EXHIBIT 2.1
SHARE EXCHANGE AGREEMENT BY AND BETWEEN GALAXY INVESTMENTS, INC.
AND PANNONIAN INTERNATIONAL, LTD.
SHARE EXCHANGE AGREEMENT
by and between
GALAXY INVESTMENTS, INC., A COLORADO CORPORATION
and
PANNONIAN INTERNATIONAL, LTD., A COLORADO CORPORATION
Dated as of May 7, 2003
TABLE OF CONTENTS
PAGE
THE SHARE EXCHANGE.............................................................1
1.1 THE SHARE EXCHANGE................................................1
1.2 NUMBER OF SHARES OF GALAXY COMMON STOCK...........................1
1.3 CONVERSION OF PANNONIAN COMMON STOCK..............................1
1.4 EFFECTIVE TIME....................................................2
1.5 FRACTIONAL SHARES.................................................2
1.6 RESERVATION OF SHARES.............................................2
1.7 ADJUSTMENTS TO EXCHANGE RATIO.....................................2
1.8 DISSENTING SHARES.................................................2
1.9 EXCHANGE OF CERTIFICATES..........................................3
1.10 NO FURTHER OWNERSHIP RIGHTS IN PANNONIAN COMMON STOCK.............3
1.11 LOST, STOLEN OR DESTROYED CERTIFICATES............................3
1.12 EXEMPTION FROM REGISTRATION.......................................3
1.13 REPORTING OF SHARE EXCHANGE.......................................3
1.14 BOARD OF DIRECTORS AND OFFICERS OF GALAXY.........................3
1.15 TAKING OF NECESSARY ACTION; FURTHER ACTION........................3
THE CLOSING....................................................................4
2.1 TIME AND PLACE OF CLOSING.........................................4
2.2 OBLIGATIONS OF PANNONIAN AND THE PANNONIAN SHAREHOLDERS AT OR PRIOR
TO THE CLOSING....................................................4
2.3 OBLIGATIONS OF GALAXY AT OR PRIOR TO THE CLOSING..................4
REPRESENTATIONS AND WARRANTIES OF PANNONIAN....................................5
3.1 ORGANIZATION AND QUALIFICATION....................................5
3.2 CAPITALIZATION....................................................5
3.3 SUBSIDIARIES AND AFFILIATES.......................................5
3.4 OPTIONS OR OTHER RIGHTS...........................................5
3.5 OWNERSHIP OF SHARES...............................................6
3.6 VALIDITY AND EXECUTION OF AGREEMENT...............................6
3.7 NO CONFLICT.......................................................6
3.8 CONSENTS AND APPROVALS............................................6
3.9 VIOLATION OF LAWS, PERMITS, ETC...................................6
3.10 BOOKS AND RECORDS.................................................7
3.11 PANNONIAN FINANCIAL STATEMENTS....................................7
3.12 UNDISCLOSED LIABILITIES...........................................7
3.13 TITLE TO PROPERTY; ENCUMBRANCES...................................7
3.14 TAXES.............................................................8
3.15 LITIGATION........................................................8
3.16 CONTRACTS AND OTHER AGREEMENTS....................................9
3.17 COMPENSATION ARRANGEMENTS; OFFICERS AND DIRECTORS.................9
3.18 ERISA.............................................................9
3.19 OPERATIONS........................................................9
3.20 LICENSES AND PERMITS.............................................11
3.21 BROKERS..........................................................11
3.22 DISCLOSURE.......................................................11
REPRESENTATIONS AND WARRANTIES OF GALAXY......................................11
4.1 ORGANIZATION AND QUALIFICATION...................................11
4.2 CAPITALIZATION...................................................11
4.3 SUBSIDIARIES AND AFFILIATES......................................12
4.4 OPTIONS OR OTHER RIGHTS..........................................12
4.5 VALIDITY AND EXECUTION OF AGREEMENT..............................12
4.6 NO CONFLICT......................................................12
4.7 CONSENTS AND APPROVALS...........................................12
4.8 VIOLATION OF LAWS, PERMITS, ETC..................................13
4.9 TAXES............................................................13
4.10 LITIGATION.......................................................13
4.11 BROKERS..........................................................13
4.12 APPROVAL OF SHARE EXCHANGE.......................................13
4.13 SEC REPORTING STATUS.............................................13
4.14 INVESTMENT COMPANY...............................................14
4.15 TRADING STATUS...................................................14
4.16 DISCLOSURE.......................................................14
ACTIONS PRIOR TO CLOSING......................................................14
5.1 CORPORATE EXAMINATIONS AND INVESTIGATIONS........................14
5.2 CONDUCT AND PRESERVATION OF BUSINESS OF GALAXY...................15
5.3 CONDUCT AND PRESERVATION OF BUSINESS OF PANNONIAN................15
5.4 ADVICE OF CHANGES................................................15
5.5 OTC BULLETIN BOARD...............................................15
5.6 SEC REPORTS......................................................15
5.7 SHAREHOLDER APPROVALS............................................16
5.8 OTHER AGREEMENTS.................................................16
CONDITIONS PRECEDENT TO CLOSING...............................................16
6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GALAXY TO COMPLETE THE
CLOSING..........................................................16
6.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PANNONIAN TO COMPLETE
THE CLOSING......................................................17
POST-CLOSING COVENANTS........................................................19
7.1 FURTHER INFORMATION..............................................19
7.2 RECORD RETENTION.................................................19
7.3 POST-CLOSING ASSISTANCE..........................................19
7.4 SEC REPORTING....................................................19
SURVIVAL; INDEMNIFICATION.....................................................20
8.1 SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES...........20
TERMINATION OF AGREEMENT......................................................20
9.1 TERMINATION......................................................20
9.2 SURVIVAL AFTER TERMINATION.......................................21
MISCELLANEOUS.................................................................21
10.1 EXPENSES.........................................................21
10.2 FURTHER ASSURANCES...............................................21
10.3 NOTICES..........................................................21
10.4 MEDIATION........................................................22
10.5 ARBITRATION......................................................23
10.6 PUBLICITY........................................................23
10.7 ENTIRE AGREEMENT.................................................23
10.8 WAIVERS AND AMENDMENTS...........................................23
10.9 GOVERNING LAW....................................................24
10.10 BINDING EFFECT, NO ASSIGNMENT.................................24
10.11 COUNTERPARTS..................................................24
10.12 SCHEDULES.....................................................24
10.13 EFFECT OF DISCLOSURE ON SCHEDULES.............................24
10.14 HEADINGS......................................................24
10.15 SEVERABILITY OF PROVISIONS....................................24
SCHEDULE A - PANNONIAN SHAREHOLDERS
THIS SHARE EXCHANGE AGREEMENT is entered into as of May 7, 2003, by and between
GALAXY INVESTMENTS, INC., a Colorado corporation ("GALAXY"), and PANNONIAN
INTERNATIONAL, LTD., a Colorado corporation ("PANNONIAN").
RECITALS
A. The Boards of Directors of each of Galaxy and Pannonian have determined
that it is in the best interests of GALAXY and PANNONIAN (as
applicable) and their respective shareholders that GALAXY acquire
PANNONIAN through a statutory share exchange under the laws of Colorado
(the "SHARE EXCHANGE") and, in furtherance thereof, have approved the
Share Exchange, this Agreement and the transactions contemplated
hereby.
B. Pursuant to the Share Exchange, among other things, and subject to the
terms and conditions of this Agreement, all of the shares of capital
stock of PANNONIAN which are issued and outstanding immediately prior
to the Effective Time (as defined below) shall be converted into the
right to receive shares of common stock, $0.001 par value per share, of
GALAXY ("GALAXY COMMON STOCK") on the terms and subject to the
conditions set forth herein.
