statement to be filed with the SEC will also seek to register for
subsequent sale by Daedalus (i.e., "shelf registration") of up to an additional
2,000,000 shares of common stock of Daedalus.
8. Transaction/Registration Costs. All costs and expenses relating or
attendant to the registration process outlined in Section 7 hereof, including,
without limitation, the cost of performing the audit work with respect to
Daedalus as referred to in this Agreement, all legal fees and expenses incurred
in connection with the preparation, filing, handling and processing with the SEC
of the registration statement and all amendments and exhibits thereto and the
response to all comments or question of the SEC related thereto, all costs of
printing of the registration statement and amendments and exhibits thereto, all
costs of printing preliminary and final prospectuses and stock certificates
evidencing the 1,500,000 shares of Daedalus common stock, all costs associated
with the listing of the Daedalus common stock with NASDAQ or any other exchange
upon which the parties mutually agree to apply for listing, and (except as
hereinafter provided) all other reasonable costs and expenses necessarily
incurred in connection with such registration process or the carrying out of the
terms, conditions and provisions of this Agreement shall be borne and paid by
Daedalus.
Notwithstanding the preceding paragraph Empiric shall bear and pay: (i)
all costs directly related to the providing of information or data concerning
Empiric as may be required in connection with such registration process; (ii)
one-half of the attorney's fees and expenses relating to the preparation and
execution of this Agreement, the remainder of which fees and expenses shall be
borne and paid by Daedalus; and (iii) the cost of providing the listing of
holders of Empiric common stock to whom the Daedalus common stock is to be
distributed, and the expense of mailing certificates therefore to such holders.
9. Daedalus Common Stock Listing. As soon as practicable following the
filing of the registration statement, Empiric and Daedalus shall make
application for listing and acceptance for trading of the Daedalus common stock
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with NASDAQ National Market System or next highest NASDAQ category for which
such stock qualifies for trading. Additionally, the parties shall consider, and
subject to mutual agreement shall apply for, listing of such securities on the
Boston or other regional stock exchange. Upon the filing of such listing
application(s), the parties shall each, in cooperative fashion, exert their best
efforts to obtain approval thereof.
10. Post Closing Agreements. At all times following the Closing of this
Agreement, Empiric and Daedalus each mutually covenant and agree with and for
the benefit of the other, to prepare and file on a timely basis, all
post-effective amendments, registrations and reports with the SEC and NASDAQ or
any stock exchange upon which any of the securities of such party may be listed
or traded from time to time, that may be required of such party in compliance
with applicable provisions of the 1933 Act, the 1934 Act, or any such exchange
in order to maintain the respective status of each of them and their securities
in good standing and in full compliance with such Acts and all requirements,
rules and regulations of the SEC thereunder and all rules or requirements of
such exchange(s).
11. Closing. The closing and consummation of this Agreement shall take
place at the offices of Empiric at 00000 Xxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000, beginning at 10:00 am on the third (3rd) business day following the date
upon which the registration statement provided for in Section 7 is declared
effective by the SEC, and all of the other conditions of Closing provided for in
Sections 17 and 18 hereof have been fully met and satisfied (except to the
extent waived as provided for in such Sections), or at such later time or such
other location as the parties may mutually agree. At the Closing:
A. Daedalus shall deliver to Empiric duly executed:
(1) stock certificates representing the 1,500,000 shares
of Daedalus Common Stock; and
(2) certificates representing the 750,000 Daedalus Series
"A" Warrants; and
(3) stock certificates representing the 250,000 shares of
common stock of The Daedalus Project, Inc.
B. Empiric shall deliver to Daedalus duly executed:
(1) stock certificates representing the $1,500,000
principal amount of Empiric convertible preferred
securities, with a conversion price of $2.00 per
share, convertible into a total amount of 750,000
Common shares (Empiric Series "B" Stock); and
(2) certificates representing the 750,000 Empiric Series
"F" Warrants.
In addition to the foregoing, Empiric and Daedalus shall each execute and
deliver to the other, such certificates, resolutions or other written assurances
provided for in this Agreement or reasonably requested by either of the parties
to evidence and confirm the corporate authority of the other party with regard
to the due authorization, execution and delivery by the other party of the
foregoing securities or the performance by such other party of any act with
respect to the carrying out of such parties duties and responsibilities as set
forth in this Agreement.
12. Representations and Warranties of Empiric. Empiric represents and
warrants to Daedalus that:
12.1 Organization, Good Standing and Qualification. Empiric is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, its state of incorporation, has all requisite
corporate power and authority to carry on its business as now conducted, and is
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duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which the failure so to quality would have a
material adverse effect on its business or properties, considered in the
aggregate.
12.2 Capitalization. The authorized and presently issued and
outstanding capital of Empiric is as reflected in Exhibit "A" hereto, all of
which has been duly authorized and, to the extent noted and set forth in Exhibit
"A", all of such capital stock designated as having been issued and presently
outstanding, has been duly issued, is presently outstanding and is fully paid
and non-assessable.
12.3 Subsidiaries. Empiric does not presently own and control any
substantial percentage of the issued and outstanding shares of stock of any
other corporation.
12.4 Authorization. All corporate action on the part of Empiric, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all obligations of Empiric
hereunder and the authorization, issuance (or reservation for issuance) and
delivery of the Empiric Series "B" Stock and the Empiric Series "F" Warrants to
be issued hereunder, and the Common Stock issuable upon conversion of the
Empiric Series "B" Stock and the common stock issuable upon exercise of the
Empiric Series "F" Warrants have been taken or will be taken prior to the
Closing. This Agreement constitutes the valid and legally binding obligation of
Empiric, enforceable in accordance with its terms except as such enforcement may
be limited or affected by the availability of equitable remedies such as
specific performance, and by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the enforcement of creditors'
rights, including court decisions and general equity principles relating
thereto.
