AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (the "Plan") is made this 30th day of December,
1997, by and between International Fire Prevention, Inc., a Nevada corporation
("International Fire"); a wholly owned subsidiary to be formed by
International Fire (the "International Fire Subsidiary"); Xxxxxxx
Entertainment Group, Inc., a California corporation ("Xxxxxxx Entertainment");
and Millenium Entertainment Group, Inc., a California corporation, the entity
listed in Exhibit A hereof who is the sole stockholder of Xxxxxxx
Entertainment (the "Xxxxxxx Entertainment Stockholder").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of International Fire
and Xxxxxxx Entertainment have adopted certain resolutions whereby the
International Fire Subsidiary and Xxxxxxx Entertainment will merge in a tax
free "forward triangular merger" pursuant to the provisions of Sections
368(a)(1) and 368(a)(2)(D) of the Internal Revenue Code and the applicable
provisions of the California General Corporation Law, and whereby the Xxxxxxx
Entertainment Stockholder will receive shares of common stock of International
Fire in consideration of such merger; and
WHEREAS, International Fire and Xxxxxxx Entertainment entered
into a Letter of Intent dated October 28, 1997, relating to the merger
described herein. The Letter of Intent contemplates that the parties shall
execute, among other material documents, a definitive agreement; and
WHEREAS, the International Fire Subsidiary will be a newly formed
entity without any liabilities, claims, obligations or encumbrances
whatsoever, and will be a wholly owned subsidiary of International Fire,
authorized to issue one thousand (1000) shares of common stock, no par value
("International Fire Subsidiary Stock"), which shall constitute all of the
issued and outstanding capital stock of the International Fire Subsidiary; and
WHEREAS, Xxxxxxx Entertainment is in the business of providing
satellite communications, television production and closed-circuit television
services in North America; and
WHEREAS, the Xxxxxxx Entertainment Stockholder is the holder of
1,000 shares of common stock, no par value, of Xxxxxxx Entertainment (the
"Xxxxxxx Entertainment Stock"), which constitutes all of the issued and
outstanding capital stock of Xxxxxxx Entertainment; and
WHEREAS, International Fire desires to acquire ownership of
Xxxxxxx Entertainment by: (i) causing the International Fire Subsidiary to
merge into Xxxxxxx Entertainment; and (ii) issuing "unregistered"
and"restricted"
shares of common stock of International Fire in exchange for all of the
Xxxxxxx
Entertainment Stock, all on the basis set forth in more detail in this Plan;
and
WHEREAS, International Fire is a "reporting company" filing
reports with the Securities and Exchange Commission pursuant to Section 15(d)
of the Securities Act of 1934, as amended, and its common stock is qualified
on the National Association of Securities Dealers, Inc. ("NASD") Bulletin
Board trading system under the current symbol of "IFRP." International Fire
does not have nor conduct any operations and has no material assets or
liabilities; and
WHEREAS, the respective Boards of Directors of International Fire,
the International Fire Subsidiary and Xxxxxxx Entertainment deem it desirable
and in the best interest of their respective corporations and stockholders,
that the International Fire Subsidiary merge with and into Xxxxxxx
Entertainment in accordance with the provisions of the California General
Corporation Law ("CGCL"), as a result of which Xxxxxxx Entertainment shall be
the surviving corporation and the Xxxxxxx Entertainment Stockholder shall
receive the total consideration set forth in this Plan;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, the Plan and the terms and conditions hereof
and the mode of carrying the same into effect, together with any provisions
required or permitted to be set forth therein, are hereby determined and
agreed upon as required by the laws of the States of Nevada and California as
follows, to-wit:
Section 1
Plan of Merger
1.1 Merger and Surviving Corporation. The International Fire
Subsidiary will merge into Xxxxxxx Entertainment, with Xxxxxxx Entertainment
being the surviving corporation (the "Surviving Corporation"); the separate
existence of the International Fire Subsidiary shall cease, and the name of
the Surviving Corporation shall remain "Xxxxxxx Entertainment Group, Inc.;
Until amended, modified or otherwise altered, the Articles of Incorporation of
Xxxxxxx Entertainment shall continue to be the Articles of Incorporation of
the Surviving Corporation; and the Bylaws of Xxxxxxx Entertainment shall
continue to be the Bylaws of the Surviving Corporation.
1.2 Share Conversion. Each share of issued, outstanding or
subscribed common stock of Xxxxxxx Entertainment (the "Xxxxxxx Entertainment
Shares") shall, upon the effective date of the Plan, be converted into 4,500
shares of common stock of International Fire, amounting to 4,500,000 shares in
the aggregate, as outlined in Exhibit A; all fractional shares shall be
rounded to the nearest whole share.
1.3 Survivor's Succession to Corporate Rights. The Surviving
Corporation shall thereupon and thereafter possess all the rights, privileges,
powers and franchises as well of a public as of a private nature, and be
subject to all of the restrictions, disabilities and duties of the
International Fire Subsidiary; and all and singular, the rights, privileges,
powers and franchises of the International Fire Subsidiary, and all property,
real, personal and mixed, and all debts due to the International Fire
Subsidiary on whatever account, as well for stock subscriptions as all other
things in action or belonging to the International Fire Subsidiary shall be
vested in the Surviving Corporation; and all property, rights, privileges,
powers and franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of the
International Fire Subsidiary, and the title to any real estate vested by deed
or otherwise in the International Fire Subsidiary shall not revert or be in
any way impaired by reason of the Plan; but all rights of creditors and all
liens upon any property of the International Fire Subsidiary shall be
preserved unimpaired, and all debts, liabilities and duties of the
International Fire Subsidiary shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if said
debts, liabilities and duties had been incurred or contracted by it.
1.4 Survivor's Succession to Corporate Acts, Plans, Contracts,
etc. All corporate acts, plans, policies, contracts, approvals and
authorizations of the International Fire Subsidiary and its stockholders, its
Board of Directors, committees elected or appointed by the Board of Directors,
officers and agents, which were valid and effective immediately prior to the
effective time of the Plan, shall be taken for all purposes as the acts,
plans, policies, contracts, approvals and authorizations of the Surviving
Corporation and shall be as effective and binding thereon as the same were
with respect to the International Fire Subsidiary. The employees of the
International Fire Subsidiary shall become the employees of the Surviving
Corporation and continue to be entitled to the same rights and benefits which
they enjoyed as employees of the International Fire Subsidiary.
1.5 Survivor's Rights to Assets, Liabilities, Reserves, etc.
The assets, liabilities, reserves and accounts of the International Fire
Subsidiary shall be recorded on the books of the Surviving Corporation at the
amounts at which they, respectively, shall then be carried on the books of the
International Fire Subsidiary, subject to such adjustments or eliminations of
intercompany items as may be appropriate in giving effect to the Plan.
1.6 Directors and Executive Officers. On Closing, the present
directors and executive officers of Xxxxxxx Entertainment shall remain as
directors and executive officers of the Surviving Corporation, until the next
respective annual meetings of the stockholders and Board of Directors of the
Surviving Corporation, and until their respective successors shall be elected
and qualified or until their respective prior resignations or terminations.
1.7 Principal Office. The principal executive office of the
Surviving Corporation shall be located at 0000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000.
1.8 Change of Parent's Name. The Articles of Incorporation of
International Fire shall be amended to change its name to one of the
following, with the first being the first choice and the last being the last
choice: "Trident Media Group, Inc."; "Polaris Media Group, Inc."; "Pinnacle
Entertainment Group, Inc."; and "Pinnacle Media Group, Inc."
1.9 Adoption. The Plan shall be adopted by the Board of
Directors of International Fire as the sole stockholder of the International
Fire Subsidiary, the Board of Directors of the International Fire Subsidiary
and by the Board of Directors of Xxxxxxx Entertainment and the Xxxxxxx
Entertainment Stockholder.
1.10 Dissenters' Rights and Notification. As the Plan requires
the affirmative vote of all of the outstanding voting securities of the
International Fire Subsidiary and Xxxxxxx Entertainment, and the Nevada
Revised Statutes do not require a vote of International Fire stockholders,
dissenters' rights are not applicable under the Plan;
1.11 Delivery of Certificates by the Xxxxxxx Entertainment
Stockholder. The transfer of the Xxxxxxx Entertainment Shares by the Xxxxxxx
Entertainment Stockholder shall be effected by the delivery to International
Fire or its transfer agent of certificates representing the Xxxxxxx
Entertainment Shares endorsed in blank or accompanied by stock powers executed
in blank, with all signatures witnessed or guaranteed to the satisfaction of
International Fire and the International Fire Subsidiary and with any
necessary transfer taxes and other revenue stamps affixed (which are usually
not applicable) and acquired at the expense of the Xxxxxxx Entertainment
Stockholder, and on receipt thereof to the satisfaction of the Surviving
Corporation, a stock certificate representing shares in the International Fire
as outlined in Exhibit A shall be issued and delivered to the Xxxxxxx
Entertainment Stockholder; as a condition to the exchange of the Xxxxxxx
Entertainment Shares, International Fire and the Surviving Corporation shall
require the Xxxxxxx Entertainment Stockholder to execute and deliver and
Investment Letter as outlined in Section 4.12 hereof, acknowledging, among
other things, that the shares of International Fire to be received in exchange
for the Xxxxxxx Entertainment Shares are "unregistered" and "restricted"
securities which have not been registered with the Securities and Exchange
Commission or any state regulatory agency, and which must be so registered
prior to public sale by the Xxxxxxx Entertainment Stockholder, unless an
exemption from such registration is available for any such sale.
1.12 Further Assurances. At the Closing and from time to time
thereafter, the parties shall execute such additional instruments and take
such other action as may be reasonably required or necessary to carry out the
terms and provisions hereof.
1.13 Effective Date. The Effective Date of the Plan shall be the
date when the Agreement of Merger required by CGCL Section 1103 is filed and
accepted by the Secretary of State of the State of California and at such time
as all applicable provisions of the CGCL are met.
Section 2
Closing
The Closing contemplated by Section 1.1 shall be held at the
principal executive offices of the Surviving Corporation as outlined in
Section 1.7 hereof, not later than ten days following the date of this Plan,
unless another place or time is agreed upon in writing by the parties. The
Closing may be accomplished by wire, express mail or other courier service,
conference telephone communications or as otherwise agreed by the respective
parties or their duly authorized representatives.
Section 3
Representations and Warranties of International Fire and the International
Fire Subsidiary
International Fire and the International Fire Subsidiary represent
and warrant to, and covenant with, the Xxxxxxx Entertainment Stockholder and
Xxxxxxx Entertainment as follows:
3.1 Corporate Status. International Fire is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Nevada and is licensed or qualified as a foreign corporation in all states
in which the nature of its business or the character or ownership of its
properties makes such licensing or qualification necessary. International
Fire is a publicly held company, having previously and lawfully offered and
sold a portion of its securities in accordance with applicable federal and
state securities laws, rules and regulations. There is presently no public
market for these or any other securities of International Fire, though the
shares of common stock of International Fire are currently quoted on the OTC
Bulletin Board of the NASD under the Symbol "IFRP."
The International Fire Subsidiary will be organized under the laws
of the State of California immediately following the execution and delivery of
this Plan, by the filing of the Articles of Incorporation attached hereto as
Exhibit B.
3.2 Capitalization. The authorized capital stock of
International Fire consists of 100,000,000 shares of common stock, having a
par value of $0.001 per share. As of the date of this Plan, 1,500,000 shares
of common stock were issued and outstanding, all duly authorized, validly
issued, fully paid and non-assessable and were not issued in violation of the
preemptive rights, or any other rights, of any person. The International Fire
common stock to be issued pursuant to this Plan, when issued in accordance
with the terms of this Plan, shall be duly authorized, validly issued, fully
paid and non-assessable. As of the date of this Plan, there are no
outstanding rights, subscriptions, warrants, puts, calls, unsatisfied
preemptive rights, conversion rights, option or other agreements of any kind
relating to any of the outstanding authorized but unissued, unauthorized or
treasury shares of the capital stock or any other security of International
Fire or the International Fire Subsidiary and there are no authorized or
outstanding securities convertible into, or exchangeable for, any such capital
stock or other security of International Fire or the International Fire
Subsidiary, as the case may be.
The capitalization of the International Fire Subsidiary shall be
as set forth in Exhibit B, and except as provided in this Plan, there are no
outstanding options, warrants or calls pursuant to which any person has the
right to purchase any authorized and unissued capital stock of the
International Fire Subsidiary.
3.3 Financial Statements. The financial statements of
International Fire furnished to the Xxxxxxx Entertainment Stockholder and
Xxxxxxx Entertainment, consisting of audited financial statements for the
periods ended December 31, 1996 and 1995, attached hereto as Exhibit C and
incorporated herein by reference, and unaudited financial statements for the
period ended September 30, 1997, attached hereto as Exhibit C-1 and
incorporated herein by reference, are correct and fairly present the financial
condition of International Fire at such dates and for the periods involved;
such statements were prepared in accordance with generally accepted accounting
principles consistently applied, and no material change has occurred in the
matters disclosed therein, except as indicated in Exhibit D, which is attached
hereto and incorporated herein by reference. Such financial statements do not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. International Fire
represents and warrants that, as of Closing, all existing liabilities shall be
paid and/or extinguished and that any and all current shareholder equity or
other deficits shall be resolved to a zero balance and that as of Closing,
there shall be no impact upon Xxxxxxx in a consolidated financial
presentation.
3.4 Undisclosed Liabilities. International Fire has no
liabilities of any nature except to the extent reflected or reserved against
in its balance sheet, whether accrued, absolute, contingent or otherwise,
including, without limitation, tax liabilities and interest due or to become
due, except as set forth in Exhibit D.
3.5 Interim Changes. Since the date of its balance sheet,
except as set forth in Exhibit D, there have been no (1) changes in financial
condition, assets, liabilities or business of International Fire which, in the
aggregate, have been materially adverse; (2) damages, destruction or losses of
or to property of International Fire, payments of any dividend or other
distribution in respect of any class of stock of International Fire, or any
direct or indirect redemption, purchase or other acquisition of any class of
any such stock; or (3) increases paid or agreed to in the compensation,
retirement benefits or other commitments to employees.
3.6 Title to Property. International Fire has good and
marketable title to all properties and assets, real and personal, reflected in
its balance sheet, and the properties and assets of International Fire are
subject to no mortgage, pledge, lien or encumbrance, except for liens shown
therein or in Exhibit D, with respect to which no default exists.
3.7 Litigation. There is no litigation or proceeding pending,
or to the knowledge of International Fire, threatened, against or relating to
International Fire, its properties or business, except as set forth in Exhibit
D. Further, no officer, director or person who may be deemed to be an
affiliate of International Fire is party to any material legal proceeding
which could have an adverse effect on the Company (financial or otherwise),
and none is party to any action or proceeding wherein any has an interest
adverse to International Fire.
3.8 Books and Records. From the date of this Plan to the
Closing, International Fire will (1) give to the Xxxxxxx Entertainment
Stockholder and Xxxxxxx Entertainment or their respective representatives full
access during normal business hours to all of its offices, books, records,
contracts and other corporate documents and properties so that the Xxxxxxx
Entertainment Stockholder and Xxxxxxx Entertainment or their respective
representatives may inspect and audit them; and (2) furnish such information
concerning the properties and affairs of International Fire as the Xxxxxxx
Entertainment Stockholder and Xxxxxxx Entertainment or their respective
representatives may reasonably request.
3.9 Tax Returns. International Fire has filed all federal and
state income or franchise tax returns required to be filed or has received
currently effective extensions of the required filing dates. International
Fire shall also fully and timely cooperate with Xxxxxxx in the preparation of
any and all federal and state income or franchise tax returns including the
coordination of its current auditors and access and use of records required by
Xxxxxxx.
3.10 Confidentiality. Until the Closing (and thereafter if there
is no Closing), International Fire and its representatives will keep
confidential any information which they obtain from the Xxxxxxx Entertainment
Stockholder or from Xxxxxxx Entertainment concerning the properties, assets
and business of Xxxxxxx Entertainment. If the transactions contemplated by
this Plan are not consummated by December 31, 1997, International Fire will
return to Xxxxxxx Entertainment all written matter with respect to Xxxxxxx
Entertainment obtained by International Fire in connection with the
negotiation or consummation of this Plan.
