EXHIBIT 10.6
A G R E E M E N T A N D P L A N O F R E O R G A N I Z A T I O N
This Agreement ("Agreement") is made and entered into on February 26,
1999, by and among BLAZOON SYSTEMS INCORPORATED, a Colorado corporation, as
buyer (the "Company"); X.X. XXXXXX, an individual residing in Colorado, as a
shareholder of the Company ("Xxxxxx"); XXXX X. XXXXXXX XX., an individual
residing in Colorado, as a shareholder of the Company ("Xxxxxxx"); NORDSTROM,
FORBES & LINCOLN INCORPORATED, a Colorado corporation, as a shareholder of the
Company ("NFL"); DIVERSE CAPITAL CORP., a Florida corporation, as the acquired
company ("Acquired Company" or "DCC"); and certain persons executing this
Agreement in their capacity as shareholders of DCC (the "DCC Holders").
R E C I T A L S:
A. The DCC Holders collectively own of record and beneficially all of
the 1,235,000 issued and outstanding shares of common stock, $.001 par value,
and 625,000 Class A Convertible Preferred Shares, Series 2, $4.00 par value, of
DCC (collectively, the "DCC Shares"): and
B. The DCC Holders desire to sell to the Company, and the Company
desires to purchase from the DCC Holders, all of the DCC Shares, on the terms
and subject to the conditions of this Agreement; and
X. Xxxxxx is the owner of 335,000 shares of the Company's issued and
outstanding common stock ("Xxxxxx Shares"), Xxxxxxx is the owner of 353,000
shares of the Company's issued and outstanding common stock ("Xxxxxxx Shares"),
and NFL is the owner of 200,000 shares of the Company's issued and outstanding
common stock, and such persons appear as parties to this Agreement for the
purpose of consenting to the transactions herein and entering into certain
covenants required by DCC and the DCC Holders; and
D. The respective boards of directors of DCC and the Company have
approved the execution of this Agreement and performance of the parties'
respective obligations herein.
NOW THEREFORE, for and in consideration of the premises and the mutual
promises and undertakings contained herein, and for other good and valuable
consideration, and subject to the terms and conditions of this Agreement, the
parties hereto agree as follows:
1. THE EXCHANGE.
1.1 Sale and Purchase of the DCC Shares. On the terms and
subject to conditions of this Agreement, at the Closing (defined below), the DCC
Holders shall sell, transfer, assign, convey and deliver to the Company, free
and clear of all adverse claims, security interests, liens, claims and
encumbrances (other than restrictions under applicable securities laws or as
expressly agreed to herein by the Company), and the Company or its subsidiary
shall purchase, accept and acquire all of the DCC Shares from the DCC Holders,
such purchase and sale being herein sometimes referred to as the "Exchange." The
Company shall receive good and merchantable title to the DCC Shares. It is
intended among all the parties that the Exchange shall constitute a tax free
reorganization within the meaning of Sections 351 and 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended ("Code").
1.2 Issuance of Exchange Shares. In full payment for the DCC
Shares, the Company shall ratably issue and deliver to the DCC Holders in
proportion to their respective ownership of the DCC Shares, an aggregate of
(i) 1,235,000 shares of the Company's common stock, no par value
per share (the "Common Exchange Shares"), being one (1) Common
Exchange Share for every common DCC Share exchanged; and
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(ii) 625,000 shares of the Company's "Series A Convertible
Preferred Shares," $4.00 stated value per share (the
"Preferred Exchange Shares"), the terms, preferences and
designations of which are set forth on EXHIBIT A to this
Agreement, being one (1) Preferred Exchange Share for every
preferred DCC Share exchanged.
The Common Exchange Shares and Preferred Exchange Shares are sometimes
collectively referred to in this Agreement as the "Exchange Shares." The
Exchange Shares, which term includes the common shares of the Company into which
the Preferred Exchange Shares may be converted ("Conversion Shares"), will, when
issued, be validly issued, fully paid, and nonassessable; the sale, issuance and
delivery of the Exchange Shares on the terms herein contemplated has been
authorized by all requisite corporate action of the Company; and the Exchange
Shares and Conversion Shares will not be subject to any preemptive rights,
options or similar rights on the part of any shareholder or creditor of the
Company or any other person. The Exchange Shares shall be issued to the DCC
Holders in the respective denominations set forth on SCHEDULE 1.2 to this
Agreement.
1.3 Exchange Shares Not Registered. The Exchange Shares have
not been and will not be registered under the Securities Act of 1933, as amended
("Act"), or the securities laws of any state or states, but shall be issued in
reliance upon the exemptions from registration provided by Section 4(2) of the
Act and/or Rule 506 of Regulation D under the Act and under analogous state
securities laws, on the grounds that the Exchange does not involve any public
offering. The Exchange Shares will be "restricted securities" as that term is
defined in Rule 144(a) of the General Rules and Regulations under the Act and
must be held indefinitely, unless they are subsequently registered under the Act
or an exemption from the Act's registration requirements is available for their
resale. The prior written consent of the Company will be necessary for any
transfer of any or all of the Exchange Shares, unless the shares have been duly
registered under the Act or the transfer is made in accordance with Rule 144 or
other available exemption under the Act. All certificates evidencing the
Exchange Shares shall, unless and until removed in accordance with law, bear a
restrictive legend substantially in the following form:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and are "restricted securities" as that term is defined in Rule 144
under the Act. These shares may not be offered for sale, sold or
otherwise transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from registration
under the Act."
1.4 Closing. Subject to the conditions precedent set forth
herein, the purchase of the Control Shares and any other transactions herein
contemplated ("Closing") shall take place either at the offices of Xxxxxxx &
Company, 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 or by the exchange
of documents via courier, on or before March 4, 1999 which is herein referred to
as the "Closing Date". The parties may by unanimous agreement provide for one or
more postponements of the Closing.
1.5 Assignment of Exchange Shares. If any certificate for
Exchange Shares is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer, that such transfer
otherwise be proper and that the person requesting such transfer pay any
transfer or other taxes payable by reason of the issuance of such new
certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of Survivor that such
tax has been paid or is not payable.
1.6 Officers and Directors of the Company. At the Closing, the
current officers and directors of the Company shall resign as necessary, each
resignation to confirm in writing that the resigning persons do not owe and are
not owed anything by the Company, and the persons named below shall be elected
to the offices and directorships shown next to their respective names:
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Name Position
---- --------
XXXX X. XXXX DIRECTOR, PRESIDENT, SECRETARY
XXXXXX X. XXXXXX DIRECTOR
XXXX X. XXXXX, XX DIRECTOR
1.7 Further Assurances. DCC and the DCC Holders agree to
execute all documents and instruments and to take or to cause to be taken all
actions which the Company deems necessary or appropriate to complete the
transactions contemplated by this Agreement, whether before or after the
Closing.
2. OTHER AGREEMENTS OF THE PARTIES.
2.1 Reverse Splits and Certain Recapitalizations Prohibited.
The parties acknowledge that, following the Closing, Xxxxxxx, Xxxxxx and other
persons who are shareholders of the Company immediately preceding the Closing,
will no longer hold a majority of the Company's voting power. The Company and
all other parties expressly agree that, during the two-year period following the
Closing ("Period"), the Company shall not effect any "prohibited
recapitalization," defined as any reverse split or combination of its common
shares, or any reorganization, merger, recapitalization or other action
whatsoever which has the effect of changing any issued and outstanding common
share of the Company into less than one common share; provided, that the term
"prohibited recapitalization" shall not include any cancellation, partial
cancellation or readjustment of shares issued by the Company in the normal
course of business which relates only to shares issued after the Closing Date
and not to all common shares of the Company then issued and outstanding. The DCC
Holders expressly agree that, during the Period, they will not vote for or
support any prohibited recapitalization nor grant a proxy or other voting right
to a person other than a DCC Holder to vote at any meeting or act by written
consent on a proposal to effect a prohibited recapitalization, and will
affirmatively oppose any attempt to effect a prohibited recapitalization during
the Period unless approved in a manner permitted by this Agreement.