12.5 Valid Issuance of Preferred and Common Stock and Warrants.
(a) The Empiric Series "B" Stock and the Empiric Series "F"
Warrants which are to be issued hereunder to Daedalus, when issued and delivered
in accordance with the terms hereof and for the consideration expressed herein,
will be duly and validly issued, fully paid and nonassessable and, based in part
upon the representations of Daedalus in this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The common
stock issuable upon conversion of the Empiric Series "B" Stock and the common
stock issuable pursuant to exercise of the Empiric Series "F" Warrants has been
duly and validly reserved for issuance and, when issued in accordance with the
terms of the Certificate of Incorporation and the agreements of Empiric covering
the issuance of such securities, and, in the case of common stock issued upon
exercise of the warrants, when the applicable purchase price therefore is
received by Empiric, will be duly and validly issued, fully paid and
nonassessable.
(b) The shares of common stock and Series "A" preferred stock
of Empiric and the Series "A", Series "B", Series "C", Series "D" and Series "E"
Warrants of Empiric outstanding on the date of execution of this Agreement are
all duly and validly authorized and issued, fully paid and nonassessable, and
were issued in compliance with all applicable federal and state securities laws.
12.6 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against Empiric which questions the validity of
this Agreement or the right of Empiric to enter into it, or to consummate the
transactions contemplated hereby, or which might result, either individually or
in the aggregate, in any material adverse changes individually or in the
aggregate, in the assets, condition, affairs or prospects of Empiric, taken as a
whole, financially or otherwise, or any change in the current equity ownership
of Empiric, nor is Empiric aware that there is any basis for the foregoing.
Empiric is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality.
12.7 Compliance With Other Instruments. To the best knowledge of the
officers of Empiric, Empiric is not in violation or default of any provisions of
its Certificate of Incorporation or Bylaws or of any judgment, order, writ, or
decree, or any material instrument or contract to which it is a party or by
which it is bound or, to their knowledge, of any provision of federal or state
statute, rule or regulation applicable to Empiric or its assets or properties.
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The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not result in any such violation or
be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, judgment, order,
writ, or decree, or any such material instrument or contract, or an event which
results in the creation of any lien, charge or encumbrance upon any assets of
Empiric.
12.8 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby, and
except as disclosed in Empiric's Financial Statements (as defined in Section
12.10 hereof) there are no material agreements, understandings or proposed
transactions between Empiric and any of its officers, directors or affiliates.
(b) Except as disclosed in the Financial Statements (as
defined in Section 12.10 hereof), Empiric is not a party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Certificate of Incorporation or By-laws which materially and adversely affect
its business as now conducted.
12.9 Corporate Documents. Except for amendments necessary to satisfy
Empiric's obligations pursuant to this Agreement or representations and
warranties or conditions contained herein, the Certificate of Incorporation and
By-laws of the Company are in the form previously provided to Daedalus.
12.10 Financial Statements. Empiric has delivered to Daedalus its
audited financial statements as of September 30, 1999, including limited
explanatory notes to the financial statements (collectively, the "Financial
Statements"). The Financial Statements accurately set out and describe the
financial condition and operating results of Empiric as of the dates and for the
periods indicated therein, subject to normal year-end audit adjustments. Except
as set forth in the Financial Statements, Empiric has no liabilities, contingent
or otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to the date of such unaudited interim financial statements;
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements; which, individually and in the
aggregate, are not material to the financial condition or operating results of
Empiric.
12.11 Changes. Since the date of such Financial Statements, except for
the transactions contemplated hereby, there has not been:
(a) any material change in the assets, liabilities, financial
condition or operating results of Empiric from those reflected in the Financial
Statements, except changes in the ordinary course of business, which have not
been, in the aggregate, materially adverse;
(b) any material damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of Empiric (as
such business is presently conducted);
(c) any waiver by Empiric of a material valuable right or debt
owed to it;
(d) any declaration, authorization or payment of any
dividend or other distribution of the assets of Empiric, or any agreement to
declare, authorize or pay any such dividend or distribution;
(e) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by Empiric, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company taken as a
whole, as such business is presently conducted;
(f) any material change in any compensation arrangement or
agreement with any employee;
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(g) to Empiric's knowledge, any other event or condition of
any character which might materially adversely affect the assets, properties,
financial condition, operating results or business of Empiric taken as a whole
(as such business is presently conducted).
12.12 Employee Benefit Plans. Empiric does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
12.13 Labor Agreements and Actions. Empiric is not bound by or subject
to (and none of its respective assets or properties are bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
Empiric, has sought to represent any of the employees, representatives or agents
of Empiric. There is no strike or other labor dispute involving Empiric pending,
or to the knowledge of Empiric threatened, which could have a material diverse
effect on the assets, properties, financial condition, operating results, or
business of Empiric (as such business is presently conducted), nor is Empiric
aware of any labor organization activity involving its employees.
13. Representations and Warranties of Daedalus. Daedalus represents and
warrants to Empiric that:
13.1 License Agreement. Daedalus, as licensee, holds a license (the
"License Agreement") from The Daedalus Project, Inc., related to the use of the
Daedalus Building System(tm) for the production, manufacture, assembly, sale,
use and installation of dwelling units, utilizing any patents, techniques,
methods, technology and know-how developed by The Daedalus Project, Inc. The
specific terms, conditions and provisions of such license are set forth in a
copy the License Agreement, which has been provided to Empiric.
