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AGREEMENT
THIS AGREEMENT is made this 17th day of March. 1999 by and among Kowt
ow, nc a Nevadacorporation, hereinafter called "KOWTOW", Affordable
Homes of America. Inc., a Nevada corporation hereinafter called "AHA",
and the shareholders of AHA, hereinafter called "AHA SHAREHOLDERS".
RECITALS:
WHEREAS. KOWTOW desires to acquire 100% of the issued and outstanding
shares of the common stock of AHA, in exchange for 4,000,000 authorized
but unissued shares of the .001 par value common stock of KOWTOW, pur-
suant to a plan of reorganization within the meaning of lRC (1986),
Section 368(a)(l)(B) as amended: and
WHEREAS, the AHA SHAREHOLDERS desire to exchange 100% of the issued and
outstanding shares of the common stock of AHA, currently owned by AHA
SHAREHOLDERS, in exchange for said 4,000,000 shares of KOWTOW.
NOW THEREFORE, in consideration of the mutual promises, covenants and
representations contained herein, and co consummate the foregoing plan
of reorganization, the parties hereby adopt said planof organization
and agree as follows:
ARTICLE I
EXCHANGE OF SECURITIES
1.01 Issuance of KOWTOW hares. Subject to all of the terms and
conditions of this Agreement KOWTOW agrees to issue to AHA SHAREHOLDERS
4,000,000 fully paid and non assessable unregistered shares of KOWTOW
common stock in exchange for 100% or the outstanding AHA common stock,
all of which is currently owned by AHAO SHAREHOLDERS.
1.02 Transfer of AHA Shares. In exchange for KOWTOW'S stock being
issued to AHA SHAREHOLDERS as above described. AHA SHAREHOLDERS shall
on the closing date and concurrent withsuch issuance of KOWTOW'S common
stock, deliver to KOWTOW 100% of the outstanding common stock of AHA.
ARTICLE II
INDEMNIFICATION OF FINDER / NO AFFILIATE
2.01 Indemnification of Finder/Broker. Negotiations relative to this
Agreement and relatedtransactions have been conducted with the assis-
tance of Capital General Corporation who is acting as a broker, finder
and consultant on behalf of both AHA and KOWTOW, AHA, KOWTOW
and AHA SHAREHOLDERS agree to hold harmless and indemnify Capital
General Corporation and its officers anddirectors from any and all
claim, demand, cause of action or suit raised or filed in connection
with die withinAgreement or any related transaction or the operation
or promtion of AHA and/or KOWTOW or the trading of their shares.
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2.02 No Affiliate. All parties agree thai after the exchange of
shares as provided above, that neither Capital General Corporation
nor any of its officers and directors have any ongoing or other
business relationship with any of the panics to this Agreement, or
their officers, directors and promoters, nor any family or other
relationships with such, and therefure have no ability to exercise
any control or influence over the management and conduct of KOWTOW'S
business and therefore are non affiliates of KOWTOW.
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ARTICLE III
REPRESENTATIONS, AGREEMENTS AND WARRANTIES OF AHA SHAREHOLDERS AND AHA
AHA SHAREHOLDERS AND AHA hereby represent, agree and warrant that:
3.01 Organization. AHA is a corporation rilily organized, validly
existing, and in guud standing under che laws of Nevada, has all
necessary corporate powers to own its properties and co carry on
its business as now owned and operated by it. is duly qualified co
do business and is in good standing in any jurisdiction
its business requires qualification.
3.02 Capital. The authorized capital stock of AHA consists of
25.000,000 shares of common stock All of the issued and outstanding
shares are validly issued, fully paid and nonassessable.
3.03 Subsidiaries. AHA does not have any subsidiaries.
3.04 Directors and Officers. Exhibit 3.04 to this Agreement contains
the names and titles of all directors and officers of AHA as of the
date of this Agreement.
3.05 Financial Statements. Exhibit 3.05 to this Agreement includes
the unaudited financial statements of AHA a.s of December 31. 1998.
3.06 Absence of Changes. Since the dace of AHA's most recent financial
statements included in Exhibit 3.05 there have been no changes in its
financial condition or operations, except for changes in the
ordinary course of business.
3.07 Absence of Undisclosed Liabilities. As of xxx xxxx of AHA's most
recent balance sheet included in Exhibit 3.05 it did not have any
material debt, liability or obligation of any iuiure, whecher accrued
absolute, contingent or otherwise, and whether due or can become due;
that is not reflected in such balance sheet.