C. GALAXY and PANNONIAN desire to make certain representations,
warranties, covenants and agreements in connection with the Share
Exchange.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements hereinafter set forth, in accordance with the provisions of
applicable law, the parties hereby agree as follows:
ARTICLE I
THE SHARE EXCHANGE
1.1 THE SHARE EXCHANGE. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and the applicable
provisions of the Colorado Business Corporation Act and all amendments
and additions thereto (the "COLORADO LAW"), by virtue of the Share
Exchange and without any action on the part of GALAXY or the holder of
any shares of PANNONIAN Common Stock, the following shall occur:
1.2 NUMBER OF SHARES OF GALAXY COMMON STOCK. The stockholders of PANNONIAN
named on SCHEDULE A attached to this Agreement (the "PANNONIAN
SHAREHOLDERS") shall receive an aggregate of 2,000,000 shares of GALAXY
Common Stock on a pro rata basis based on their percentage
shareholdings in PANNONIAN at the Effective Date, and PANNONIAN shall
become a wholly-owned subsidiary of GALAXY.
1.3 CONVERSION OF PANNONIAN COMMON STOCK. Each share of PANNONIAN Common
Stock issued and outstanding immediately prior to the Effective Time
(other than any Dissenting Shares, as such term is defined in SECTION
1.8) will be automatically cancelled and extinguished and each share of
PANNONIAN Common Stock that is issued and
Share Exchange Agreement - Page 1
outstanding immediately prior to the Effective Time shall be converted
automatically into the right to receive 0.1990173 share of GALAXY
Common Stock (the "EXCHANGE RATIO").
1.4 EFFECTIVE TIME. The Share Exchange will become effective upon the
proper filing of Articles of Share Exchange with the Secretary of State
of the State of Colorado (the "EFFECTIVE TIME").
1.5 FRACTIONAL SHARES. No fraction of a share of GALAXY Common Stock will
be issued upon such exchange of shares of PANNONIAN Common Stock.
Instead amounts of shares will be rounded to the nearest whole number.
1.6 RESERVATION OF SHARES. GALAXY will reserve sufficient shares of GALAXY
Common Stock for issuance pursuant to SECTION 1.3.
1.7 ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be equitably
adjusted to reflect fully the effect of any stock split, reverse split,
stock combination, stock dividend (including any dividend or
distribution of securities convertible into GALAXY Common Stock or
PANNONIAN Common Stock), reorganization, reclassification,
recapitalization or other like change with respect to GALAXY Common
Stock or PANNONIAN Common Stock, the effective date of which occurs
after the date hereof and prior to the Effective Time.
1.8 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of PANNONIAN Common Stock held by a
holder who has demanded and perfected appraisal rights for
such shares in accordance with the Colorado Law and who, as of
the Effective Time, has not effectively withdrawn or lost such
appraisal or dissenters' rights ("DISSENTING SHARES") shall
not be converted into or represent a right to receive GALAXY
Common Stock pursuant to SECTIONS 1.2 and 1.3, but the holder
thereof shall only be entitled to such rights as are granted
by the Colorado Law.
(b) Notwithstanding the provisions of SECTION 1.8(A), if any
holder of shares of PANNONIAN Common Stock who demands
appraisal of such shares under the Colorado Law shall
effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of
(i) the Effective Time or (ii) the occurrence of such event,
such holder's shares shall automatically be converted into and
represent only the right to receive GALAXY Common Stock as
provided in SECTIONS 1.2 and 1.3, without interest thereon, in
accordance with SECTIONS 1.2 and 1.3.
(c) PANNONIAN shall give GALAXY (i) prompt notice of its receipt
of any written demands for appraisal of any shares of GALAXY
Common Stock, withdrawals of such demands, and any other
instruments relating to the Share Exchange received by
PANNONIAN and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for
appraisal under the Colorado Law.
Share Exchange Agreement - Page 2
1.9 EXCHANGE OF CERTIFICATES. At Closing, or as soon as practicable
thereafter, GALAXY shall have its transfer agent issue a letter of
transmittal to each PANNONIAN Shareholder listed on SCHEDULE A hereto.
After having received a completed letter of transmittal and
certificates representing such PANNONIAN Shareholder's PANNONIAN Common
Stock, the transfer agent shall deliver certificates representing the
whole number of shares of GALAXY Common Stock into which such PANNONIAN
Shareholder's shares of PANNONIAN Common Stock shall have been
exchanged as set forth herein.
1.10 NO FURTHER OWNERSHIP RIGHTS IN PANNONIAN COMMON STOCK. All shares of
GALAXY Common Stock issued upon the surrender for exchange of shares of
PANNONIAN Common Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights
pertaining to such shares of PANNONIAN Common Stock, and there shall be
no further registration of transfers on the records of PANNONIAN of
shares of PANNONIAN Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates
are presented to the GALAXY for any reason, they shall be canceled and
exchanged as provided in this Article 1.
1.11 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any certificates
evidencing shares of PANNONIAN Common Stock shall have been lost,
stolen or destroyed, the transfer agent for GALAXY shall issue
certificates representing such shares of GALAXY Common Stock in
exchange for such lost, stolen or destroyed certificates, upon the
making of an affidavit of that fact by the holder thereof.
1.12 EXEMPTION FROM REGISTRATION. The shares of GALAXY Common Stock to be
issued pursuant to SECTIONS 1.2 and 1.3 in connection with the Share
Exchange will be issued in a transaction exempt from registration under
the Securities Act of 1933, as amended (including the rules and
regulations promulgated thereunder, the "SECURITIES ACT").
1.13 REPORTING OF SHARE EXCHANGE. For federal, state, and local income tax
return reporting purposes, all parties agree to treat the Share
Exchange as a nontaxable exchange under Section 368 of the Internal
Revenue Code.
1.14 BOARD OF DIRECTORS AND OFFICERS OF GALAXY. No changes shall be made to
the board of directors or officers of GALAXY.
1.15 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any such further action is necessary or desirable to
carry out the purposes of this Agreement, the officers and directors of
GALAXY are fully authorized to take, and will use their reasonable
efforts to take, all such lawful and necessary action.
Share Exchange Agreement - Page 3
ARTICLE II
THE CLOSING
2.1 TIME AND PLACE OF CLOSING. The closing of the Share Exchange (the
"CLOSING") shall, unless otherwise agreed to in writing by the parties,
take place at a location and a time to be determined by the parties, on
or prior to May 31, 2003.
2.2 OBLIGATIONS OF PANNONIAN AND THE PANNONIAN SHAREHOLDERS AT OR PRIOR TO
THE CLOSING. At or prior to Closing, and subject to the satisfaction by
GALAXY of its obligations hereunder, PANNONIAN and the PANNONIAN
Shareholders shall deliver to GALAXY the following:
(a) A copy of the Articles of Incorporation of PANNONIAN certified
as of a date within ten days of the Closing by the Secretary
of State of the State of Colorado and certified by the
corporate secretary of PANNONIAN as to the absence of any
amendments between the date of certification by the Secretary
of State and the Closing;
(b) A certificate from the Secretary of State of the State of
Colorado as to the existence and good standing of PANNONIAN as
of a date within ten days of the Closing;
(c) A certificate of the corporate secretary of PANNONIAN
attaching thereto true and correct copies of the bylaws of
PANNONIAN;
(d) The certificate of PANNONIAN referred to in SECTION 6.1
hereof;
(e) Such other documents as are required pursuant to this
Agreement or as may reasonably be requested from PANNONIAN by
GALAXY or its counsel; and
(f) The certificates evidencing the shares of PANNONIAN Common
Stock owned by the PANNONIAN Shareholders, duly endorsed for
transfer to GALAXY.