2.2 Right to Enforce Provisions. The provisions set forth in
Section 2.1 are intended for the protection and benefit of Xxxxxx and Xxxxxxx
and of all persons who are and during the Period become shareholders of the
Company, all of whom are and shall be deemed third party beneficiaries of such
provisions, and all parties agree that such provisions and the duration of the
Period are reasonable. Xxxxxxx, Xxxxxx or any one or more of such other
shareholders may bring an injunctive action to prevent a prohibited
recapitalization, an action to force the Company to revoke or rescind a
prohibited recapitalization as if it had never been effected, an action to
recover on the Company's behalf any damages suffered by effecting the prohibited
recapitalization, or any one or more of such actions, or may otherwise
judicially enforce such provisions. Any shareholder prevailing in such
injunctive or other action shall be entitled to reimbursement from the Company
and all officers and directors involved in effecting the prohibited
recapitalization for costs and reasonable attorneys' fees incurred in bringing
such action(s).
2.3 Change of the Company's Name. The parties agree that, as
soon as reasonably possible following the Closing, a special meeting of the
Company's shareholders shall be called for the purpose of voting upon a change
of the Company's name to better reflect the Company's new business. The DCC
Holders agree to vote their Exchange Shares in favor of the name change.
2.4 Company, DCC and Any Acquired Companies to Obtain Audited
Financial Statements. As soon as reasonably possible after the Closing, the
Company and DCC (including Orlando Digital Telephone Corp.) shall obtain the
audited financial statements called for by Item 310 of Regulation S-B of the
Securities and Exchange Commission, including at a minimum a balance sheet as of
December 31, 1998, and statements of cash flows, operations and changes in
stockholders' equity for the two years ended December 31, 1998, together with
all required footnotes and schedules, audited by certified public accountants
who are members of the SEC Practice Section of the AICPA. Such statements shall
be prepared in accordance with generally accepted accounting principles, applied
on a consistent basis. If the Company should subsequently acquire a company
which does not have audited financial statements meeting such requirements, then
it shall also promptly obtain audited financial statements for such acquired
companies.
2.5 Acquisition of Orlando Digital Telephone. DCC has acquired
Orlando Digital Telephone Corp., a
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Florida corporation ("ODTC"), in a stock-for-stock exchange pursuant to that
certain Acquisition Agreement dated January 6, 1999, and Amended Acquisition
Agreement dated January 29, 1999, and such agreement has been duly consummated
and all required securities and promissory notes, exhibits, schedules, documents
and instruments called for thereunder have been duly issued and delivered. DCC
and the DCC Holders agree that such Acquisition Agreement is not in default for
any reason, and no cause exists as of this date or shall exist at the time of
Closing which entitles or will entitle any party thereto to cancel or rescind
the Acquisition Agreement.
2.6 Stipulation as to Status of Certain Shareholders of the
Company; Etc. Xxxxxxx and Xxxxxx represent and warrant, and the Company, DCC and
the DCC Holders stipulate and acknowledge that (i) the shareholdings of Xxxxxxx
and Xxxxxx and their respective affiliates are set forth on SCHEDULE 2.6 to this
Agreement and that no other shareholders of the Company are their affiliates,
and (ii) no other shareholder of the Company is an affiliate of Xxxxxxx or
Xxxxxx, despite having the last name Xxxxxxx or Xxxxxx. The Company, DCC and the
DCC Holders have satisfied themselves fully on this point. The term "affiliate"
as used in this Agreement has the meaning given it in Rule 144(a) under the Act.
The Company, DCC and the DCC Holders acknowledge that,
following the Closing, Xxxxxxx and his affiliates ("Xxxxxxx Group") and Xxxxxx
and his affiliates ("Xxxxxx Group") will not be officers or directors of the
Company, will not control the Company, be controlled by the Company or be under
common control with the Company, and can only continue to be presumed to be
affiliates of the Company based on their ownership of securities of the Company.
The Company, DCC and the DCC Holders agree that, when the number of common
shares of the Company issued and outstanding increases such that either or both
the Xxxxxxx Group or the Xxxxxx Group owns less than ten percent (10%) of the
issued and outstanding shares (as to each group or shareholder, the
"Non-Affiliation Date"), then the Xxxxxxx Group or the Xxxxxx Group, or both as
the case may be, shall on such date cease to be affiliates of the Company; it
being further agreed that the Xxxxxxx Group and Xxxxxx Group each must
separately satisfy the non-affiliation test and that shares owned by the Xxxxxxx
Group and Xxxxxx Group shares shall not be aggregated for purposes of
determining satisfaction of the non-affiliation test.
The Company, DCC and the DCC Holders stipulate and agree that on and
after the date which is three months after the Non-Affiliation Date, the Company
will permit Xxxxxxx and his affiliates and Xxxxxx and his affiliates to rely
upon Rule 144(k) under the Act to remove all restrictive legends affecting their
respective shares of the Company and will interpose no delay or delays for a
combined period exceeding 10 business days after receipt by the Company or its
transfer agent of written request by Xxxxxxx and affiliates or Xxxxxx and
affiliates to remove such legends. Nothing in this Section shall limit or affect
the obligations of Xxxxxx or Xxxxxxx under any lock-up agreement entered into by
them. This requirement for removal of restrictive legends shall not apply in the
event that Xxxxxxx, Xxxxxx or any of their respective affiliates become
executive officers or directors of the Company or otherwise become affiliates of
the Company based on grounds other than stock ownership. Xxxxxxx and Xxxxxx each
agree to notify the Company in the event that he or an affiliate of his acquires
common stock of the Company or any security exercisable for, convertible into or
exchangeable for common stock of the Company; provided, that no such notice
shall be required if the common stock or other security is issued by the Company
directly to Xxxxxxx or Xxxxxx.
If the Company without good cause delays in permitting legend removal
more than 10 business days after its or its' transfer agent's receipt of written
request for removal, the Company shall be liable to Xxxxxxx and his affiliates
or Xxxxxx and his affiliates, as the case may be, for any damages they or either
of them suffer due to fall in the market price of their shares of the Company
which occurs after the lapse of the maximum permissible 10-day delay period. In
such event Xxxxxxx and his affiliates shall be entitled to recover from the
Company all damages suffered by them due to diminution of the stock's trading
price, plus court costs and reasonable attorneys' fees in a court of proper
jurisdiction. The parties agree that proper jurisdiction and venue for any such
action shall be in the Xxxxxxxx Xxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx. "Good cause"
means that Xxxxxxx or Xxxxxx due to events subsequent to Closing becomes an
affiliate of the Company again, or the discovery of evidence admissible in court
showing that Xxxxxxx'x or Xxxxxx'x representations herein concerning their
affiliates are false and that Xxxxxxx or Xxxxxx continues to be an affiliate of
the Company.
