EXHIBIT 10.1
AGREEMENT AND PLAN OF REORGANIZATION
Agreement and Plan of Reorganization ("Agreement") between
Chancellor Group, Inc., a Nevada corporation ("Chancellor"), and SOUTHWIN
FINANCIAL, LTD., (the "Shareholder"), being the owner of record of all of the
issued and outstanding shares of Getty Petroleum, Inc., a Texas corporation
(the "Company").
WHEREAS, Chancellor wishes to acquire and the Shareholder wishes to
transfer all of the issued and outstanding stock of the Company in exchange
for 4,500,000 shares of common stock of Chancellor in a transaction intended
to qualify as a reorganization within the meaning of Section 368(a)(1)(B) of
the Internal Revenue Code of 1954, as amended.
NOW, THEREFORE, Chancellor and the Shareholder adopt this plan of
reorganization and agree as follows:
SECTION 1. EXCHANGE OF STOCK
1.01 NUMBER OF SHARES. The Shareholder agrees to transfer to
Chancellor at the Closing all of the outstanding shares of common stock of
the Company ("Company Shares"), in exchange for an aggregate of 4,500,000
shares (the "Chancellor Shares") of common stock of Chancellor, $.001 par
value per share. The Chancellor Shares will be issued at the Closing to the
Shareholder and the designee of the Shareholder ("Designee").
1.02 DELIVERY OF CERTIFICATES BY SHAREHOLDER. The transfer of the
Company Shares by the Shareholder shall be effected by the delivery to
Chancellor at the Closing of certificates representing the Company Shares
endorsed in blank or accompanied by stock powers executed in blank, with all
signatures guaranteed by a national bank or broker-dealer.
1.03 FURTHER ASSISTANCE. At the Closing and from time to time
thereafter, the Shareholder shall execute such additional instruments and
take such other action as Chancellor may request in order more effectively to
sell, transfer and assign the transferred Company Shares to Chancellor and to
confirm Chancellor's title thereto.
1.04 CHANGES IN CHANCELLOR'S CAPITALIZATION. If between the date of
this Agreement and the Closing, the outstanding shares of Chancellor common
stock are, without the receipt of new consideration by Chancellor, increased,
decreased, changed into or exchanged for a different number or kind of shares
or securities of Chancellor through reorganization, reclassification, stock
dividend, stock split, reverse stock split or similar change in Chancellor's
capitalization, Chancellor will issue and deliver to the Shareholder in
addition to or in lieu of the Chancellor Shares specified in Section 1.01,
voting stock of Chancellor in equitably adjusted amounts. In the
2
event of any change in Chancellor's capitalization, all references to
Chancellor Shares herein shall refer to the number of Chancellor Shares as
thus adjusted.
SECTION 2. CLOSING
2.01 The closing contemplated by Section 1.1 (the "Closing") shall
be held at the offices of Xxxxx X. Xxxxx, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000,
Xxx Xxxxxxx, Xxxxxxxxxx 00000, on October 25, 2000 or as soon as practical
thereafter unless another place or time is agreed upon in writing by the
parties.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder hereby warrants, represents and agrees as follows:
3.01 CORPORATE STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas
and is licensed or qualified as a foreign corporation in all jurisdictions in
which the nature of its business or the character or ownership of its
properties makes such licensing or qualification necessary.
3.02 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000,000 shares of common stock, $2.00 par value of which 1,000
shares are issued and outstanding. All such
3
shares are fully paid and non-assessable.
3.03 FINANCIAL STATEMENT. The financial statements of the Company to
be furnished to Chancellor, consisting of a balance sheet and a related
statement of income (the "Financial Statements") as set forth on Exhibit A,
which will be delivered at the Closing, will be correct and fairly present
the financial condition of the Company as of the dates and for the periods
involved, and such Financial Statements will be prepared in accordance with
generally accepted accounting principles consistently applied.
3.04 UNDISCLOSED LIABILITIES. The Company had no liabilities of any
nature except to the extent reflected or reserved against in the Financial
Statements, whether accrued, absolute, contingent or otherwise, including,
without limitation, tax liabilities and interest due or to become due, and
the Company's accounts receivable are collectible in accordance with the
terms of such accounts, except to the extent of the reserve therefor in the
Financial Statements.