3.08 Tax Returns. Within the times and in the manner prescribed by law,
AHA has filed all federal state and local tax returns required by law,
has paid all taxes, assessments and penalties due and payable and has
made adequate provision on ics most recent balance sheet for any unpaid
taxes. There are no present disputes as to taxes of any nature
payable by AHA.
3.09 Investigation of Financial Condition. Without in any manner reducing
or otherwise mitigating the representations contained herein. KOWTOW
and/or its attorneys shall have the opportunity to meet with accountants
and attorneys to discuss the financial condition of AHA. AHA shall make
available to KOWTOW and/or its attorneys all books and records of AHA.
If the transaction contemplated hereby is not completed, all documents
received by KOWTOW and/or its attorneys shall be returned to AHA and all
information so received shall be treated as confidential.
3.10 Patents, Trade Names and Rights. AHA owns or holds all necessary
patents, trademarks,service marks, trade names, copyright and other
rights neressary to the conduct or proposed conduct of its business.
3.11 Complianec with Laws. AHA has complied with, and is not in
violation of, applicable federal, xxxxx or local statutes, laws and
regulations affecting its properties or the operation of its business.
3.12 Litigation. AHA is not a party to,nor to the best of its
knowledge is there pending or threatened, any suit, action,
arbitration or legal, administrative or Other proceeding, or
governmental investigation concerning its business, assets or
financial condition. AHA is not in default with respect to any
order, writ,injunction or decree of any federal, state, local or
foreign court or agency, nor is it engaged in any lawsuits to
recover monies due to it.
3.13 Authority. The Board of Directors of AHA authorized the execution
of this Agreement and the consummation of the transactions contemplated
herein and has full power and authority to execute, deliver and
perform this Agreement.
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3.14 Ability to Carry Out Obligations. The excution and delivery of
this Agreement by AHA and the performance of its obligations hereunder
in the time and manner contemplated will not cause, constitute or
conflict with or result in (i) any breach of the provisions of any
license, indenture, mortgage, charter, instrument, certificate of
incorporation, bylaw or other agreement or instrument to which it is
a party or by which it may be bound, nor will any consents or
authorizations of any party other than those hereto be required,
(ii) an event that would permit any party to any agreement or in.
instrument to terminate it or to accelerate the maturity of any
indebtedness or other obligation. or (iii) an event that would
result in the creation or imposition of any lien,charge or
encumbrance on any assest.
3.15 Full Disclosure. None of the representations and warranties
made by AHA SHAREHOLDERS or AHA herein or in any exhibit, certificate
or memorandum furnished or to be furnished by AHA SHAREHOLDERS or AHA.
or on either's behalf, contains or will contain any untrue statement
of material face,or omits any material fact, the omission of which
would be misleading.
3.16 Assets. AHA has good and marketable title to all of its property
free and clear of any and all liens, claims or encumbrances except as
may be indicated in Exhibit 3.05.
3.17 Indemnification. AHA SHAREHOLDERS and AHA agree to defend and
hold KOWTOW and its officers and directors harmless against and in
respect of any and all claims, demands, losses, costs. expenses,
obligations, liabilities or damages, including interest. penalties
and reasonable attorney's fees. that it shall incur or suffer, which
arise out of result from or relace to any breach of this Agreement or
failure by AHA SHAREHOLDERS or AHA to perform with respectto any of its
representations, warranties or covenants contained in this Agreement or
in any exhibit or other instrument furnished or to be turnished under
this Agreement.
3.18 Authority to Exchange. As of die xxxx of this Agreement,
AHA bHARJEHOLDERS hold 100% of the shares of AHA common stock.
Such shares are owned of record and beneficially by AHA
SHAREHOLDERS and such shares are not subject to any lien,
encumbrance or pledge. AHA SHAREHOLDERS hold authority to exchange
such shares pursuant to this Agreement.
3.19 Investment Intent. AHA SHAREHOLDERS understand and acknowledge
that the shares of KOWTOW common stock offered for exchange or sale
pursuant to this Agreement are being offered in reliance upon the
exemption from registration requirements of the Securities Act of
1933, as amended (The"Act"), pursuant to Section 4(2) of the Act
and the rules and regulations promulgated thereunder, for nonpublic
offerings and make the following representations, agreements and
warranties with the intent that the same may be relied upon in
determining the suitabilily of AHA SHAREHOLDERS as a purchaser
of KOWTOW common stock:
(a) The shares of KOWTOW common stock are being acquired solely
for the account of AHA SHAREHOLDERS, for investment purposes only,
and not with a view to, or for sale in connection with,any
distribution thereof, and with no present intention of distributing
or reselling any part of the KOWTOW common stock acquired:
(b) AHA SHAREHOLDERS agree not to dispose of their KOWTOW common
stock or any portion thereof unless and until counsel for KOWTOW
shall have determined that the intended disposition is permissible
and does not violate the Act or any applicable Federal or state
securities laws, or the rules and regulations thereunder;
(c) AHA SHAREHOLDERS agree that the certificates evidencing the
KOWTOW common stock acquired pursuant to this Agreement will have a
legend placed thereon staring that they have not been registered
under the Act or any state securities laws and setting forth or
referring to the restrictions on transferability and sale of the
KOWTOW common stock, and that stop transfer instructions shall be
picked with the transfer agent for said certificate.