It is further agreed that, other than Xxxxxx, Xxxxxxx and their
respective affiliates, the other shareholders of the Company are not affiliates
of the Company, Xxxxxx or Xxxxxxx, and that the shares held by them are freely
tradeable and not restricted in any manner, nor is there any basis to restrict
or delay any transfer of such persons' shares of the Company, and the Company,
DCC and the DCC Holders agree that no attempt shall be made to do so. The
Company shall be liable for any damages suffered by any non-
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affiliated shareholder of the Company who is delayed in the transfer of his, her
or its shares for more than a 5-day period upon request for transfer duly
presented in accordance with the transfer agent's customary rules and practices
applicable to all its client issuers generally.
2.7 Lock-Up and Leakage Agreement. Xxxxxxx and Xxxxxx each
agree to execute a Lock-Up and Leakage Agreement in the form of EXHIBIT B to
this Agreement, to govern the orderly disposition of the 435,000 shares of the
Company's common stock being retained by them after the Closing, as shown on
SCHEDULE 2.6. Xxxxxx and Xxxxxxx shall not receive or be entitled to any
compensation for entering into and performing their covenants under the Lock-Up
and Leakage Agreements, and agree that the consummation of the transactions
contemplated and performance of the covenants of DCC and the DCC Holders set
forth in this Agreement constitute sufficient consideration therefor. Xxxxxx and
Xxxxxxx further agree that, until the Lock-Up and Leakage Agreements expire and
all restrictive legends affecting stock held by the Xxxxxxx Group and Xxxxxx
Group have been removed as permitted by Rule 144(k) under the Act, they will
make all resales of stock in accordance with Rule 144 under the Act and make all
required filings.
2.8 Registration of the Company. The Company, DCC and the DCC
Holders acknowledge that recent changes to Rules 6530 and 6540 of the National
Association of Securities Dealers, Inc. ("NASD") will require that the Company
become subject to the reporting requirements of Section 15(d) or 13 of the
Exchange Act in order for its common stock to continue to be quoted on the OTC
Bulletin Board. Accordingly, it is agreed by all parties that as soon as
reasonably possible after obtaining the required audits, the Company shall file
a registration statement under the Act under cover of Form SB-2 or other
appropriate form, or under Section 12(g) of the Exchange Act, and expend
reasonable effort to cause such registration statement to become effective as
promptly as reasonably possible.
2.9 The Company's Capitalization at Closing; Sale of Certain
Shares. At the Closing, the Company shall have issued and outstanding 1,000,000
shares of common stock. Other than such shares, at the Closing the Company will
not without the prior written consent of DCC have issued or outstanding any
other shares of stock, nor any options or other rights to purchase its common
stock, nor any instrument convertible into or exchangeable for its common stock.
No shareholder of the Company will have any preemptive right or similar right to
purchase the Exchange Shares or other stock of the Company. The Company, DCC and
the DCC Holders acknowledge that NFL, Xxxxxxx and Xxxxxx are, in conjunction
with this Agreement and conditioned upon the consummation of this Agreement,
selling an aggregate of 443,000 shares of common stock of the Company owned by
them to Xxxx Capital Corp., pursuant to that certain Stock Purchase Agreement of
even date herewith, and consent to such sale.
2.10 Assumption of DCC Rights and Obligations. The Company
hereby guarantees payment of any sums and deliveries of all other things owed to
the DCC Holders under, and assumes all liabilities of DCC to the DCC Holders
under, the DCC/ODTC Acquisition Agreement dated January 6, 1999, and Amended
Acquisition Agreement dated January 29, 1999. Such guarantee and assumption of
liabilites shall be effective upon consummation of the Closing. It is agreed
among the parties, however, that if the Exchange is subsequently rescinded and
unwound with the vote or other concurrence of a majority or more of the DCC
Holders, then the guarantee and assumption of liabilities of the Company in this
paragraph shall cease as of the effective time of such unwinding and from and
after such effective time the Company shall have no liability to the DCC
Holders, or any successor or assign of any DCC Holder, or to any other person
whatsoever under the guarantee and assumption of liabilities contained in this
Section. The Company acknowledges and assumes the existing options to purchase
DCC shares set forth on SCHEDULE 1.2 hereto.
3. DCC's REPRESENTATIONS AND WARRANTIES. DCC hereby represents and
warrants that the following are true and correct as of the date hereof and will
be true and correct through the Closing Date as if made on that date:
(a) Organization and Standing. DCC is a corporation duly
organized, validly existing and in good standing under the laws of Florida, with
all requisite power and authority to carry on the business in which it is
engaged, to own the properties and assets it owns, and is duly qualified and
licensed to do business and is in good standing in all jurisdictions where the
nature of its business makes such qualification necessary. ODTC is a corporation
duly organized, validly existing and in good standing under the laws of Florida,
with all requisite power and authority to carry on the business in which it is
engaged, to own the properties and assets it owns, and is duly qualified and
licensed to do business and is in good standing in all jurisdictions where the
nature of its business makes such qualification necessary.
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(b) Capitalization. DCC's authorized capital stock consists of
50,000,000 shares of common stock, $.001 par value, of which 1,235,000 shares
have been issued and are outstanding, 5,000,000 shares of Class A Preferred
Stock, $4.00 par value, of which 625,000 shares have been issued and are
outstanding, and 5,000,000 shares of Series B Preferred Stock, none of which has
been issued or is outstanding. All of the 1,235,000 of common stock and 625,000
shares of Class A Convertible Preferred Stock, Series 2, $4.00 par value, of DCC
(the DCC Shares) issued and outstanding have been duly authorized, validly
issued, and are fully paid and nonassessable. DCC does not have outstanding any
other equity securities or, except as set forth on SCHEDULE 1.2 hereto, any
option, warrant or similar instrument and is not a party to or bound by any
agreement, instrument, arrangement, contract, obligation, commitment or
understanding of any character, whether written or oral, express or implied,
whereby DCC is bound to issue shares of its capital stock or any instrument or
right convertible into or exchangeable for shares of its capital stock, nor
relating to the sale, assignment, encumbrance, conveyance, transfer or delivery
of any capital stock of DCC of any type or class. SCHEDULE 1.2 sets forth the
names and addresses of all holders of capital stock of DCC and the number of
shares of common and preferred stock held by each, and of all holders of options
and any other rights to acquire DCC capital stock, which is an accurate and
complete list. No person has preemptive or similar rights as to the DCC Shares,
and DCC is not party to any agreement other than the Acquisition Agreement that
contemplates a stock exchange, merger, reorganization or similar transaction.
(c) Subsidiaries. ODTC is a wholly owned subsidiary of DCC,
and no other person has the right to acquire shares of ODTC. DCC currently has
no subsidiaries other than ODTC.
(d) Litigation. There are no claims, actions, suits,
proceedings or investigations pending or threatened against or affecting the DCC
Shares, DCC, ODTC or any of its properties or assets in any court or by or
before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or other instrumentality, domestic or foreign,
or arbitration tribunal or other forum which, if determined adversely to DCC or
ODTC, would materially affect its business, prospects, properties or financial
condition or DCC's or ODTC's right to conduct its business as being conducted or
expected to be conducted, except as disclosed on SCHEDULE 3(d). There are no
judgments, decrees, injunctions, writs, orders or other mandates outstanding to
which the DCC Shares, DCC or ODTC is a party or by which it is bound or
affected, except as disclosed on SCHEDULE 3(d). Copies of material pleadings
shall accompany such schedule.
(e) Estoppel. All statements made in this Agreement, or in any
Exhibit or Schedule hereto, or in any document or certificate executed and
delivered herewith, by DCC are true, correct and complete as of the date of this
Agreement and will be so as of the Closing Date. All statements contained in any
certificate made by any official of DCC and delivered to the Company shall be
deemed representations and warranties of DCC.