The License Agreement is presently, and upon Closing will be, paid
current, in full force and effect and in good standing in accordance with all
terms, conditions and provisions thereof as heretofore provided to Empiric.
13.2 Peruvian Contract. Daedalus has entered into contract to sell and
provide a minimum of 36,000 basic structural units, or other structures, of the
Daedalus Building Systems(tm), to the World Business Investors Group ("foreign
buyer"), which contract (the "Peruvian Contract") will produce gross revenues to
Daedalus of at least U.S. $67,500,000. Payments to Daedalus for its performance
in accordance with the terms of the Peruvian Contract are anticipated from the
Export-Import Bank of the United States and will be contingent upon the
financial strength of the foreign buyer, its supporting financial team, and its
supporting contracts with agencies of the Peruvian government or private sector
entities. Copies of the Peruvian Contract and related statements of funding
interest, provided to Empiric, are presently, and upon Closing will be, in full
force and in good standing in accordance with all terms, conditions and
provisions thereof as heretofore provided to Empiric.
13.3 Organizations, Good Standing and Qualifications. Daedalus is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, its state of incorporation, has all requisite
corporate power and authority to carry on its business as now conducted, and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which the failure so to quality would have a
material adverse effect on its business or properties, considered in the
aggregate.
13.4 Capitalization. Except for an additional amount of common stock
(not to exceed 500,000 shares) which may be issued by Daedalus prior to Closing,
the authorized and presently issued and outstanding capital of Daedalus is as
reflected in Exhibit B hereto, all of which has been duly authorized and, to the
extent noted and set forth in Exhibit B, all of such capital stock designated as
having been issued and presently outstanding, has been duly issued, is presently
outstanding and is fully paid and non-assessable.
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13.5 Subsidiaries. As a result of agreement with the Daedalus Project,
Inc. Daedalus will own and control a substantial percentage of the issued and
outstanding shares of stock of subsidiaries in Canada.
13.6 Authorization. All corporate action on the part of Daedalus, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all obligations of Daedalus
hereunder and the authorization, issuance and delivery of the Daedalus Common
Stock and the Daedalus Series "A" Warrants to be issued hereunder, and the
Daedalus Common Stock issuable upon conversion of its Series "B" Convertible
Preferred Stock and the common stock issuable upon exercise of the Daedalus
Series "A" Warrants, have been taken or will be taken prior to the Closing. This
Agreement constitutes a valid and legally binding obligation of Daedalus,
enforceable in accordance with its terms except as such enforcement may be
limited or affected by the availability of equitable remedies such as specific
performance, and by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the enforcement of creditors'
rights, including court decisions and general equity principles relating
thereto.
13.7 Valid Issuance of Daedalus Common Stock and Daedalus Series "A"
Warrants.
(a) The Daedalus Common Stock and the Daedalus Series "A"
Warrants which are to be issued hereunder, when issued and delivered in
accordance with the terms hereof and for the consideration expressed herein,
will be duly and validly issued, fully paid and nonassessable and, based in part
upon the representations of Empiric in this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The common
stock issuable upon exercise of the Daedalus Series "A" Warrants has been duly
and validly reserved for issuance and, when issued upon exercise of such
Warrants, and the applicable purchase price therefore is received by Daedalus,
will be duly and validly issued, fully paid and nonassessable.
(b) The approximately 8,500,000 shares of common stock of
Daedalus to be outstanding in accordance with the provisions of Section 1 (as
increased pursuant to Section 13.4) will, upon compliance with such provision
and upon the issuance thereof will all be duly and validly authorized and
issued, fully paid and nonassessable, and issued in compliance with all
applicable federal and state securities laws.
13.8 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against Daedalus which questions the validity of
this Agreement or the right of Daedalus to enter into it, or to consummate the
transactions contemplated hereby, or which might result, either individually or
in the aggregate, in any material adverse changes individually or in the
aggregate, in the assets, condition, affairs or prospects of Daedalus, taken as
a whole, financially or otherwise, or, except as otherwise provided herein, any
change in the current equity ownership of Daedalus, nor is Daedalus aware that
there is any basis for the foregoing. Daedalus is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
13.9 Compliance With Other Instruments. To the best knowledge of the
officers of Daedalus, Daedalus is not in violation or default of any provisions
of its certificate or articles of incorporation or bylaws or of any judgment,
order, writ, or decree, or any material instrument or contract to which it is a
party or by which it is bound or, to their knowledge, of any provision of
federal or state statute, rule or regulation applicable to Empiric or its assets
or properties. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision, judgment,
order, writ, or decree, or any such material instrument or contract, or an event
which results in the creation of any lien, charge or encumbrance upon any assets
of Daedalus.
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13.10 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby, and
except as will be disclosed in the Financial Statements of Daedalus (as defined
in Section 13.12 hereof) there are no material agreements, understandings or
proposed transactions between Daedalus and any of its officers, directors or
affiliates.
(b) Except as disclosed in writing to Empiric, Daedalus is not
a party to and is not bound by any contract, agreement or instrument, or subject
to any restriction under its certificate of incorporation or bylaws which
materially and adversely affects its business as now conducted.
13.11 Corporate Documents. The certificate of incorporation and By-laws
of Daedalus are in the form previously provided to Empiric.