(d) AHA SHAREHOLDERS acknowledge that KOWTOW has made all records and
documentation pertaining to KOWTOW common stock available to them and
to their qualified representatives, if any, and has offered such person
or persons an opportunity to ask questions and further discuss the
proposed acquisition of KOWTOW common stock, and any available
information pertaining hereto, with the officers and directors of
KOWTOW, and that all such questions and information requested have
been answered by KOWTOW and its officers and directors to AHA
SHAREHOLDERS satisfaction:
(e) AHA SHAREHOLDERS have carefully evaluated their financial resources
and investment position and the risks associated with this transaction
and are able to bear the economic risks of this transaction and they
have substantial knowledge and experience in financial, business and
investment matters and are qualified as sophisticated investors, and are
capable of evaluating the merits and risks of this transaction and they
desire to acquire the KOWTOW common stock on the terms and conditions set
forth:
(f) AHA SHAREHOLDERS are able to bear the economic risk of an
investment in the KOWTOW common stock and
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(g)AHA SHAREHOLDERS understand that an investment in the KOWTOW
common stock is not liquid and AHA SHAREHOLDERS have no need for
liquidity in this investment.
3.20 Receipt of Relevant Information. AHA SHAREHOLDERS and AHA have
received from KOWTOW all financial and other information concerning
KOWTOW and its promoters, officers and directors, including, but not
limited to Prospectus dated June 30. 1993, and Annual Report on
Form IO-K for the year ended December 31. 1998, as filed with the
Securities and Exchange Commission, and all other documents and
information they have requested.
3.21 Public "Shell" Corporation. AHA and AHA SHAREHOLDERS are aware
that KOWTOW has public shareholders and is a "shell" corporation
without significant assets or liabilities, and further that
public companies arc subject to extensive and complex sale. federal
and other regulations. Among other requirements. AHA SHAREHOLDERS
and AHA are aware chat a Form 8-K must be filed with the United
States Securities and Exchange Commission within fifteen days after
Closing which filing requires that audited Financial statements be
filed within sixty days after the filing of the 8-K. and they agree
that such responsibility shall not be the responsibility of Capital
General Corporation, its officers, directors or employees nor the
existing officers of KOWTOW, but the sole responsibility of the new
officers and directors of KOWTOW. AHA SHAREHOLDERS and AHA are aware of
the legal requirements and obligations of public companies,
understand that regulatory efforts regarding public shell transactions
similar to die transaction contemplated herein has been and is currently
being exerted by some states, the U.S. Securities and Exchange Commission
and the National Association of Securities Dealers, Inc. (NASD). and are
fully aware of their responsibilities following closing, to fully
comply will all securities laws and regulations, and agree to do so.
3.22 No Assurances or Warranties. AHA SHAREHOI.DF.R5! and AHA acknowledge
hat there can be no assurance regarding the tax consequences of this
transaction, nor can there be any assurance that the Internal Revenue
Code or the regulations promulgated thereunder will not be amended in
such manner as to deprive them of any tax benefits that might otherwise
be received. AHA SHAREHOLDERS and AHA are relying upon the advice of
theirown tax advisors with respect of the tax aspires of this transac-
tion. Norepresentations or warranties have been made by KOWTOW, Capital
General Corporation, or their officers,directors, affiliates Or agents,
as to thebenefits to be derived by AHA SHAREHOLDERS or AHA in completing
this transaction, nor have any of them made any warranty or agreement,
expressed of implied, as to the tax or securities consequences
of thetransactions contemplated by this Agreement or the tax or
securities consequences of any action pursuant co or growing out of this
Agreement.
ARTICLE IV
REPRESENTATIONS, AGREEMENTS AND WARRANTIES OF KOWTOW
KOWTOW represents, agrees and warrants that:
4.01 Organization. KOWTOW is a corporation duly organized, validly
existing, and in goodstanding under the laws of Nevada,has all necessary
corporate powers to own properties and to carry on its business as now
owned and operated by its duly qualified to do business and is in good
standing in each of the jurisdictions where its business requires
qualification.