3.05 INTERIM CHANGES. Between January 1, 2000 and the date of this
Agreement, there have not been, except as set forth on Exhibit A attached
hereto and made a part hereof (1) any changes in the Company's financial
condition, assets, liabilities, or business which, in the aggregate, have
been materially adverse; (2) any damage, destruction or loss of or to the
Company's
4
property, whether or not covered by insurance; (3) any declaration or payment
of any dividends or other distribution in respect of the Company's capital
stock, or any direct or indirect redemption, purchase or other acquisition or
any such stock; or (4) any increase paid or agreed to in the compensation,
retirement benefits or other commitments to employees.
3.06 TITLE TO PROPERTY. The Company has good and marketable title to
all properties and assets, real and personal, reflected in the Financial
Statements or as set forth on Exhibit B, except as since sold or otherwise
disposed of in the ordinary course of business, and the Company's properties
and assets are subject to no mortgage, pledge, lien or encumbrance, except
for liens shown therein, with respect to which no default exists. The sole
asset of the Company is described in and set forth on Exhibit B, attached
hereto.
3.07 LITIGATION. There is no litigation or proceeding pending, or to
Shareholder' knowledge threatened, against or relating to the Company, its
properties or business.
3.08 ACCESS TO RECORDS, ETC. From the date of this Agreement to the
Closing, the Shareholder will cause the Company (1) to give to Chancellor 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 Chancellor may inspect and audit them; and (2) to furnish
5
such information concerning the Company's properties and affairs as
Chancellor may reasonably request.
3.09 CONFIDENTIALITY. Until the Closing (and permanently if there is
no Closing), the Shareholder and his representatives will keep confidential
any information which they obtain from Chancellor concerning its properties,
assets and business. If the transactions contemplated by this Agreement are
not consummated by December 31, 2000, the Shareholder will return to
Chancellor all written matter with respect to Chancellor obtained by them in
connection with the negotiation or consummation of this Agreement.
3.10 TITLE TO SHARES. The Shareholder is, the owner, free and clear
of any liens, claims and encumbrances, of all Company Shares, and has full
right to transfer such Shares to Chancellor.
3.11 ACCESS TO INFORMATION. Shareholder or Shareholder's
professional advisor has been granted the opportunity to ask questions of and
receive answers from representatives of Chancellor, its officers, directors,
employees and agents concerning the terms and conditions of this Offering,
Chancellor and its business and prospects, and to obtain any additional
information which Shareholder or Shareholder's professional advisor deems
necessary to verify the accuracy and completeness of the information received.
3.12 RELIANCE ON OWN ADVISORS. Shareholder has relied
6
completely on the advice of, or has consulted with, Shareholder's own
personal tax, investment, legal or other advisors and has not relied on
Chancellor or any of its affiliates, officers, directors, attorneys,
accountants or any affiliates of any thereof and each other person, if any,
who controls any thereof, within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "Act"), for any tax or legal advice (other than
reliance on information in the Disclosure Documents as defined in Section
3.14 below). The foregoing, however, does not limit or modify Shareholder's
right to rely upon representations and warranties of Chancellor in this
Agreement.
3.13 CAPABILITY TO EVALUATE. Shareholder has such knowledge and
experience in financial and business matters so as to enable such Shareholder
to utilize the information made available to it in connection with this
transaction in order to evaluate the merits and risks of the prospective
investment, which are substantial, including without limitation those set
forth in the Disclosure Documents (as defined in Section 3.14 below).
3.14 DISCLOSURE DOCUMENTS. Shareholder, in making Shareholder's
investment decision to accept the Chancellor Shares hereunder, represents
that (a) Shareholder has received and had an opportunity to review and relied
solely on the reports of Chancellor under the Securities Exchange Act of 1934
(the "Exchange Act"), including Chancellor's registration statement on
7
Form 10-SB and its reports on Form 10K-SB for the fiscal years ended December
31, 1998 and 1999 and on Form 10-Q for the quarters ended March 31 and June
30, 2000 (the documents described in this Section 3.14 are collectively
referred to as the "Disclosure Documents"), and an independent investigation
made by Shareholder and Shareholder's representatives, if any; and (b)
Shareholder is not relying on any oral representation of Chancellor or any
other person, nor any written representation or assurance from Chancellor
other than those referred to herein or otherwise contained in the Disclosure
Documents or incorporated herein or therein. The foregoing, however, does not
limit or modify Shareholder's right to rely upon representations and
warranties of Chancellor in this Agreement.