13.12 Financial Statements. As stated in Section 7, Daedalus shall,
promptly upon the execution of this Agreement, engage a firm of independent
certified public accountants to perform an audit of the balance sheet and
financial condition and affairs of Daedalus as agreed upon by the parties and
required for inclusion in or in support of the registration with the SEC
referred to in such Section 7. Daedalus shall keep Empiric apprised of the
progress of such audit work and shall provide Empiric with copies of all
preliminary or draft statements or reports prepared by such accountants as they
are made available to Daedalus. In any event, upon completion of their audit
work and the delivery by such accountants to Daedalus of the audited financial
statements and opinion thereon, copies of such audited statements and opinion
(the "Daedalus Financial Statements") shall be promptly provided to Empiric. The
opinion of the accountants contained in such Daedalus Financial Statements shall
be unqualified.
13.13 Changes. Since the date of such Daedalus Financial Statements to
the date of Closing, except for the transactions contemplated hereby, there
shall not have been:
(a) any material change in the assets, liabilities, financial
condition or operating results of Daedalus from those reflected in the Daedalus
Financial Statements, except changes in the ordinary course of business, which
have not been, in the aggregate, materially adverse;
(b) any material damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of Daedalus (as
such business is presently conducted);
(c)any waiver by Daedalus of a material valuable right or debt
owed to it;
(d) any declaration, authorization or payment of any dividend
or other distribution of the assets of Daedalus, or any agreement to declare,
authorize or pay any such dividend or distribution;
(e) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by Daedalus, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of Daedalus taken as a whole,
as such business is presently conducted;
(f) any material change in any compensation arrangement or
agreement with any employee;
(g) to the knowledge of Daedalus, any other event or condition
of any character which might materially adversely affect the assets, properties,
financial condition, operating results or business of Daedalus taken as a whole
(as such business is presently conducted).
9
13.14 Employee Benefit Plans. Daedalus does not have any Employee
Benefit Plans as defined in the Employee Retirement Income Security Act of 1974
other than a group medical and hospital service agreement under Xxxxxx
Permanente.
13.15 Labor Agreements and Actions. Daedalus is not bound by or subject
to (and none of its respective assets or properties are bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
Daedalus, has sought to represent any of the employees, representatives or
agents of Daedalus. There is no strike or other labor dispute involving Daedalus
pending, or to the knowledge of Daedalus threatened, which could have a material
diverse effect on the assets, properties, financial condition, operating
results, or business of Daedalus (as such business is presently conducted), nor
is Daedalus aware of any labor organization activity involving its employees.
14. Daedalus Private Placement. Prior to the Closing of this Agreement,
Daedalus intends to undertake efforts to obtain financing through the private
placement and sale to a limited number of qualified and accredited investors of
debt and/or equity securities of Daedalus. The precise nature, amount and other
features of such private placement and securities to be offered thereby shall be
subject to the mutual agreement of Empiric and Daedalus. Upon reaching agreement
concerning such matters, the parties agree to cooperate fully in efforts to
successfully conclude such placement contemporaneously with the Closing of this
Agreement, or as soon thereafter as is practicable. To accomplish that end, it
is presently intended that subscribers to such private placement would deposit
funds for their purchase of such Daedalus securities in escrow pending the
Closing of this Agreement. Notwithstanding any other provision of this
Agreement, provided all minimum or other conditions to the closing of such
private placement have been met on the date of Closing of this Agreement, the
net proceeds of such private placement relating to the sale of Daedalus equity
securities which have been so deposited in escrow or otherwise irrevocably
committed to the satisfaction of Empiric at the time of Closing of this
Agreement shall be counted in determining the amount of shareholders' equity of
Daedalus for the purposes of Section 17. All costs, expenses and commissions
relating to such private placement shall be borne and paid by Daedalus. The
Daedalus securities issued as a result of such private placement, or other
activity agreed upon by the parties, shall be added to those represented by
Daedalus as issued and outstanding, or to be issued and outstanding on the date
of Closing, as set forth elsewhere in this Agreement.
15. Registration of Empiric Common Stock of Daedalus. In the event that
following the Closing, Daedalus converts the Empiric Series "B" Stock and/or
exercises the Empiric Series "F" Warrants so that Daedalus thereby becomes the
holder of a substantial number of shares of Empiric common stock, then subject
to the conditions of this Section 15, Daedalus shall have the right and option,
exercisable on only one occasion, to cause Empiric to prepare and file with the
SEC a registration statement for the immediate sale by Daedalus (or for the
shelf registration for subsequent sale by Daedalus) of all, (or, if less than
all, such portion as may be mutually acceptable to Empiric and Daedalus) of such
shares of Empiric common stock then held by Daedalus. Empiric and Daedalus shall
each provide all certified and unaudited interim financial statements, and all
other information and data concerning their respective financial condition,
results of operations, properties, management, affairs and other material
required by or with respect to them as may be required in support of or in
connection with such registration. Upon filing of such registration statement,
Empiric, with the cooperation and assistance of Daedalus. Shall exert all
reasonable efforts to have such registration declared effective by the SEC at
the earliest practicable date.
The cost and expense of preparation, filing, amendment, response to
comments and other efforts of Empiric and securities counsel toward the
successful conclusion of such registration shall be borne by Empiric; provided,
however, Daedalus shall bear and pay all costs and expenses of: (i) providing
all financial and other statements, data and information pertaining to the
condition and affairs of Daedalus required in connection with such registration;
(ii) printing preliminary and final prospectuses; (iii) all filing fees and
legal expense connected with registration or approval of state securities
regulatory bodies; and (iv) all commissions, underwriting fees and other selling
expenses relating to the sale of such stock.