3.11 Corporate Authority. International Fire has full corporate
power and authority to enter into this Plan and to carry out its obligations
hereunder and will deliver to the Xxxxxxx Entertainment Stockholder and
Xxxxxxx Entertainment or their respective representatives at the Closing a
certified copy of resolutions of its Board of Directors authorizing execution
of this Plan by its officers and performance thereunder.
3.12 Due Authorization. The execution of this Plan and
performance by International Fire hereunder has been duly authorized by all
requisite corporate action on the part of International Fire, and this Plan
constitutes a valid and binding obligation of International Fire and
performance hereunder will not violate any provision of the Articles of
Incorporation, Bylaws, agreements, mortgages or other commitments of
International Fire.
3.13 Environmental Matters. International Fire has no knowledge
of any assertion by any governmental agency or other regulatory authority of
any environmental lien, action or proceeding, or of any cause for any such
lien, action or proceeding related to the business operations of International
Fire. In addition, to the best knowledge of International Fire, there are no
substances, past operations, products or conditions which may support a claim
or cause of action against International Fire or any of its current or former
officers, directors, agents or employees, whether by a governmental agency or
body, private party or individual, under any Hazardous Materials Regulations.
"Hazardous Materials" means any oil or petrochemical products, PCB's,
asbestos, urea formaldehyde, flammable explosives, radioactive materials,
solid or hazardous wastes, chemicals, toxic substances or related materials,
including, without limitation, any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," or "toxic substances" under any applicable federal or state laws
or regulations. "Hazardous Materials Regulations" means any regulations
governing the use, generation, handling, storage, treatment, disposal or
release of hazardous materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act and the Federal Water Pollution Control
Act.
3.14 Access to Information Regarding Xxxxxxx Entertainment.
International Fire and the International Fire Subsidiary acknowledge
that they have been delivered copies of what has been represented to be
documentation containing all material information respecting Xxxxxxx
Entertainment and its present and contemplated business operations, potential
acquisitions, management and other factors; that they have had a reasonable
opportunity to review such documentation and discuss it, to the extent
desired, with their legal counsel, directors and executive officers; that they
have had, to the extent desired, the opportunity to ask questions of and
receive responses from the directors and executive officers of Xxxxxxx
Entertainment, and with the legal and accounting firms of Xxxxxxx
Entertainment, with respect to such documentation; and that to the extent
requested, all questions raised have been answered to their complete
satisfaction.
3.15 Governmental Approval; Consents. Except as set forth in
Section 1.13 as to filing of documents under the CGCL, and except for the
reports required to be filed in the future by International Fire pursuant to
Section 15(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and under the Securities Act of 1933, as amended (the "1933 Act"), with
the Securities and Exchange Commission or any national securities exchange, no
authorization, license, permit, franchise, approval, order or consent of, and
no registration, declaration or filing by International Fire or the
International Fire Subsidiary with any governmental authority, domestic or
foreign, federal, state or local, is required in connection with International
Fire's or the International Fire Subsidiary's execution, delivery and
performance of this Plan or the consummation of the transactions contemplated
hereby or thereby. No consents of any other parties are required to be
received by or on the part of International Fire or the International Fire
Subsidiary to enable International Fire or the International Fire Subsidiary
to enter into and carry out this Plan.
3.16 Securities and Exchange Commission Reports. International
Fire has delivered to Xxxxxxx Entertainment true and complete copies of all
the documents filed by International Fire with the Securities and Exchange
Commission (sometimes called the "SEC Reports"), and has filed all reports,
registrations and other documents, together with any amendments thereto,
required to be filed under the 1933 Act and the 1934 Act. As of their
respective dates, the International Fire SEC Reports complied in all respects
with the requirements of the 1933 Act and the 1934 Act, and none of the SEC
Reports contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. As of the date of this Plan, there is no litigation
pending, or to the knowledge of International Fire, threatened against
International Fire or any of its subsidiaries, any officer, director, employee
or agent thereof.
3.17 No Conflict. The making, performance, execution and
delivery of this Plan, the merger and the consummation of the transactions
contemplated hereby shall not: (i) conflict with the Certificate of
Incorporation or the Bylaws of International Fire or the Articles of
Incorporation or the Bylaws of the International Fire Subsidiary; (ii) violate
any laws, ordinances, rules or regulations or any order, writ, injunction or
decree to which International Fire or the International Fire Subsidiary are
party or by which International Fire or the International Fire Subsidiary or
any of their material assets, business or operations may be bound or affected;
or (iii) result in any breach or termination of, or constitute a material
default under, or constitute an event which, with notice or lapse of time or
both, would become a default under or result in the creation of any
encumbrance upon any material assets of International Fire or the
International Fire Subsidiary under, or create any rights of termination,
cancellation or acceleration in any person under any material agreement,
arrangement or commitment.
3.18 Compliance with Laws and Regulations. International Fire
and the International Fire Subsidiary have complied and are presently
complying, in all material respects, with all laws, rules, regulations, orders
and requirements (federal, state, local and foreign) applicable to them in all
jurisdictions where the business of International Fire and the International
Fire Subsidiary is conducted or to which International Fire is subject,
including, without limitation, all applicable federal and state securities
laws, communications laws, civil rights and equal opportunity employment laws
and regulations, and all antitrust, antimonopolies and fair trade practice
laws. International Fire and the International Fire Subsidiary do not know of
any assertion by any party that International Fire or the International Fire
Subsidiary are in violation in any material respect of any such laws, rules,
regulations, orders, restrictions or requirements with respect to their
operations and no notice in that regard has been received by International
Fire or the International Fire Subsidiary which would have a material adverse
effect on International Fire or the International Fire Subsidiary.
3.19 No Omission or Untrue Statement. No representation or
warranty made by International Fire or the International Fire Subsidiary to
Xxxxxxx Entertainment in this Plan, or in any certificate of an International
Fire officer required to be delivered to Xxxxxxx Entertainment pursuant to the
terms of this Plan, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading as of the date
hereof and as of the Closing.
3.20 No Adverse Actions. As of the date of this Plan, there is
no existing, pending or to the knowledge of International Fire and the
International Fire Subsidiary, threatened termination, cancellation,
limitation, modification or change in the business relationship of
International Fire or the International Fire Subsidiary. Neither
International Fire nor any of its subsidiaries, or to the knowledge of
International Fire, any director, officer, agent, employee or other person
acting on behalf of any of the foregoing has used any corporate funds for
unlawful contributions, payments, gifts, entertainment or other unlawful
expenses.
3.21 Labor and Employment Agreements.
(a) There are none of the following to which International
Fire or the International Fire Subsidiary are party, to-wit:
(i) Collective bargaining agreements or labor
or employment agreements;
(ii) Employment, profit sharing, deferred
compensation, bonus, pension, retainer,
consulting, retirement, health, welfare, or
incentive plans or agreements;
(iii) Plans or agreements under which "fringe
benefits" (including, without limitation,
vacation plans or programs, sick leave
plans or programs, dental or medical plans
or programs and related or similar
benefits) are afforded to employees of
International Fire or the International
Fire Subsidiary;
(iv) Informal arrangements or understandings for
the payment of post-retirement benefits;
and
(v) There are no employees or agents of or
consultants to International Fire or the
International Fire Subsidiary who since
January 1, 1995, was or is being paid
$20,000 or more per year or $2,000 per
month.
(b) No material organization effort, and no sex
discrimination, racial discrimination, age discrimination or other employment-
related allegation, claim, suit or proceeding, has been made or is pending
with respect to the employees of International Fire and to International
Fire's knowledge, no such effort, allegation, claim, suit or proceeding has
been made, raised or brought prior to the date of this Agreement.
(c) All reasonably anticipated material obligations of
International Fire, whether arising by operation of law, contract, past custom
or otherwise, for unemployment compensation benefits, pension benefits,
advances, salaries, bonuses, vacation and holiday pay, sick leave and other
forms of compensation payable to the employees or agents of International Fire
in respect of the services rendered by any of them on or prior to the date of
the financial statements attached hereto as Exhibits C and C-1, respectively,
have been paid or adequate accruals therefor have been made in the
consolidated books and records of International Fire and in the financial
statements attached hereto as Exhibits C and C-1, as the case may be. All
such material obligations in respect of services rendered on or prior to the
date hereof have been paid as of the date hereof or adequate accruals therefor
have been made. All accrued material obligations of International Fire
applicable to its employees, whether arising by operation of law, contract,
past custom or otherwise, for payments to trusts or other funds or to any
governmental entity with respect to unemployment compensation benefits, social
security benefits or any other benefits for employees, with respect to
employment of said employees through the date of the financial statements
attached hereto as Exhibits C and C-1, respectively, have been paid or
adequate accruals have been made therefor.
3.23 Business Locations. International Fire does not own or
lease any real or personal property in any state or country. International
Fire has no executive offices or places of business except the one of the
President's residence, which is without charge.
Section 4
Representations, Warranties and Covenants of Xxxxxxx Entertainment
and the Xxxxxxx Entertainment Stockholder
Xxxxxxx Entertainment and the Xxxxxxx Entertainment Stockholder
represent and warrant to, and covenant with, International Fire and the
International Fire Subsidiary as follows:
4.1 Xxxxxxx Entertainment Shares. The Xxxxxxx Entertainment
Stockholder is the record and beneficial owner of all of the Xxxxxxx
Entertainment Shares listed in Exhibit A, free and clear of adverse claims of
third parties; and Exhibit A correctly sets forth the name, address and the
number of Xxxxxxx Entertainment Shares owned by the Xxxxxxx Entertainment
Stockholder.
4.2 Corporate Status. Xxxxxxx Entertainment is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and is licensed or qualified as a foreign corporation in
all states in which the nature of its business or the character or ownership
of its properties makes such licensing or qualification necessary.
4.3 Capitalization. The authorized capital stock of Xxxxxxx
Entertainment consists of 100,000 shares of common voting stock, no par value,
of which 1,000 shares are issued and outstanding, all fully paid and non-
assessable. Except outstanding warrants issued to its Senior Lending
Institution and options accrued to certain of its Senior Executives, there are
no outstanding options, warrants or calls pursuant to which any person has the
right to purchase any authorized and unissued capital stock of Xxxxxxx
Entertainment.
4.4 Financial Statements. The financial statements of Xxxxxxx
Entertainment furnished to International Fire, consisting of audited financial
statements for the periods ended December 31, 1996 and 1995, attached hereto
as Exhibit E, and incorporated herein by reference, are correct and fairly
present the financial condition of Xxxxxxx Entertainment as of these dates and
for the periods involved, and such statements were prepared in accordance with
generally accepted accounting principles consistently applied. These
financial statements do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not misleading.
4.5 Undisclosed Liabilities. Xxxxxxx Entertainment has no
material liabilities of any nature except to the extent reflected or reserved
against in the balance sheets, whether accrued, absolute, contingent or
otherwise, including, without limitation, tax liabilities and interest due or
to become due, except as set forth in Exhibit F attached hereto and
incorporated herein by reference.
4.6 Interim Changes. Since the date of these balance sheets,
except as set forth in Exhibit F, there have been no (1) changes in the
financial condition, assets, liabilities or business of Xxxxxxx Entertainment,
in the aggregate, have been materially adverse; (2) damages, destruction or
loss of or to the property of Xxxxxxx Entertainment, payment of any dividend
or other distribution in respect of the capital stock of Xxxxxxx
Entertainment, or any direct or indirect redemption, purchase or other
acquisition of any such stock; or (3) increases paid or agreed to in the
compensation, retirement benefits or other commitments to their employees.
4.7 Title to Property. Xxxxxxx Entertainment has good and
marketable title to all properties and assets, real and personal, proprietary
or otherwise, reflected in these balance sheets, and the properties and assets
of Xxxxxxx Entertainment are subject to no mortgage, pledge, lien or
encumbrance, except as reflected in the balance sheet or in Exhibit F, with
respect to which no default exists.
4.8 Litigation. There is no litigation or proceeding pending,
or to the knowledge of Xxxxxxx Entertainment, threatened, against or relating
to Xxxxxxx Entertainment or its properties or business, except as set forth in
Exhibit F. Further, no officer, director or person who may be deemed to be an
affiliate of Xxxxxxx Entertainment is party to any material legal proceeding
which could have an adverse effect on Xxxxxxx Entertainment (financial or
otherwise), and none is party to any action or proceeding wherein any has an
interest adverse to Xxxxxxx Entertainment.
4.9 Books and Records. From the date of this Plan to the
Closing, the Xxxxxxx Entertainment Stockholder will cause Xxxxxxx
Entertainment to (1) give to International Fire and its representatives full
access during normal business hours to all of its offices, books, records,
contracts and other corporate documents and properties so that International
Fire may inspect and audit them; and (2) furnish such information concerning
the properties and affairs of Xxxxxxx Entertainment as International Fire may
reasonably request.
4.10 Tax Returns. Xxxxxxx Entertainment has filed all federal
and state income or franchise tax returns required to be filed or has received
currently effective extensions of the required filing dates.
4.11 Confidentiality. Until the Closing (and continuously if
there is no Closing), Xxxxxxx Entertainment, the Xxxxxxx Entertainment
Stockholder and their representatives will keep confidential any information
which they obtain from International Fire concerning its properties, assets
and business. If the transactions contemplated by this Plan are not
consummated by December 31, 1997, Xxxxxxx Entertainment, the Xxxxxxx
Entertainment Stockholder will return to International Fire all written matter
with respect to International Fire obtained by them in connection with the
negotiation or consummation of this Plan.
4.12 Investment Intent. The Xxxxxxx Entertainment Stockholder is
acquiring the shares to be exchanged and delivered to it under this Plan for
investment and not with a view to the sale or distribution thereof, and the
Xxxxxxx Entertainment Stockholder has no commitment or present intention to
liquidate the Company or to sell or otherwise dispose of the International
Fire shares. The Xxxxxxx Entertainment Stockholder shall execute and deliver
to International Fire on the Closing an Investment Letter attached hereto as
Exhibit G and incorporated herein by reference, acknowledging the
"unregistered" and "restricted" nature of the shares of International Fire
being received under the Plan in exchange for the Xxxxxxx Entertainment
Shares, and receipt of certain material information regarding International
Fire.
4.13 Corporate Authority. Xxxxxxx Entertainment has full
corporate power and authority to enter into this Plan and to carry out its
obligations hereunder and will deliver to International Fire or its
representative at the Closing a certified copy of resolutions of its Board of
Directors authorizing execution of this Plan by its officers and performance
thereunder.
4.14 Due Authorization. Execution of this Plan and performance
by Xxxxxxx Entertainment hereunder have been duly authorized by all requisite
corporate action on the part of Xxxxxxx Entertainment, and this Plan
constitutes a valid and binding obligation of Xxxxxxx Entertainment and
performance hereunder will not violate any provision of the Articles of
Incorporation, Bylaws, agreements, mortgages or other commitments of Xxxxxxx
Entertainment.
4.15 Environmental Matters. Xxxxxxx Entertainment and the
Xxxxxxx Entertainment Stockholder have no knowledge of any assertion by any
governmental agency or other regulatory authority of any environmental lien,
action or proceeding, or of any cause for any such lien, action or proceeding
related to the business operations of Xxxxxxx Entertainment or its
predecessors. In addition, to the best knowledge of Xxxxxxx Entertainment,
there are no substances or conditions which may support a claim or cause of
action against Xxxxxxx Entertainment or any of its current or former officers,
directors, agents, employees or predecessors, whether by a governmental agency
or body, private party or individual, under any Hazardous Materials
Regulations. "Hazardous Materials" means any oil or petrochemical products,
PCB's, asbestos, urea formaldehyde, flammable explosives, radioactive
materials, solid or hazardous wastes, chemicals, toxic substances or related
materials, including, without limitation, any substances defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," or "toxic substances" under any applicable federal or
state laws or regulations. "Hazardous Materials Regulations" means any
regulations governing the use, generation, handling, storage, treatment,
disposal or release of hazardous materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act and the Federal Water Pollution Control
Act.
4.16 Access to Information Regarding International Fire.
Xxxxxxx Entertainment and the Xxxxxxx Entertainment Stockholder acknowledge
that they have been delivered copies of what has been represented to be
documentation containing all material information respecting International
Fire
and its present and contemplated business operations, potential acquisitions,
management and other factors; that they have had a reasonable opportunity to
review such documentation and discuss it, to the extent desired, with their
legal counsel, directors and executive officers; that they have had, to the
extent desired, the opportunity to ask questions of and receive responses from
the directors and executive officers of International Fire, and with the legal
and accounting firms of International Fire, with respect to such
documentation; and that to the extent requested, all questions raised have
been answered to their complete satisfaction.