2.3 OBLIGATIONS OF GALAXY AT OR PRIOR TO THE CLOSING. At or prior to
Closing, and subject to the satisfaction by PANNONIAN of its
obligations hereunder, GALAXY shall deliver to PANNONIAN and the
PANNONIAN Shareholders the following:
(a) A copy of the Articles of Incorporation of GALAXY certified as
of a date within ten days of the Closing by the Secretary of
State of the State of Colorado and certified by the corporate
secretary of GALAXY as to the absence of any amendments
between the date of certification by the Secretary of State
and the Closing;
(b) A certificate from the Secretary of State of the State of
Colorado as to the existence and good standing of GALAXY as of
a date within ten days of the Closing;
(c) A certificate of the corporate secretary of GALAXY attaching
thereto true and correct copies of the bylaws of GALAXY and
the corporate resolutions duly adopted
Share Exchange Agreement - Page 4
by the board of directors of GALAXY authorizing the
consummation of the transactions contemplated hereby;
(d) The certificate of GALAXY referred to in SECTION 6.2 hereof;
(e) Such other documents as are required pursuant to this
Agreement or as may reasonably be requested from GALAXY by
PANNONIAN or its counsel; and
(f) Certificates evidencing the GALAXY Common Stock to be issued
to the PANNONIAN Shareholders pursuant to ARTICLE I hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PANNONIAN
Except as expressly set forth and specifically identified by the section number
of this Agreement in the schedule delivered by PANNONIAN to GALAXY
contemporaneously with the execution of this Agreement (the "PANNONIAN
DISCLOSURE SCHEDULE"), PANNONIAN represents, warrants, and covenants to GALAXY
as follows:
3.1 ORGANIZATION AND QUALIFICATION. PANNONIAN is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Colorado and has all requisite corporate power and authority
to (a) own, lease and operate its properties and assets as they are now
owned, leased and operated and (b) carry on its business as currently
conducted and as proposed to be conducted. PANNONIAN is duly qualified
or licensed to do business in each jurisdiction in which the failure to
be so qualified or licensed could have a material adverse effect in the
business, operations, properties, assets, liabilities, prospects, or
condition (financial or otherwise) of PANNONIAN (hereinafter a
"MATERIAL EFFECT").
3.2 CAPITALIZATION. The issued and outstanding capital stock of PANNONIAN
consists of 10,049,375 shares of common stock. All of the issued and
outstanding shares of capital stock of PANNONIAN are validly issued,
fully paid, and nonassessable, and none of such shares has been issued
in violation of the preemptive rights of any person.
3.3 SUBSIDIARIES AND AFFILIATES. Except as set forth in SECTION 3.3 of the
PANNONIAN Disclosure Schedule, PANNONIAN does not own or hold, directly
or indirectly, any equity, debt, or other interest in any entity or
business or any option to acquire any such interest.
3.4 OPTIONS OR OTHER RIGHTS. Except as set forth in SECTION 3.4 of the
PANNONIAN Disclosure Schedule, no options, warrants, calls, commitments
or other rights to acquire, sell or issue shares of capital stock or
other equity interests of PANNONIAN, whether upon conversion of other
securities or otherwise, are issued or outstanding, and there is no
agreement or understanding with respect to the voting of such capital
stock or other equity interests.
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3.5 OWNERSHIP OF SHARES. The shares of PANNONIAN Common Stock are owned of
record and beneficially by the PANNONIAN Shareholders as set forth on
Schedule A. To the knowledge of PANNONIAN, the PANNONIAN Shareholders
possess full authority and legal right to sell, transfer, and assign
the entire legal and beneficial ownership of the shares of PANNONIAN
common stock, free from all liens, claims, and encumbrances of any
kind.
3.6 VALIDITY AND EXECUTION OF AGREEMENT. PANNONIAN has the full legal
right, capacity and power required to enter into, execute and deliver
this Agreement and to carry out the transactions contemplated, subject
to approval of the shareholders of PANNONIAN and the terms set forth in
this Agreement. This Agreement has been duly executed and delivered by
PANNONIAN and constitutes the valid and binding obligation of
PANNONIAN, enforceable in accordance with its terms, subject to the
qualification that enforcement of the rights and remedies created
hereby is subject to (a) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights
and remedies of creditors and (b) general principles of equity
(regardless of whether such enforcement is considered in a proceeding
in equity or at law).
3.7 NO CONFLICT. Except as set forth in SECTION 3.7 of the PANNONIAN
Disclosure Schedule and to the knowledge of PANNONIAN, none of the
execution, delivery, or performance of this Agreement does or will: (a)
result in any violation or be in conflict with or constitute a default
under any term or provision of the Articles of Incorporation or bylaws
of PANNONIAN or any term or provision of any judgment, decree, order,
statute, injunction, rule, or regulation applicable to PANNONIAN that
would cause a Material Effect, or of any material note, bond, mortgage,
indenture, lease, license, franchise, agreement, or other instrument or
obligation to which PANNONIAN or is bound that would cause a Material
Effect; (b) result in the creation of any material option, pledge,
security interest, lien, charge, encumbrance, or restriction, whether
imposed by agreement, understanding, law or otherwise, except those
arising under applicable federal or state securities laws (hereinafter
an "ENCUMBRANCE") upon any of the properties or assets of PANNONIAN
pursuant to any such term or provision that would cause a Material
Effect; or (c) constitute a default under, terminate, accelerate, amend
or modify, or give any party the right to terminate, accelerate, amend,
modify, abandon, or refuse to perform or comply with, any material
contract, agreement, arrangement, commitment, or plan to which
PANNONIAN is a party, or by which PANNONIAN or any of its properties or
assets may be subject or bound that would cause a Material Effect.
3.8 CONSENTS AND APPROVALS. No federal, state, or other regulatory
approvals are required to be obtained, nor any regulatory requirements
complied with, by PANNONIAN in connection with the Share Exchange.
3.9 VIOLATION OF LAWS, PERMITS, ETC.
(a) PANNONIAN is not in violation of any term or provision of its
Articles of Incorporation or bylaws, or of any material term
or provision of any judgment, decree, order, statute, law,
injunction, rule, ordinance, or governmental regulation
Share Exchange Agreement - Page 6
that is applicable to it and where the failure to comply with
which would have a Material Effect.
(b) PANNONIAN has maintained in full force and effect all
certificates, licenses, and permits material to the conduct of
its business, and has not received any notification that any
revocation or limitation thereof is threatened or pending.
3.10 BOOKS AND RECORDS. The books and records of PANNONIAN (including,
without limitation, the books of account, minute books, and stock
record books) are complete and correct in all material respects and
have been maintained in accordance with sound business practices. The
minute books of PANNONIAN are complete and current in all material
respects and, as applicable, accurately reflect all actions taken by
the shareholders and the board of directors of PANNONIAN since the date
of inception of PANNONIAN, and all signatures contained therein are the
true signatures of the persons whose signatures they purport to be.
3.11 PANNONIAN FINANCIAL STATEMENTS. The unaudited balance sheet of
PANNONIAN as of September 30, 2002, and the related unaudited statement
of income and statement of cash flows for the nine months then ended,
together with the audited balance sheet of PANNONIAN as of December 31,
2001, and the related audited statements of income and statements of
cash flow for the year ended December 31, 2001 (the "PANNONIAN
FINANCIAL STATEMENTS"), true and complete copies of which have been
delivered to GALAXY, present fairly, in all material respects, the
financial position of PANNONIAN as at such dates and the results of
operations of PANNONIAN for the periods then ended, in accordance with
generally accepted accounting principles ("GAAP") consistently applied
for the periods covered thereby.
3.12 UNDISCLOSED LIABILITIES. To the knowledge of PANNONIAN, PANNONIAN does
not have any material direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility, fixed or
unfixed, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise (all of the
foregoing being collectively referred to as "LIABILITIES" and
individually as a "LIABILITY"), of a kind required by GAAP to be set
forth on a financial statement that is not fully and adequately
reflected or reserved against on the PANNONIAN Financial Statements.
PANNONIAN does not have any Liabilities, whether or not of a kind
required by GAAP to be set forth on a financial statement, other than
(a) Liabilities incurred in the ordinary course of business since the
date of the latest balance sheet included in the PANNONIAN Financial
Statements that are consistent with past practice and are included in
the latest PANNONIAN Financial Statements, (b) Liabilities that are
fully reflected on or reserved against on the latest balance sheet
included in the PANNONIAN Financial Statements, or (c) as specifically
disclosed in the PANNONIAN Financial Statements.