10
Notwithstanding the foregoing provisions of this Section 15, Empiric
shall not be obligated to file for or otherwise conduct or pursue such
registration at any time during which: (i) certified financial statements of
Empiric required in support of the registration are not sufficiently current; or
(ii) Empiric is in the process of filing or preparing for and/or pursuing the
registration of its own offering of its securities and its proposed managing
underwriter or independent financial advisor determines that such demand
registration of Daedalus will likely be substantially detrimental to the success
of Empiric's own proposed offering.
16. Restricted Securities. Both Empiric and Daedalus understand that
the (i) shares of Daedalus Common Stock to be received by Empiric and not
distributed to its holders of common stock; (ii) the 750,000 Series "A" Daedalus
Warrants to be issued by Daedalus to Empiric; (iii) the 250,000 shares of common
stock of The Daedalus Project, Inc., to be issued to Empiric; (iv) the
$1,500,000 principal amount of Empiric Energy, Inc. convertible preferred
securities, with a conversion price of $2.00 per share, convertible into a total
of 750,000 Common shares (Empiric Series "B" Stock) to be issued by Empiric to
Daedalus; (v) the 750,000 Empiric Series "F" Warrants to be issued to Daedalus;
and (vi) all shares of common stock of either Empiric or Daedalus issuable upon
the conversion of any of such convertible preferred stock or upon the exercise
of any such warrants; are all characterized (and hereinafter collectively
referred to herein) as "Restricted Securities" under the securities laws of the
United States inasmuch as they are being, or will be, acquired from the issuer
in a transaction not involving a public offering. Accordingly, such Restricted
Securities may be resold without registration under the 1933 Act only in certain
limited circumstances.
In addition to the warranties, representations and agreements of the
parties contained in other Sections of this Agreement, with regard to such
Restricted Securities, Empiric and Daedalus each mutually and specifically,
warrant, represent, acknowledge and agree as follows:
16.1 Purchase for Own Account. The Restricted Securities will be
acquired for investment for the respective recipient's own account or as a
nominee or agent for any related entities, and not with a view to the resale or
distribution of any part thereof. The recipient has, or upon issuance will have,
no present intention of selling, granting any participation in, or otherwise
distributing any of the Restricted Securities to be issued to it. The recipient
does not have, nor upon issuance will it have, any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to any third person, with respect to any of the Restricted
Securities.
16.2 Disclosure of Information. Each recipient believes it has received
all the information it considers necessary or appropriate for deciding whether
to acquire the Restricted Securities and has had an opportunity to ask questions
and receive answers from the issuer regarding the terms and conditions of the
offering of the Restricted Securities to be issued to it.
16.3 Investment Experience. Both Empiric and Daedalus are, among other
things, investors in securities of privately held companies and acknowledge that
each is able to fend for itself, can bear the economic risk of its investment
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of acquiring the Restricted
Securities to be issued to it.
16.4 Empiric and Daedalus each understand that no market exists or is
likely to develop in the foreseeable future with respect to the Restricted
Securities. Each certificate representing the Restricted Securities shall be
inscribed with a legend substantially in the following form:
"The [description of security] represented by this certificate may not
be offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Securities Act of 1933 (the "Act")
and applicable state law or pursuant to an exemption from registration under the
Act and applicable state law, the availability of which is to be established to
the satisfaction of the Company."
11
Additionally, with regard to the Restricted Securities and all common
stock issued pursuant to conversion of the preferred stock and/or exercise of
the warrants comprising the Restricted Securities, the issuer thereof shall
cause its transfer agent to place a "stop order" thereon precluding any transfer
thereof.
17. Conditions of Empiric's Obligations at Closing. The obligations of
Empiric under this Agreement are subject to the fulfillment on or before the
Closing of each of the following conditions, the waiver of which shall not be
effective against Empiric unless it consents in writing thereto:
17.1 Representations and Warranties. The representations and warranties
of Daedalus contained in this Agreement shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on as of the date of such Closing.
17.2 Performance. Daedalus shall have performed and complied with all
terms, agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
17.3 Registration Statement. The registration statement pertaining to
the issuance and distribution of the 1,000,000 shares of Daedalus Common Stock
to holders of Empiric common stock as provided for herein shall have been
declared effective by the SEC.
17.4 Qualifications. All registrations, qualifications, permits and
approvals required to be obtained by Daedalus and/or Empiric under applicable
state securities laws shall have been obtained for the issuance and delivery of
the 1,000,000 shares of Daedalus Common Stock to holders of Empiric common
stock, all upon terms satisfactory to Empiric.
17.5 Proceedings and Documents. All corporate and other proceedings of
Daedalus in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Empiric, and Empiric shall have received all such counterpart
original and certified or other copies of such documents as it may reasonably
request, including, without limitation, the following:
(a) certified copies of the resolutions adopted by
Daedalus's Board of Directors authorizing the
execution, delivery and performance of this
Agreement; and
(b) certified copies of the Certificate of Incorporation
and Bylaws of Daedalus, as amended through the date
of Closing.
17.6 Daedalus Shareholders' Equity. The shareholders' equity of
Daedalus, as stated in the Daedalus Financial Statements of Daedalus referred to
in Section 13.12, as adjusted on a pro-forma basis to give effect to increases
resulting from the Closing of this Agreement and any increases pursuant to
Section 14, shall be at least $4,000,000.
17.7 Peruvian Contract. Empiric shall have satisfied itself, at its
sole discretion, that the Peruvian Contract, and all representations provided by
Daedalus relating thereto (are fully committed, in place)-are as represented and
in good standing as of the date of Closing.
17.8 Trading of Daedalus Stock. The 1,000,000 or more shares of
Daedalus Common Stock to be issued to holders of Empiric common stock shall have
been approved for trading on NASDAQ on either the National Market System or at
another level acceptable to Empiric, or approved for listing on a regional stock
exchange approved by Empiric, all upon terms and conditions satisfactory to
Empiric.