4.17 Governmental Approval; Consents. Except as set forth in
Section 1.13 as to filing of documents under the CGCL, no authorization,
license, permit, franchise, approval, order or consent of, and no
registration, declaration or filing by Xxxxxxx Entertainment or the Xxxxxxx
Entertainment Stockholder with any governmental authority, domestic or
foreign, federal, state or local, is required in connection with execution,
delivery and performance of this Plan or the consummation of the transactions
contemplated hereby or thereby. No consents of any other parties are required
to be received by or on the part of Xxxxxxx Entertainment or the Xxxxxxx
Entertainment Stockholder to enable Xxxxxxx Entertainment or the Xxxxxxx
Entertainment Stockholder to enter into and carry out this Plan.
4.18 No Conflict. The making, performance, execution and
delivery of this Plan, the merger and the consummation of the transactions
contemplated hereby shall not: (i) conflict with the Certificate of
Incorporation or the Bylaws of Xxxxxxx Entertainment or the Xxxxxxx
Entertainment Stockholder; (ii) violate any laws, ordinances, rules or
regulations or any order, writ, injunction or decree to which Xxxxxxx
Entertainment or the Xxxxxxx Entertainment Stockholder are party or by which
Xxxxxxx Entertainment or any of its material assets, business or operations
may be bound or affected; or (iii) result in any breach or termination of, or
constitute a material default under, or constitute an event which, with notice
or lapse of time or both, would become a default under or result in the
creation of any encumbrance upon any material assets of Xxxxxxx Entertainment
under, or create any rights of termination, cancellation or acceleration in
any person under any material agreement, arrangement or commitment.
4.19 Compliance with Laws and Regulations. Xxxxxxx
Entertainment has complied and is presently complying, in all material
respects, with all laws, rules, regulations, orders and requirements (federal,
state, local and foreign) applicable to it in all jurisdictions where the
business of Xxxxxxx Entertainment is conducted or to which Xxxxxxx
Entertainment is subject, including, without limitation, all applicable
federal and state securities laws, communications laws, civil rights and equal
opportunity employment laws and regulations, and all antitrust, antimonopolies
and fair trade practice laws. It does not know of any assertion by any party
that Xxxxxxx Entertainment is in violation in any material respect of any such
laws, rules, regulations, orders, restrictions or requirements with respect to
its operations and no notice in that regard has been received by Xxxxxxx
Entertainment which would have a material adverse effect on Xxxxxxx
Entertainment.
4.20 No Omission or Untrue Statement. No representation or
warranty made by Xxxxxxx Entertainment or the Xxxxxxx Entertainment
Stockholder to International Fire in this Plan, or in any certificate of a
Xxxxxxx Entertainment or the Xxxxxxx Entertainment Subsidiary officer required
to be delivered to International Fire pursuant to the terms of this Plan,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading as of the date hereof and as of the Closing.
4.21 No Adverse Actions. As of the date of this Plan, there is
no existing, pending or to the knowledge of Xxxxxxx Entertainment, threatened
termination, cancellation, limitation, modification or change in the business
relationship of Xxxxxxx Entertainment. Neither Xxxxxxx Entertainment nor any
of its subsidiaries, or to the knowledge of Xxxxxxx Entertainment, any
director, officer, agent, employee or other person acting on behalf of any of
the foregoing has used any corporate funds for unlawful contributions,
payments, gifts, entertainment or other unlawful expenses.
Section 5
Conduct of Xxxxxxx Entertainment Pending the Closing
Except as otherwise provided herein, Xxxxxxx Entertainment agrees
that it will conduct itself in the following manner pending the Closing:
5.1 Certificate of Incorporation and Bylaws. No change will be
made in the Certificate of Incorporation or Bylaws of Xxxxxxx Entertainment.
5.2 Capitalization, etc. Xxxxxxx Entertainment will not make
any change in its authorized or issued shares of any class, declare or pay any
dividend or other distribution, or issue, encumber, purchase or otherwise
acquire any of its shares of any class.
5.3 Conduct of Business. Xxxxxxx Entertainment will use its
best efforts to maintain and preserve its business organization, employee
relationships and good will intact, and will not, without the written consent
of International Fire, enter into any material commitments except in the
ordinary course of business.
Section 6
Conduct of International Fire and the International Fire Subsidiary Pending
the Closing
Except as otherwise provided herein, International Fire and the
International Fire Subsidiary agree that International Fire will conduct
itself in the following manner pending the Closing:
6.1 Certificate of Incorporation and Bylaws. No change will be
made in the Certificate of Incorporation or Bylaws of International Fire.
6.2 Capitalization, etc. International Fire will not make any
change in its authorized or issued shares, declare or pay any dividend or
other distribution, or issue, encumber, purchase or otherwise acquire any of
its shares of any class.
6.3 Conduct of Business. International Fire will use its best
efforts to maintain and preserve its business organization, employee
relationships and good will intact, and will not, without the written consent
of Xxxxxxx Entertainment and the Xxxxxxx Entertainment Stockholder, enter into
any material commitments except in the ordinary course of business.
Section 7
Conditions Precedent to Obligations of International Fire and the
International Fire Subsidiary
All obligations of International Fire and the International Fire
Subsidiary under this Plan are subject, at its option, to the fulfillment,
before or at the Closing, of each of the following conditions:
7.1 Representations and Warranties True at Closing. The
representations and warranties of Xxxxxxx Entertainment and the Xxxxxxx
Entertainment Stockholder contained in this Plan shall be deemed to have been
made again at and as of the Closing and shall then be true in all material
respects and shall survive the Closing.
7.2 Due Performance. Xxxxxxx Entertainment and the Xxxxxxx
Entertainment Stockholder shall have performed and complied with all of the
terms and conditions required by this Plan to be performed or complied with by
them before the Closing.
7.3 Officer's and Stockholder's Certificate. International Fire
shall have been furnished with a certificate signed by the President of
Xxxxxxx Entertainment and by the President of the Xxxxxxx Entertainment
Stockholder, attached hereto as Exhibit I and incorporated herein by
reference, dated as of the Closing, certifying (1) that all representations
and warranties of Xxxxxxx Entertainment and the Xxxxxxx Entertainment
Stockholder contained herein are true and correct; and (2) that since the date
of the financial statements (Exhibit D), there has been no material adverse
change in the financial condition, business or properties of Xxxxxxx
Entertainment, taken as a whole.
7.4 Opinion of Counsel of Xxxxxxx Entertainment. International
Fire shall have received an opinion of counsel for Xxxxxxx Entertainment,
dated as of the Closing, to the effect that (1) the representations of
Sections 4.2, 4.3 and 4.13 are correct; (2) except as specified in the
opinion, counsel knows of no inaccuracy in the representations in 4.6, 4.7 or
4.8; (3) the Xxxxxxx Entertainment Shares to be delivered to International
Fire under this Plan will, when so delivered, have been validly issued, fully
paid and non-assessable.
7.5 Books and Records. The Xxxxxxx Entertainment Stockholder or
the Board of Directors of Xxxxxxx Entertainment shall have caused Xxxxxxx
Entertainment to make available all books and records of Xxxxxxx
Entertainment, including minute books and stock transfer records; provided,
however, only to the extent requested in writing by International Fire at
Closing.
7.6 Acceptance by Xxxxxxx Entertainment Stockholder. The terms
of this Plan shall have been accepted by the Xxxxxxx Entertainment
Stockholder, who is the sole stockholder of Xxxxxxx Entertainment, by its
execution and delivery of a copy of the Plan and related instruments.
7.7 Warrants. International Fire shall have granted the
warrants (the "Warrants") attached hereto as Exhibits K-1 and K-2 and
incorporated herein by reference.
7.8 Debenture. International Fire shall have issued the
debenture (the "Debenture") attached hereto as Exhibit L and incorporated
herein by reference.
Section 8
Conditions Precedent to Obligations of the Xxxxxxx Entertainment Stockholder
and Xxxxxxx Entertainment
All obligations of Xxxxxxx Entertainment and the Xxxxxxx
Entertainment Stockholder under this Plan are subject, at their option, to the
fulfillment, before or at the Closing, of each of the following conditions:
8.1 Representations and Warranties True at Closing. The
representations and warranties of International Fire contained in this Plan
shall be deemed to have been made again at and as of the Closing and shall
then be true in all material respects and shall survive the Closing.
8.2 Due Performance. International Fire shall have performed
and complied with all of the terms and conditions required by this Plan to be
performed or complied with by it before the Closing.
8.3 Officers' Certificate. Xxxxxxx Entertainment and the
Xxxxxxx Entertainment Stockholder shall have been furnished with a certificate
signed by the President of International Fire, in such capacity and
personally, attached hereto as Exhibit H and incorporated herein by reference,
dated as of the Closing, certifying (1) that all representations and
warranties of International Fire contained herein are true and correct; and
(2) that since the date of the financial statements (Exhibits B and B-1
hereto), there has been no material adverse change in the financial condition,
business or properties of International Fire, taken as a whole.
8.4 Opinion of Counsel of International Fire. Xxxxxxx
Entertainment and the Xxxxxxx Entertainment Stockholder shall have received an
opinion of counsel for International Fire, dated as of the Closing, to the
effect that (1) the representations of Sections 3.1, 3.2 and 3.12 are correct;
(2) except as specified in the opinion, counsel knows of no inaccuracy in the
representations in 3.5, 3.6 or 3.7; and (3) the shares of International Fire
to be issued to the Xxxxxxx Entertainment Stockholder under this Plan will,
when so issued, be validly issued, fully paid and non-assessable.
8.5 Assets and Liabilities of International Fire. International
Fire shall have no material assets and no liabilities at Closing, and all
costs, expenses and fees incident to the Plan shall have been paid, and Xxxxx
X. Xxxxxxx shall have executed and delivered to Xxxxxxx Entertainment the
Letter of Indemnification attached hereto as Exhibit I and incorporated herein
by reference.
8.6 Resignation of Directors and Executive Officers and
Designation of New Directors and Executive Officers. The present directors
and executive officers of International Fire shall resign, and shall have
designated nominees of Xxxxxxx Entertainment as directors and executive
officers of International Fire to serve in their place and stead, until the
next respective annual meetings of the stockholders and Board of Directors of
International Fire, and until their respective successors shall be elected and
qualified or until their respective prior resignations or terminations.
8.7 Name Change of International Fire. Persons owning a
majority of the outstanding voting securities of International Fire shall have
consented, in accordance with the Nevada Revised Statutes, to a change in the
name of International Fire to one of the names set forth in Section 1.8
hereof.
8.8 Cancellation of Certain Outstanding Shares. The two
principal stockholders of International Fire, Xxxxx X. Xxxxxxx and Xxxxx
Xxxxxxx, husband and wife, shall each have conveyed, for cancellation, to
International Fire, their respective stock certificates representing the
500,000 shares of "unregistered" and "restricted" common stock of
International Fire issued to each of them on July 29, 1997, resulting in there
being 500,000 pre-Plan outstanding shares of common stock of International
Fire.
Section 9
Termination
Prior to Closing, this Plan may be terminated (1) by mutual
consent in writing; (2) by either the Directors of International Fire or the
Xxxxxxx Entertainment Stockholder and Xxxxxxx Entertainment if there has been
a material misrepresentation or material breach of any warranty or covenant by
the other party; or (3) by either the Directors of International Fire or the
Xxxxxxx Entertainment Stockholder and Xxxxxxx Entertainment if the Closing
shall not have taken place, unless adjourned to a later date by mutual consent
in writing, by the date fixed in Section 2.
Section 10
Survival and Indemnity
10.1 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements
contained herein shall survive the Closing without regard to any action taken
pursuant to this Plan, including without limitation, any investigation made by
the party asserting any breach thereof, and shall continue in full force and
effect for three years after the Closing.
10.2 Indemnity from International Fire and the International Fire
Subsidiary. International Fire and the International Fire Subsidiary agree to
indemnify and hold Xxxxxxx Entertainment and the Xxxxxxx Entertainment
Stockholder harmless against and in respect of:
(a) Any damage, liability, deficiency, loss, cost, expense or
claim arising out of or resulting from (i) any defect in
title, (ii) any misrepresentation or omission by
International Fire or the International Fire Subsidiary
herein or in any exhibit hereto, (iii) any materially
misleading information furnished by International Fire or
the International Fire Subsidiary herein or in any exhibit
hereto, (iv) any breach by International Fire or the
International Fire Subsidiary of any representation,
warranty or covenant herein or in any exhibit hereto, or (v)
any debt or other obligation of International Fire or the
International Fire Subsidiary existing at or prior to the
Closing or arising thereafter in connection with events
occurring prior to the Closing (to the extent only that such
debt or obligation is attributable to such events prior to
the Closing); and
(b) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Xxxxxxx Entertainment or the
Xxxxxxx Entertainment Stockholder in connection with any
action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this
Section 10.2.
10.3 Indemnity from Xxxxxxx Entertainment and Xxxxxxx
Entertainment Stockholder. Xxxxxxx Entertainment the Xxxxxxx Entertainment
Stockholder agree to indemnify and hold International Fire and the
International Fire Subsidiary harmless from and against and in respect of:
(a) Any damage, liability, deficiency, loss, cost, expense or
claim arising out of or resulting from (i) the breach of any
representation, warranty or covenant by Xxxxxxx
Entertainment or the Xxxxxxx Entertainment Stockholder
herein or in any exhibit hereto (ii) any misrepresentation
or omission by Xxxxxxx Entertainment or the Xxxxxxx
Entertainment Stockholder herein or in any exhibit hereto or
(iii) any materially misleading information furnished by
Xxxxxxx Entertainment or the Xxxxxxx Entertainment
Stockholder herein or in any exhibit hereto; and
(b) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by International Fire and the
International Fire Subsidiary in connection with any action,
suit, proceeding, demand, assessment, or judgment incident
to any of the matters indemnified against in this Section
10.3.
10.4 Not Exclusive Remedy. Any right of indemnity of any party
pursuant to this Section 10 shall be in addition to and shall not operate as a
limitation on any other right to indemnity of such party pursuant to this
Plan, any other document or instrument executed in connection with the
consummation of the transaction contemplated hereby, or otherwise.
Section 11
General Provisions
11.1 Further Assurances. At any time, and from time to time,
after the Closing, each party will execute such additional instruments and
take such action as may be reasonably requested by the other party to confirm
or perfect title to any property transferred hereunder or otherwise to carry
out the intent and purposes of this Plan.
11.2 Waiver. Any failure on the part of any party hereto to
comply with any of their respective obligations, agreements or conditions
hereunder may be waived in writing by the party to whom such compliance is
owed.
11.3 Brokers. Each party represents to the other parties
hereunder that no broker or finder has acted for it in connection with this
Plan, and agrees to indemnify and hold harmless the other parties against any
fee, loss or expense arising out of claims by brokers or finders employed or
alleged to have been employed by he/she/it.
11.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered in
person or sent by prepaid first-class registered or certified mail, return
receipt requested, as follows:
If to International Fire 0000 Xxxxxx Xxxxxx Xxxx
or the International Fire Xxxxx, Xxxx 00000
Subsidiary:
and
Xxxxxxx X. Xxxxxxxxxx, Esq.
Suite 205
000 Xxxx 000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
If to Xxxxxxx Entertainment 0000 Xxxxxxx Xxxx Xxxxx
and the Xxxxxxx Entertainment Xxxxxxxx, Xxxxxxxxxx 00000
Stockholder:
and
Xxxxxxx Xxxxxx, Esq.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
11.5 Entire Agreement. This Plan constitutes the entire
agreement between the parties and supersedes and cancels any other agreement,
representation, or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
11.6 Headings. The section and subsection headings in this Plan
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Plan.
11.7 Governing Law. This Plan shall be governed by and construed
and enforced in accordance with the laws of the State of Nevada, except to the
extent pre-empted by federal law, in which event (and to that extent only),
federal law shall govern; and the Warrants and the Debenture shall be governed
by the laws stated therein, respectively.
11.8 Assignment. This Plan shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided
however, that any assignment by any party of any rights under this Plan
without the prior written consent of the other parties shall be void.
11.9 Counterparts. This Plan may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11.10 Severability. Any provision of this Plan which is invalid
or unenforceable shall be ineffective only to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions of this Agreement.