3.13 TITLE TO PROPERTY; ENCUMBRANCES. PANNONIAN has good and indefeasible
title to and other legal right to use all properties and assets, real,
personal and mixed, tangible and intangible, reflected as owned on the
latest balance sheet included in the PANNONIAN Financial Statements or
acquired after the date of such balance sheet, except for properties
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and assets disposed of in accordance with customary practice in the
business or disposed of for full and fair value since the date of such
balance sheet in the ordinary course of business consistent with past
practice and except for matters that would not have a Material Effect.
3.14 TAXES. All returns, reports, information returns, or other documents
(including any related or supporting information) filed or required to
be filed with any federal, state, local, or foreign governmental entity
or others authority in connection with the determination, assessment or
collection of any Tax (whether or not such Tax is imposed on PANNONIAN)
or the administration of any laws, regulations or administrative
requirements relating to any Tax (hereinafter "TAX RETURNS"), reports
and declarations of estimated tax or estimated tax deposit forms
required to be filed by PANNONIAN have been duly and timely filed;
PANNONIAN has paid all taxes, charges, fees, levies or other
assessments imposed by any federal, state, local or foreign taxing
authority, whether disputed or not, including, without limitation,
income, capital, estimated, excise, property, sales, transfer,
withholding, employment, payroll, and franchise taxes and such terms
shall include any interest, penalties or additions attributable to or
imposed on or with respect to such assessments and any expenses
incurred in connection with the settlement of any tax liability
(hereinafter "TAXES") which have become due whether pursuant to such
returns or any assessment received by it or otherwise, and has paid all
installments of estimated Taxes due; and all Taxes which PANNONIAN is
required by law to withhold or to collect have been duly withheld and
collected, and have been paid over to the proper court, tribunal,
arbitrator or any government or political subdivision thereof, whether
federal, state, county, local or foreign, or any agency, authority,
official or instrumentality of any such government or political
subdivision (hereinafter "GOVERNMENTAL OR REGULATORY BODY"). There are
no tax liens upon any of the assets or properties of PANNONIAN except
for any lien, pledge, hypothecation, mortgage, security interest,
claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any member or similar agreement,
encumbrance or any other restriction or limitation whatsoever, other
than (i) materialmen's, mechanics', repairmen's or other like liens
arising in the ordinary course of business for amounts either not yet
due or being contested in good faith and by appropriate proceedings so
long as such proceedings shall not involve any material danger of sale,
forfeiture or loss of any part of the assets and shall have been
disclosed to GALAXY hereunder, or (ii) any lien arising as a result of
any act or omission of GALAXY (hereinafter "LIENS") for Taxes not yet
due. PANNONIAN is not a party to any express tax settlement agreement,
arrangement, policy or guideline, formal or informal (a "SETTLEMENT
AGREEMENT"), and PANNONIAN does not have any obligation to make
payments under any Settlement Agreement.
3.15 LITIGATION.
(a) There is no action, proceeding, investigation, or inquiry
pending or, to the best of PANNONIAN's knowledge, threatened
(i) against or affecting any of PANNONIAN's assets or business
that, if determined adversely to PANNONIAN, would result in a
Material Effect or (ii) that questions this Agreement or any
action contemplated by this Agreement or in connection with
the Share Exchange.
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(b) PANNONIAN has no knowledge of any state of facts or of the
occurrence or nonoccurrence of any event or group of related
events, that should reasonably cause PANNONIAN to determine
that there exists any basis for any material claim against
PANNONIAN for any of the matters described in paragraph (a)
above.
3.16 CONTRACTS AND OTHER AGREEMENTS. PANNONIAN has made available to GALAXY
complete and correct copies of all material written agreements,
contracts, and commitments, together with all amendments thereto, and
accurate (in all material respects) descriptions of all material oral
agreements. Such agreements, contracts, and commitments are in full
force and effect, and, to the best of PANNONIAN's knowledge, all other
parties to such agreements, contracts, and commitments have performed
all obligations required to be performed by them to date thereunder in
all material respects and are not in default thereunder in any material
respect.
3.17 COMPENSATION ARRANGEMENTS; OFFICERS AND DIRECTORS. SECTION 3.17 to the
PANNONIAN Disclosure Schedule sets forth: (a) the names of all present
officers and directors of PANNONIAN and current annual salary,
including any promised, expected or customary bonus or such other
amount, and (b) the names and titles of all directors and officers of
PANNONIAN. PANNONIAN has not made a commitment or agreement (verbally
or in writing) to increase the compensation or to modify the conditions
or terms of employment of any person listed in SECTION 3.18 to the
PANNONIAN Disclosure Schedule. To the knowledge of PANNONIAN, none of
such persons has made a threat to PANNONIAN to terminate such person's
relationship with PANNONIAN.
3.18 ERISA. Except as set forth in SECTION 3.18 to the PANNONIAN Disclosure
Schedule, there are no employee benefit plans as defined in ERISA
("PLANS") maintained for the benefit of, or covering, any employee,
former employee, independent contractor or former independent
contractor of PANNONIAN, or their dependents or their beneficiaries, or
otherwise, now or heretofore contributed to by PANNONIAN, and no such
Plan is or has ever been subject to ERISA.
3.19 OPERATIONS. Except as expressly authorized by this Agreement, and
except as set forth in SECTION 3.19 to the PANNONIAN Disclosure
Schedule, since the date of the latest PANNONIAN Financial Statements,
PANNONIAN has not:
(a) amended its Articles of Incorporation or By-Laws or merged
with or into or consolidated with any other entity, or changed
or agreed to rearrange in any manner the character of the
business of PANNONIAN;
(b) issued, sold or purchased options or rights to subscribe to,
or entered into any contracts or commitments to issue, sell or
purchase, any shares of its capital stock or other equity
interests except in the ordinary course of business and
consistent with past practices;
(c) issued any note, bond or other debt security, created,
incurred or assumed any indebtedness for borrowed money other
than in the ordinary course of business in
Share Exchange Agreement - Page 9
connection with trade payables, or guaranteed any
indebtedness for borrowed money or any capitalized lease
obligation;
(d) declared, set aside or paid any dividends or declared or made
any other distributions of any kind to the shareholders, or
made any direct or indirect redemption, retirement, purchase
or other acquisition of any shares of its capital stock or
other equity interests;
(e) knowingly waived any right of material value to the business
of PANNONIAN;
(f) made any change in its accounting methods or practices or made
any changes in depreciation or amortization policies or rates
adopted by it or made any material write-down of inventory or
material write-off as uncorrectable of accounts receivable;
(g) made any wage or salary increase or other compensation payable
or to become payable or bonus, or increase in any other direct
or indirect compensation, for or to any of its officers,
directors, employees, consultants, agents or other
representatives, or any accrual for or commitment or agreement
to make or pay the same, other than increases made in the
ordinary course consistent with past practice;
(h) entered into any transactions with any of its affiliates,
shareholders, officers, directors, employees, consultants,
agents or other representatives (other than employment
arrangements made in the ordinary course of business
consistent with past practice), or any affiliate of any
shareholder, officer, director, consultant, employee, agent or
other representative;
(i) made any payment or commitment to pay any severance or
termination pay to any person or any of its officers,
directors, employees, consultants, agents or other
representatives, other than payments or commitments to pay
such persons or their officers, directors, employees in the
ordinary course of business;
(j) except in the ordinary course of business, incurred or assumed
any debt, obligation or liability (whether absolute or
contingent and whether or not currently due and payable);
(k) except in the ordinary course of business, made any
acquisition of all or any part of the assets, properties,
capital stock or business of any other person;
(l) except in the ordinary course of business, paid, directly or
indirectly, any of its Liabilities before the same became due
in accordance with their terms or otherwise than in the
ordinary course of business, except to obtain the benefit of
discounts available for early payment;
(m) except in the ordinary course of business, created, incurred
or assumed any indebtedness for borrowed money, or guaranteed
any indebtedness for borrowed
Share Exchange Agreement - Page 10
money or any capitalized lease obligation, in each case in
excess of $50,000 individually or in the aggregate;
(n) except in the ordinary course of business, made any capital
expenditures or commitments for capital expenditures in
aggregate amount exceeding $50,000; or
(o) except in the ordinary course of business, terminated, failed
to renew, amended or entered into any contract or other
agreement of a type required to be disclosed pursuant to
SECTION 3.16.