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4.02 Capital. The authorized capital stock of KOWTOW consists of 100,000.00
shares of $.001 par value common stock of which 1,000,000 shares are
currently issued and outstanding. All of the issued and outstanding shares
are validly issued, fully paid and non-assessable.
4 03 Subsidiaries. KOWTOW has no subsidiaries and docs not own any interest
in any other enterprise, whether or not such enterprise is a corporation.
4.04 Directors and Officers. Exhibit 4.04 to this Agreement contains the
names and titles of all officers and directors of KOWTOW as of the xxxx of
this Agreement.
4.05 Financial Statements. Exhibit 4.05 to this Agreement includes KOW
TOW' audited financial statements as of December 31. 1998. The financial
statements have been prepared in accordance with generally accepted
accounting principles and practices consistently followed throughout the
period indicated and fairly present the financial position of KOWTOW as
of the daces of the balance sheets included in the financial statements
and the results of operations for the periods Indicated.
4.06 Absence of Changes. Since the date of KOWTOW'S most recent financial
statements, there has not been any change in its financial condition or
operations except for changes in the ordinary course of business.
4.07 Absence of Undisclosed Liabilities. As of the date of KOWTOW'S most
recent balancesheet, included in Exhibit 4.05, it did not have any
material debt. liability or obligation of any nature whether accrued,
absolute, contingent or otherwise, and whether due or to become due,
that is not reflectedin such balance sheet.
4.08 Tax Returns. Wilhin the times and in the xxxx.xx prescribed by law.
KOWTOW has filed all state or local tax returns required by law. has
paid all taxes, assessments and penalties due and payable and has made
adequate provision on its most recent balance sheet for any unpaid
taxes. There areno present disputes as to taxes of any nature payable
by KOWTOW.
4.09 tigation of Financial Condition. Without in any manner red
ucin or olherwisemitigating the representations contained herein. AHA
and AHA SHAREHOLDERS shall have the opportunity to meet with KOWTOW'S
accountants and attorneys to discuss the financial condition KOWTOW.
KOWTOW shall make available ro AHA and AHA SHAREHOLDERS all books and
records of KOWTOW.
4.10 Patents, Trade Names and Rights. KOWTOW does not use any patent,
trade marks, aervmarks, trade names or copvriahts in its business.
4.11 Compliance with Laws. KOWTOW has complied with. and is not in violaton
of, applicablefederal, state or local statutes, laws and regulations
affecting its properties or the operation of its business.
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4.12 Litigation. KOWTOW is not a party to, nor to the best of its know-
ledge there pending or threatened, any suit, action, arbitration or
legal, administrative or other proceedings, or governmental investigation
concerning its business, assets or financial condition. KOWTOW is not in
default with respect to any order, writ, injunction or decree of any
federal. Slate local or foreign court or agency, nor is it engaged in.
nor does it anticipate it will be necessary to engage in, any lawsuits
to recover money or real or personal property.
4.13 Authority. The Board of Directors of KOWTOW has authorized the
execution of this Agreement and the transactions contemplated herein,
and it has full power and authority to execute, deliver and perform this
Agreement.
4.14 Ability to Carry Out Obligations. The execution and delivery of
this Agreement by KOWTOW and the performance of its obligations hereunder
will not cause, constitute, conflict with or result in (i) any breach of
the provisions of any license, indenture, mortgage, charter, instrument,
certificate of incorporation, bylaw or other agreement or instrument to
which it is a party or by which it may be bound, nor will any consents or
authorizations of any party other than those hereto be required, (ii) an
event that would permit any party to any agreement or instrument to terminate
it or to accelerate the maturity of any indebtedness or other obligation, or
(iii) an event that would result in a creation or imposition of any lien,
charge encumbrance on any asset.
4.15 Assets. KOWTOW has good and marketable title to all of its property
free and clear of any and all liens, claims and encumbrances, except as may
be indicated in Exhibit 4.05.
4.16 Validity of KOWTOW Shares. The shares of KOWTOW $.001 par value common
stock to be issued pursuant to this Agreement will be duly authorized,
validly issued, fully paid and non-assessable under Nevada law.
ARTICLE V
ACTIONS PRIOR TO CLOSING
5.01 Investigative Rights. Prior to the Closing Date each company shall
provide to the other parties, including the parties' counsel, accountants
and other authorized representatives, full access during normal business
hours (upon reasonable advance written notice) to such parties' books and
records.
5.02 Conduct of Business Prior to the Closing Date. each party shall
conduct its business in the normal course and shall not see, pledge or
assign any assets, without the prior written approval of the other parties.