11.11 Time. Time is of the essence of this Plan.
11.12 Attorneys' Fees. If any legal action, arbitration or
other proceeding is brought for the enforcement of this Plan, or because of
any
alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Plan, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred
therein, in addition to any other relief to which it or they may be entitled.
The court or arbitrator shall consider, in determining the prevailing party,
(i) which party obtains relief which most nearly reflects the remedy or relief
which the parties sought, and (ii) any settlement offers made prior to
commencement of the trial in the proceeding.
IN WITNESS WHEREOF, the parties have executed this Agreement and
Plan of Merger effective the day and year first above written.
INTERNATIONAL FIRE PREVENTION, INC.
Date: 12/30/97. By/s/ Xxxxx X. Xxxxxxx, President
INTERNATIONAL FIRE SUBSIDIARY,
BY ITS PARENT
Date: 12/30/97. By/s/ Xxxxx X. Xxxxxxx, President
XXXXXXX ENTERTAINMENT GROUP, INC.
Date: 12/30/97. By/s/ Xxxxxx X. Xxxxxxx, President
XXXXXXX ENTERTAINMENT STOCKHOLDER:
MILLENIUM ENTERTAINMENT GROUP, INC.
Date:12/30/97. By/s/ Xxxxxx X. Xxxxxxx, President
EXHIBIT A
Number of Shares of Number of Shares
International Fire Owned of
to be Xxxxxxx Entertainment
Received in
Exchange
Name and Address
Millenium Entertainment *1,000 4,500,000
Group, Inc.
*Represents all of the issued and outstanding voting
securities of Xxxxxxx Entertainment Group, Inc., a
California corporation.
EXHIBIT B
ARTICLES OF INCORPORATION
OF
INTERNATIONAL FIRE PREVENTION FIRST SUBSIDIARY, INC.
ARTICLES OF INCORPORATION
OF
INTERNATIONAL FIRE PREVENTION FIRST SUBSIDIARY, INC.
FIRST: The name of this corporation is "International Fire
Prevention First Subsidiary, Inc."
SECOND: The purpose of this corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorporated
by the California Corporations Code.
THIRD: The name and address in the State of California of this
corporation's initial agent for service of process is: Xxxx Xxxxxxx, Esq.,
0000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000.
FOURTH: This corporation is authorized to issue only one class of
shares of stock, which shall be designated as common voting stock, and the
total number of shares which this corporation is authorized to issue is 100.
DATED: December 30, 1997.
/s/Xxxxx X. Xxxxxxx, Incorporator
/s/Xxxxx Xxxxxxx, Incorporator
The undersigned hereby declare that they are the persons who executed
the foregoing Articles of Incorporation, which execution was their act and
deed.
/s/Xxxxx X. Xxxxxxx
/s/ Xxxxx Xxxxxxx
EXHIBIT C
INTERNATIONAL FIRE PREVENTION, INC.
FINANCIAL STATEMENTS
FOR THE PERIODS ENDED
DECEMBER 31, 1996 AND 1995 (AUDITED)
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
XXXXXXXXX, XXXXX & XXXXX, P.C. [letterhead]
CERTIFIED PUBLIC ACCOUNTANTS
000 XXXX 000 XXXXX
XXXX XXXX XXXX, XXXX 00000
(000) 000-0000 - FAX (000) 000-0000
INDEPENDENT AUDITORS' REPORT
Board of Directors
INTERNATIONAL FIRE PREVENTION, INC.
Indian Xxxxx, California
We have audited the accompanying balance sheet of International Fire
Prevention, Inc. [a development stage company] at December 31, 1996 and 1995,
and the related statements of operations, stockholders' equity (deficit) and
cash flows for the years ended December 31, 1996 and 1995 and for the
cumulative period from December 31, 1995 through December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion and based on the opinions of other auditors, the financial
statements audited by us present fairly, in all material respects, the
financial position of International Fire Prevention, Inc. as of December 31,
1996 and 1995, and the results of its operations and its cash flows for the
years ended December 31, 1996 and 1995, and for the cumulative period from
December 31, 1995 through December 31, 1996 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 8 to the financial
statements, the Company has no on-going operations, has incurred substantial
losses and has liabilities in excess of assets resulting in a stockholders'
deficit. These factors raise substantial doubt about its ability to continue
as a going concern. Management's plans in regards to these matters are also
described in Note 8. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
March 15, 1997
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
BALANCE SHEETS
ASSETS
December 31,
1996 1995
CURRENT ASSETS:
Cash $ - $ -
Total Current Assets - -
$ - $ -
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 11,650 $ 10,400
Payable to related parties 1,930 515
Total Current Liabilities 13,580 10,915
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 per value, 100,000,000
shares authorized, 10,821,500 shares issued
and outstanding at December 31, 1996 and 1995 10,821 10,821
Capital in excess of par value 191,080 191,080
Retained earnings (deficit) (212,816) (212,816)
Deficit accumulated during the development stage (2,665) -
Total Stockholders' Equity (Deficit) (13,580) (10,915)
$ - $ -
The accompanying notes are an integral part of these financial statements.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
Cumulative
From
For the Years Ended December 31,
December 31, 1995 through
December 31,
1996 1995 1996
REVENUE:
Sales $ - $ - $ -
Total Revenue - - -
EXPENSES:
General and administrative 2,665 2,024 2,665
Total Expenses 2,665 2,024 2,665
LOSS FROM OPERATIONS (2,665) (2,024) (2,665)
CURRENT INCOME TAX - - -
DEFERRED INCOME TAX - - -
NET LOSS $ (2,665) $ (2,024) $ (2,665)
LOSS PER SHARE $ (.00) $ (.00) $ (.00)
The accompanying notes are an integral part of these financial statements.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM DECEMBER 31, 1994 THROUGH DECEMBER 31, 1996
(Deficit)
Earnings
Accumulated
Common Stock Capital in Retained During the
Excess of Earnings Development
Shares Amount Par Value (Deficit) Stage
BALANCE,
December 31, 1994 10,821,500 $ 10,821 $191,080 $(210,792) $ -
Net loss for the
period ended
December 31
1995 - - - (2,024) -
BALANCE,
December 31, 1995 10,821,500 10,821 191,080 (212,816) -
Net loss for the
period ended
December 31,
1996 - - - - (2,665)
BALANCE,
December 31, 1996 10,821,500 $ 10,821 $191,080 $(212,816) $ (2,665)
The accompanying notes are an integral part of these financial statements.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Cumulative
From
For the Years Ended December 31,
December 31, 1995 through
December 31,
1996 1995 1996
Cash Flows to Operating Activities:
Net income (loss) $ (2,665) $ (2,024) $ (2,665)
Adjustments to reconcile net loss to
net cash used by operating activities:
Changes in assets and liabilities:
Increase (decrease) in accounts
payable 1,250 2,000 1,250
Increase (decrease) in Payable
to related party 1,415 24 1,415
Net Cash Flows to Operating
Activities - - -
Cash Flows to Investing Activities:
Proceeds from sale of property
and equipment - - -
Net Cash to Investing Activities - - -
Cash Flows from Financing Activities:
Proceeds from notes payable - - -
Proceeds from shareholder advances - - -
Net Cash from Financing Activities - - -
Net Cash Flow Activity - - -
Cash at Beginning of the Year - - -
Cash at End of the Year $ - $ - $ -
Supplemental Disclosures of Cash
Flow Information:
None
Supplemental Schedule of Noncash Investing and Financial Activities:
None
The accompanying notes are an integral part of these financial statements.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company was organized under the laws of the State of Nevada
as Conference Capital Corp. on December 14, 1984. The Company raised $100,000
through a public stock offering which was registered with the Securities and
Exchange Commission on Form S- 18. During 1987 the Company entered into a
business acquisition with International Fire Prevention ("IFP") wherein IFP
became a wholly-owned subsidiary of the Company. The operations of IFP were
not successful and the Company became dormant in approximately 1988. The
Company has been inactive since that time and also had its corporate charters
canceled. During 1996, the Company was re-instated with the State of Nevada
and is currently in good standing. The Company is considered to have
re-entered into a new development stage during 1996. The Company is presently
an inactive shell pursuing a suitable business opportunity. Any transaction
with n operating company will likely be structured similar to a reverse
acquisition in which a controlling interest in the Company will be acquired by
the successor operation. In such a transaction, the shareholders of the
Company will likely own a minority interest in the combined company after the
acquisition, and present management of the Company will likely resign and be
replaced by the principals of the operating company. This type of transaction
will leave the current shareholders with only a small minority voice in the
operating business and their interest may be insufficient to control any seats
of the board of directors or to have any substantial voice in other corporate
transactions.
Development Stage - The Company is considered a development stage company as
defined in SFAS No. 7. Consequently, cumulative numbers have been provided
from December 31, 1995 forward to reflect the Company re-entering into
development stage during 1996.
Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimated
by management.
Loss Per Share - The computation of loss per share of common stock is based on
the weighted average number of shares outstanding during the periods
presented.
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a maturity
of three months or less to be cash equivalents.
Income Taxes - The Company accounts for its income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" which requires the liability approach for the effect of income taxes.
NOTE 2 - PAYABLE TO RELATED PARTY
An officer and director of the Company has periodically advanced funds to the
Company or paid expenses on behalf of the Company. These advances are
non-interest bearing and are due upon demand. The unpaid advances amounted to
$1,930 and $515 as of December 31, 1996 and 1995, respectively. [See Note 4]
NOTE 3 - CAPITAL STOCK
Common Stock - During 1985 in connection with its organization the Company
issued 5,000,000 shares of its previously authorized, but unissued common
stock for cash of $5,000.
During 1985, the Company issued 500,000 shares of common stock pursuant to a
public offering for cash of $100,000. Stock offerings costs of $35,030 were
deducted from the proceeds.
During the years ended 1985 and 1986 the Company issued 321,500 additional
shares of common stock, upon exercise of warrants at $.40 per share for total
proceeds of $128,931.
During 1987 the Company issued 5,000,000 shares of common stock in connection
with an acquisition agreement with IFP.
NOTE 4 - RELATED PARTY TRANSACTIONS
Payables to Related Party - At December 31, 1996 and 1995 the Company had
$1,930 and $515 in related party payables. Total advances made during 1996 and
1995 were $1,415 and $24 respectively.
Office Space - The Company currently has no operations and has not had a need
to rent office space. An officer of the Company is allowing the Company to use
his address, as needed, on a rent free basis.
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" which
requires the liability approach for the effect of income taxes.
The Company has available at December 31, 1996 unused operating loss
carryforwards of approximately $13,000, which may be applied against future
taxable income and which expire in various years through 2011. If certain
substantial changes in the Company's ownership should occur, there could be an
annual limitation on the amount of net operating loss carryforward which can
be utilized. The amount of and ultimate realization of the benefits from the
operating loss carryforwards for income tax purposes is dependent, in part,
upon the tax laws in effect, the future earnings of the Company, and other
future events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the Company
has established a valuation allowance equal to the tax effect of the loss
carryforwards (approximately $4,500) at December 31, 1996 and, therefore, no
deferred tax asset has been recognized for the loss carryforwards. The change
in the valuation allowance is equal lo the tax effect of the current period's
net loss (approximately $900 for 1996).
NOTE 6 - RETAINED EARNINGS (DEFICIT)
When the Company discontinued its previous operations and became inactive
(approximately 1987-1988) many of the Company's records were lost or not
maintained. Current management has made a search for any assets, potential
liabilities and accounting records related to the Company and its previous
operations. Management has used the last available financial statements of the
Company (prior to going inactive) to calculate its retained earnings
(deficit). The financial statements used by management included an audited
financial statement for the year ended December 31, 1986 and an unaudited
interim statement for the nine months ended September 30, 1987. All assets and
liabilities which existed at those times were written off resulting in a
deficit of $201,901. Expenses incurred from that time until 1996, ($10,915)
when the Company re-entered into a development stage, have also been included
in retained earnings (deficit) resulting in a balance of $212,816 at December
31, 1995. The balance sheet category "Deficit accumulated during the
development stage" includes the activity for the year 1996.
NOTE 7 - CONTINGENCIES
During 1987 and 1988, the Company discontinued all of its operations and those
of its subsidiary. Management believes that the Company is not liable for any
existing liabilities related to its former operations and those of its
subsidiary but the possibility exists that creditors and others seeking relief
from the subsidiary may also include the Company in claims and suits pursuant
to the parent subsidiary relationship which existed between the Company and
its subsidiary. The Company is not currently named in any such suits nor is it
aware of any such suits against its former subsidiary. It is the belief of
Management and their Counsel that the Company would be successful in defending
against any such claims and that no material negative impact on the financial
position of the Company would occur. Management and Counsel further believe
that with the passage of time the likelihood of any such claims being raised
is becoming more remote and that various Statutes of Limitations should
provide adequate defenses for the Company. Consequently, the financial
statements do not reflect any accruals or allowances for any such claims.
NOTE 8 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company has no current operations,
has incurred significant losses the past few years and has liabilities in
excess of assets resulting in a stockholders' deficit. This raises substantial
doubt about the ability of the Company to continue as a going concern. In this
regard, management is proposing to raise additional funds through loans and
/or through additional sales of its common stock which funds will be used to
assist in establishing on-going operations or through a business acquisition.
There is no assurance that the Company will be successful in raising this
additional capital or achieving profitable operations. The financial
statements do not include any adjustments that might result from the outcome
of these uncertainties.
EXHIBIT C-1
INTERNATIONAL FIRE PREVENTION, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 (UNAUDITED)
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
CONDENSED BALANCE SHEETS
[Unaudited]
ASSETS
September 30, December 31,
1997 1996
___________ ___________
CURRENT ASSETS:
Cash $ - $ -
___________ ___________
Total Current Assets - -
OTHER ASSETS - -
___________ ___________
$ - $ -
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15,899 $ 11,650
Payable to related parties 4,430 1,930
___________ ___________
Total Current Liabilities 20,329 13,580
___________ ___________
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 1,500 500
Capital in excess of par value 201,401 201,401
Retained earnings (deficit) (212,816) (212,816)
Deficit accumulated during the
development stage (10,414) (2,665)
___________ ___________
Total Stockholders' Equity (Deficit) (20,329) (13,580)
___________ ___________
$ - $ -
___________ ___________
The accompanying notes are an integral part of these financial
statements.
NOTE: The balance sheet at December 31, 1996 was taken from the
audited financial statements at that date and condensed.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF OPERATIONS
[Unaudited]
For the Three For the Nine For the Period
Months Ended Months Ended From December 31,
September 30, September 30, 1995 Through
________________ ________________ September 30,
1997 1996 1997 1996 1997
______ ______ ______ ______ ________________
REVENUE $ - $ - $ - $ - $ -
______ ______ ______ ______ ________________
EXPENSES:
General and
administrative 6,549 313 7,749 2,353 10,414
______ ______ ______ ______ ________________
Total expenses 6,549 313 7,749 2,353 10,414
______ ______ ______ ______ ________________
LOSS FROM OPERATIONS (6,549) (313) (7,749) (2,353) (10,414)
CURRENT INCOME TAX
EXPENSE - - - - -
DEFERRED INCOME TAX
EXPENSE - - - - -
______ ______ ______ ______ ________________
NET LOSS $(6,549) $ (313) $(7,749) $(2,353) $ (10,414)
______ ______ ______ ______ ________________
The accompanying notes are an integral part of these financial
statements.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF CASH FLOWS
[Unaudited]
For the Nine For the Period
Months Ended From December 31,
September 30, 1995 Through
_______________________ September 30,
1997 1996 1997
__________ __________ ________________
Cash Flows from Operating Activities:
Net (loss) $ (7,749) $ (2,040) $ (10,414)
Adjustments to reconcile net
income to net cash used by
operating activities:
Non-cash expenses (income) 1,000 - 1,000
Changes in assets and liabilities:
Accounts Payable 4,249 625 5,499
Payable to related party 2,500 1,415 3,915
__________ __________ ________________
Net Cash Flows used by
Operating Activities - - -
__________ __________ ________________
Cash Flows from Investing Activities - - -
__________ __________ ________________
Net Cash Flows used by
Investing Activities - - -
__________ __________ ________________
Cash Flows from Financing Activities:
Proceeds from common stock issuance - - -
Advances by shareholders - - -
__________ __________ ________________
Net Cash Flows Provided by
Financing Activities - - -
__________ __________ ________________
Net Increase (Decrease) in Cash - - -
Cash at Beginning of Period - - -
__________ __________ ________________
Cash at End of Period $ - $ - $ -
__________ __________ ________________
Supplemental schedule of Non-cash Investing and Financing
Activities:
For the period ended September 30, 1997
1,000,000 shares of common stock was issued for services rendered
valued at $1,000.