3.20 LICENSES AND PERMITS. All of the licenses, concessions and permits
issued to PANNONIAN are set forth in SECTION 3.20 of the PANNONIAN
Disclosure Schedule. PANNONIAN has not received any notice of any claim
of revocation of any such licenses, concessions, and permits and has no
knowledge of any event, which would be likely to give rise to such a
claim.
3.21 BROKERS. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out by PANNONIAN
directly with GALAXY without the intervention of any other person on
behalf of PANNONIAN in such manner as to give rise to any valid claim
by any person against PANNONIAN or GALAXY for a finder's fee, brokerage
commission or similar payment.
3.22 DISCLOSURE. To the knowledge of PANNONIAN, neither this Agreement nor
any Schedule to this Agreement, contains an untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GALAXY
Except as expressly set forth and specifically identified by the section number
of this Agreement in the schedule delivered by GALAXY to PANNONIAN
contemporaneously with the execution of this Agreement (the "GALAXY DISCLOSURE
Schedule"), GALAXY represents, warrants, and covenants to PANNONIAN as follows:
4.1 ORGANIZATION AND QUALIFICATION. GALAXY is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Colorado and has all requisite corporate power and authority to (a)
own, lease and operate its properties and assets as they are now owned,
leased and operated and (b) carry on its business as currently
conducted and as proposed to be conducted. GALAXY is duly qualified or
licensed to do business in each jurisdiction in which the failure to be
so qualified or licensed could have a Material Effect.
4.2 CAPITALIZATION. The issued and outstanding capital stock of GALAXY
consists of 31,325,262 shares of common stock, $0.001 par value per
share. All of the issued and outstanding shares of capital stock of
GALAXY are validly issued, fully paid, and nonassessable, and none of
such shares has been issued in violation of the preemptive rights
Share Exchange Agreement - Page 11
of any person. The GALAXY Common Stock shall be validly issued, fully
paid, and nonassessable.
4.3 SUBSIDIARIES AND AFFILIATES. Except as set forth in SECTION 4.3 of the
GALAXY Disclosure Schedule, GALAXY does not own or hold, directly or
indirectly, any equity, debt, or other interest in any entity or
business or any option to acquire any such interest.
4.4 OPTIONS OR OTHER RIGHTS. Except as set forth in SECTION 4.4 of the
GALAXY Disclosure Schedule, no options, warrants, calls, commitments or
other rights to acquire, sell or issue shares of capital stock or other
equity interests of GALAXY whether upon conversion of other securities
or otherwise, are issued or outstanding except as set forth in the
GALAXY Disclosure Schedule, and there is no agreement or understanding
with respect to the voting of such capital stock or other equity
interests.
4.5 VALIDITY AND EXECUTION OF AGREEMENT. GALAXY has the full legal right,
capacity, and power required to enter into, execute, and deliver this
Agreement and to carry out the transactions contemplated, subject to
approval of the shareholders of GALAXY and the terms set forth in this
Agreement. This Agreement has been duly and validly executed on behalf
of GALAXY and is a valid and binding obligation of GALAXY, enforceable
in accordance with its terms, subject to the qualification that
enforcement of the rights and remedies created hereby is subject to (a)
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and
(b) general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
4.6 NO CONFLICT. Except as set forth in SECTION 4.6 of the GALAXY
Disclosure Schedule and to the knowledge of GALAXY, none of the
execution, delivery, or performance of this Agreement does or will: (a)
result in any violation or be in conflict with or constitute a default
under any term or provision of the Articles of Incorporation or bylaws
of GALAXY or any term or provision of any judgment, decree, order,
statute, injunction, rule, or regulation applicable to GALAXY that
would cause a Material Effect, or of any material note, bond, mortgage,
indenture, lease, license, franchise, agreement, or other instrument or
obligation to which GALAXY is bound that would cause a Material Effect;
(b) result in the creation of any Encumbrance upon any of the
properties or assets of GALAXY pursuant to any such term or provision
that would cause a Material Effect; or (c) constitute a default under,
terminate, accelerate, amend or modify, or give any party the right to
terminate, accelerate, amend, modify, abandon, or refuse to perform or
comply with, any material contract, agreement, arrangement, commitment,
or plan to which GALAXY is a party, or by which GALAXY or any of its
properties or assets may be subject or bound that would cause a
Material Effect.
4.7 CONSENTS AND APPROVALS. No federal, state, or other regulatory
approvals are required to be obtained, nor any regulatory requirements
complied with, by GALAXY in connection with the Share Exchange.
Share Exchange Agreement - Page 12
4.8 VIOLATION OF LAWS, PERMITS, ETC.
(a) GALAXY is not in violation of any term or provision of its
Articles of Incorporation or bylaws, or of any material term
or provision of any judgment, decree, order, statute, law,
injunction, rule, ordinance, or governmental regulation that
is applicable to it and where the failure to comply with which
would have a Material Effect.
(b) GALAXY has maintained in full force and effect all
certificates, licenses, and permits material to the conduct of
its business, and has not received any notification that any
revocation or limitation thereof is threatened or pending.
4.9 TAXES. All Tax Returns, reports and declarations of estimated tax or
estimated tax deposit forms required to be filed by GALAXY have been
duly and timely filed; GALAXY has paid all Taxes which have become due
whether pursuant to such returns or any assessment received by it or
otherwise, and has paid all installments of estimated Taxes due; and
all Taxes which GALAXY is required by law to withhold or to collect
have been duly withheld and collected, and have been paid over to the
proper Governmental or Regulatory Body. There are no tax liens upon any
of the assets or properties of GALAXY except for Liens for Taxes not
yet due. GALAXY is not a party to any Settlement Agreement, and GALAXY
does not have any obligation to make payments under any Settlement
Agreement.
4.10 LITIGATION.
(a) There is no action, proceeding, investigation, or inquiry
pending or, to the best of GALAXY's knowledge, threatened (i)
against or affecting any of GALAXY's assets or business that,
if determined adversely to GALAXY, would result in a Material
Effect or (ii) that questions this Agreement or any action
contemplated by this Agreement or in connection with the Share
Exchange.
(b) GALAXY has no knowledge of any state of facts or of the
occurrence or nonoccurrence of any event or group of related
events, that should reasonably cause GALAXY to determine that
there exists any basis for any material claim against GALAXY
for any of the matters described in paragraph (a) above.
4.11 BROKERS. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out by PANNONIAN
directly with GALAXY without the intervention of any other person on
behalf of GALAXY in such manner as to give rise to any valid claim by
any person against PANNONIAN or GALAXY for a finder's fee, brokerage
commission or similar payment.
4.12 APPROVAL OF SHARE EXCHANGE. The board of directors of GALAXY has
approved the Share Exchange without reservation or qualification.
4.13 SEC REPORTING STATUS. GALAXY filed a registration statement under
Section 12(g) of the Securities Exchange Act of 1934 (the "EXCHANGE
ACT") which was declared effective on . Since March 19, 2001, GALAXY
has filed with the Securities and Exchange Commission
Share Exchange Agreement - Page 13
("SEC") all reports required to be filed pursuant to Section 13 of
the Exchange Act. It has not filed a certification on Form 15 pursuant
to Rule 12h-3 of the Exchange Act. To the best knowledge of GALAXY, the
reports filed with the SEC do not contain a material misrepresentation
or omit any material information.