(f) Compliance with Laws and Permits. DCC and ODTC have
complied in all material respects with its articles of incorporation and bylaws
(each as amended to date), all applicable laws, regulations and rules, all
applicable orders, judgments, writs, decrees or injunctions of federal, state
and municipal governments or any department, agency or other instrumentality
thereof, domestic or foreign, applicable to its business or properties, and has
not done or omitted to do any act or acts which singly or in the aggregate are
in violation of any of the foregoing. DCC and ODTC have obtained all federal,
provincial and municipal licenses and permits necessary to its properties and
operations, is not in violation of any such license or permit and has not
received any notification that any revocation or limitation thereof is pending
or threatened.
(g) No Undisclosed Material Liabilities. DCC has not incurred
any liabilities or obligations whatever (whether direct, indirect, accrued,
contingent, absolute, secured or unsecured or otherwise), including liabilities
as guarantor or surety or otherwise for the obligations of others and tax
liabilities due or to become due, except as described in the Acquisition
Agreement, as amended, or on SCHEDULE 3(g). There is no basis for any material
claim against DCC's or ODTC's assets which involves an amount in excess of
$10,000, except as disclosed in writing to the Company. DCC and ODTC have no
creditors whose prior consent might be required by law to the Exchange.
(h) Material Transactions and Adverse Changes. Except as has
been disclosed in writing to the Company, DCC and ODTC have not and as of the
Closing Date will not have: (i) suffered any materially adverse change in its
assets taken as a whole; (ii) suffered any damage or destruction in the nature
of a casualty loss to any one or more of its assets, whether or not covered
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by insurance, which singly or in the aggregate are materially adverse to the
properties or business of DCC or ODTC; (iii) made any change in any method of
accounting or accounting practice, including the revaluation of any of its
assets; or (iv) agreed in writing or otherwise to take any action prohibited in
this Section.
(i) Taxes. All income, excise, unemployment, social security,
occupational, franchise, ad valorem and other taxes, duties, assessments or
charges levied, assessed or imposed upon DCC or ODTC by any federal, state or
municipal government or subdivision or instrumentality thereof have been duly
paid or adequately provided for, and all required tax returns or reports
concerning any such items have been duly filed. Adequate reserves have been
established for all income and other tax liabilities, except as otherwise
disclosed on SCHEDULE 3(i). Neither DCC nor ODTC has waived any statute of
limitations with respect to any tax liability whatever for any period prior to
the date of this Agreement or agreed to any extension of time with respect to a
tax assessment or liability. No consents have been filed by DCC or ODTC pursuant
to Section 341(f) of the Internal Revenue Code of 1986, as amended.
(j) Contracts. Attached to this Agreement as SCHEDULE 3(j) is
a listing of all material contracts to which DCC and ODTC is a party. With
respect to each such contract, except as disclosed in writing to the Company,
DCC or ODTC is not in default, the contract is legal, valid, binding, in full
force and effect and enforceable in accordance with its terms, and the contract
will continue after the Closing to be legal, valid, binding, in full force and
effect in accordance with its terms. Contracts or commitments described in any
other Schedule need not be disclosed in SCHEDULE 3(j).
(k) Indebtedness to and from Affiliates. Except as disclosed
on SCHEDULE 3(k), DCC and ODTC are not indebted to any officer, director,
employee or shareholder thereof as of the date of this Agreement, and no money
or property is owed to DCC or ODTC by any officer, director, employee or
shareholder thereof, and none will be owed as of the Closing Date.
(l) Documents Genuine. All originals and/or copies of DCC's
and ODTC's articles of incorporation and bylaws, each as amended to date, and
all minutes of meetings and written consents in lieu of meetings of directors
and shareholders of DCC, financial data, and any and all other documents,
material, data, files, or information which have been or will be furnished to
the Company, are and will be true, complete, correct and unmodified originals
and/or copies of such documents, information, data, files or material.
(m) Financial Statements and Records. DCC and ODTC will
provide to the Company two years' of financial statements, and all such
statements shall fairly present the assets, liabilities and financial condition
of DCC and ODTC as of the respective dates thereof, and all shall have been
prepared in conformity with generally accepted accounting principles,
consistently applied during the periods covered. For purposes of this Agreement,
such statements shall include all notes thereto. DCC also will furnish to the
Company copies of its other books, accounts and records as requested.
(n) Officers and Directors Salaries. DCC will provide to the
Company a list of all its and ODTC's officers and directors, reflecting the job
description and salary of each person in Schedule 3(n).
(o) Insurance. Attached hereto as SCHEDULE 3(o) is a list of
all insurance policies of DCC and ODTC in effect.
(p) Authorization and Validity. The execution, delivery and
performance by DCC of this Agreement and any other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by DCC and all necessary approvals of the
shareholder(s) of DCC will have been obtained by the Closing Date. This
Agreement and any other agreement contemplated hereby have been or will be as of
the Closing Date duly executed and delivered by DCC and constitutes and will
constitute legal, valid and binding obligations of DCC, enforceable against it
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
(q) Consents; Approvals; Conflict. Except for compliance with
applicable federal and state securities laws, no consent, approval,
authorization or order of any court or governmental agency or other body is
required for DCC and the DCC
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Holders to consummate the Exchange. Neither the execution, delivery,
consummation or performance of this Agreement shall conflict with, or constitute
a breach of, and no prior approval is necessary by or under, DCC's articles of
incorporation, bylaws or any note, mortgage, indenture, deed of trust, lease,
obligation, or other agreement or instrument to which DCC is a party.
(r) Intellectual Property. Attached to this Agreement as
SCHEDULE 3(r) is a description of all registered trademarks, trademarks,
servicemarks, copyrights, trade names and licenses, owned or held by DCC or ODTC
and applications pending therefor. Copies of each such right or application
shall be furnished to the Company. DCC nor ODTC has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any patent,
trademark, trade name, servicemark or copyright belonging to any third person,
and DCC and ODTC have never received any charge, complaint, claim, demand or
notice alleging any such interference, infringement or misappropriation. DCC and
ODTC own or hold adequate licenses or other rights to use all patents,
trademarks, trade names, servicemarks and copyrights used in its business as now
conducted, and such use does not conflict with, infringe upon or violate the
rights of any third party in a manner which might have a materially adverse
effect upon DCC or ODTC.
(s) Restrictive Covenants. Prior to the consummation of the
Exchange, DCC and ODTC shall conduct its business in the ordinary and usual
course without unusual commitments and in compliance with all applicable laws,
rules, and regulations. Furthermore, DCC will not, without the prior written
consent of the Company, (i) make any changes in its capital structure, (ii)
incur any liability or obligation other than current liabilities incurred in the
ordinary and usual course of business, (iii) incur any material indebtedness for
borrowed money, (iv) make any loans or advances other than in the ordinary and
usual course of business, (v) declare or pay any dividend or make any other
distribution with respect to its capital stock, (vi) issue, sell, or deliver or
purchase or otherwise acquire for value any of its stock or other securities, or
(vii) mortgage, pledge, or subject to encumbrance any of its assets or
properties or sell or transfer any of its assets or properties, except in the
ordinary and usual course of business.
(t) Disclaimer of Further Warranties; Etc. Except as expressly
set forth in this Agreement and the Schedules and Exhibits hereto, the Company,
Xxxxxxx and Xxxxxx have made no other representation or warranty to DCC or any
DCC Holder in connection with the Exchange. DCC's decision to enter into the
Exchange is based upon its own independent judgment and investigation and not on
any representations and warranties of the Company other than those expressly
stated in this Agreement and in the Schedules and Exhibits hereto.
