AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
AND PLAN OF REORGANIZATION
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into
effective as of April 28, 2004 by and among Xxxxxxx International, Inc. a Utah
corporation (the "PARENT"), Quest Minerals & Mining, Ltd., a Nevada corporation
(the "COMPANY"), Gwenco, Inc., a Kentucky corporation (the "TARGET"), and the
stockholders of Target (the "SELLING STOCKHOLDERS") listed on Exhibit A attached
hereto.
R E C I T A L S
A. The Target is in the business of coal mining (the "Business").
B. The Selling Stockholders own beneficially and of record all of the
issued and outstanding shares of capital stock of the Target (including all
options, warrants and other rights to acquire capital stock of the Target).
Target has authorized capital stock consisting of 1,000 shares of common stock,
no par value, of which 200 shares (the "TARGET SHARES") are issued and
outstanding and held by the Selling Stockholders.
C. The Company desires to acquire from the Selling Stockholders all of
the capital stock of the Target (including all options, warrants and other
rights to acquire capital stock of the Target) such that the Target will become
a wholly-owned subsidiary of the Company.
D. The parties hereto wish to make certain representations, warranties,
covenants and agreements in connection with the purchase of all of the issued
and outstanding capital stock of the Target and also to prescribe various
conditions to such transaction.
E. The Company has authorized capital stock consisting of 40,000,000
shares of common stock ("COMMON STOCK"), $0.001 par value, of which 39,335,642
shares are issued and outstanding.
A G R E E M E N T
It is agreed as follows:
1. Securities Purchase and Reorganization
1.1 PURCHASE AND SALE OF TARGET SHARES. Upon the terms and
subject to the conditions of this Agreement, at the Closing (as defined below)
the Selling Stockholders will sell and deliver to the Company, and the Company
will purchase from the Selling Stockholders, the Target Shares, which Shares
will constitute all of the issued and outstanding capital stock of the Company
at the Closing.
1.2 PURCHASE PRICE. The aggregate purchase price for the
Target Shares (the "Purchase Price") will be paid by the Company's and Parent's
delivery to the Sellers, at the Closing, of the following:
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1.2.1 One Million Six Hundred Thousand ("1,600,000") shares of Series B
Convertible Preferred Stock of the Parent (the "CONVERTIBLE PREFERRED
STOCK"). The terms of the Convertible Preferred Stock are attached as
Schedule 1.2.1
In addition to the above purchase price the Parent and/or the Company
shall assume liabilities at closing of up to One Million Seven Hundred Thousand
($1,700,000.00) Dollars.
1.3. INSTRUMENTS OF TRANSFER.
(a) TARGET SHARES. Each Selling Stockholder shall
deliver to the Company original certificates evidencing the Target Shares along
with executed stock powers, in form and substance satisfactory to the Company,
for purposes of assigning and transferring all of their right, title and
interest in and to the Target Shares. From time to time after the Closing Date,
and without further consideration, the Selling Stockholders will execute and
deliver such other instruments of transfer and take such other actions as the
Company may reasonably request in order to facilitate the transfer to the
Company of the securities intended to be transferred hereunder.
(b) THE CONVERTIBLE PREFERRED STOCK. The Company and
the Parent shall deliver to the Selling Stockholders on the Closing Date the
Convertible Preferred Stock Certificates in form and substance satisfactory to
the Selling Stockholders. From time to time after the Closing Date, and without
further consideration, the Company and the Parent shall execute and deliver such
other instruments and take such other actions as the Selling Stockholders may
reasonably request in order to facilitate the conversion of the Convertible
Preferred Stock.
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1.3 CLOSING. The closing ("CLOSING") of the acquisition of the
Target Shares shall take place at the offices of Spectrum Law Group, LLP, 0000
Xxxx Xxxxxx, Xxxxx 000, Xxxxxx, XX 00000 as soon as practicable upon the
execution of this Agreement. The date on which the Closing takes place is
referred to herein as the "CLOSING DATE." The Closing shall be effective as of
the Closing Date.