12
18. Conditions of Daedalus's Obligations at Closing. The obligations of
Daedalus under this Agreement are subject to the fulfillment on or before the
Closing of each of the following conditions, the waiver of which shall not be
effective against Daedalus unless it consents in writing thereto:
18.1 Representations and Warranties. The representations and warranties
of Empiric contained in this Agreement shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on as of the date of such Closing.
18.2 Performance. Empiric shall have performed and complied with all
terms, agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
18.3 Registration Statement. The registration statement pertaining to
the issuance and distribution of at least 1,000,000 shares of Daedalus Common
Stock to holders of Empiric common stock as provided for herein shall have been
declared effective by the SEC.
18.4 Qualifications. All registrations, qualifications, permits and
approvals required to be obtained by Daedalus and/or Empiric under applicable
state securities laws of all states in which such securities shall be
distributed shall have been obtained for the issuance and delivery of at least
1,000,000 shares of Daedalus Common Stock to holders of Empiric common stock,
all upon terms satisfactory to Daedalus.
18.5 Proceedings and Documents. All corporate and other proceedings of
Empiric in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Daedalus, and Daedalus shall have received all such counterpart
original and certified or other copies of such documents as it may reasonably
request, including, without limitation, the following:
(a) certified copies of the resolutions adopted by Empiric's
Board of Directors authorizing the execution, delivery and
performance of this Agreement; and
(b) certified copies of the Articles or Certificate of
Incorporation and Bylaws of Empiric, as amended through the
date of Closing.
18.6 Trading of Daedalus Stock. The 1,000,000 or more shares of
Daedalus Common Stock to be issued to holders of Empiric common stock shall have
been approved for trading on NASDAQ on either the National Market System or at
another level acceptable to Empiric, or approved for listing on a regional stock
exchange approved by Daedalus, all upon terms and conditions satisfactory to
Daedalus.
19. Miscellaneous.
19.1 Survival of Warranties. The warranties, representations and
covenants of the respective parties hereto contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
19.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
19.3 Governing Law. This agreement shall be governed by and construed
under the laws of the State of Delaware. Each party hereto agrees that any and
all actions brought between them shall be brought in the appropriate courts in
the State of Delaware.
13
19.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19.5 Titles, Subtitles and Exhibits. The titles, subtitles and other
headings used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. All Exhibits referred
to herein are expressly incorporated by reference as a part of this Agreement as
though fully reproduced as a part of the text hereof.
19.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or five
days after deposit with the United States mail, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
19.7 Expenses. Irrespective of whether the Closing is effectuated,
except as provided in Section 8, each party shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement.
19.8 Finder's Fee. Empiric agrees to indemnify and to hold harmless
Daedalus from any liability for any commission or compensation in the nature of
a finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which Empiric or any of its officers, partners,
employees, or representatives is responsible. Daedalus agrees to indemnify and
hold harmless Empiric from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which Daedalus or any of its officers,
employees or representatives is responsible.
19.9 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of Empiric and Daedalus.
19.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
19.11 Contents of Agreement. This Agreement together with the Exhibits
hereto and the documents referred to herein, sets forth the entire understanding
of the parties hereto with respect to the transaction contemplated hereby, and
any previous agreements or understandings between the parties regarding the
subject matter hereof are merged into and superseded by this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPIRIC ENERGY, INC. DAEDALUS BUILDING SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxx By: /s/ Xxxxxx X. XxXxxxxxx
------------------------------ ---------------------------
Xxxxx X. Xxxx Xxxxxx X. XxXxxxxxx
Chief Executive Officer President
Address: 00000 Xxxxx Xxxxx Address: 0000 Xxxxxxxx Xxxxxxx
Xxxxx 000 Xxxxxxxxxx, Xxxxxxxx
Xxxxxx, Xxxxx 00000-0000 22309
14
EXHIBIT A
EMPIRIC ENERGY, INC. (the "Company")
Present Capital Structure
Common Stock
Authorized: 20,000,000 shares, $0.01 par value per share
Issued and Outstanding: 8,669,027 shares - as of September 30, 1999
Preferred Stock
Authorized: 2,000,000 shares, $0.05 par value each,
issuable in series, as determined and
designated from time to time by the board of
directors. Each series shall consist of the
number of shares so designated for such
series and shares of that series shall have
the rights, preferences and other features
as so determined and designated.
Designated, Issued and Outstanding
Series "A" Preferred Stock
No. of Shares Designated: 57,500
No. Shares Issued & Outstanding: 57,500
Liquidation Preference: $10.00 per share
Ranking: Senior to all other series of preferred
stock of the Company.
Conversion Rights: Each share is convertible into three (3)
shares of common stock of the Company.
Voting Rights: None, except as otherwise provided in the
Certificate of Incorporation of the Company
or pursuant to the General Corporation Law
of the State of Delaware.
Dividends: None
Redemption Rights: Holders have no rights to require redemption
by the Company
Call Provisions: The Company may at its option and on at
least thirty (30) days' notice call all or
any part of the Series A Preferred Stock
then outstanding for mandatory redemption,
if and when the "Average Market Price"
(meaning, for the purpose of this Exhibit
"A", the mean between the bid and asked
price at closing) of the Company's common
stock is at least $4.165 per share for any
period of ten (10) consecutive market days.
If less than all shares are called for
redemption, shares shall be redeemed on a
pro-rata basis from all holders of Series
"A" Preferred Stock then outstanding.