3.15 INVESTMENT EXPERIENCE; FEND FOR SELF. Shareholder has
substantial experience in investing in securities and he, she or it has made
investments in securities other than those of Chancellor. Shareholder
acknowledges that Shareholder is able to fend for Shareholder's self in the
transaction contemplated by this Agreement, that Shareholder has the ability
to bear the economic risk of Shareholder's investment pursuant to this
Agreement. Shareholder has not been organized for the purpose of investing in
securities of Chancellor, although such investment is consistent with
Shareholder's purposes.
8
3.16 EXEMPT OFFERING UNDER REGULATION D.
(a) INVESTMENT; NO DISTRIBUTION. Shareholder is acquiring
the Chancellor Shares to be issued and sold hereunder for his, her or its own
account and not as a nominee and not with a present view to the
re-distribution thereof except that 2,925,000 of the Chancellor Shares will
be issued in the name of HORIZON NO. 4 TRUST ("Designee") an affiliate of
Xxxxx X.G. Xxxxxxx, an officer, director and principal shareholder of
Chancellor. Shareholder is aware that there are legal and practical limits on
Shareholder's ability to sell or dispose of the Chancellor Shares and,
therefore, that Shareholder must bear the economic risk of the investment for
an indefinite period of time and has adequate means of providing for
Shareholder's current needs and possible personal contingencies and has need
for only limited liquidity of this investment. Shareholder's commitment to
illiquid investments is reasonable in relation to Shareholder's net worth. By
making the representations in this Section 3.16 the Shareholder does not
agree to hold the Chancellor Shares for any minimum or other specific term
and reserves the right to dispose of the Chancellor Shares at any time in
accordance with or pursuant to any exemption from registration under the Act,
except as otherwise required in this Agreement.
3.17 NO GENERAL SOLICITATION. The Chancellor Shares were not offered
to Shareholder through, and Shareholder is not aware of, any form of general
solicitation or general advertising, including, without limitation, (a) any
advertisement, article,
9
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio, and (b) any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising. Shareholder has had a prior business relationship with the
Company.
3.18 DESIGNEE'S REPRESENTATION. Designee for itself makes the
representation set forth in Sections 3.11 through 3.17, inclusive.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CHANCELLOR
Chancellor represents and warrants to, and covenants with the
Shareholder as follows:
4.01 INTERIM CHANGES. Between December 31, 1999 and the date of this
Agreement, there have not been, except as set forth on Exhibit E attached
hereto and made a part hereof,(1) any changes in Chancellor's financial
condition, assets, liabilities or business which, in the aggregate, have been
materially adverse; (2) any damage, destruction or loss of or to Chancellor's
property, whether or not covered by insurance; (3) any declaration or payment
of any dividends or other distribution in respect of Chancellor's capital
stock, or any direct or indirect redemption, purchase or other acquisition of
any such stock; or (4) any increase paid or agreed to in the compensation,
10
retirement benefits or other commitments to employees.
4.02 INFORMATION. Chancellor has furnished Shareholder with copies
of all of Chancellor's reports filed with the Securities and Exchange
Commission under the Exchange Act since January 1, 1999.
4.03 TITLE OF PROPERTY. Chancellor has good and marketable title to
all properties and assets, real and personal, set forth on Exhibit C and such
properties and assets are subject to no mortgage, pledge, lien or
encumbrance, except for liens shown therein, with respect to which no default
exists.
4.04 LITIGATION. There is no litigation or proceeding pending, or to
Chancellor's knowledge threatened, against or relating to Chancellor, its
properties or business.
4.05 CONFIDENTIALITY. Until the Closing (and permanently if there is
no Closing), the Company and its representatives will keep confidential any
information which it obtained from the Company concerning its properties,
assets and business. If the transactions contemplated by this Agreement are
not consummated by December 31, 2000, Chancellor will return to the Company
all written matter with respect to the Company obtained by it in connection
with the negotiation or consummation of this Agreement.
11
4.06 INVESTMENT INTENT. Chancellor is acquiring the Company Shares
to be transferred to it under this Agreement for investment and not with a
view to the sale or distribution thereof, and Chancellor has no commitment or
present intention to liquidate the Company or to sell or otherwise dispose of
the Company Shares.
4.07 CORPORATE AUTHORITY. Chancellor has full corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder and will deliver to the Shareholder at the Closing a certified copy
of resolutions of its Board of Directors authorizing execution of this
Agreement by its officers and performance thereunder.