For the period ended September 30, 1996:
None
The accompanying notes are an integral part of these financial
statements.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed Financial Statements - The accompanying financial
statements have been prepared by the Company without audit.
In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows
at September 30, 1997 and for all periods presented have been
made.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these condensed financial statements be
read in conjunction with the financial statements and notes
thereto included in the Company's December 31, 1996 audited
financial statements. The results of operations for the
period ended September 30, 1997 are not necessarily indicative
of the operating results for the full year.
Organization - The Company was organized under the laws of the
State of Nevada as Conference Capital Corp. on December 14,
1984. The Company raised $100,000 through a public stock
offering which was registered with the Securities and Exchange
Commission on Form S-18. During 1987 the Company entered into
a business acquisition with International Fire Prevention
("IFP") wherein IFP became a wholly-owned subsidiary of the
Company. The operations of IFP were not successful and the
Company became dormant in approximately 1988. The Company has
been inactive since that time and also had its corporate
charters canceled. During 1996, the Company was re-instated
with the State of Nevada and is currently in good standing.
The Company is considered to have re-entered into a new
development stage during 1996. The Company is presently an
inactive shell pursuing a suitable business opportunity. Any
transaction with an operating company will likely be
structured similar to a reverse acquisition in which a
controlling interest in the Company will be acquired by the
successor operation. In such a transaction, the shareholders
of the Company will likely own a minority interest in the
combined company after the acquisition, and present management
of the company will likely resign and be replaced by the
principals of the operating company. This type of transaction
will leave the current shareholders with only a small minority
voice in the operating business and their interest may be
insufficient to control any seats of the board of directors or
to have any substantial voice in other corporate transactions.
Development Stage - The Company is considered a development
stage company as defined in SFAS No. 7. Consequently,
cumulative numbers have been provided from December 31, 1995
forward to reflect the Company re-entering into development
stage during 1996.
Accounting Estimates - The preparation of the financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimated.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Common Stock Split - The financial statements have been
restated for all periods presented to reflect a reverse stock
split on the basis of one share issued for every 21.643 shares
previously issued. The stock split was effected during July,
1997.
NOTE 2 - PAYABLE TO RELATED PARTY
An officer and director of the Company has periodically
advanced funds to the Company or paid expenses on behalf of
the Company. These advances are non-interest bearing and are
due upon demand. The unpaid advances amounted to $4,430 and
$1,930 as of September 30, 1997 and December 31, 1996,
respectively. [See Note 4]
NOTE 3 - CAPITAL STOCK
Common Stock - During 1985 in connection with its organization
the Company issued 231,022 shares of its previously
authorized, but unissued common stock for cash of $5,000.
During 1985, the Company issued 23,102 shares of common stock
pursuant to a public offering for cash of $100,000. Stock
offerings costs of $35,030 were deducted from the proceeds.
During the years ended 1985 and 1986 the Company issued
14,855 additional shares of common stock, upon exercise of
warrants for total proceeds of $128,931.
During 1987 the Company issued 231,022 shares of common
stock in connection with an acquisition agreement with IFP.
The Company issued 1,000,000 shares of common stock, during July,
1997, to an officer of the Company for services rendered
valued at $1,000.
NOTE 4 - RELATED PARTY TRANSACTIONS
Payables to Related Party - At September 30, 1997 and December
31, 1996 the Company had $4,430 and $1,930 in related party
payables. Total advances made during 1997 and 1996 were
$2,500 and $1,415 respectively.
Office Space - The Company currently has no operations and has
not had a need to rent office space. An officer of the
Company is allowing the Company to use his address, as
needed, on a rent free basis.
The Company issued 1,000,000 shares of common stock, during July,
1997, to an officer of the Company for services rendered
valued at $1,000.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" which requires the liability
approach for the effect of income taxes.
The Company has available at December 31, 1996 unused
operating loss carryforwards of approximately $13,000, which
may be applied against future taxable income and which expire
in various years through 2011. If certain substantial changes
in the Company's ownership should occur, there could be an
annual limitation on the amount of net operating loss
carryforward which can be utilized. The amount of and
ultimate realization of the benefits from the operating loss
carryforwards for income tax purposes is dependent, in part,
upon the tax laws in effect, the future earnings of the
Company, and other future events, the effects of which cannot
be determined. Because of the uncertainty surrounding the
realization of the loss carryforwards the Company has
established a valuation allowance equal to the tax effect of
the loss carryforwards (approximately $4,500) at December 31,
1996 and, therefore, no deferred tax asset has been recognized
for the loss carryforwards. The change in the valuation
allowance is equal to the tax effect of the current period's
net loss (approximately $900 for 1996).
NOTE 6 - RETAINED EARNINGS (DEFICIT)
When the Company discontinued its previous operations and
became inactive (approximately 1987-1988) many of the
Company's records were lost or not maintained. Current
management has made a search for any assets, potential
liabilities and accounting records related to the Company and
its previous operations. Management has used the last
available financial statements of the Company (prior to going
inactive) to calculate its retained earnings (deficit). The
financial statements used by management included an audited
financial statement for the year ended December 31, 1986 and
an unaudited interim statement for the nine months ended
September 30, 1987. All assets and liabilities which existed
at those times were written off resulting in a deficit of
$201,901. Expenses incurred from that time until 1996,
($10,915) when the Company re-entered into a development
stage, have also been included in retained earnings (deficit)
resulting in a balance of $212,816 at December 31, 1995. The
balance sheet category "Deficit accumulated during the
development stage" includes the activity from December 31,
1995 forward.
NOTE 7 - CONTINGENCIES
During 1987 and 1988, the Company discontinued all of its
operations and those of its subsidiary. Management believes
that the Company is not liable for any existing liabilities
related to its former operations and those of its subsidiary
but the possibility exists that creditors and others seeking
relief from the subsidiary may also include the Company in
claims and suits pursuant to the parent subsidiary
relationship which existed between the Company and its
subsidiary. The Company is not currently named in any such
suits nor is it aware of any such suits against its former
subsidiary. It is the belief of Management and their Counsel
that the Company would be successful in defending against any
such claims and that no material negative impact on the
financial position of the Company would occur. Management and
Counsel further believe that with the passage of time the
likelihood of any such claims being raised is becoming more
remote and that various Statutes of Limitations should provide
adequate defenses for the Company. Consequently, the
financial statements do not reflect any accruals or allowances
for any such claims.
INTERNATIONAL FIRE PREVENTION, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 8 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles which
contemplate continuation of the Company as a going concern.
However, the Company has no current operations, has incurred
significant losses the past few years and has liabilities in
excess of assets resulting in a stockholders' deficit. This
raises substantial doubt about the ability of the Company to
continue as a going concern. In this regard, management is
proposing to raise additional funds through loans and /or
through additional sales of its common stock which funds will
be used to assist in establishing on-going operations or
through a business acquisition. There is no assurance that
the Company will be successful in raising this additional
capital or achieving profitable operations. The financial
statements do not include any adjustments that might result
from the outcome of these uncertainties.
EXHIBIT D
EXCEPTIONS TO REGISTRANT'S FINANCIAL STATEMENTS
None.
EXHIBIT E
XXXXXXX ENTERTAINMENT GROUP, INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (AUDITED)
SEE ITEM 7(a) OF THIS REPORT
EXHIBIT F
EXCEPTIONS TO XXXXXXX ENTERTAINMENT GROUP, INC. FINANCIAL STATEMENTS
1. The Company has a dispute with an entity contracted to provide satellite
transponder capacity and has withheld payment for services totaling forty
thousand dollars ($40,000) as a consequence of the other party's breach of the
contract.
2. The Company recently won an arbitration award against a client for its
breach of a communications contract and its provisions. The arbitrator
awarded the Company certain monetary damages, including arbitration fees and a
specific performance award wherein the client is required to have the Company
continue to provide services over the next four (4) years. The Company is
currently in the process of enforcing the damages and specific performance
awards in the appropriate court.
EXHIBIT G
International Fire Prevention, Inc.
0000 Xxxxxx Xxxxxx Xxxx
Xxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, President
Re: Exchange of shares of Xxxxxxx Entertainment Group,
Inc., a California corporation ("Xxxxxxx
Entertainment"), for shares of International Fire
Prevention, Inc., a Nevada corporation ("International
Fire" or the "Company"), by the merger of a newly
formed wholly owned subsidiary of International Fire
with and into Xxxxxxx Entertainment
Dear Ladies and Gentlemen:
Pursuant to that certain Agreement and Plan of Merger (the "Plan")
between Xxxxxxx Entertainment, the undersigned, as President of the sole
stockholder of Xxxxxxx Entertainment, International Fire and a wholly owned
subsidiary of International Fire to be formed under the laws of the State of
California, I acknowledge that I have approved this exchange; that I am aware
of all of the terms and conditions of the Plan; that I have received and
personally reviewed a copy of the Plan and any and all material documents
regarding the Company, including, but not limited to Articles of
Incorporation, Bylaws, minutes of meetings of directors and stockholders,
financial statements and reports filed with the Securities and Exchange
Commission during the past twelve months. I represent and warrant that no
director or executive officer of the Company or any associate of either has
solicited this exchange; that I am an "accredited investor" as that term is
known under the Rules and Regulations of the Securities and Exchange
Commission (see Exhibit "A" hereto); and/or, I represent and warrant that I
have sufficient knowledge and experience to understand the nature of the
exchange and am fully capable of bearing the economic risk of the loss of my
entire cost basis.
I further understand that immediately prior to the completion of
the Plan, International Fire and its newly formed wholly subsidiary had
little, if any assets, of any measurable value, and that in actuality, the
completion of the Plan and the exchange of my shares of Xxxxxxx Entertainment
for shares of International Fire results in a decrease in the actual
percentage of ownership that my shares of Xxxxxxx Entertainment represented in
Xxxxxxx Entertainment prior to the completion of the Plan.
I understand that you have and will make books and records of your
Company available to me for my inspection in connection with the contemplated
exchange of my shares, and that I have been encouraged to review the
information and ask any questions I may have concerning the information of any
director or officer of the Company or of the legal and accounting firms for
the Company.
I also understand that I must bear the economic risk of ownership
of any of the International Fire shares for a long period of time, the minimum
of which will be one (1) year, as these shares are "unregistered" shares and
may not be sold unless any subsequent offer or sale is registered with the
United States Securities and Exchange Commission or otherwise exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Act"), or other applicable laws, rules and regulations.
I intend that you rely on all of my representations made herein
for use by International Fire as they are made to induce you to issue me the
shares of International Fire under the Plan, and I further represent (of my
personal knowledge or by virtue of my reliance on one or more personal
representatives), and agree as follows, to-wit:
1. That the shares being acquired are being received for
investment purposes and not with a view toward further distribution;
2. That I have a full and complete understanding of the phrase
"for investment purposes and not with a view toward further distribution";
3. That I understand the meaning of "unregistered" shares and
know that they are not freely tradeable;
4. That any stock certificate issued by you to me in connection
with the shares being acquired shall be imprinted with a legend restricting
the sale, assignment, hypothecation or other disposition unless it can be made
in accordance with applicable laws, rules and regulations;
5. I agree that the stock transfer records of your Company
shall reflect that I have requested the Company not to effect any transfer of
any stock certificate representing any of the shares being acquired unless I
shall first have obtained an opinion of legal counsel to the effect that the
shares may be sold in accordance with applicable laws, rules and regulations,
and I understand that any opinion must be from legal counsel satisfactory to
the Company and, regardless of any opinion, I understand that the exemption
covered by any opinion must in fact be applicable to the shares;
6. That I shall not sell, offer to sell, transfer, assign,
hypothecate or make any other disposition of any interest in the shares being
acquired except as may be pursuant to any applicable laws, rules and
regulations;
7. I fully understand that my shares which are being exchanged
for shares of the Company are "risk capital," and I am fully capable of
bearing the economic risks attendant to this investment, without
qualification; and
8. I also understand that without approval of counsel for
International Fire, all shares of International Fire to be issued and
delivered to me in exchange for my shares of Xxxxxxx Entertainment shall be
represented by one certificate only and which such certificate shall be
imprinted with the following legend or a reasonable facsimile thereof on the
front and reverse sides thereof:
The shares of stock represented by this certificate
have not been registered under the Securities Act of
1933, as amended, and may not be sold or otherwise
transferred unless compliance with the registration
provisions of such Act has been made or unless
availability of an exemption from such registration
provisions has been established, or unless sold
pursuant to Rule 144 under the Act.
Any request for more than one stock certificate must be
accompanied by a letter signed by the requesting stockholder setting forth all
relevant facts relating to the request. International Fire will attempt to
accommodate any stockholders' request where International Fire views the
request is made for valid business or personal reasons so long as in the sole
discretion of International Fire, the granting of the request will not
facilitate a "public" distribution of unregistered shares of International
Fire.
You are requested and instructed to issue a stock certificate as
follows, to-wit:
Millenium Entertainment Group, Inc.
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Dated this 30th day of December, 1997.
Very truly yours,
MILLENIUM ENTERTAINMENT GROUP, INC.
By /s/ Xxxxxx X. Xxxxxxx, President
EXHIBIT H
CERTIFICATE OF OFFICER PURSUANT TO
AGREEMENT AND PLAN OF MERGER
The undersigned, the President of International Fire Prevention,
Inc., a Nevada corporation ("International Fire"), and of its newly formed
wholly owned subsidiary, represents and warrants the following as required by
the Agreement and Plan of Merger (the "Plan") between International Fire and
Xxxxxxx Entertainment Group, Inc., a California corporation ("Xxxxxxx
Entertainment"), Millenium Entertainment Group, Inc., the sole stockholder of
Xxxxxxx Entertainment (the "Xxxxxxx Entertainment Stockholder") and such
wholly owned subsidiary, to-wit:
1. That he is the President of International Fire and its
wholly owned subsidiary and has been authorized and empowered by their
respective Board of Directors to execute and deliver this Certificate to
Xxxxxxx Entertainment and the Xxxxxxx Entertainment Stockholder;
2. Based upon his personal knowledge, information, belief and
opinions of counsel for International Fire and such subsidiary regarding the
Plan:
(i) All representations and warranties of International
Fire and such subsidiary contained within the Plan are
true and correct;
(ii) International Fire and such subsidiary have complied
with all terms and provisions required of them
pursuant to the Plan; and
(iii) There have been no material adverse changes in the
financial position of International Fire as set forth
in its financial statements for the years ended
December 31, 1996 and 1995, and the nine months ended
September 30, 1997; and that the formation of such
subsidiary has no material impact on such financial
statement; except as set forth in Exhibit C to the
Plan.
INTERNATIONAL FIRE PREVENTION, INC.
By/s/ Xxxxx X. Xxxxxxx, President
EXHIBIT I
Letter of Indemnification
Xxxxxxx Entertainment Group, Inc.
Xxxxxxx Corporate Center
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
Re: International Fire Prevention, Inc., a Nevada corporation
(the "Company"), Agreement and Plan of Merger (the "Plan")
with Xxxxxxx Entertainment Group, Inc., a California
corporation ("Xxxxxxx Entertainment"), and the sole
stockholder of Xxxxxxx Entertainment (the "Xxxxxxx
Entertainment Stockholder"), and a newly formed wholly owned
subsidiary of the Company
Dear Ladies and Gentlemen:
In further consideration of the completion of the Plan and to
satisfy one of the conditions of Xxxxxxx Entertainment and the Xxxxxxx
Entertainment Stockholder to their respective obligations under the Plan, I,
Xxxxx X. Xxxxxxx, the President, a director and the principal stockholder of
the Company, do hereby personally (i) compromise any outstanding liabilities
of the Company owed to me for advances or otherwise prior to the closing (the
"Closing") of the Plan (excluding any benefits I may receive under the Plan,
including warrants or the debenture); (ii) agree to pay all other outstanding
liabilities which were incurred prior to the Closing; (iii) represent and
warrant that to my knowledge, there are no other outstanding liabilities of
the Company which are not set forth in the financial statements of the Company
which are appended to the Plan as Exhibits B and B-1; and (iv) I agree to
indemnify and hold the Company, Xxxxxxx Entertainment and the Xxxxxxx
Entertainment Stockholder harmless from and against any and all other
liabilities of the Company existing prior the Closing, including, but not
limited to, those related to "hazardous materials" as defined in the Plan or
the prior manufacture or use thereof by the Company, any outstanding options
or warrants to acquire any securities of the Company which were not disclosed
to you specifically in writing prior to the Closing or any claims of former
directors, executive officers or principal stockholders relating to their
pledge of their stock to me on loans and my foreclosure of such loans;
provided, however, in the event any such claims are made respecting the
existence of any such liabilities, I shall be afforded reasonable written
notice and an opportunity to compromise, defend or otherwise settle any such
liabilities.