4.14 INVESTMENT COMPANY. GALAXY is not an investment company within the
meaning of Section 3 of the Investment Company Act.
4.15 TRADING STATUS. The GALAXY Common Stock is quoted on the OTC Bulletin
Board under the symbol "GAXI."
4.16 DISCLOSURE. To the knowledge of GALAXY, neither this Agreement nor any
Schedule to this Agreement, contains an untrue statement of a material
fact or omits a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE V
ACTIONS PRIOR TO CLOSING
5.1 CORPORATE EXAMINATIONS AND INVESTIGATIONS. At or prior to the Closing
Date, each of GALAXY and PANNONIAN shall be entitled to make such
investigation of the assets, properties, business and operations of the
other and such examination of the books, records, Tax Returns,
financial condition and operations of the other as each may wish. Any
such investigation and examination shall be conducted at reasonable
times and under reasonable circumstances and GALAXY and PANNONIAN shall
cooperate fully therein. In order that each of GALAXY and PANNONIAN may
have full opportunity to make such a business, accounting and legal
review, examination or investigation as it may wish of the business and
affairs of the other, GALAXY or PANNONIAN, as the case may be, shall
furnish to the other during such period all such information and copies
of such documents concerning its affairs as GALAXY or PANNONIAN may
reasonably request and cause its officers, employees, consultants,
agents, accountants and attorneys to cooperate fully and provide all
material facts affecting its financial condition and business
operations. Until the Closing and if the Closing shall not occur,
thereafter, GALAXY, PANNONIAN, and its respective affiliates shall keep
confidential and shall not use in any manner inconsistent with the
transactions contemplated by this Agreement and after termination of
this Agreement, GALAXY, PANNONIAN, and its respective affiliates shall
not disclose, nor use for their own benefit, any information or
documents obtained from the other concerning its assets, properties,
business and operations, unless (a) readily ascertainable from public
or published information, or trade sources, (b) received from a third
party not under an obligation to GALAXY or PANNONIAN, as the case may
be, to keep such information confidential or (c) required by any Law or
Order. If this transaction does not close for any reason, GALAXY,
PANNONIAN, and its respective affiliates shall return or destroy all
such confidential information and compilations thereof as is
practicable, and shall certify such destruction or return to GALAXY or
PANNONIAN, as the case may be.
Share Exchange Agreement - Page 14
5.2 CONDUCT AND PRESERVATION OF BUSINESS OF GALAXY. From the date hereof
through the Closing Date, GALAXY shall cause its corporate existence
and status as a reporting issuer with the SEC to be continued in the
ordinary course in the same manner as it has been conducted since it
inception. GALAXY covenants that, except with the prior written consent
of PANNONIAN, which consent shall not be unreasonably withheld, GALAXY
will not:
(a) Do any of the restricted acts set forth in SECTION 4.18
hereof, or enter into any agreement of a nature set forth in
SECTION 4.15 hereof; or
(b) Enter into any transaction other than in the ordinary course
of business.
5.3 CONDUCT AND PRESERVATION OF BUSINESS OF PANNONIAN. From the date hereof
through the Closing Date, PANNONIAN shall cause its business to be
conducted in the ordinary course and in the same manner as it has been
conducted since its inception. PANNONIAN covenants that, except with
the prior written consent of GALAXY, which consent shall not be
unreasonably withheld, PANNONIAN will not:
(a) Do any of the restricted acts set forth in SECTION 3.20
hereof, or enter into any agreement of a nature set forth in
SECTION 3.16 hereof; or
(b) Enter into any transaction other than in the ordinary course
of business.
Further, PANNONIAN shall use commercially reasonable efforts to (i)
preserve intact its business, assets, properties and organizations,
(ii) keep available the services of its present officers, employees,
consultants and agents; and (iii) maintain its present suppliers and
customers and preserve its goodwill.
5.4 ADVICE OF CHANGES. PANNONIAN will promptly advise GALAXY in writing
from time to time prior to the Closing with respect to any matter
hereafter arising and known to them that, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in the PANNONIAN Disclosure Schedule or would have resulted
in any representation of PANNONIAN in this Agreement being untrue.
GALAXY will promptly advise PANNONIAN in writing from time to time
prior to the Closing with respect to any matter hereafter arising and
known to it that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in the
GALAXY Disclosure Schedule or would have resulted in any representation
of GALAXY in this Agreement being untrue in any material respect.
5.5 OTC BULLETIN BOARD. GALAXY will use its best efforts to maintain the
listing on the OTC Bulletin Board of the GALAXY Common Stock. GALAXY
shall take the necessary action to notify NASD Regulation of the Share
Exchange in a timely manner.
5.6 SEC REPORTS. GALAXY shall file with the SEC all reports and other
documents that are required by the Exchange Act and the rules and
regulations promulgated thereunder to be filed in connection with this
transactions contemplated by this Agreement.
Share Exchange Agreement - Page 15
5.7 SHAREHOLDER APPROVAL. PANNONIAN shall, as expeditiously as possible,
take all actions necessary to obtain the approval of its shareholders
of the transactions contemplated by this Agreement as required by the
laws of Colorado.
5.8 OTHER AGREEMENTS. PANNONIAN and GALAXY agree to take, or cause to be
taken, all actions and to do, or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by
this Agreement, including, without limitation, the obtaining of all
necessary waivers, consents and approvals and the effecting of all
necessary registrations and filings, including, but not limited to,
submissions of information requested by Governmental or Regulatory
Bodies and any other persons required to be obtained by them for the
consummation of the closing and the continuance in full force and
effect of the permits, contracts and other agreements set forth on the
Schedules to this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GALAXY TO COMPLETE THE
CLOSING. The obligations of GALAXY to enter into and complete the
Closing are subject to the fulfillment of the following conditions, any
one or more of which may be waived by GALAXY:
(a) (i) All of the terms, covenants, and conditions of this
Agreement to be complied with or performed by PANNONIAN at or
before the Closing shall have been duly complied with and
performed in all material respects, (ii) the representations
and warranties of PANNONIAN set forth in Article III shall be
true in all material respects on and as of the Closing Date
with the same force and effect as if such representations and
warranties had been made on and as of the Closing, and (iii)
GALAXY shall have received a certificate to such effect from
PANNONIAN, specifically referencing SECTIONS 3.7 AND 3.8.
(b) All consents, waivers, approvals, licenses, authorizations of,
or filings or declarations with third parties or Governmental
or Regulatory Bodies required to be obtained by PANNONIAN in
order to permit the transactions contemplated by this
Agreement to be consummated in accordance with agreements and
court orders applicable to PANNONIAN and applicable
governmental laws, rules, regulations and agreements shall
have been obtained and any waiting period thereunder shall
have expired or been terminated, and GALAXY shall have
received a certificate from PANNONIAN to such effect.
(c) All actions, proceedings, instruments, and documents in
connection with the consummation of the transactions
contemplated by this Agreement, including the forms of all
documents, legal matters, opinions, and procedures in
connection therewith, shall have been approved in form and
substance by counsel for GALAXY, which approval shall not be
unreasonably withheld.
Share Exchange Agreement - Page 16
(d) PANNONIAN shall have furnished such certificates to evidence
compliance with the conditions set forth in this Article, as
may be reasonably requested by GALAXY or its counsel.
(e) PANNONIAN shall not have suffered any Material Effect.
(f) No material information or data provided or made available to
GALAXY by or on behalf of PANNONIAN shall be incorrect in any
material respect.
(g) No investigation and no suit, action, or proceeding before any
court or any governmental or regulatory authority shall be
pending or threatened by any state or federal governmental or
regulatory authority, against PANNONIAN or any of its
affiliates, associates, officers, or directors seeking to
restrain, prevent, or change in any material respect the
transactions contemplated hereby or seeking damages in
connection with such transactions that are material to
PANNONIAN.