(u) OTC Quotation. The staff of NASD Regulation, Inc. has
approved the Company's common stock for unpriced quotation on the OTC Bulletin
Board, and the common stock of the Company is quoted without price by two market
makers on the OTC Bulletin Board under symbol "BLZO." To the knowledge of the
Company, there have not been any price quotations or market trades in its common
stock. There is at this time no active market in the shares of the Company, and
DCC and the DCC Holders have been advised that such a market is likely to arise
only after the acquisition of DCC and acquisition of funding.
4. REPRESENTATIONS AND WARRANTIES OF THE DCC HOLDERS. The DCC Holders
each represent and warrant to the Company that the following are true and
correct as of the date hereof and will be true and correct through the Closing
Date as if made on that date:
(a) Each DCC Holder owns of record and beneficially all the
DCC Shares respectively shown next to his, her or its name on SCHEDULE 1.2 to
this Agreement; and his, her or its DCC Shares are free and clear of all liens,
claims, rights or other encumbrances whatever and of all options and similar
rights of third persons; and no person has or will have any right in and to such
shares except as are created by force of law under any marital, community
property or similar rights. No third party has or at Closing will have any right
of first refusal, pre-emptive right, option or similar right to acquire any of
the DCC Shares except as disclosed to the Company in writing prior to the
Closing. Each DCC Holder represents and warrants that he, she or it is not now
insolvent and will not be insolvent after selling and delivering the DCC Shares
to the Company on the terms of this Agreement, and each DCC Holder is receiving
new consideration at least equal to the full and fair value of the DCC Shares
being sold. Each DCC Holder has the full right, power and legal capacity to
enter into this Agreement and sell and deliver the DCC Shares to the Company. As
to each DCC Holder which is a corporation or other entity, all requisite
corporate or equivalent action has been taken necessary to approve the execution
and performance of this Agreement.
Page 8
(b) DCC and the DCC Holders understand and acknowledge that
the Company is a public shell with no current operations, revenues or assets,
that the Company does not have full-time or professional management, and that
the officers and directors of the Company after the Closing will be the current
officers and directors of or persons designated by DCC. Each DCC Holder
recognizes that the Exchange Shares are speculative and involve a high degree of
risk, and that the prospects and future success of the Company depend
principally upon the DCC Holders and current DCC management.
(c) Each DCC Holder acknowledges and agrees that he, she or it
or his, her or its representatives have been furnished with substantially the
same kind of information regarding the Company and its business, assets,
financial condition and plan of operation as would be contained in a
registration statement and included prospectus prepared in connection with a
public offering of the Exchange Shares. Each DCC Holder further represents that
he, she or it has had an opportunity to ask questions of and receive answers
from the Company regarding the Company and its business, assets, results of
operations, financial condition and plan of operation and the terms and
conditions of the issuance of the Exchange Shares.
(d) In connection with the issuance and delivery of the
Exchange Shares, each DCC Holder understands and acknowledges that the Exchange
Shares have not been and will not be registered under the Act or any state laws
in reliance upon exemptions from registration and that such shares will be
restricted and subject to significant restrictions on transfer, as described in
Section 1.3 of this Agreement. Each DCC Holder is acquiring the Exchange Shares
for his, her or its own account, and not for the account of any other person and
not for distribution, assignment or resale to others, or for pledge or
hypothecation, and no other person has or is intended to have a direct or
indirect ownership or contractual interest in the Exchange Shares except as may
exist or arise under marital property laws or otherwise by operation of law.
(e) The DCC Holder, alone or together with the DCC Holder's
adviser(s), has such knowledge and experience in financial, tax and business
matters as to enable DCC Holder to utilize the information made available by the
Company, in connection with the Exchange and issuance of the Exchange Shares, to
evaluate the merits and risks of acquiring the Exchange Shares and to make an
informed investment decision with respect thereto.
(f) All information which each DCC Holder has provided or will
provide to the Company is or will be correct and complete as of the date
furnished to the Company, and, if there should be any material change in such
information prior to the Closing as to a DCC Holder, that DCC Holder will
immediately provide the Company with such information.
(g) No DCC Holder was solicited by the Company by any form of
general solicitation or general advertising, including but not limited to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
made available over telephone lines by any information service, or any seminar
or meeting whose attendees had been invited by any means of general solicitation
or general advertising.
(h) Except as expressly set forth in this Agreement and the
Schedules and Exhibits hereto, the Company has not made any representation or
warranty to any DCC Holder in connection with this Agreement. Each DCC Holder's
decision to enter into the Exchange is based upon his, her or its own
independent judgment and investigation and not on any representations and
warranties of the Company other than those expressly stated in this Agreement
and in the Schedules and Exhibits hereto.
(i) To the best of the knowledge of each DCC Holder, all of
the representations and warranties of DCC set forth in this Agreement are
accurate and true.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Unless specifically
stated otherwise, the Company represents and warrants to the other parties that
the following are true and correct as of the date hereof and will be true and
correct through the Closing Date as if made on that date.
(a) Organization and Good Standing. The Company is and on the
Closing Date will be duly organized, validly existing and in good standing under
the laws of the State of Colorado. The Company has no assets or liabilities and
currently conducts no business in any state.
Page 9
(b) Authorized Capitalization. As provided in its Articles of
Incorporation, the authorized capital stock of the Company consists of
60,000,000 shares, of which 50,000,000 shares, no par value, are designated as
common stock, of which 1,000,000 shares shall be issued and outstanding at
Closing; and 10,000,000 shares, no par value, are designated as preferred stock,
none of which are issued or outstanding.
(c) Outstanding Options, Warrants or Other Rights. The Company
does not have outstanding any option, warrant or similar instrument and is not a
party to or bound by any agreement, instrument, arrangement, contract,
obligation, commitment or understanding of any character, whether written or
oral, express or implied, whereby the Company is bound to issue shares of its
capital stock or any instrument or right convertible into or exchangeable for
shares of its capital stock, nor relating to the sale, assignment, encumbrance,
conveyance, transfer or delivery of any capital stock of the Company of any type
or class. The Company shall provide to DCC a list of all holders of the
Company's capital stock, the number of shares held by each and the number of
each certificate held, duly certified by the Secretary of the Company.
(d) Subsidiaries. The Company has and as of the Closing will
have no subsidiaries.
(e) Documents Genuine. All originals and/or copies of the
Company's articles of incorporation and bylaws, each as amended to date, and all
minutes of meetings and written consents in lieu of meetings of shareholders,
directors and committees of directors of the Company, financial data, and any
and all other documents, material, data, files, or information which have been
or will be furnished to DCC, are and will be true, complete, correct and
unmodified originals and/or copies of such documents, information, data, files
or material.
(f) Litigation. There are no claims, actions, suits,
proceedings or investigations pending or threatened against or affecting the
Company in any court or by or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or other
instrumentality, domestic or foreign, or arbitration tribunal or other forum.
There are no judgments, decrees, injunctions, writs, orders or other mandates
outstanding to which the Company is a party or by which it is bound or affected.
(g) Compensation Plans. Except as described below, the Company
has not authorized and does not have in effect any stock option or stock
purchase plan, dividend reinvestment plan or similar plan pursuant to which any
person is entitled to acquire capital stock of the Company or any securities
convertible into or exchangeable for its capital stock. The Company has
delivered to DCC a copy of each plan described below. No shares will be awarded
or issued pursuant to either such plan without the prior written authorization
of DCC.