This Letter of Indemnification and all obligations of any type or
nature hereunder shall expire three years from the date hereof.
Dated:12/30/97. /s/Xxxxx X. Xxxxxxx
International Fire Prevention, Inc.
Dated: 12/30/97. By/S/Xxxxx X. Xxxxxxx, President
EXHIBIT J
CERTIFICATE OF OFFICER PURSUANT TO
AGREEMENT AND PLAN OF MERGER
The undersigned, the President of Xxxxxxx Entertainment Group,
Inc., a California corporation ("Xxxxxxx Entertainment"), and the President of
Millenium Entertainment Group, Inc., a California corporation (the "Xxxxxxx
Entertainment Stockholder"), represents and warrants the following as required
by the Agreement and Plan of Merger (the "Plan") between Xxxxxxx
Entertainment, the Xxxxxxx Entertainment Stockholder, International Fire
Prevention, Inc., a Nevada corporation ("International Fire"), and it newly
formed wholly owned subsidiary, to-wit:
1. That he is the President of Xxxxxxx Entertainment and has
been authorized and empowered by its Board of Directors to execute and deliver
this Certificate to International Fire;
2. Based on his personal knowledge, information, belief:
(i) All representations and warranties of Xxxxxxx
Entertainment contained within the Plan are true and
correct;
(ii) Xxxxxxx Entertainment has complied with all terms and
provisions required of it pursuant to the Plan; and
(iii) There have been no material adverse changes in the
financial position of Xxxxxxx Entertainment as set
forth in its financial statements for the years ended
December 31, 1996 and 1995, except as set forth in
Exhibit E to the Plan.
XXXXXXX ENTERTAINMENT GROUP, INC.
By /s/ Xxxxxx X. Xxxxxxx, President
EXHIBIT K-1
Stock Subscription Warrant of Xxxxx X. Xxxxxxx
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
STOCK SUBSCRIPTION WARRANT
To Purchase 80,000 Shares of Common Stock of
International Fire Prevention, Inc., a Nevada Corporation
(or any successor thereto)(the "Company")
DATE OF INITIAL ISSUANCE: December 30, 1997
THIS CERTIFIES THAT, for value received, Xxxxx X. Xxxxxxx or registered
assigns (hereinafter called the "Holder") is entitled to purchase from the
Company during the Term of this Warrant at the times provided for herein, the
number of shares of Common Stock, par value $.001 per share, of the Company
(the "Common Stock") as specified herein, at the Warrant Price (as hereinafter
defined), payable in the manner specified herein. The conversion of this
Warrant shall be subject to the provisions, limitations and restrictions
herein contained.
SECTION 1. Definitions.
Common Stock - shall mean and include the Company's authorized Common
Stock, par value $.001 per share, as constituted at the date hereof, and shall
also include any capital stock of any class of equal rank the Company
hereafter authorized which has the right to participate in the distribution of
earnings and assets of the Company without limit to amount or percentage.
Securities Act - the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
Term of this Warrant - shall mean the period beginning on the date that
the exercise price is determined as set forth in Section 2.1 herein and ending
two (2) years from such beginning date.
Warrant Price - is defined in Section 2.1 hereof.
Warrant Rights - the rights of the Holder to purchase shares of Common
Stock upon conversion of this Warrant, which rights shall not relate to shares
of Common Stock already purchased pursuant to this Warrant.
Warrant Shares - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the conversion hereof.
SECTION 2. Conversion of Warrant.
2.1. Right to Exercise Warrant. At any time and from time to time
during the term of this Warrant, the Holder hereof shall have the right to
convert this Warrant, in whole or part(s) to purchase up to the number of
shares of Common Stock set forth on the cover page hereof, subject to
adjustment as provided in Section 5.
The Warrant Price shall be determined as followed:
(i) In the event the Company is listed on the NASDAQ Small Cap
Exchange (the "Exchange") within twelve (12) months from the date of issuance
of this Warrant as set forth on the cover page hereof (the "Anniversary
Date"), the Warrant price shall be equal to the opening bid price on the
Exchange plus twenty-five (25%) percent of such opening bid price.
(ii) In the event the Company is not listed on the Exchange by the
Anniversary Date, the Warrant Price shall be equal to the average bid price of
the Common Stock as listed on the OTC Bulletin Board for the period of thirty
(30) days immediately prior to the Anniversary Date plus twenty-five (25%)
percent of such average price.
The Warrant Price as set forth above shall be subject to adjustment as
provided in Section 5 and shall be paid in cash.
2.2. Procedure for Conversion of Warrant. To exercise this Warrant the
Holder shall deliver to the Company at its office referred to in Section 9
hereof at any time and from time to time during the Term of this Warrant:
this Warrant, together with the Notice of Exercise in the form attached hereto
and the payment of the aggregate Warrant Price with respect to the Warrants
exercised; or, in lieu of cash payment as provided herein, the Holder, may, at
the sole discretion of the Holder, deem the Warrants to be "cashless" or "net
purchase" Warrants and exchange Warrants as payment for shares of common
stock underlying other Warrants, such payment to be comprised of the
difference calculated by subtracting the exercise price of the Warrants from
the market value of the common stock underlying such Warrants on the Exchange
or the OTC Bulletin Board on the date of exercise. In the event of any
exercise of these rights represented by this Warrant, a certificate or
certificates for the shares of Common Stock so purchased, registered in the
name of the Holder or such other name or names as may be designated by the
Holder, shall be delivered to the Holder hereof within a reasonable time, not
exceeding fifteen (15) days, after the rights represented by this Warrant
shall have been so exercised. The person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which the Notice of Exercise was delivered and payment of the Warrant
Price and any applicable taxes was made, irrespective of the date of delivery
of such certificate, except that, if the date of such delivery and payment is
a date when the stock transfer books of the Company are closed, such person
shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are
open. In the event this Warrant is exercised in part, a new Warrant for the
balance of shares of Common Stock purchasable shall be issued to the Holder.
2.3. Transfer and Restriction Legend. This Warrant is freely
transferable by the Holder, except as transferability may be limited by
federal and state securities laws. Each certificate for Warrant Shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
securities represented thereby) shall also bear such legend unless, in the
opinion of counsel for the holder thereof (which counsel shall be reasonably
satisfactory to counsel for the Company) the securities represented thereby
are not, at such time, required by law to bear such legend.
SECTION 3. Covenants as to Common Stock. The Company covenants and
agrees that all shares of Common Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance and receipt by the
Company of the Warrant Price, be validly issued, fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
The Company further covenants and agrees that it will pay when due and payable
any and all federal and state taxes which may be payable in respect of the
issue of this Warrant, or any Common Stock or certificates therefor issuable
upon the exercise of this Warrant. The Company further covenants and agrees
that the Company will at all times have authorized and reserved, free from
preemptive rights, a sufficient number of shares of Common Stock to provide
for the exercise of the rights represented by this Warrant. The Company
further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the conversion of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon conversion, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the
conversion of this Warrant is listed on any national securities exchange, the
Company will, if permitted by the rules of such exchange, list and keep listed
on such exchange, upon official notice of issuance, all shares of such Common
Stock issuable upon conversion of this Warrant.
SECTION 4. Ownership.
4.1 Register; Transfer or Exchange of Warrants. The Company shall
keep at its office maintained in Carlsbad, California a register in which the
Company shall provide for the registration of Warrants and for the
registration of transfer of Warrants. The Holder of any Warrant may, at its
option and either in person or by duly authorized attorney, surrender the same
for registration of transfer or exchange at such office and, without expense
to such Holder (other than transfer taxes, if any), receive in exchange
therefor a new Warrant or Warrants, dated as of the date to which transfer is
effectuated, for the same aggregate amount of shares as the Warrant or
Warrants so surrendered for transfer or exchange and each registered in such
name or names as may be designated by such Holder. Every Warrant so made and
delivered in exchange for any Warrant shall in all other respects be in the
same form and have the same terms as the Warrant so surrendered for transfer
or exchange.
4.2. Ownership of This Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary until presentation of this Warrant for registration of
transfer as provided in this Section 4.
4.3. Transfer and Replacement. This Warrant and all rights hereunder
are subject to applicable federal and state securities laws, transferable in
whole or in part upon the books of the Company by the Holder hereof in person
or by duly authorized attorney, and a new Warrant or Warrants, of the same
tenor as this Warrant but registered in the name of the transferee or
transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft or destruction, and, in such case, of
indemnity or security reasonably satisfactory to it, and upon surrender of
this Warrant if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant; provided that if the Holder hereof is an
instrumentality of a state or local government or an institutional holder or a
nominee for such an instrumentality or institutional holder, an irrevocable
agreement of indemnity by such Holder shall be sufficient for all purposes of
this Section 4, and no evidence of loss or theft or destruction shall be
necessary. This Warrant shall be promptly canceled by the Company upon the
surrender hereof in connection with any transfer or replacement. Except as
otherwise provided above, in the case of the loss, theft or destruction of a
Warrant, the Company shall pay all expenses, taxes and other charges payable
in connection with any transfer or replacement of this Warrant, other than
stock transfer taxes (if any) payable in connection with a transfer of this
Warrant, which shall be payable by the Holder.
SECTION 5. Adjustment of Warrant Price and Number of Shares of Common
Stock or Warrants.
(a) In case the Company shall (i) pay a dividend or make a
distribution in shares of its capital stock (whether shares of Common Stock or
of capital stock of any other class) or distribute evidences of indebtedness
or assets, (ii) sub-divide its outstanding shares of Common Stock (iii)
combine its outstanding shares of Common Stock into a smaller number of
shares, or (iv) issue by reclassification of its shares of Common Stock any
shares of capital stock of the Company, the conversion privilege and Warrant
Price in effect immediately prior to such action shall be adjusted so that the
holders of any Warrants thereafter surrendered for exercise shall be entitled
to receive the number of shares of capital stock of the Company which he or
she would have owned immediately following such action had such Warrant been
exercised immediately prior thereto. An adjustment made pursuant to this
subsection (a) shall become effective retroactively immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made
pursuant to this subsection (a), the holder of any shares of this Warrant
thereafter surrendered for conversion shall become entitled to receive shares
of two or more classes of capital stock of the Company, the Board of Directors
(whose reasonable determination shall be made in good faith) shall determine
the allocation of the adjusted conversion price between or among shares of
such classes of capital stock.
(b) The Company may elect, upon any adjustment of the Warrant
Price hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the
conversion of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment
of the number of Warrants shall become that number of Warrants (calculated to
the nearest tenth) determined by multiplying the number one by a fraction, the
numerator of which shall be the Warrant Price in effect immediately prior to
such adjustment and the denominator of which shall be the Warrant Price in
effect immediately after such adjustment.
(c) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by converting such Warrant, to purchase the kind
and number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock that might have been purchased upon conversion of such Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 5. The Company
shall not effect any such consolidation, merger or sale unless prior to or
simultaneously with the consummation thereof the successor (if other than the
Company) resulting from such consolidation or merger of the corporation
purchasing assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Company, the obligation to
deliver to the holder of each Warrant such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations under this Warrant. The
foregoing provisions shall similarly apply to successive reclassification,
capital reorganizations and other changes of outstanding shares of Common
Stock and to successive consolidations, mergers, sales or conveyances.
(d) After each adjustment of the Warrant Price pursuant to this
Section 5, the Company will promptly prepare a certificate signed by the
President, and by the Treasurer or an Assistant Treasurer or the Secretary or
any Assistant Secretary, of the Company setting forth: (i) the Warrant Price
as so adjusted, (ii) the number of shares of Common Stock purchasable upon
conversion of each Warrant after such adjustment, and, if the Company shall
have elected to adjust the number of Warrants, the number of Warrants to which
the registered holder of each Warrant shall then be entitled.
(e) For purposes of Section 5(a) and 5(b) hereof, the following
shall also be applicable:
(A) The number of shares of Common Stock outstanding at
any given time shall include shares of Common Stock owned or held by or
for the account of the Company and the sale or issuance of such treasury
shares or the distribution of any such treasury shares shall not be
considered a Change of Shares for purposes of said sections.
(B) No adjustment of the Warrant Price shall be made
unless such adjustment would require a decrease of a least $.0001 in
such price; provided that any adjustments which by reason of this clause
(B) are not required to be made at the time of and together with the
next subsequent adjustment which, together with any adjustment(s) so
carried forward, shall require an increase or decrease of at least
$.0001 in the Warrant Price then in effect hereunder.
(f) If and whenever the Company shall grant to all holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into
or exchangeable for carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered
Holder as of the record date for such transaction of the Warrants then
outstanding, the rights, warrants or options to which each Registered Holder
would have been entitled if, on the record date used to determine the
stockholders entitled to the rights, warrants or options being granted by the
Company, the Registered Holder were the holder of record of the number or
whole shares of Common Stock then issuable upon conversion (assuming, for
purposes of this section 5 (f), that exercise of Warrants is permissible
during periods prior to the Warrant Exercise Date) of his Warrants. Such
grant by the Company to the holders of the Warrants shall be in lieu of any
adjustment which otherwise might be called for pursuant to this Section 5.
SECTION 6. Notice of Extraordinary Dividends. If the Board of
Directors of the Company shall declare any dividend or other distribution on
its Common Stock except out of earned surplus or by way of a stock dividend
payable in shares of its Common Stock, the Company shall mail notice thereof
to the Holder hereof not less than fifteen (15) days prior to the record date
fixed for determining shareholders entitled to participate in such dividend or
other distribution, and the Holder hereof shall not participate in such
dividend or other distribution unless this Warrant may be converted, in whole
or in part, pursuant to Section 2.1 of this Warrant, and is converted prior to
such record date. The provisions of this Section 6 shall not apply to
distributions made in connection with transactions covered by Section 5.
SECTION 7. Fractional Shares. Fractional shares shall not be issued
upon the conversion of this Warrant but in any case where the Holder would,
except for the provisions of this Section 7, be entitled under the terms
hereof to receive a fractional share upon the conversion of this Warrant, the
Company shall, upon the conversion of this Warrant, pay a sum in cash equal to
the excess of the value of such fractional share (determined in such
reasonable manner as may be prescribed in good faith by the Board of Directors
of the Company).
SECTION 8. Registration Rights; Etc.
8.1. Certain Definitions. As used in this Section 8, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean this Warrant or the Warrant Shares
issued or issuable upon conversion of this Warrant.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company
in compliance with Section 8.2 hereof other than Selling Expenses, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses".
"Holder" shall mean any holder of outstanding Warrant Shares or
Registrable Securities which (except for purposes of determining "Holders"
under Section 8.6 hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
8.2. Company Registration.
(a) Notice of Registration. If the Company shall determine to register
any of its securities either for its own account or the account of a security
holder or holders exercising their respective demand registration rights,
other than a registration relating solely to employee benefit plans, or a
registration relating solely to a Commission Rule 145 transaction, or a
registration on any registration form which does not permit secondary sales,
the Company will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request
or requests, made by any Holder within fifteen (15) days after receipt
of the written notice from the Company described in clause (i) above,
except as set forth in Section 8.2(b) below.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the written notice given
pursuant to Section 8.2(a)(i). In such event, the right of any Holder to
registration pursuant to Section 8.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company, directors and officers and the Other
Shareholders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 8.2, if the
underwriter determines that marketing factors require a limitation on the
number of shares to be underwritten, the underwriter may (subject to the
allocation priority set forth below) exclude from such registration and
underwriting some of the Registrable Securities which would otherwise be
underwritten pursuant hereto provided, however, that in no event shall the
Registrable Securities underwritten pursuant hereto constitute less than
one-third of such offering. The Company shall so advise all holders of
securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be
allocated in the following manner. The number of shares that may be included
in the registration and underwriting on behalf of such Holders, directors and
officers and Other Shareholders shall be allocated among such Holders,
directors and officers and other Shareholders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities and other
securities which they had requested to be included in such registration at the
time of filing the registration statement.