2. Representations, Warranties and Covenants of the Selling
Stockholders. Each Selling Stockholder severally represents, warrants and
covenants to and with the Company with respect to himself, as follows:
2.1. TITLE TO SHARES. Each Selling Stockholder is the sole
record and beneficial owner of the Target Shares held by such Selling
Stockholder, free and clear of all liens, encumbrances, equities, assessments
and claims, and that there are no warrants, options, subscriptions, calls, or
other similar rights of any kind for the issuance or purchase of any of the
Target Shares or other securities of the Target held by such Selling
Stockholder. Upon delivery of the Target Shares by each Selling Stockholder and
payment of the Purchase Price in full by the Company pursuant to this Agreement,
each Selling Stockholder will transfer to the Company valid legal title to the
Target Shares held by such Selling Stockholder, free and clear of all
restrictions, liens, encumbrances, equities, assessments and claims (other than
any restrictions, liens, encumbrances, equities, assessments or claims as may
arise from or as a result of (i) restrictions under applicable Federal and state
securities laws, and (ii) any act or omission of the Company).
2.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each Selling
Stockholder has all requisite individual or corporate power and authority, as
the case may be, to enter into and to carry out all of the terms of this
Agreement and all other documents executed and delivered in connection herewith
(collectively, the "DOCUMENTS"). All individual or corporate action, as the case
may be, on the part of each Selling Stockholder necessary for the authorization,
execution, delivery and performance of the Documents by such Selling Stockholder
has been taken and no further authorization on the part of such Selling
Stockholder is required to consummate the transactions provided for in the
Documents. When executed and delivered by each Selling Stockholder, the
Documents shall constitute the valid and legally binding obligation of such
Selling Stockholder, enforceable in accordance with their respective terms,
except as limited by applicable bankruptcy, insolvency reorganization and
moratorium laws and other laws affecting enforcement of creditor's rights
generally and by general principles of equity.
2.3. SECURITIES MATTERS.
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(a) Each Selling Stockholder understands that (i) any
shares of capital stock issuable upon conversion of the Convertible Preferred
Stock ("PARENT SHARES") have not been registered or qualified under the
Securities Act of 1933, as amended (the "SECURITIES ACT") or any state
securities or "blue sky" laws, on the ground that the sale provided for in this
Agreement and the issuance of the securities hereunder is exempt from
registration and qualification under Sections 4(2) and 18 of the Securities Act,
and (ii) the Company's reliance on such exemptions is predicated on the each
Selling Stockholder's representations set forth herein
(b) Each Selling Stockholder acknowledges that an
investment in the Company involves an EXTREMELY HIGH DEGREE OF RISK, lack of
liquidity and substantial restrictions on transferability and that such Selling
Stockholder may lose his, her or its entire investment in the Parent Shares.
(c) The Company has made available to each Selling
Stockholder or the advisors of any such Selling Stockholder the opportunity to
obtain information to evaluate the merits and risks of the investment in the
Parent Shares, and each Selling Stockholder has received all information
requested from the Company. Each Selling Stockholder has had an opportunity to
ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Parent Shares and the business, properties,
plans, prospects, and financial condition of the Company and to obtain
additional information as such Selling Stockholder has deemed appropriate for
purposes of investing in the Parent Shares pursuant to this Agreement.
(d) Each Selling Stockholder, personally or through
advisors, has expertise in evaluating and investing in private placement
transactions of securities of companies in a similar stage of development to the
Company and has sufficient knowledge and experience in financial and business
matters to assess the relative merits and risks of an investment in the Company.
In connection with the purchase of the Parent Shares, each Selling Stockholder
has relied solely upon independent investigations made by such Selling
Stockholder and has consulted such Selling Stockholder's own investment
advisors, counsel and accountants. Each Selling Stockholder has adequate means
of providing for current needs and personal contingencies, has no need for
liquidity, and can sustain a complete loss of the investment in the Parent
Shares.
(e) The Parent Shares, which the Company is to issue
hereunder, will be acquired for each Selling Stockholder's own account, for
investment purposes, not as a nominee or agent, and not with a view to or for
sale in connection with any distribution of the Parent Shares in violation of
applicable securities laws.
(f) Each Selling Stockholder understands that no
federal or state agency has passed upon the Parent Shares or made any finding or
determination as to the fairness of the investment in the Parent Shares.