(h) All of the PANNONIAN Shareholders approving the Share Exchange
shall have acknowledged that the shares of GALAXY Common Stock
are restricted securities under the Securities Act and
represent that such PANNONIAN Shareholder (i) is acquiring the
GALAXY Common Stock for his own account without a view to
distribution within the meaning of the Securities Act; (ii)
has received from GALAXY its filings with the Securities and
Exchange Commission and all other information that he has
deemed necessary to make an informed investment decision with
respect to an investment in GALAXY in general and the GALAXY
Common Stock in particular; (iii) is financially able to bear
the economic risks of an investment in GALAXY; and (iv) has
such knowledge and experience in financial and business
matters in general and with respect to investments of a nature
similar to the GALAXY Common Stock so as to be capable, by
reason of such knowledge and experience, of evaluating the
merits and risks of, and making an informed business decision
with regard to, the acquisition of the GALAXY Common Stock.
Such acknowledgment shall also indicate that each PANNONIAN
Shareholder understands and agrees that the certificates
evidencing the GALAXY Common Stock shall bear the usual
restrictive legend pertaining to Rule 144 under the Securities
Act and that the GALAXY Common Stock will not be transferable
except under an effective registration statement under the
Securities Act or in accordance with available exemptions from
registration under the Securities Act.
(i) PANNONIAN shall have received the necessary approvals from at
least 75% of its shareholders to proceed with the transactions
contemplated herein.
(j) PANNONIAN shall have completed an audit of its financial
statements and prepared unaudited financial statements, if
necessary, so as to allow GALAXY to comply with its reporting
requirements to the SEC in connection with the proposed
transaction.
6.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PANNONIAN TO COMPLETE THE
CLOSING. The obligations of PANNONIAN to enter into and complete the
Closing are subject to the
Share Exchange Agreement - Page 17
fulfillment on or prior to the Closing Date, of the following
conditions, any one or more of which may be waived by PANNONIAN:
(a) (i) All of the terms, covenants, and conditions of this
Agreement to be complied with or performed by GALAXY at or
before the Closing shall have been duly complied with and
performed in all material respects, (ii) the representations
and warranties of GALAXY set forth in Article IV shall be true
in all material respects on and as of the Closing Date with
the same force and effect as if such representations and
warranties had been made on and as of the Closing, and (iii)
PANNONIAN shall have received a certificate to such effect
from GALAXY.
(b) All consents, waivers, approvals, licenses, authorizations of,
or filings or declarations with third parties or Governmental
or Regulatory Bodies required to be obtained by GALAXY in
order to permit the transactions contemplated by this
Agreement to be consummated in accordance with agreements and
court orders applicable to GALAXY and applicable governmental
laws, rules, regulations and agreements shall have been
obtained and any waiting period thereunder shall have expired
or been terminated, and PANNONIAN shall have received a
certificate from GALAXY to such effect.
(c) All actions, proceedings, instruments, and documents in
connection with the consummation of the transactions
contemplated by this Agreement, including the forms of all
documents, legal matters, opinions, and procedures in
connection therewith, shall have been approved in form and
substance by counsel for PANNONIAN, which approval shall not
be unreasonably withheld.
(d) GALAXY shall have furnished such certificates to evidence
compliance with the conditions set forth in this Article, as
may be reasonably requested by PANNONIAN or its counsel.
(e) GALAXY shall not have suffered any Material Effect.
(f) No material information or data provided or made available to
PANNONIAN by or on behalf of GALAXY shall be incorrect in any
material respect.
(g) No investigation and no suit, action, or proceeding before any
court or any governmental or regulatory authority shall be
pending or threatened by any state or federal governmental or
regulatory authority, against GALAXY or any of its affiliates,
associates, officers, or directors seeking to restrain,
prevent, or change in any material respect the transactions
contemplated hereby or seeking damages in connection with such
transactions that are material to GALAXY.
(h) The GALAXY Common Stock shall be approved for listing on the
OTC Bulletin Board.
Share Exchange Agreement - Page 18
(i) GALAXY shall satisfy the filing requirements set forth in
Section 13 of the Exchange Act.
(j) PANNONIAN Shareholders holding no more than 5% of the issued
and outstanding PANNONIAN common stock shall have perfected
appraisal rights for their shares in accordance with the
Colorado Law.
ARTICLE VII
POST-CLOSING COVENANTS
The parties covenant to take the following actions after the Closing Date:
7.1 FURTHER INFORMATION. Following the Closing, each party will afford to
the other party, its counsel and its accountants, during normal
business hours, reasonable access to the books, records and other data
of PANNONIAN or GALAXY, as the case may be, relating to the business of
PANNONIAN or GALAXY in their possession with respect to periods prior
to the Closing and the right to make copies and extracts therefrom, to
the extent that such access may be reasonably required by the
requesting party (a) to facilitate the investigation, litigation and
final disposition of any claims which may have been or may be made
against any party or its affiliates and (b) for any other reasonable
business purpose.
7.2 RECORD RETENTION. Each party agrees that for a period of not less than
five years following the Closing Date, such party shall not destroy or
otherwise dispose of any of the Books and Records of PANNONIAN or
GALAXY relating to the business of PANNONIAN or GALAXY in his or its
possession with respect to periods prior to the Closing Date. Each
party shall have the right to destroy all or part of such Books and
Records after the fifth anniversary of the Closing Date or, at an
earlier time by giving each other party hereto 30 days prior written
notice of such intended disposition and by offering to deliver to the
other party or parties, at the other party's or parties' expense,
custody of such Books and Records as such party may intend to destroy.
7.3 POST-CLOSING ASSISTANCE. PANNONIAN and GALAXY will provide each other
with such assistance as may reasonably be requested in connection with
the preparation of any Tax Return, any audit or other examination by
any taxing authority, or any judicial or administrative proceedings
relating to liability for Taxes, and each will retain and provide the
requesting party with any records or information that may be reasonably
relevant to such return, audit or examination, proceedings or
determination. The party requesting assistance shall reimburse the
other party for reasonable out-of-pocket expenses incurred in providing
such assistance. Any information obtained pursuant to this SECTION 7.3
or pursuant to any other Section hereof providing for the sharing of
information or the review of any Tax Return or other schedule relating
to Taxes shall be kept confidential by the parties hereto.
7.4 SEC REPORTING. With a view to making available the benefits of certain
rules and regulations of the SEC which may at any time permit the sale
of the GALAXY Common
Share Exchange Agreement - Page 19
Stock to the public without registration, from and after the Closing,
the new management of GALAXY will:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act,
at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of GALAXY under the Exchange Act; and
(c) continue a listing with a recognized securities manual for a
period of at least three years after the Closing.
ARTICLE VIII
SURVIVAL
8.1 SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES. Notwithstanding
any investigation conducted or notice or knowledge obtained by or on
behalf of any party hereto, each agreement in this Agreement shall
survive the Closing without limitation as to time until fully performed
and each representation and warranty in this Agreement or in the
Schedules or certificates delivered pursuant to this Agreement shall
survive the Closing for a period of two years (other than the
representations and warranties contained in SECTION 3.5 which shall
survive the Closing without limitation as to time, and other than the
representations and warranties contained in SECTION 3.14, which shall
survive the Closing until the earlier of (i) three and one-half years
from the Closing Date and (ii) three years following the date on which
GALAXY files the Tax Return relating to the taxable period from
December 1, 2002 through the Closing Date). Notice must be given to the
party from whom indemnification is sought of any claim for
indemnification under Article VIII prior to the termination of the
relevant survival period.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing as follows:
(a) by mutual written consent of GALAXY and PANNONIAN;
(b) by GALAXY or PANNONIAN by written notice to the other party
hereto, if the Closing shall not have occurred on or prior to
the close of business on May 31, 2003 (unless such event has
been caused by a breach of this Agreement by the party seeking
such termination);
Share Exchange Agreement - Page 20
(c) by GALAXY or by PANNONIAN if a Governmental or Regulatory Body
has permanently enjoined or prohibited consummation of the
Share Exchange and such court or government action is final
and nonappealable;
(d) by GALAXY if PANNONIAN has failed to comply in any material
respect with any of its covenants or agreements under this
Agreement that are required to be complied with prior to the
date of such termination; or
(e) by PANNONIAN if GALAXY has failed to comply in any material
respect with any of its covenants or agreements under this
Agreement that are required to be complied with prior to the
date of such termination.