If any Holder of Registrable Securities or any officer, director or
Other Shareholder disapproves of the terms of any such underwriting, such
person may elect to withdraw therefrom by written notice to the Company and
the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
8.3 Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 8.2 hereof. All Selling
Expenses shall be borne by the holders of the securities so registered pro
rata on the basis of the number of their shares so registered.
8.4 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Section 8, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable
Securities under the securities laws or blue-sky laws of such jurisdictions as
any Holder may request; provided, however, that the Company shall not be
obligated to register or qualify such Registrable Securities in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process in order to effect such registration,
qualification or compliance unless the Company is already subject to service
in such jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder.
8.5 Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 8, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party
who controls any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, each of its
officers, directors and partners, and each party controlling such Holder, each
such underwriter and each party who controls any such underwriter, for any
legal and any other expenses incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished to the
Company by such Holder or underwriter, as the case may be, and stated to be
specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities
held by such person are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and
hold harmless the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a
registration statement, each party who controls the Company or such
underwriter, each other such Holder and Other Shareholder and each of their
respective officers, directors and partners, and each party controlling such
Holder or Other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal
to the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 8.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense (unless the
Indemnified Party shall have been advised by counsel that actual or potential
differing interests or defenses exist or may exist between the Indemnifying
Party and the Indemnified Party, in which case such expense shall be paid by
the Indemnifying Party), and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 8. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.
8.6 Information by Holder. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 8.
8.7 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
the Registrable Securities to the public without registration, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities
Act and the Securities Exchange Act of 1934, as amended, at any time after it
has become subject to such reporting requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without
registration.
SECTION 9. Notices. Any notice or other document required or permitted
to be given or delivered to the Holder or the Company shall be effected on the
seventh day following delivery to the United States Post Office, proper
postage prepaid, sent by certified or registered mail return receipt
requested, or on the day delivered by hand and receipted, or on the second
business day after delivery to a recognized overnight courier service,
addressed to the Holder at the address thereof specified in the records of the
Company or to such other address as shall have been furnished to the Company
in writing by the Holder or the Company at 0000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000 or to such other address as shall have been furnished in
writing to the Holder by the Company.
SECTION 10. No Rights as Stockholder; Limitation of Liability. This
Warrant shall not entitle the Holder to any of the rights of a shareholder of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of
the rights or privileges of the Holder, shall give rise to any liability of
the Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 11. Law Governing. This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of
California.
SECTION 12. Miscellaneous. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought. The headings in this Warrant are for
purposes of reference only and shall not affect the meaning or construction of
any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 30th day of December, 1997.
INTERNATIONAL FIRE PREVENTION, INC.
By:/s/ Xxxxx X. Xxxxxxx, President
[FORM NOTICE OF CONVERSION]
To be executed by the registered holder if
such holder desires to convert the Warrant
To____________:
The undersigned hereby irrevocably elects to convert the Warrant to
purchase _______ shares of Common Stock issuable upon the conversion of such
Warrant and requests that Certificate for such shares be issued in the name
of:
___________________________________________________________________
(Please print name and address)
___________________________________________________________________
(Please insert social security or other identifying number)
___________________________________________________________________
(Please insert number of shares exercised)
___________________________________________________________________
Please insert Warrant Price Paid
If such number of Warrant shall not be all the Warrant evidenced by the
accompanying Warrant, a new Warrant for the balance remaining of such Warrant
shall be registered in the name of and delivered to:
__________________________________________________________________
(Please print name and address)
____________________________________________________________
(Please insert social security or other identifying number)
Dated:________________, ____.
[HOLDER]
By___________________________
EXHIBIT K-2
Stock Subscription Warrant of Xxxxxxx X. Xxxxxxxxxx
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
STOCK SUBSCRIPTION WARRANT
To Purchase 20,000 Shares of Common Stock of
International Fire Prevention, Inc., a Nevada Corporation
(or any successor thereto)(the "Company")
DATE OF INITIAL ISSUANCE: December 30, 1997
THIS CERTIFIES THAT, for value received, Xxxxx X. Xxxxxxx or registered
assigns (hereinafter called the "Holder") is entitled to purchase from the
Company during the Term of this Warrant at the times provided for herein, the
number of shares of Common Stock, par value $.001 per share, of the Company
(the "Common Stock") as specified herein, at the Warrant Price (as hereinafter
defined), payable in the manner specified herein. The conversion of this
Warrant shall be subject to the provisions, limitations and restrictions
herein contained.
SECTION 1. Definitions.
Common Stock - shall mean and include the Company's authorized Common
Stock, par value $.001 per share, as constituted at the date hereof, and shall
also include any capital stock of any class of equal rank the Company
hereafter authorized which has the right to participate in the distribution of
earnings and assets of the Company without limit to amount or percentage.
Securities Act - the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
Term of this Warrant - shall mean the period beginning on the date that
the exercise price is determined as set forth in Section 2.1 herein and ending
two (2) years from such beginning date.
Warrant Price - is defined in Section 2.1 hereof.
Warrant Rights - the rights of the Holder to purchase shares of Common
Stock upon conversion of this Warrant, which rights shall not relate to shares
of Common Stock already purchased pursuant to this Warrant.
Warrant Shares - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the conversion hereof.
SECTION 2. Conversion of Warrant.
2.1. Right to Exercise Warrant. At any time and from time to time
during the term of this Warrant, the Holder hereof shall have the right to
convert this Warrant, in whole or part(s) to purchase up to the number of
shares of Common Stock set forth on the cover page hereof, subject to
adjustment as provided in Section 5.
The Warrant Price shall be determined as followed:
(i) In the event the Company is listed on the NASDAQ Small Cap
Exchange (the "Exchange") within twelve (12) months from the date of issuance
of this Warrant as set forth on the cover page hereof (the "Anniversary
Date"), the Warrant price shall be equal to the opening bid price on the
Exchange plus twenty-five (25%) percent of such opening bid price.
(ii) In the event the Company is not listed on the Exchange by the
Anniversary Date, the Warrant Price shall be equal to the average bid price of
the Common Stock as listed on the OTC Bulletin Board for the period of thirty
(30) days immediately prior to the Anniversary Date plus twenty-five (25%)
percent of such average price.
The Warrant Price as set forth above shall be subject to adjustment as
provided in Section 5 and shall be paid in cash.
2.2. Procedure for Conversion of Warrant. To exercise this Warrant the
Holder shall deliver to the Company at its office referred to in Section 9
hereof at any time and from time to time during the Term of this Warrant:
this Warrant, together with the Notice of Exercise in the form attached hereto
and the payment of the aggregate Warrant Price with respect to the Warrants
exercised; or, in lieu of cash payment as provided herein, the Holder, may, at
the sole discretion of the Holder, deem the Warrants to be "cashless" or "net
purchase" Warrants and exchange Warrants as payment for shares of common
stock underlying other Warrants, such payment to be comprised of the
difference calculated by subtracting the exercise price of the Warrants from
the market value of the common stock underlying such Warrants on the Exchange
or the OTC Bulletin Board on the date of exercise. In the event of any
exercise of these rights represented by this Warrant, a certificate or
certificates for the shares of Common Stock so purchased, registered in the
name of the Holder or such other name or names as may be designated by the
Holder, shall be delivered to the Holder hereof within a reasonable time, not
exceeding fifteen (15) days, after the rights represented by this Warrant
shall have been so exercised. The person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which the Notice of Exercise was delivered and payment of the Warrant
Price and any applicable taxes was made, irrespective of the date of delivery
of such certificate, except that, if the date of such delivery and payment is
a date when the stock transfer books of the Company are closed, such person
shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are
open. In the event this Warrant is exercised in part, a new Warrant for the
balance of shares of Common Stock purchasable shall be issued to the Holder.
2.3. Transfer and Restriction Legend. This Warrant is freely
transferable by the Holder, except as transferability may be limited by
federal and state securities laws. Each certificate for Warrant Shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
securities represented thereby) shall also bear such legend unless, in the
opinion of counsel for the holder thereof (which counsel shall be reasonably
satisfactory to counsel for the Company) the securities represented thereby
are not, at such time, required by law to bear such legend.
SECTION 3. Covenants as to Common Stock. The Company covenants and
agrees that all shares of Common Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance and receipt by the
Company of the Warrant Price, be validly issued, fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
The Company further covenants and agrees that it will pay when due and payable
any and all federal and state taxes which may be payable in respect of the
issue of this Warrant, or any Common Stock or certificates therefor issuable
upon the exercise of this Warrant. The Company further covenants and agrees
that the Company will at all times have authorized and reserved, free from
preemptive rights, a sufficient number of shares of Common Stock to provide
for the exercise of the rights represented by this Warrant. The Company
further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the conversion of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon conversion, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the
conversion of this Warrant is listed on any national securities exchange, the
Company will, if permitted by the rules of such exchange, list and keep listed
on such exchange, upon official notice of issuance, all shares of such Common
Stock issuable upon conversion of this Warrant.
SECTION 4. Ownership.
4.1 Register; Transfer or Exchange of Warrants. The Company shall
keep at its office maintained in Carlsbad, California a register in which the
Company shall provide for the registration of Warrants and for the
registration of transfer of Warrants. The Holder of any Warrant may, at its
option and either in person or by duly authorized attorney, surrender the same
for registration of transfer or exchange at such office and, without expense
to such Holder (other than transfer taxes, if any), receive in exchange
therefor a new Warrant or Warrants, dated as of the date to which transfer is
effectuated, for the same aggregate amount of shares as the Warrant or
Warrants so surrendered for transfer or exchange and each registered in such
name or names as may be designated by such Holder. Every Warrant so made and
delivered in exchange for any Warrant shall in all other respects be in the
same form and have the same terms as the Warrant so surrendered for transfer
or exchange.
4.2. Ownership of This Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary until presentation of this Warrant for registration of
transfer as provided in this Section 4.
4.3. Transfer and Replacement. This Warrant and all rights hereunder
are subject to applicable federal and state securities laws, transferable in
whole or in part upon the books of the Company by the Holder hereof in person
or by duly authorized attorney, and a new Warrant or Warrants, of the same
tenor as this Warrant but registered in the name of the transferee or
transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft or destruction, and, in such case, of
indemnity or security reasonably satisfactory to it, and upon surrender of
this Warrant if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant; provided that if the Holder hereof is an
instrumentality of a state or local government or an institutional holder or a
nominee for such an instrumentality or institutional holder, an irrevocable
agreement of indemnity by such Holder shall be sufficient for all purposes of
this Section 4, and no evidence of loss or theft or destruction shall be
necessary. This Warrant shall be promptly canceled by the Company upon the
surrender hereof in connection with any transfer or replacement. Except as
otherwise provided above, in the case of the loss, theft or destruction of a
Warrant, the Company shall pay all expenses, taxes and other charges payable
in connection with any transfer or replacement of this Warrant, other than
stock transfer taxes (if any) payable in connection with a transfer of this
Warrant, which shall be payable by the Holder.
SECTION 5. Adjustment of Warrant Price and Number of Shares of Common
Stock or Warrants.
(a) In case the Company shall (i) pay a dividend or make a
distribution in shares of its capital stock (whether shares of Common Stock or
of capital stock of any other class) or distribute evidences of indebtedness
or assets, (ii) sub-divide its outstanding shares of Common Stock (iii)
combine its outstanding shares of Common Stock into a smaller number of
shares, or (iv) issue by reclassification of its shares of Common Stock any
shares of capital stock of the Company, the conversion privilege and Warrant
Price in effect immediately prior to such action shall be adjusted so that the
holders of any Warrants thereafter surrendered for exercise shall be entitled
to receive the number of shares of capital stock of the Company which he or
she would have owned immediately following such action had such Warrant been
exercised immediately prior thereto. An adjustment made pursuant to this
subsection (a) shall become effective retroactively immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made
pursuant to this subsection (a), the holder of any shares of this Warrant
thereafter surrendered for conversion shall become entitled to receive shares
of two or more classes of capital stock of the Company, the Board of Directors
(whose reasonable determination shall be made in good faith) shall determine
the allocation of the adjusted conversion price between or among shares of
such classes of capital stock.
(b) The Company may elect, upon any adjustment of the Warrant
Price hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the
conversion of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment
of the number of Warrants shall become that number of Warrants (calculated to
the nearest tenth) determined by multiplying the number one by a fraction, the
numerator of which shall be the Warrant Price in effect immediately prior to
such adjustment and the denominator of which shall be the Warrant Price in
effect immediately after such adjustment.
(c) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by converting such Warrant, to purchase the kind
and number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock that might have been purchased upon conversion of such Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 5. The Company
shall not effect any such consolidation, merger or sale unless prior to or
simultaneously with the consummation thereof the successor (if other than the
Company) resulting from such consolidation or merger of the corporation
purchasing assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Company, the obligation to
deliver to the holder of each Warrant such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations under this Warrant. The
foregoing provisions shall similarly apply to successive reclassification,
capital reorganizations and other changes of outstanding shares of Common
Stock and to successive consolidations, mergers, sales or conveyances.
(d) After each adjustment of the Warrant Price pursuant to this
Section 5, the Company will promptly prepare a certificate signed by the
President, and by the Treasurer or an Assistant Treasurer or the Secretary or
any Assistant Secretary, of the Company setting forth: (i) the Warrant Price
as so adjusted, (ii) the number of shares of Common Stock purchasable upon
conversion of each Warrant after such adjustment, and, if the Company shall
have elected to adjust the number of Warrants, the number of Warrants to which
the registered holder of each Warrant shall then be entitled.
(e) For purposes of Section 5(a) and 5(b) hereof, the following
shall also be applicable:
(A) The number of shares of Common Stock outstanding at
any given time shall include shares of Common Stock owned or held by or
for the account of the Company and the sale or issuance of such treasury
shares or the distribution of any such treasury shares shall not be
considered a Change of Shares for purposes of said sections.
(B) No adjustment of the Warrant Price shall be made
unless such adjustment would require a decrease of a least $.0001 in
such price; provided that any adjustments which by reason of this clause
(B) are not required to be made at the time of and together with the
next subsequent adjustment which, together with any adjustment(s) so
carried forward, shall require an increase or decrease of at least
$.0001 in the Warrant Price then in effect hereunder.
(f) If and whenever the Company shall grant to all holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into
or exchangeable for carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered
Holder as of the record date for such transaction of the Warrants then
outstanding, the rights, warrants or options to which each Registered Holder
would have been entitled if, on the record date used to determine the
stockholders entitled to the rights, warrants or options being granted by the
Company, the Registered Holder were the holder of record of the number or
whole shares of Common Stock then issuable upon conversion (assuming, for
purposes of this section 5 (f), that exercise of Warrants is permissible
during periods prior to the Warrant Exercise Date) of his Warrants. Such
grant by the Company to the holders of the Warrants shall be in lieu of any
adjustment which otherwise might be called for pursuant to this Section 5.
SECTION 6. Notice of Extraordinary Dividends. If the Board of
Directors of the Company shall declare any dividend or other distribution on
its Common Stock except out of earned surplus or by way of a stock dividend
payable in shares of its Common Stock, the Company shall mail notice thereof
to the Holder hereof not less than fifteen (15) days prior to the record date
fixed for determining shareholders entitled to participate in such dividend or
other distribution, and the Holder hereof shall not participate in such
dividend or other distribution unless this Warrant may be converted, in whole
or in part, pursuant to Section 2.1 of this Warrant, and is converted prior to
such record date. The provisions of this Section 6 shall not apply to
distributions made in connection with transactions covered by Section 5.
SECTION 7. Fractional Shares. Fractional shares shall not be issued
upon the conversion of this Warrant but in any case where the Holder would,
except for the provisions of this Section 7, be entitled under the terms
hereof to receive a fractional share upon the conversion of this Warrant, the
Company shall, upon the conversion of this Warrant, pay a sum in cash equal to
the excess of the value of such fractional share (determined in such
reasonable manner as may be prescribed in good faith by the Board of Directors
of the Company).
SECTION 8. Registration Rights; Etc.
8.1. Certain Definitions. As used in this Section 8, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean this Warrant or the Warrant Shares
issued or issuable upon conversion of this Warrant.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company
in compliance with Section 8.2 hereof other than Selling Expenses, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses, and
the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses".