4.08 DUE AUTHORIZATION. Execution of this Agreement and performance
by Chancellor hereunder has been duly authorized by all requisite corporate
and shareholder action on the part of Chancellor, and this Agreement
constitutes a valid and binding obligation of Chancellor and performance
hereunder will not violate any provision of Chancellor's Certificate of
Incorporation, Bylaws, mortgages, agreements with third parties or other
commitments.
12
SECTION 5. CONDUCT OF COMPANY PENDING THE CLOSING
The Shareholder agrees that from the date of this Agreement until
the Closing the Company will conduct itself in the following manner:
5.01 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company will not
change its Certificate of Incorporation or Bylaws.
5.02 CAPITALIZATION, ETC. The Company will not make any change in
its authorized, issued or outstanding capital stock; grant any stock option
or right to purchase shares of its capital stock; issue any security
convertible into shares of its capital stock; purchase, redeem, retire, or
otherwise acquire any shares of its capital stock; or agree to do any of the
foregoing; or declare, set aside or pay any dividend or other distribution in
respect of its capital stock.
5.03 BUSINESS IN ORDINARY COURSE. The Company will conduct its
business in the ordinary course and will (1) use its best efforts to preserve
its business organization intact, to keep available to Chancellor the
services of its present officers and employees and to preserve the goodwill
of suppliers, customers and others having business relations with it; (2)
maintain its properties in customary repair, working order and condition,
reasonable wear and tear and damage by casualty excepted; (3) keep in force
at no less than their present limit all policies of
13
insurance listed in Schedule D; (4) make no material change in the customary
terms and conditions on which it extends credit to customers; and (5) enter
into no sale, lease, contract, commitment or other transaction; provided,
however, that nothing in this Section 5.03 shall prohibit compliance by the
Company with, or the Company's borrowings or repayment funds pursuant to, and
agreements or other commitments disclosed by the Company to Chancellor on
Schedule E.
5.04 BANKING ARRANGEMENTS; POWERS OF ATTORNEY. The Company will not
make any change in its banking and safe deposit arrangements and will not
grant any powers of attorney.
5.05 ACCOUNTING PRACTICES. Except as required by generally accepted
accounting principles, the Company will not make any changes in its
accounting methods or practices.
5.06 MERGER, ETC. The Company will not merge or consolidate with any
other corporation; sell or lease all or substantially all of its assets and
business; acquire all or substantially all of the stock of the business or
assets or any other person, corporation or business organization; or agree to do
any of the foregoing.
SECTION 6. COVENANTS AFTER THE CLOSING
6.01 AFTER CLOSING. From and after the Closing, all parties
14
hereto agree to issue certificates representing the Chancellor Shares to the
Shareholder and to a single designee of Shareholder.
SECTION 7. CONDITIONS PRECEDENT - CHANCELLOR
All obligations of Chancellor under this Agreement are subject, at
Chancellor's option, to the fulfillment, before or at the Closing, of each of
the following conditions:
7.01 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
Shareholder's representations and warranties contained in this Agreement
shall be true and correct as of the date hereof and as of the Closing in all
material respects.
7.02 DUE PERFORMANCE. The Shareholder shall have performed and
complied with all the terms and conditions required by this Agreement to be
performed or complied with by it before the Closing.
7.03 BOOKS AND RECORDS. The Shareholder shall have caused the
Company to make available to Chancellor all books and records of the Company,
including minute books and stock transfer records.
7.04 ACCEPTANCE BY THE SHAREHOLDER. The terms of this Agreement
shall have been accepted by the Shareholder of the
15
Company as evidenced by its signature on the signature page of this Agreement.
7.05 RESIGNATIONS. There shall have been delivered to Chancellor the
signed resignations of such directors of the Company as Chancellor shall
request, dated as of the Closing.
SECTION 8. CONDITIONS PRECEDENT - THE SHAREHOLDER
All obligations of the Shareholder under this Agreement are subject,
at its option, to the fulfillment, before or at the Closing, of each of the
following conditions:
8.01 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Chancellor's
representations and warranties contained in this Agreement shall be true and
correct as of the date hereof at and as of the Closing in all material
respects.
8.02 DUE PERFORMANCE. Chancellor shall have performed and complied
with all of the terms and conditions required by this Agreement to be
performed or complied with by it before the Closing.