(g) Each Selling Stockholder is an "Accredited
Investor" as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act. Each Selling Stockholder acknowledges that the Parent Shares may
be purchased only by persons who come within the definition of an "Accredited
Investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
(h) No Selling Stockholder has received any general
solicitation or general advertising concerning the Parent Shares, nor is any
Selling Stockholder aware of any such solicitation or advertising.
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(i) Each Selling Stockholder understands that the
Parent Shares will be characterized as "restricted" securities under federal
securities laws inasmuch as they are being acquired in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances. Each Selling Stockholder agrees that such
Selling Stockholder will not sell all or any portion of the Parent Shares except
pursuant to registration under the Securities Act or pursuant to an available
exemption from registration under the Securities Act. Each Selling Stockholder
understands and acknowledges that all certificates representing the Parent
Shares shall bear the following legend or a legend of similar import and that
the Company shall refuse to transfer the Parent Shares except in accordance with
such restrictions:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER CERTAIN STATE SECURITIES LAWS. NO SALE OR
TRANSFER OF THESE SHARES MAY BE MADE IN THE ABSENCE OF (1) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (2) AN
OPINION OF COUNSEL THAT REGISTRATION UNDER THE ACT OR UNDER
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED SALE OR TRANSFER."
2.4. FULL DISCLOSURE. No representations or warranties made by
any Selling Stockholder in this Agreement, in any of the exhibits or schedules
attached to this Agreement, or in the schedules attached hereto, or in any other
statements furnished or to be furnished by the such Selling Stockholder to the
Company pursuant to this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary to make any statement contained
herein or therein not misleading. Copies of all documents heretofore or
hereafter delivered or made available to the Company by any Selling Stockholder
pursuant hereto were or will be complete and accurate records of such documents.
3. Representations, Warranties and Covenants of the Target and the
Selling Stockholders. The Target and each Selling Stockholder jointly and
severally represents, warrants and covenants to the Company and the Parent as
follows (exceptions to the following representations and warranties shall be set
forth on Schedules 3.1 through 3.22, which collectively are referred to as the
"DISCLOSURE SCHEDULE"):
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3.1. AUTHORITY RELATIVE TO THIS AGREEMENT. The Target has all
requisite corporate power and authority to enter into and to carry out all of
the terms of this Agreement and all other documents executed and delivered in
connection herewith (collectively, the "DOCUMENTS"). All corporate action on the
part of the Target necessary for the authorization, execution, delivery and
performance of the Documents by the Target has been taken and no further
authorization on the part of the Target is required to consummate the
transactions provided for in the Documents. When executed and delivered by the
Target, the Documents shall constitute the valid and legally binding obligation
of the Target, enforceable in accordance with their respective terms, except as
limited by applicable bankruptcy, insolvency reorganization and moratorium laws
and other laws affecting enforcement of creditor's rights generally and by
general principles of equity.
3.2. CAPITALIZATION OF THE TARGET. The authorized capital
stock of the Target consists of 1,000 shares of common stock, no par value (the
"TARGET COMMON STOCK"), of which 200 shares are issued and outstanding. All
issued and outstanding shares of Target Common Stock are duly authorized,
validly issued, fully paid and nonassessable, and are held of record by the
Selling Stockholders. There are no outstanding options, warrants, rights,
subscriptions, calls, contracts or other agreements to issue, purchase or
acquire, or securities convertible into, shares of capital stock or other
securities of any kind representing an ownership interest in the Target, and no
Selling Stockholder is a party to any proxy, voting trust or other agreements
with respect to the voting of the Target Common Stock.
3.3. SUBSIDIARIES. Set forth on SCHEDULE 3.3 is a
complete listing of any stock or equity interests, direct or indirect, of the
Target in any other firm, corporation, association or business organization
(each of which is referred to herein individually as a "SUBSIDIARY" and
collectively as the "SUBSIDIARIES"). The Target is the sole record owner of all
of the issued and outstanding capital stock of any such Subsidiaries, free and
clear of all liens, encumbrances, equities, assessments and claims. All of the
issued and outstanding shares of capital stock of each such Subsidiary are duly
authorized, validly issued, fully paid and non-assessable. There are no
outstanding options, warrants, rights, subscriptions, calls, contracts or other
agreements to purchase or acquire, or securities convertible into, shares of
capital stock or other securities of any kind representing an ownership interest
in any such Subsidiaries, and neither the Target nor any Selling Stockholder is
a party to any proxy, voting trust or other agreements with respect to the
voting of the capital stock of any such Subsidiaries.