(i) The Company has in effect a 1997 Compensatory
Stock Option Plan, covering 1,000,000 shares of the Company's common
stock. No options have been granted or shares issued pursuant to this
plan, and none will be granted or issued prior to Closing.
(ii) The Company has in effect a 1997 Employee Stock
Compensation Plan covering 1,500,000 of the Company's common shares,
pursuant to which the Company may award shares of common stock to
persons defined therein as employees. No shares have been awarded
pursuant to such plan or will be awarded prior to Closing.
(h) Authorization and Validity. The execution, delivery and
performance by the Company of this Agreement and any other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Company. This Agreement and
any other agreement contemplated hereby have been or will be as of the Closing
Date duly executed and delivered by the Company and constitute and will
constitute legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
(i) Financial Statements. The Company will provide to DCC the
Company's financial books and records such audited and unaudited financial
statements of the Company, back to inception, as exist and as DCC requests. All
such statements shall fairly present the assets, liabilities and financial
condition of the Company as of the respective dates thereof, and all shall have
been prepared in conformity with generally accepted accounting principles,
consistently applied during the periods covered. For
Page 10
purposes of this Agreement, such statements shall include all notes thereto.
(j) No Undisclosed Material Liabilities. The Company has not
incurred any liabilities or obligations whatever (whether direct, indirect,
accrued, contingent, absolute, secured or unsecured or otherwise), which singly
or in the aggregate are material to it, except as disclosed in the Company's
financial statements or otherwise disclosed in writing to DCC.
(k) Taxes. All income, excise, unemployment, social security,
occupational, franchise and other taxes, duties, assessments or charges levied,
assessed or imposed upon the Company by the United States or by any state or
municipal government or subdivision or instrumentality thereof have been duly
paid or adequately provided for, and all required tax returns or reports
concerning any such items have been duly filed or will be so filed.
(l) Indebtedness to or from Affiliates. The Company is not and
will not be indebted to any officer, director, employee or shareholder thereof
as of the Closing Date. No money or property is owed to the Company by any
officer, director, employee or shareholder thereof, and none will be owed as of
the Closing.
(m) Salaries. No person currently receives a salary or other
cash compensation from the Company, and no person will receive a salary or other
cash compensation from the Company prior to Closing.
(n) Insurance. The Company does not now have any insurance
policy in effect and will not obtain any insurance policy prior to Closing.
(o) Books, Records and Accounts. Except for the minute book
and accounting and corporate records of the Company furnished to DCC, there are
no other books, records or accounts of the Company. DCC shall have the right to
review and obtain the records, books and accounts of the Company, all and
sundry.
(p) Estoppel. All statements made herein, or in any Exhibit or
Schedule hereto, or in any document or certificate executed and delivered
herewith by the Company are true, correct and complete as of the date of this
Agreement and will be so as of the Closing. All statements contained in any
certificate made by any officer or director of the Company and delivered to DCC
shall be deemed representations and warranties of the Company.
(q) Consents; Approvals; Conflict. No consent, approval,
authorization or order of any court or governmental agency or other body is
required for the Company to execute and perform its obligations under this
Agreement. Neither the execution, delivery, consummation or performance of this
Agreement shall conflict with, constitute a breach of the Company's articles of
incorporation and bylaws, as amended to date, or any note, mortgage, indenture,
deed of trust or other agreement of instrument to which the Company is a party
or by which it is bound nor, to the best of the Company's knowledge and belief,
any existing law, rule, regulation, or any decree of any court or governmental
department, agency, commission, board or bureau, domestic or foreign, having
jurisdiction over the Company.
(r) Restrictive Covenants. Prior to the consummation of the
proposed Exchange, the Company shall not engage in any business or activity
other than attempting to consummate the Exchange. Furthermore, the Company will
not, without the prior written authorization of DCC, (i) make any changes in its
capital structure, (ii) incur any liability or obligation other than current
liabilities incurred in the ordinary and usual course, (iii) declare or pay any
dividend or make any other distribution with respect to its capital stock, (iv)
issue, sell, or deliver or purchase or otherwise acquire for value any of its
stock or other securities, (v) make any investment of a capital nature, or (vi)
enter into any contract, agreement, or other commitment which is material to the
Company.
(s) Disclaimer of Further Warranties; Etc. Except as expressly
set forth in this Agreement and the Schedules and Exhibits hereto, DCC has made
no other representation or warranty to the Company in connection with the
Exchange. The Company's decision to enter into the Exchange is based upon the
Company's own independent judgment and investigation and not on any
representations and warranties of DCC other than those expressly stated in this
Agreement and in the Schedules and Exhibits hereto.
Page 11
6. CONDITIONS TO OBLIGATIONS OF THE PARTIES; DELIVERIES. All
obligations of the parties under this Agreement are subject to the accuracy and
truthfulness of all representations of the other parties, and the fulfillment,
prior to the Closing, of all conditions precedent and to performance of all
covenants and agreements and completion of all deliveries contemplated herein,
unless specifically waived in writing by the party entitled to performance or to
demand fulfillment of the covenant or delivery of the documents.
6.1 Documents to be Delivered to the Company. At the Closing,
the following documents shall be delivered to the Company by DCC or the DCC
Holders, as the case may be, which documents shall be satisfactory in form and
content to the Company's counsel:
(a) Certificates executed by the chief executive officer
and the chief financial or accounting officer of DCC,
dated the Closing Date, certifying that the
representations and warranties of DCC contained in
this Agreement and the information set forth in all
Schedules and Exhibits of DCC hereto are then true
and correct and that DCC has complied with all
agreements and conditions required by this Agreement
and all related agreements to be performed or
complied with by DCC.
(b) A copy of the directors' resolution or the minutes of
the meeting of the directors of DCC approving the
execution and performance of this Agreement.
(c) All certificates evidencing the DCC Shares, each
indorsed on the reverse side for transfer or
accompanied by a signed stock power in form
satisfactory to the Company.
(d) All Schedules, properly filled out, and all Exhibits
called for in this Agreement.
6.2 Documents to be Delivered to DCC and the DCC Holders. At
the Closing the following documents shall be delivered to DCC and the DCC
Holders by the Company, which documents shall be satisfactory in form and
content to DCC's counsel:
(a) To the DCC Holders, certificates evidencing the
Exchange Shares in the proper denominations.
(b) To DCC, a certificate executed by the Company dated
the Closing Date, certifying that the representations
and warranties of the Company contained in this
Agreement and the information set forth in all
Schedules and Exhibits of the Company are then true
and correct and that the Company has complied with
all agreements and conditions required by this
Agreement to be performed or complied with by it.
(c) To DCC, a copy of the directors' resolution or the
minutes of the meeting of the directors of the
Company approving the execution and performance of
this Agreement.
(d) All Schedules, properly filled out, and all Exhibits
called for in this Agreement.
6.3 Conditions Precedent. The obligations of the parties under
this Agreement are subject to the satisfaction of the following conditions (in
addition to other conditions and terms of this Agreement), unless waived in
writing, on or prior to the Closing:
(a) Representations and Warranties Correct. The
representations and warranties of every party contained in this Agreement shall
be in all material respects true and correct on and as of the Closing Date as if
made on such date.
(b) Compliance. The Company, DCC and the DCC Holders each
shall have performed all covenants and agreements, satisfied all conditions and
complied with all other terms and provisions of this Agreement to be
respectively performed,
Page 12
satisfied or complied with by it as of the Closing Date.
(c) No Errors or Misrepresentations. The Company shall not
have discovered any material error, misstatement or omission in or failure of
any representation or warranty made by any of the other parties, and DCC shall
not have discovered any material error, misstatement or omission in or failure
of any representation or warranty made by the Company.