Series "B" Convertible Preferred Stock
No. of Shares Designated: 750,000
No. To Be Issued & Outstanding at Closing:
750,000
Liquidation Preference: $2.00 per share
15
Ranking: Inferior to the Series "A" convertible
preferred stock, but senior to of preferred
stock of the Company thereafter designated
after the Closing.
Conversion Rights: Each share is convertible into one (1) share
of common stock of the Company.
Voting Rights: None, except as otherwise provided in the
Certificate of Incorporation of the Company
or pursuant to the General Corporation Law
of the State of Delaware.
Dividends: None
Redemption Rights: Holders have no rights to require redemption
by the Company.
Call Provisions: May be called at any time. The Company shall
have the right to call for conversion all
series "B" Convertible Preferred Stock then
outstanding if and when the Average Market
Price (meaning for the purpose of this
Exhibit "C", the mean between the bid and
asked price at Closing) of the Company's
common stock is at least $3.00 per share for
a period of ten (10) consecutive market
days.
Par Value: $0.05 per share
Term: Ten years. If not converted by the end of
10th year following Closing, Series "B"
Preferred will convert to common.
Common Stock Warrants
Series "A" Warrants - No longer outstanding
Series "B" Warrants
Number Authorized: 327,400
Number Issued & Outstanding: 327,400
Expiration Date: May 13, 2001
Rights (General): The holder of each Series "B" Warrant has
the right to purchase one (1) share of
common stock of the Company at a price of
$2.50 per share.
Call Provisions: The Company shall have the right to call for
redemption all Series "B" Warrants then
outstanding if and when the Average Market
Price of the Company's common stock is at
least $3.125 per share for a period of ten
(10) consecutive market days. The redemption
price is $0.25 per warrant.
Series "C" Warrants
Number Authorized: 215,000
Number Issued & Outstanding: 215,000
Expiration Date: May 13, 2001
16
Rights (General): The holder of each Series "C" Warrant has
the right to purchase one (1) share of
common stock of the Company at a price of
$3.00 per share.
Call Provisions: The Company shall have the right to call for
redemption all Series "C" Warrants then
outstanding if and when the Average Market
Price of the Company's common stock is at
least $3.125 per share for a period of ten
(10) consecutive market days. The redemption
price is $0.25 per warrant.
* Series "D" Warrants
Number Authorized: 299,990
Number Issued & Outstanding: 299,990
Expiration Date: May 13, 2001
Rights (General): The holder of each Series "D" Warrants has
the right to purchase one (1) share of
common stock of the Company at a price of
$1.50 per share.
Call Provisions: The Company shall have the right to call for
redemption all Series "D" Warrants then
outstanding if and when the Average Market
Price of the Company's common stock is at
least $1.875 per share for a period of ten
(10) consecutive market days. The redemption
price is $0.10 per warrant.
* Series "E" Warrants
Number Authorized: 200,000
Number Issued & Outstanding: 200,000
Expiration Date: May 13, 2002
Rights (General): The holder of each Series "E" Warrant has
the right to purchase one (1) share of
common stock of the Company at a price of
$2.00 per share.
Call Provisions: The Company shall have the right to call for
redemption all Series "E" Warrants then
outstanding if and when the Average Market
Price of the Company's common stock is at
least $2.50 per share for a period of ten
(10) consecutive market days. The redemption
price is $0.15 per warrant.
17
EXHIBIT B
DAEDALUS BUILDING SYSTEMS, INC. ("DAEDALUS")
Capital Structure
Common Stock
Authorized: 30,000,000 shares, $0.01 par value per share
Issued and Outstanding: Approximately 8,500,000 shares - as of date
to be established by the parties, 1,500,000
shares to be issued to Empiric Energy, Inc.
("Empiric") at Closing of this Agreement in
addition to any shares and or warrants
issued in connection with planned private
placement memoranda.
Preferred Stock
Authorized: 3,000,000 shares, $1.00 par value per share,
issuable in series, with the 250,000 shares
Series "A" and 1,000,000 shares of Series
"B" preferred stock having the general terms
as hereinafter set forth, and the remaining
1,750,000 shares of authorized preferred
stock being issuable in one or more series,
as designated and determined from time to
time by the board of directors of Daedalus.
Except for the above mentioned Series "A"
and "B" preferred stock, each subsequently
designated series of preferred stock shall
consist of the number of shares so
designated for such series, and shares of
that series shall have the rights,
preferences and other features as so
determined and designated.
Designated, Issued and Outstanding:
Series "A"
No. of Shares Designated: 250,000
No. of Shares Issued and Outstanding:
250,000
Liquidation Preference: $1.00 per share
Ranking: Pari passu with the Series "B" preferred
stock of Daedalus, and senior to all other
series of preferred stock of Daedalus
designated at any time subsequent to Closing
of this Agreement.
Conversion Rights: Each share of Series "A" preferred
stock may, at the option of the holder, be
converted into one (1) share of common stock
of Daedalus at any time within twenty (20)
years following the Closing of this
Agreement.
Voting Rights: Each share of Series "A" preferred stock
shall have and be entitled to cast thirty
(30) votes, in common with the votes to
which holders of common stock of Daedalus
then outstanding shall be entitled to cast
(one vote per share) on all matters
submitted for, or required to be submitted
for action by the stockholders, as set forth
18
in the Certificate of Incorporation of
Daedalus or applicable provisions of the
General Corporation Law of Delaware.
Additionally, holders of Series "A"
preferred stock shall be entitled to cast
one (1) vote for each share of such Series
"A" preferred stock on all matters submitted
for, or required to be submitted for, voting
by holders of such Series "A" preferred
stock, as a separate class of stock, as set
forth in the certificate of incorporation or
the General Corporation Law of the State of
Delaware.