Should PANNONIAN terminate this Agreement for any reason other than a
default by GALAXY as described in SECTION 9.1(E) hereof, PANNONIAN
shall be liable for all damages caused by the failure to close.
Similarly, if GALAXY should terminate this Agreement for any reason
other than a default by PANNONIAN as described in SECTION 9.1(D)
hereof, GALAXY shall be liable for all damages caused by the failure to
close.
9.2 SURVIVAL AFTER TERMINATION. If this Agreement is terminated pursuant to
SECTION 9.1, (a) this Agreement shall become null and void and of no
further force and effect, except for the provisions of SECTION 5.1
relating to the obligation to keep confidential certain information and
(b) there shall be no liability on the part of PANNONIAN or GALAXY or
their respective affiliates.
ARTICLE X
MISCELLANEOUS
10.1 EXPENSES. GALAXY and PANNONIAN shall each be responsible for its own
legal and accounting fees in connection with the Share Exchange.
10.2 FURTHER ASSURANCES. At any time and from time to time after the Closing
Date at the request of GALAXY, and without further consideration,
PANNONIAN will execute and deliver such other instruments of sale,
transfer, conveyance, assignment and confirmation and take such other
action as GALAXY may reasonably deem necessary or desirable in order to
transfer, convey and assign the Shares to GALAXY and to assist GALAXY
in exercising all rights with respect thereto. The parties shall use
their best efforts to fulfill or obtain the fulfillment of the
conditions to the Closing, including, without limitation, the execution
and delivery of any document or other papers, the execution and
delivery of which are conditions precedent to the Closing.
10.3 NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and
shall be given personally, sent by facsimile transmission or sent by
prepaid air courier or certified or express mail, postage prepaid. Any
such notice shall be deemed to have been given (a) when received, if
delivered in person, sent by facsimile transmission and confirmed in
writing within three (3) business days thereafter or sent by prepaid
air courier or (b) three (3) business days
Share Exchange Agreement - Page 21
following the mailing thereof, if mailed by certified first class
mail, postage prepaid, return receipt requested, in any such case as
follows (or to such other address or addresses as a party may have
advised the other in the manner provided in this SECTION 10.3):
If to PANNONIAN:
Pannonian International, Ltd.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Fails, President
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to GALAXY:
Galaxy Investments, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
503 University Tower
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
10.4 MEDIATION. The parties hereto encourage the prompt and equitable
settlement of all controversies or claims (a "DISPUTE") between or
among the parties and their affiliates including but not limited to
those arising out of or relating to this Agreement or the transactions
contemplated hereby. At any time, either party can give the other
written notice that it desires to settle a Dispute. Within 10 days of
delivery of such notice, the parties agree to cause their officers
having authority to resolve such differences to meet for two out of
four continuous days (the "NEGOTIATION PERIOD"), the parties agree to
submit their Dispute to a mediator to work with them to resolve their
differences. Such mediator shall be selected by mutual agreement of the
parties. The parties shall participate in the mediation proceeding in
good faith with the intention to settle. The mediation shall be
conducted pursuant to the rules generally used by the mediator in the
mediator's practice, which rules may be modified or amended with the
written consent of the parties. No later than three business days prior
to the mediation, each party shall deliver to the mediator all
information reasonably required for the mediator to understand the
Dispute and the issues presented. The mediation shall be
Share Exchange Agreement - Page 22
determined upon the first to occur of the following: (i) by the
execution of a settlement agreement resolving the Dispute by the
parties; (ii) by a written declaration of the mediator to the effect
that further efforts at mediation are no longer worthwhile; or (iii)
after the completion of two full days of mediation effect that
mediation proceedings are terminated. No party shall ▇▇▇ any other
party hereto in connection with any Dispute, except for enforcement of
the negotiation and mediation process set forth herein, and the
arbitration provisions set forth in SECTION 10.5 hereof shall not be
applicable, in each case, prior to termination of the Negotiation
Period and of the mediation as provided above.
10.5 ARBITRATION. Any dispute, controversy, or claim arising out of,
relating to, or in connection with, this Agreement or the agreements or
transactions contemplated by this Agreement shall be finally settled by
binding arbitration. The arbitration shall be conducted and the
arbitrator chosen in accordance with the rule of the American
Arbitration Association in effect at the time of the arbitration,
except as they may be modified herein or by mutual agreement of GALAXY
and PANNONIAN. In connection with any such arbitration, each party
shall be afforded the opportunity to conduct discovery in accordance
with the Federal Rules of Civil Procedure.
(a) The seat of the arbitration shall be in Denver, Colorado. Each
of PANNONIAN and GALAXY hereby irrevocably submits to the
jurisdiction of the arbitrator in Denver, Colorado, and waives
any defense in an arbitration based upon any claim that such
party is not subject personally to the jurisdiction of such
arbitrator, that such arbitration is brought in an
inconvenient format, or that such venue is improper.
(b) The arbitral award shall be in writing and shall be final and
binding on each of the parties to this Agreement. The award
may include an award of costs, including reasonable attorneys'
fees and disbursements. Judgment upon the award may be entered
by any court having jurisdiction thereof or having
jurisdiction over the parties or their assets. PANNONIAN and
GALAXY acknowledge and agree that by agreeing to these
arbitration provisions each of the parties hereto is waiving
any right that such party may have to a jury trial with
respect to the resolution of any dispute under this Agreement
or the agreements or transactions contemplated hereby.
10.6 PUBLICITY. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without
advance approval thereof by GALAXY and PANNONIAN except as may be
required by applicable law or the rules and regulations of the
applicable regulatory authorities.
10.7 ENTIRE AGREEMENT. This Agreement (including the Schedules) and the
agreements, certificates and other documents delivered pursuant to this
Agreement contain the entire agreement among the parties with respect
to the transactions described herein, and supersede all prior
agreements, written or oral, with respect thereto.
10.8 WAIVERS AND AMENDMENTS. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only
by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay
Share Exchange Agreement - Page 23
on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof
10.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without regard to
principles of conflicts of law.
10.10 BINDING EFFECT, NO ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement is not assignable by any party hereto
without the prior written consent of the other parties hereto except by
operation of law and any other purported assignment shall be null and
void.
10.11 COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of
a number of copies hereof each signed by less than all, but together
signed by all of the parties hereto.
10.12 SCHEDULES. The Schedules are a part of this Agreement as if fully set
forth herein. All references herein to Sections, subsections, clauses,
and Schedules shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.
10.13 EFFECT OF DISCLOSURE ON SCHEDULES. Any item disclosed on any Schedule
to this Agreement shall only be deemed to be disclosed in connection
with (a) the specific representation and warranty to which such
Schedule is expressly referenced, (b) any specific representation and
warranty which expressly cross-references such Schedule and (c) any
specific representation and warranty to which any other Schedule to
this Agreement is expressly referenced if such other Schedule expressly
cross-references such Schedule.
10.14 HEADINGS. The headings in this Agreement are for reference only, and
shall not affect the interpretation of this Agreement.
10.15 SEVERABILITY OF PROVISIONS. If any provision or any portion of any
provision of this Agreement or the application of such provision or any
portion thereof to any person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the
remaining provisions of this Agreement, or the application of such
provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby.
Share Exchange Agreement - Page 24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GALAXY:
GALAXY INVESTMENTS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
PANNONIAN:
PANNONIAN INTERNATIONAL, LTD.
By: /s/ ▇▇▇▇▇▇ ▇. FAILS
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. Fails
Title: President
Share Exchange Agreement - Page 25