(d) Due Diligence Examination. The Company shall have
completed a due diligence examination of DCC satisfactory to the Company
covering all books, records, contracts and other documents and all financial
affairs of DCC. DCC shall have completed a due diligence examination of the
Company satisfactory to DCC covering all books, records, contracts and other
documents and all financial affairs of the Company.
(e) Legal Matters. All legal matters in connection with this
Agreement and the consummation of all transactions herein contemplated, and all
documents and instruments delivered in connection herewith shall be reasonably
satisfactory in form to each party.
(f) No Litigation or Proceedings. No injunction or restraining
order of any federal or state court is in effect which prevents the purchase of
the Assets or issuance and delivery of the Exchange Shares, and no lawsuit or
other proceeding has been filed by any person by the Closing Date contesting or
attempting to enjoin either action, and no action is taken and no law is passed
after the date of this Agreement which prevents the Exchange.
7. OTHER COVENANTS OF THE PARTIES. The parties agree that, prior to the
Closing:
(a) Effectuation of this Agreement. The parties hereto each
will use their best efforts to cause this Agreement and all related agreements
to become effective, and all transactions herein and therein contemplated to be
consummated, in accordance with its and their terms, to obtain all required
consents, waivers and authorizations of governmental entities and other third
parties, to make all filings and give all notices to those regulatory
authorities or other third parties which may be necessary or reasonably required
in order to effect the transactions contemplated in this Agreement, and to
comply with all federal, local and state laws, rules and regulations as may be
applicable to the contemplated transactions.
(b) Restriction on Action. The parties each agree that he or
it will not do any thing or act prohibited by this Agreement or any related
agreement, or fail to do any thing or act which he or it has undertaken to do in
this Agreement or any related agreement.
(c) Access and Information. To the extent each party deems
necessary for purposes of this Agreement and the transactions contemplated
hereby, DCC and the Company each shall permit the other, its counsel,
accountants and other representatives to have full access, upon reasonable
notice and during regular business hours, throughout the period prior to
Closing, to its equipment, assets, properties, books and records, and will cause
to be furnished to the requesting party and its representatives during such
period all information it or its representatives may reasonably request.
(e) Confidentiality. DCC and the Company covenant that they
each will not disclose any confidential information of the other party, except
to its officers, directors, attorneys, accountants, and employees involved in
these transactions, and only then on the condition that such individuals not
disclose the information disclosed to them. Notwithstanding the foregoing, the
terms of this Agreement, or of any of the transactions contemplated hereby, may
be disclosed following execution hereof, provided that each party will provide
at least twenty-four hours' notice to the other party prior to making the
initial public announcement regarding the transaction. In addition, either party
may disclose this Agreement or any part hereof to any third party at any time if
required to do so by law, this Agreement or other contractual obligation.
8. INDEMNIFICATION.
8.1 Indemnification by DCC. DCC agrees to defend, indemnify
and hold the Company, any subsidiary or affiliate thereof, and its respective
successors, officers, directors and controlling persons (the "Indemnified
Company Group") harmless
Page 13
from and against any and all losses, liabilities, damages, costs or expenses
(including reasonable attorney's fees, penalties and interest) payable to or for
the benefit of, or asserted by, any party resulting from, arising out of, or
incurred as a result of (a) the breach of any representation made by DCC or a
DCC Holder herein or in accordance herewith; (b) the breach of any warranty or
covenant made by DCC or a DCC Holder herein or in accordance herewith; or (c)
any claim, whether made before or after the date of this Agreement, or any
litigation, proceeding or governmental investigation, whether commenced before
or after the date of this Agreement, arising out of the business of DCC or
arising out of any act or occurrence prior to, or any state of facts existing as
of the Closing.
8.2 Indemnification by the Company. The Company agrees to
defend, indemnify and hold DCC, any subsidiary or affiliate thereof, and its
respective successors, officers, directors and controlling persons (the
"Indemnified DCC Group") harmless from and against any and all losses,
liabilities, damages, costs or expenses (including reasonable attorney's fees,
penalties and interest) payable to or for the benefit of, or asserted by, any
party resulting from, arising out of, or incurred as a result of (a) the breach
of any representation made by the Company herein or in accordance herewith; (b)
the breach of any warranty or covenant made by the Company herein or in
accordance herewith; or (c) any claim, litigation, proceeding or governmental
investigation, whether commenced before or after the date of this Agreement,
arising out of any act or occurrence prior to, or any state of facts existing as
of the Closing.
8.3 Survival of Covenants and Warranties. The representations,
warranties, covenants and agreements made by DCC on the one hand, and the
Company on the other hand, shall survive the Closing and shall be fully
enforceable at law or in equity against such other party and its successors and
assigns for a period of one year after the Closing Date. Any investigation at
any time made by or on behalf of (or any disclosure to ) any party hereto shall
not diminish in any respect whatsoever its right to rely on the representations
and warranties of the other party hereto.
8.4 Notice of Claims. The Company and DCC each agree to give
prompt written notice to the other of any claim against the party giving notice
which might give rise to a claim by it against the other party hereto based upon
the indemnity provisions contained herein, stating the nature and basis of the
claim and the actual or estimated amount thereof; provided, however, that
failure to give such notice will not affect the obligation of the indemnifying
party to provide indemnification in accordance with the provisions of this
Section 10 unless, and only to the extent that, such indemnifying party is
actually prejudiced thereby. In the event that any action, suit or proceeding is
brought against any member of the Indemnified DCC Group or the Indemnified
Company Group with respect to which any party hereto may have liability under
the indemnification provisions contained herein, the indemnifying party shall
have the right, at its sole cost and expense, to defend such action in the name
of or on behalf of the indemnified party and, in connection with any such
action, suit or proceeding, the parties hereto agree to render to each other
such assistance as may reasonably be required in order to ensure the proper and
adequate defense of any such action, suit or proceeding; provided, however, that
an indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate because of actual or potential differing interests between such
indemnified party and any other party represented by such counsel. Neither party
hereto shall make any settlement of any claim which might give rise to liability
of the other party under the indemnification provisions contained herein without
the written consent of such other party, which consent such other party
covenants shall not be unreasonably withheld.
9. TERMINATION OF THIS AGREEMENT.
9.1 Grounds for Termination. This Agreement shall terminate:
(a) By mutual written consent of the Company and DCC;
(b) By DCC or the Company, if:
(i) all the conditions precedent to its respective
obligations hereunder have not been satisfied or waived prior to the
Closing Date, as it may be accelerated or extended, or if any DCC
Holder refuses to execute this Agreement;
Page 14
(ii) any party shall have defaulted or refused to
perform in any material respect under this Agreement, or if the Company
or DCC should have reasonable cause to believe there has been a
material representation concerning, or failure or breach of, any
representation or warranty by the other party, or if it appears that
either DCC or the Company has committed any unlawful acts affecting the
other party;
(iii) the transactions contemplated in this Agreement
and related agreements have not been consummated on the Closing Date,
as it may be mutually accelerated or extended, OR
(iv) either the Company or DCC shall reasonably
determine that the transactions contemplated in this Agreement have
become inadvisable by reason of the institution or threat by any
federal, state or municipal governmental authorities or by other person
whatever of a formal investigation or of any action, suit or proceeding
of any kind against either or both parties which in one party's
reasonable belief is material in light of the other party's business,
prospects, properties or financial condition;
9.2 Manner of Termination. Any termination of this Agreement
(other than an automatic termination) shall be made in accordance with the above
listed grounds and, if terminated by DCC or the Company, shall be accompanied by
a copy of the resolution of the terminating party's board of directors. Written
notice of termination shall be given to the other party as required in this
Agreement as promptly as is practical under the circumstances. Upon a party's
receipt of such termination notice, this Agreement shall terminate and the
transactions herein contemplated shall be abandoned without further action by
the parties.