No party shall amend its certificate of incorporation or bylaws, declare
dividends, redeem or sell stock or Other securities, incur additional
liabilities, acquire or dispose of fixed assets, change employment terms,
enter into any material or long-term contract, guarantee obligations of
any third party, settle or discharge any balance sheet receivable for less
than its stated amount, pay more on any liability than its stated amount
or enter into any other transaction other than in the regular course of
business.
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ARTICLE VI
CLOSING
6.01 Closing. The closing (the "Closing") of this transaction shall be
held at the offices ofKOWTOW, or such other place as shall be mutually
agreed upon, on or before March 17 1999 (the "Closing Date"):
(a) KOWTOW shall issue 4,000.000 shares of its $.001 par value common
stock in a certificate or certificates representing such shares.
(b) AHA SHAREHOLDERS shall deliver the certificates representing 100%
of the shares of AHA common stock.
(c) KOWTOW shall deliver a signed consent or minutes of its Board of
Directors, approving this Agreement and authorizing the matters set forth
herein:
(d) AHA shall deliver a signed consent or minutes of its Board of
Directors approving this Agreement and authorizing the matters sec forth
herein:
(e) KOWTOW'S existing Board of Directors will (i) elect new directors, as
named by AHA SHAREHOLDERS to act as officers and directors of KOWTOW in
the capacities set forth in Exhibit 6.01 and
(ii) the two current directors will resign their positions with KOWTOW
effective the "Closing Date".
ARTICLE VII
MISCELLANEOUS
7.01 Captions and Headings. The article and paragraph headings throughout
this Agreement are for convenience and reference only and shall not be
deemed to define, limit or add to the meaning of any provision of this
Agreement.
7.02 No Oral Change; This Agreement may not be changed or modified except
in writing signed by the party against whom enforcement of any change or
modification is sought.
7.03 Non-Waiver. Except as otherwise expressly provided herein, no waiver
of a covenant, conditionor provision of this Agreement shall be deemed
to have been made unless executed in writing and signed by the party
against whom such waiver is charged. The failure of any party to insist
in any one or more casesupon the performance of any covenant, condition
or provision of this Agreement shall not be construed as a waiver or
relinquishment for the future of any such covenant, condition or provision.
No waiver by any partyof one breach by the other shall be construed as a
waiver with respect co a subsequent breach.
7.04 Time of Essence. Time is of the essence of this Agreement and of each
and every provision hereof.
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7.05 Entire Agreement. This Agreement contains the entire agreement and
understanding between[he parties and supersedes all prior agreements and
understandings.
7.06 Choice of Law/Arbitration. This Agreement and its application, shall
be governed under the laws of the State of Nevada. Any and all disputes
and controversies of every kind and nature between the parties hereto
arising out of or relating to this Agreement relating to the existence,
construction validity, interpretation or meaning, performance,
non-performance, enforcement, operation, breach, continuance or termination
thereof shall be subject arbitration mutually agreeable co the parties or,
in the absence of such mutual agreement, then subject to arbitration in
accordance with the rules of the American Arbitration Association. It is
the intent of the parties hereto and the purpose of this provision to make
the submission to arbitration of any dispute or controversy arising here
under an express condition precedent to any legal or equitable action or
proceeding of any nature whatsoever.
7.07 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
when taken together shall constitute one and the same instrument.
7.08 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have
been given on the date of service if served personally on the party to
whom notice is co be given, or on the third day after mailing if mailed
to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed as
follows:
KOWTOW:
0000 Xx. Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
AHA and AHA SHAREHOLDERS:
0000 X. Xxxxxxxx Xxx. Xxxx #X-0
Xxx Xxxxx, Xxxxxx 00000
7.09 Expenses. The parties will pay their own legal, accounting and
other expenses incurred in connection with this Agreement.
7.10 Survival of Representation and Warranties. The representations,
warranties and covenants set forth in this Agreement or in any instrument,
certificate, opinion or other writing provided for in it survive the
Closing Date.
7.11 Further Documents. The parties agree to execute any and all other
documents and to take such other action or corpora proceedings as may be
necessary or desirable to carry out the terms hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written,
KOWTOW, INC.
By: /s/ Xxxxxx Xxxxxxx
--------------
Xxxxxx Xxxxxxx
President
Affordable Homes of America, Inc.
By: /s/ Xxxxx Xxxxxxxx
--------------
Xxxxx Xxxxxxxx
President
Shareholders of Affordable Homes of America, Inc.
By: /s/ Xxxxx Xxxxxxxx
--------------
Xxxxx Xxxxxxxx
sole shareholder