Dividends: None
Redemption Rights: Provided funds are legally available
therefore, each share of Series "A"
preferred stock then outstanding shall be
mandatorily redeemed by Daedalus at the
option of the holder thereof, at any time
upon demand of such holder, at a price of
$1.00 per share.
Call Provisions: Provided funds are legally available
therefore, all shares of Series "A"
preferred stock outstanding on the twentieth
(20th) anniversary of the Closing of this
Agreement shall be mandatorily called and
redeemed by Daedalus at a price of $1.00 per
share.
Series "B"
No. of Shares Designated: 1,000,000
No. of Share Issued & Outstanding: 1,000,000
Liquidation Preference: $2.50 per share
Ranking: Pari passu with the Series "A" preferred
stock, and senior to all other series of
preferred stock of Daedalus designated at
any time subsequent to Closing of this
Agreement.
Conversion Rights: Subject to Daedalus's satisfying the
conditions pertaining to its "Pre-Tax
Earnings" (hereinafter defined) as
hereinafter set forth, during the following
prescribed periods and subject to the
following quantity limitations, the shares
of Series "B" Preferred Stock may, at the
option of the holder thereof, be converted
into shares of common stock of Daedalus upon
reaching the following earning plateaus on
or before December 31, 2003:
(1) 333,333 Series "B" shares can be
converted into 1,666,665 Daedalus
common shares, upon record of
$5,000,000 pre-tax earnings.
(2) Upon record of an additional
$5,000,000 in pre-tax earnings (a
total of $10,000,000 pre-tax
earnings), an additional 333,333
Series "B" shares can be converted
into 1,666,665 Daedalus common
shares.
(3) Upon the record of an additional
$6,000,000 (a total of $16,000,000
pre-tax earnings), and additional
333,334 Series "B" shares can be
converted into 1,666,670 Daedalus
common shares.
19
Notes:
o The pre-tax earnings are cumulative and pro-rata for common share
conversion. To the extent that the earnings plateau are not met, X. X.
XxXxxxxxx may convert at $1.00 per share into one common share of
Daedalus
o An interim audit may be requested at any time.
o Credit will be given for performance of the company or that of any
affiliate acquired by the company, the performance of which will be
measured from the date of acquisition to the end of the term of these
Provisions.
o In the event control of the company passes to a non-related entity, the
earn-out provisions are waved and the rights to convert vest
immediately notwithstanding any earnings.
Warrants
Daedalus Series "A" Common Stock Warrants
Number To Be Authorized: 750,000
Number To Be Issued & Outstanding: 750,000
Expiration Date: Three (3) years following
Closing
Rights (General): The holder of each Series "F" Warrant has
the right to purchase one (1) share of
common stock of the Company at a price of
$2.00 per share.
Call Provisions: The Company shall have the right to call for
redemption all Series "F" Warrants then
outstanding if and when the Average Market
Price (meaning for the purpose of this
Exhibit, the mean between the bid and asked
price at Closing) of the Company's common
stock is at least $3.00 per share for a
period of ten (10) consecutive market days.
The redemption price is $0.10 per warrant.
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EXHIBIT C
EMPIRIC ENERGY INC., (the "Company")
Series "B" Convertible Preferred Stock
No. of Shares Designated: 750,000
No. Shares To Be Issued & Outstanding at Closing: 750,000
Liquidation Preference: $2.00 per share
Ranking: Inferior to the Series "A" convertible
preferred stock, but senior to all other
series of preferred stock of the Company
thereafter designated after the Closing.
Conversion Rights: Each share is convertible into one (1) share
of common stock of the Company.
Voting Rights: None, except as otherwise provided in the
Certificate of Incorporation of the Company
or pursuant to the General Corporation Law
of the State of Delaware.
Dividends: None
Redemption Rights: Holders have no rights to require redemption
by the Company.
Call Provisions: May be called at any time. The Company shall
have the right to call for conversion all
series "B" Convertible Preferred Stock then
outstanding if and when the Average Market
Price (meaning for the purpose of this
Exhibit "C", the mean between the bid and
asked price at Closing) of the Company's
common stock is at least $3.00 per share for
a period of ten (10) consecutive market
days.
Term: Ten years. If not converted by the end of
10th year following Closing, Series "B"
Preferred will convert to common.
Par Value: $0.05 per share
21
EXHIBIT D
EMPIRIC ENERGY,INC., (the "Company")
Series "F" Warrants
Number To Be Authorized: 750,000
Number To Be Issued & Outstanding: 750,000
Expiration Date: Three (3) years following Closing
Rights (General): The holder of each Series "F" Warrant has
the right to purchase one (1) share of
common stock of the Company at a price of
$2.00 per share.
Call Provisions: The Company shall have the right to call for
redemption all Series "F" Warrants then
outstanding if and when the Average Market
Price (meaning for the purpose of this
Exhibit, the mean between the bid and asked
price at Closing) of the Company's common
stock is at least $3.00 per share for a
period of ten (10) consecutive market days.
The redemption price is $0.10 per warrant.
22
EXHIBIT E
DAEDALUS BUILDING SYSTEMS, INC.
SERIES "A" PREFERRED STOCK
Issued To Shares Issued
--------- -------------
Xxxxxx X. XxXxxxxxx 250,000
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
23
EXHIBIT F
DAEDALUS BUILDING SYSTEMS, INC.
SERIES "B" PREFERRED STOCK
Issued To Shares Issued
--------- -------------
Xxxxxx X. XxXxxxxxx 1,000,000
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
24