9.3 Survival of Confidentiality Provisions. Upon termination
of this Agreement for any reason, (i) the covenants of the parties concerning
the confidentiality and proprietary nature of all documents and other
information furnished hereunder shall remain in force except as to information
which has otherwise become public knowledge, and (ii) each party shall promptly
return all documents received from the other party in connection with this
Agreement. This Section constitutes a mutual covenant of the parties, and either
may judicially enforce it.
10. MISCELLANEOUS PROVISIONS.
(a) Assignment. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto without the written
consent of the party not seeking assignment, except that the Company may direct
such an assignment to a wholly owned subsidiary corporation. No such assignment
shall relieve the assignor of any obligations created under this Agreement.
(b) Parties in Interest; No Third Party Beneficiaries. Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Neither this Agreement nor
any other agreement contemplated hereby shall be deemed to confer upon any
person not a party hereto or thereto any rights or remedies hereunder or
thereunder, except as expressly set forth in this Agreement.
(c) Entire Agreement. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding the
subject matter hereof, and supersede all prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof.
(d) Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Further, in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as part of this Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid and enforceable.
Page 15
(e) Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of all parties contained herein shall
survive the Closing, and all statements contained in any certificate, exhibit or
other instrument delivered by or on behalf of the Company or DCC, as the case
may be, and, notwithstanding any provision in this Agreement to the contrary,
shall survive the Closing.
(f) Interpretation. This Agreement shall be governed by and
construed under the laws of the State of Colorado and shall be interpreted as if
all parties participated equally in its drafting. The captions in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
any of the terms or provisions hereof. Whenever the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter, and
the number of all words shall include the singular and plural. Use of the words
"herein", "hereof", "hereto" and the like in this Agreement shall be construed
as references to this Agreement as a whole and not to any particular provision
in this Agreement, unless otherwise noted.
(g) Notice. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by telefax transmission or by delivery
by use of a messenger which regularly retains its delivery receipts. Such notice
shall be deemed received on the date on which it is delivered to the addressee.
For purposes of notice, the addresses of the parties shall be, if to a DCC
Holder, sent to DCC for forwarding, and:
If to DCC: Diverse Capital Corp.
X.X. Xxx 000000
Xxxxx, Xxxxxxx 00000
ATTN: Xxxx Xxxx, President
If to Xxxxxx/Company/NFL: 0000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
ATTN: X.X. Xxxxxx, Pres.
If to Xxxxxxx: 00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
(h) No Finders. Each party represents and warrants to the
others and agrees that it has not employed or engaged, and will not employ or
engage, any person as a finder or broker in connection with the transactions
contemplated herein, and that no person is entitled to compensation as a finder
or broker. Each party hereby indemnifies the other parties and holds the other
parties harmless from and against any claims of any third persons claiming to
have acted as a finder or broker in connection with the transactions herein
contemplated, and such indemnity shall include all expenses, costs and damages
arising from or related to such claims, including reasonable attorneys fees.
(i) Expenses. Except as otherwise provided in this letter, the
Company and DCC shall bear their own fees and expenses incurred in connection
with the transactions contemplated herein.
(j) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. Execution and delivery of
this Agreement by exchange of facsimile copies bearing facsimile signature of a
party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
(k) Prevailing Party Clause. In the event of any litigation or
proceeding arising as a result of the breach of this Agreement or the failure to
perform hereunder, or failure or untruthfulness of any representation or
warranty herein, the party or parties prevailing in such litigation or
proceeding shall be entitled to collect the costs and expenses of bringing or
defending such litigation or proceeding, including reasonable attorneys' fees,
from the party or parties not prevailing.
Page 16
(l) Relationship of the Parties. Nothing in this Agreement is
intended to be construed so as to suggest that the parties hereto are partners
or joint venturers, or that any party or its employees is the employee or agent
of the other. Neither DCC nor the Company has any express or implied right or
authority under this Agreement to assume or create any obligations on behalf of
or in the name of the other party to any contract, agreement, arrangement,
understanding or undertaking with any third party.
(m) Exhibits, Schedules, etc. Each Exhibit to this Agreement
shall be initialed by DCC and the Company, and each Schedule shall be initialed
by the party providing it. Any Schedule provided by DCC Holders shall be
initialed by all of the DCC Holders. If a Schedule does not apply, it must
nonetheless be furnished and marked "not applicable." The information contained
in every Schedule shall be updated as necessary as of a date as close as
possible to the Closing Date and must be accurate and complete as of the Closing
Date. Each party signing this Agreement represents and warrants, to all other
parties, by such signature that he, she or it has carefully read this Agreement
in its entirety and understands the provisions of this Agreement.
(n) No Advice Given. DCC and the DCC Holders acknowledge and
agree that they have neither asked for nor received any legal or tax advice from
the Company, X.X. Xxxxxx, Xxxx X. Xxxxxxx Xx., Esquire, or any other person
associated with the Company, in regard to this Agreement or the transactions
herein contemplated, and have instead relied on advice and counsel furnished by
their own legal or other advisers in order to satisfy themselves as to the tax
and other legal implications to them of the Exchange and issuance of the
Exchange Shares.
IN WITNESS WHEREOF, all parties have executed this Agreement, and DCC
and the Company have initialed every preceding page hereof, as of the dates
respectively indicated below.
BLAZOON SYSTEMS, INCORPORATED DIVERSE CAPITAL CORP.
By By
----------------------------------- --------------------------------
X.X. Xxxxxx, President Xxxx Xxxx, President
X.X. XXXXXX XXXX X. XXXXXXX XX.
X X
----------------------------------- --------------------------------
Signature Signature
NORDSTROM, FORBES & LINCOLN INCORPORATED
By
----------------------------------------------------
SHAREHOLDERS' SIGNATURE PAGE
to Agreement and Plan of Reorganization
FUNDING USA CORP. XXXX ENTERTAINMENT, INC.
By By
----------------------------------- --------------------------------
Authorized Officer Authorized Officer
Page 17
XXXX XXXXX XXXXXX X. XXXXXX
X X
----------------------------------- --------------------------------
Signature Signature
XXXX X. XXXX XXX XXXXX
X X
----------------------------------- --------------------------------
Signature Signature
XXXX X. XXXXX XXXXXX X. XXXXX
X X
----------------------------------- --------------------------------
Signature Signature
Page 18
EXHIBITS and SCHEDULES
EXHIBIT A - New Blazoon preferred stock to go to original Orlando Digital
owner(s)
EXHIBIT B- Lock-Up and Leakage Agreement
Schedule 2.6 Xxxxxx and Xxxxxxx and affiliates
DCC/ODTC Schedules:
Schedule 1.2 - Names and addresses of DCC shareholders, no. of DCC Shares
owned by each and number of common and preferred exchange
shares options that go to each person
Schedule 3(d) litigation
Schedule 3(g) disclosure of material liabilities
Schedule 3(i) taxes owed
Schedule 3(j) material contracts
Schedule 3(k) affiliate relationships
Schedule 3(n) officers and directors salaries
Schedule 3(o) insurance policies in effect
Schedule 3(r) patents, trademarks, servicemarks, licenses, franchises and
other intellectual property