SECTION 9. INDEMNIFICATION
9.01 INDEMNIFICATION OF CHANCELLOR. The Shareholder severally agrees
to indemnify Chancellor against any loss, damage
16
or expense (including reasonable attorneys' fees) suffered by Chancellor from
(1) any breach by the Shareholder of this Agreement; or (2) any inaccuracy in
or breach of any of the representations, warranties or covenants by the
Shareholder herein; provided, however that (a) Chancellor shall be entitled
to assert rights of indemnification hereunder only if and to the extent that
it suffers losses, damages and expenses (including reasonable attorneys'
fees) exceeding $50,000 in the aggregate; and (b) Chancellor shall give
notice of any claims hereunder within the twenty-four (24) month period
beginning on the date of the Closing. No loss, damage or expense shall be
deemed to have been sustained by Chancellor to the extent of insurance
proceeds paid to, or tax benefits realizable by, Chancellor or the Company as
a result of the event giving rise to such light indemnification.
9.02 INDEMNIFICATION OF SHAREHOLDER. Chancellor agrees to indemnify
the Shareholder against any loss, damage or expense (including reasonable
attorneys' fees) suffered by any of the Shareholder from (1) any breach by
Chancellor of this Agreement; or (2) any inaccuracy in or breach of any of
Chancellor's representations, warranties or covenants herein.
9.03 DEFENSE OF CLAIMS. Upon obtaining knowledge thereof, the
indemnified party shall promptly notify the indemnifying party of any claim
which has given or could give rise to a right of indemnification under this
Agreement. If the right of
17
indemnification relates to a claim asserted by a third party against the
indemnified party, the indemnifying party shall have the right to employ
counsel acceptable to the indemnified party to cooperate in the defense of
any such claim. So long as the indemnifying party is defending any such claim
in good faith, the indemnified party will not settle such claim. If the
indemnifying party does not elect to defend any such claim, the indemnified
party shall have no obligation to do so.
SECTION 10. TERMINATION
10.01 TERMINATION. This Agreement may be terminated (1) by mutual
consent in writing; (2) by either the Shareholder or Chancellor if there has
been a material misrepresentation or material breach of any warranty or
covenant by the other party; or (3) by either the Shareholder or Chancellor
if the Closing shall not have taken place, unless adjourned to a later date
by mutual consent in writing by December 31, 2000.
SECTION 11. GENERAL PROVISIONS
11.01 FURTHER ASSURANCES. At any time, and from time to time, after
the Effective Date, 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 Agreement.
18
11.02 WAIVER. Any failure on the part of either party hereto to
comply with any of its obligations, agreements or conditions hereunder may be
waived in writing by the party to whom such compliance is owed.
11.03 BROKERS. Each party represents to the other party that no
broker or finder has acted for it in connection with this Agreement, and
agrees to indemnify and hold harmless the other party against any fee, loss
or expense arising out of claims by brokers or finders employed or alleged to
have been employed by it.
11.04 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 Chancellor:
Chancellor Group, Inc.
c/o Xxxxx X. Xxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 9067
If to Shareholder:
Southwin Financial, Ltd.
0000 X. 0xx Xxxxxx
Xxxxxxx, Xxxxx 00000
11.05 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels
19
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.
11.06 HEADINGS. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
11.07 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Nevada.
11.08 ASSIGNMENT. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their successors and assigns;
provided, however, that any assignment by either party of its rights under
this Agreement without the written consent of the other party shall be void.
11.09 LEGAL REPRESENTATION. Shareholder acknowledges that this
Agreement has been prepared by the Law Offices of Xxxxx X. Xxxxx ("Xxxxx")
counsel to Chancellor and that Xxxxx has solely represented Chancellor in
this transaction and it has not provided legal representation to Shareholder.
Shareholder further acknowledges that it has had an opportunity to obtain
counsel of its choice and has not relied upon Xxxxx with respect to legal
advice or counsel in connection with this transaction.
20
11.10 COUNTERPARTS. This Agreement 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. Facsimile
signatures shall be considered as original signatures.
Executed as of this 19th day of October, 2000.
CHANCELLOR GROUP, INC.
By: /s/ XXXXX X.G. XXXXXXX
---------------------------------
XXXXX X.G. XXXXXXX, President
SHAREHOLDER
SOUTHWIN FINANCIAL, LTD.
By: /s/ XXXXXXX XXXX
---------------------------------
XXXXXXX XXXX
Sole Director
DESIGNEE
HORIZON NO. 4 TRUST
By: /s/ XXXXX X.G. XXXXXXX
---------------------------------
XXXXX X.G. XXXXXXX
21