"Holder" shall mean any holder of outstanding Warrant Shares or
Registrable Securities which (except for purposes of determining "Holders"
under Section 8.6 hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
8.2. Company Registration.
(a) Notice of Registration. If the Company shall determine to register
any of its securities either for its own account or the account of a security
holder or holders exercising their respective demand registration rights,
other than a registration relating solely to employee benefit plans, or a
registration relating solely to a Commission Rule 145 transaction, or a
registration on any registration form which does not permit secondary sales,
the Company will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request
or requests, made by any Holder within fifteen (15) days after receipt
of the written notice from the Company described in clause (i) above,
except as set forth in Section 8.2(b) below.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the written notice given
pursuant to Section 8.2(a)(i). In such event, the right of any Holder to
registration pursuant to Section 8.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company, directors and officers and the Other
Shareholders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 8.2, if the
underwriter determines that marketing factors require a limitation on the
number of shares to be underwritten, the underwriter may (subject to the
allocation priority set forth below) exclude from such registration and
underwriting some of the Registrable Securities which would otherwise be
underwritten pursuant hereto provided, however, that in no event shall the
Registrable Securities underwritten pursuant hereto constitute less than
one-third of such offering. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities
that are entitled to be included in the registration and underwriting shall be
allocated in the following manner. The number of shares that may be included
in the registration and underwriting on behalf of such Holders, directors and
officers and Other Shareholders shall be allocated among such Holders,
directors and officers and other Shareholders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities and other
securities which they had requested to be included in such registration at the
time of filing the registration statement.
If any Holder of Registrable Securities or any officer, director or
Other Shareholder disapproves of the terms of any such underwriting, such
person may elect to withdraw therefrom by written notice to the Company and
the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
8.3 Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 8.2 hereof. All Selling
Expenses shall be borne by the holders of the securities so registered pro
rata on the basis of the number of their shares so registered.
8.4 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Section 8, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable
Securities under the securities laws or blue-sky laws of such jurisdictions as
any Holder may request; provided, however, that the Company shall not be
obligated to register or qualify such Registrable Securities in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process in order to effect such registration,
qualification or compliance unless the Company is already subject to service
in such jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder.
8.5 Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 8, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party
who controls any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, each of its
officers, directors and partners, and each party controlling such Holder, each
such underwriter and each party who controls any such underwriter, for any
legal and any other expenses incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished to the
Company by such Holder or underwriter, as the case may be, and stated to be
specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities
held by such person are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and
hold harmless the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a
registration statement, each party who controls the Company or such
underwriter, each other such Holder and Other Shareholder and each of their
respective officers, directors and partners, and each party controlling such
Holder or Other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal
to the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 8.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense (unless the
Indemnified Party shall have been advised by counsel that actual or potential
differing interests or defenses exist or may exist between the Indemnifying
Party and the Indemnified Party, in which case such expense shall be paid by
the Indemnifying Party), and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 8. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.
8.6 Information by Holder. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 8.
8.7 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
the Registrable Securities to the public without registration, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities
Act and the Securities Exchange Act of 1934, as amended, at any time after it
has become subject to such reporting requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without
registration.
SECTION 9. Notices. Any notice or other document required or permitted
to be given or delivered to the Holder or the Company shall be effected on the
seventh day following delivery to the United States Post Office, proper
postage prepaid, sent by certified or registered mail return receipt
requested, or on the day delivered by hand and receipted, or on the second
business day after delivery to a recognized overnight courier service,
addressed to the Holder at the address thereof specified in the records of the
Company or to such other address as shall have been furnished to the Company
in writing by the Holder or the Company at 0000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000 or to such other address as shall have been furnished in
writing to the Holder by the Company.
SECTION 10. No Rights as Stockholder; Limitation of Liability. This
Warrant shall not entitle the Holder to any of the rights of a shareholder of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of
the rights or privileges of the Holder, shall give rise to any liability of
the Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 11. Law Governing. This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of
California.
SECTION 12. Miscellaneous. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought. The headings in this Warrant are for
purposes of reference only and shall not affect the meaning or construction of
any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 30th day of December, 1997.
INTERNATIONAL FIRE PREVENTION, INC.
By:/s/ Xxxxx X. Xxxxxxx, President
[FORM NOTICE OF CONVERSION]
To be executed by the registered holder if
such holder desires to convert the Warrant
To____________:
The undersigned hereby irrevocably elects to convert the Warrant to
purchase _______ shares of Common Stock issuable upon the conversion of such
Warrant and requests that Certificate for such shares be issued in the name
of:
___________________________________________________________________
(Please print name and address)
___________________________________________________________________
(Please insert social security or other identifying number)
___________________________________________________________________
(Please insert number of shares exercised)
___________________________________________________________________
Please insert Warrant Price Paid
If such number of Warrant shall not be all the Warrant evidenced by the
accompanying Warrant, a new Warrant for the balance remaining of such Warrant
shall be registered in the name of and delivered to:
__________________________________________________________________
(Please print name and address)
____________________________________________________________
(Please insert social security or other identifying number)
Dated:________________, ____.
[HOLDER]
By___________________________
EXHIBIT L
DEBENTURE
$75,000 Carlsbad, California
December 30, 1997
International Fire Prevention, Inc., a corporation duly organized
and existing under the laws of the State of Nevada, or any successor thereto,
(herein called the "Company"), for value received, hereby promises to pay to
the order of Xxxxx X. Xxxxxxx, or registered assigns the principal amount of
Seventy-Five Thousand ($75,000) Dollars on December 30, 1998, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for public and private debts, at the principal office of the
Company, in Carlsbad, California, and to pay interest (computed on the basis
of a 360-day year of twelve 30-day months) at said office, in like coin or
currency, on the unpaid portion of said principal amount from the date hereof,
quarterly on the first day of April, June and September and December,
commencing on March 1, 1998, at the rate of seven (7%) percent per annum until
such unpaid portion of such principal amount shall have become due. This
Debenture may be prepaid at any time without the consent of the registered
holder hereof.
1. Exchanges and Transfers of the Debenture.
1.1. Register; Transfer or Exchange of Debentures. The Company
shall keep at its office or agency maintained in Carlsbad, California, a
register in which the Company shall provide for the registration of this
Debenture and for the registration of transfer of the Debenture. The Holder
of this Debenture may, with the consent of the Company, which shall not be
unreasonably withheld or delayed, at the Holder's option and either in person
or by duly authorized attorney, surrender the same for registration of
transfer or exchange at such office and, without expense to such Holder (other
than transfer taxes, if any), receive in exchange therefor a new Debenture or
Debentures, dated as of the date to which interest has been paid on the
Debenture or Debentures so surrendered, each in the principal amount of
$10,000 or any integral multiple thereof, for the same aggregate unpaid
principal amount as the Debenture or Debentures so surrendered for transfer or
exchange and each registered in such name or names as may be designated by
such Holder. Every Debenture so made and delivered in exchange for any
Debenture shall in all other respects be in the same form and have the same
terms as the Debenture so surrendered for transfer or exchange.
1.2. Loss, Theft, Destruction or Mutilation of Debentures. Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of the Debenture and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity bond in such reasonable
amount as the Company may determine (or if such Debenture is held by the
original Holder, of an unsecured indemnity agreement reasonably satisfactory
to the Company) or, in the case of any such mutilation, upon surrender and
cancellation of such Debenture, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Debenture, a new Debenture of like
tender and unpaid principal amount and dated as of the date to which interest
has been paid on the Debenture so lost, stolen, destroyed or mutilated.
1.3. Registered Holders. The Company may deem and treat the
person in whose name the Debenture is registered as the absolute owner and
holder of such Debenture for the purpose of receiving payment of the principal
of and interest on such Debenture and for the purpose of any notices, waivers
or consents thereunder, whether or not such Debenture shall be overdue, and
the Company shall not be affected by notice to the contrary. Payments with
respect to the Debenture shall be made only to the registered Holder thereof.
2. Surrender of the Debenture.
2.1. Surrender of Debentures. The Company may, as a condition
of payment of all or any of the principal of, and interest on, this Debenture,
in whole or in part, require the holder to present this Debenture for notation
of such payment and, if this Debenture be paid in full, require the surrender
hereof.
3. Covenants.
3.1. To Pay Principal and Interest. The Company covenants and
agrees that so long as this Debenture shall be outstanding it will pay
interest and principal timely as herein provided.
3.2. Maintenance of Company Office. The Company will maintain
an office in Carlsbad, California in its current facility where notices,
presentations and demands to or upon the Company in respect of the Debenture
may be given or made unless it shall give reasonable notice to the holder
hereof of any change in its principal office.
3.3. To Keep Books. The Company will, and will cause any
subsidiaries, to keep proper books of record and account in which full, true
and correct entries will be made of its transactions in accordance with
generally accepted accounting principles.
3.4. Payment of Taxes; Corporate Existence; Maintenance of
Properties. The Company will and will cause any subsidiary to:
a. pay and discharge promptly or cause to be paid and discharged
promptly all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any of its
property, real, personal or mixed, or upon any part thereof,
before the same shall become in default, as well as all lawful
claims for labor, materials and supplies which, if unpaid, might
by law become a lien or change upon its property; provided,
however, that neither the Company nor any subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim if
the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings and if the
Company or such subsidiary, as the case may be, shall have set
aside on its books reserves (provided for and segregated to the
extent required by generally accepted accounting principles)
deemed by it adequate with respect thereto;
b. maintain and keep or cause to be maintained and kept its
properties in good repair, working order and condition, and from
time to time make or cause to be made all needful and proper
repairs, renewals, replacements and improvements so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
3.5. To Insure. The Company will, and will cause any
subsidiaries, to maintain insurance in such extent and against such hazards
and liabilities as is commonly maintained by companies similarly situated.
3.6 Payment of Dividends. The Company shall not declare,
pay or distribute any dividends to its shareholders unless (i) it may legally
do so, and in any event only from funds legally permitted to be distributed as
dividends and (ii) after giving effect to such dividend the Company shall have
sufficient liquid assets to meet all obligations and liabilities of the
Company, including interest on this Debenture, appearing on its balance sheet
or otherwise reasonably expected, which are or will be due and payable within
six months from the date of the declaration of the dividend.
3.7. Limitation on Debt. Except debt that is already
outstanding, the Company shall incur no debt for money borrowed ranking senior
in priority to this Debenture, nor shall it grant any further mortgage or
security interest, including purchase money security interests, in any of the
property or assets of the Company.
4. Events of Default.
4.1. Events of Default. If one or more of the
following events, herein called Events of Default, shall happen for any
reason whatsoever and whether such happening shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court of any order, rule
or regulation of any administrative or governmental body) and be continuing:
(a) Default shall be made in the payment of the principal
of this Debenture, when and as the same shall become due and payable, whether
at maturity or at a date fixed for prepayment or by acceleration or otherwise;
or
(b) Default shall be made in the payment of any installment
of interest on this Debenture according to its tenor when and as the same
shall become due and payable and such default shall continue for a period of
10 days; or
(c) Default shall be made in the due observance or
performance of any covenant, condition or agreement on the part of the Company
contained in this Debenture; or
(d) The Company shall be adjudicated a bankrupt or
insolvent, or shall consent to the appointment of a receiver, trustee or
liquidator of itself or of any material part of its property, or shall admit
in writing its inability to pay its debts generally as they come due, or shall
make a general assignment for the benefit of creditors, or shall file a
voluntary petition or an answer seeking reorganization or arrangement in a
proceeding under any bankruptcy law (as now or hereafter in effect) or an
answer admitting the material allegations of a petition filed against the
Company in any such proceeding, or shall, by voluntary petition, answer or
consent, seek relief under the provisions of any other now existing or future
bankruptcy or other similar law providing for the reorganization or winding up
of corporations, or the Company or its directors or majority stockholders
shall take action looking to the dissolution or liquidation of the Company; or
(e) An order, judgment or decree shall be entered by any
court of competent jurisdiction appointing, without the consent of the
Company, a receiver, trustee or liquidator of the Company or of any material
part of its property, and such receiver, trustee or liquidator shall not have
been removed or discharged within 90 days thereafter, or any material part of
the property of the Company shall, in any judicial proceeding, be sequestered
and shall not be returned to the possession of the Company within 90 days
thereafter; or
(f) A petition against the Company in a proceeding under
any bankruptcy law (as now or hereinafter in effect) shall be filed and shall
not be dismissed within 30 days after such filing, or, in case the approval of
such petition by a court of competent jurisdiction is required, shall be filed
and approved by such a court as properly filed and such approval shall not be
withdrawn or the proceeding dismissed within 30 days thereafter, or if, under
the provisions of any other similar law providing for reorganization or
winding up of corporations and which may apply to the Company, any court of
competent jurisdiction, custody or control of the Company or of any material
part of its property and such jurisdiction, custody or control shall not be
relinquished or terminated within 30 days thereafter; or
(h) The Company shall (x) be declared in default in the
payment of principal or interest on any evidence of indebtedness for money
borrowed and such default shall continue for more than the period of grace, if
any, therein specified, unless such default shall have been cured or waived
prior to such indebtedness becoming or being declared to be due and payable
prior to its stated maturity, or (y) default shall continue for more than the
period of grace, if any, therein specified, or (z) default in the performance
or observance of any other term, condition or agreement contained in any such
evidence of indebtedness for money borrowed or in any agreement relating
thereto if as a result of such default such evidence of indebtedness is
declared to be due and payable prior to its stated maturity; then, in any such
event, any registered holder of the Debenture may declare the Debenture held
by it to be immediately due and payable and upon such declaration the same
shall become and be immediately due and payable, together with accrued
interest thereon, anything in the Debenture to the contrary notwithstanding.
4.2. Suits for Enforcement. In case any one or more of the
Events of Default specified in 4.1 shall happen and be continuing, the Holder
of the Debenture which may, pursuant to the provisions of 4.1, declare the
Debenture held by it to be immediately due and payable, may proceed to protect
and enforce its rights by suit in equity, action at law and/or by other
appropriate proceeding, whether for the specific performance (to the extent
permitted by law) of any covenant or agreement contained in this Debenture,
such Debenture or in aid of the exercise of any power granted in this
Debenture, such Debenture, or may proceed to enforce the payment of such
Debenture or to enforce any other legal or equitable right of holder of such
Debenture. Nothing contained in this 4.2 or in 4.1 shall in any manner
impair that absolute and unconditional right of the Holder of the Debenture to
receive payment of the principal of and interest, on such Debenture when the
same shall become due and payable in accordance with the terms thereof, and to
institute suit for the enforcement of such payment.
4.3. Remedies Cumulative. No remedy herein conferred upon the
Holder of this Debenture is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
4.4. Remedies Not Waived. No course of dealing between the
Company and any Holder of the Debenture shall operate as a waiver of any right
of such holder hereunder or under such Debenture, and no delay on the part of
such holder in exercising any right hereunder or thereunder shall so operate.
5. Costs of Collection. In case of a default in the
payment of any principal of or interest on this Debenture, the Company will
pay to the holder hereof such further amount as shall be sufficient to cover
the costs and expenses of collection, including (without limitation)
reasonable attorneys' fees.
6. Legend. The Debenture shall bear the following
legend:
The Securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or registered or
qualified under the "blue sky" laws of any State. The securities may not be
pledged, hypothecated, assigned, sold or transferred unless registered under
that Act and registered or qualified under the blue sky laws as may be
applicable or unless, in the opinion of counsel reasonably satisfactory to the
Company, exemptions from such laws are available.
7. Covenants Bind Successors and Assigns. All the
covenants, stipulations, promises and agreements in this Debenture contained
by or on behalf of the Company shall bind its successors and assigns, whether
so expressed or not.
8. Governing Law. This Debenture shall be governed by
and construed in accordance with the laws of the State of California.
9. Notice. Any notice pursuant to this Debenture shall
be made by registered or certified mail:
If to the holder at the address shown on the register maintained
by the Company pursuant to 1.2 of this Debenture.
If to the Company:
International Fire Prevention, Inc.
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
10. Headings. The headings of the sections and
subsections of this Debenture are inserted for convenience only and do not
constitute a part of this Debenture.
IN WITNESS WHEREOF, International Fire Prevention, Inc., or its
successor, if any, has caused this Debenture to be signed in its corporate
name by one of its officers thereunto duly authorized and this Debenture to be
dated as of the day and year first above written.
INTERNATIONAL FIRE PREVENTION, INC.
By:/s/ Xxxxx X. Xxxxxxx,President
XXXXXXX ENTERTAINMENT GROUP, INC.
By:/s/ Xxxxxx X. Xxxxxxx, President