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3.4. ORGANIZATION AND STANDING. The Target and each of the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state or jurisdiction of incorporation and is
duly qualified or registered to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned or leased by it makes
such qualification necessary and where the failure to be so qualified would have
a material adverse effect on the Target and the Subsidiaries, taken as a whole.
The Target and each of the Subsidiaries has the full corporate power and
authority to own or lease and operate its properties and to carry on its
business as now being conducted.
3.5. NO DEFAULT OR LEGAL RESTRICTIONS. Neither The Target nor
any of the Subsidiaries is not in violation of its articles of incorporation,
bylaws or other governing documents. Neither the Target nor any of the
Subsidiaries, except as set forth in schedule 3.5, is in default under, or in
breach of any term or provision of, any contract, agreement, lease, license,
commitment, mortgage, indenture, bond, note, instrument or other obligation set
forth on SCHEDULE 3.22 (each a "CONTRACT") where such default or breach would
have a material adverse effect on the Target and the Subsidiaries, taken as a
whole. The execution and delivery of this Agreement by the Target and the
Selling Stockholders and the consummation of the transactions contemplated
hereby do not and will not violate the articles of incorporation, bylaws or
other governing documents of the Target or any of the Subsidiaries, and, except
where any such conflict, breach, default or violation would not have a material
adverse effect on the Target and the Subsidiaries, when taken as a whole, the
execution and delivery of this Agreement by the Target and the Selling
Stockholders and the consummation of the transactions contemplated hereby do not
and will not (a) conflict with or result in any breach of (or create in any
party the right to accelerate, terminate, modify or cancel) any terms,
conditions or provisions of, or constitute a default under, or require the
consent of any party to, or result in the imposition of any lien or encumbrance
upon any asset or property of the Target or any of the Subsidiaries pursuant to
the terms and conditions of, any Contract to which the Target or any Selling
Stockholder or any of the Subsidiaries is now a party or by which any of them or
any of their respective properties, assets or rights may be bound or affected,
(b) violate any provision of any law, rule or regulation of any administrative
agency or governmental body, or any order, writ, injunction or decree of any
court, administrative agency, governmental body or arbitrator, or (c) require
any filing with, or license, permit, consent or other governmental approval of,
any federal, state or local governmental body or governmental agency (including,
without limitation, the Securities and Exchange Commission, other than the
filing of a From D and similar state securities laws filings.)
3.6. COMPLIANCE WITH LAW. Neither the Target nor any of the
Subsidiaries is in violation of any federal, state, local or foreign law,
ordinance, regulation, judgment, decree, injunction or order of any court or
other governmental entity. The Target and the Subsidiaries have has procured and
are currently in possession of all licenses, permits and other governmental
authorizations required by federal, state or local laws for the operation of the
business of the Target and the Subsidiaries in each jurisdiction in which the
Target or any of the Subsidiaries is currently conducting business, where the
failure to possess such licenses, permits and authorizations would have a
material adverse effect on the Target and the Subsidiaries, taken as a whole,
and there is no basis for revoking any such license, permit or other
authorization. Except as otherwise disclosed on SCHEDULE 3.6, such licenses are
in full force and effect and there is no basis for any fines, penalties, or
revocation of such licenses.
3.7. FINANCIAL STATEMENTS.
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(a) The Target is currently having an accounting firm
authorized to practice before the Securities and Exchange Commission conduct an
audit of the balance sheet of the Target, including its Subsidiaries, as of
December 31, 2003 and the related statements of operations, shareholders' equity
and cash flows for the period from inception through December 31, 2003 (the
"TARGET AUDITED FINANCIAL STATEMENTS"), and such audit shall be completed in
sufficient time to have the Target Financial Statements to be filed as an
exhibit to the amendment of the Current Report on Form 8-K described in Section
6.4 hereof. The Target Audited Financial Statements will be true and accurate,
in accordance with the books and records of Target. Except as disclosed therein,
the Target Audited Financial Statements (i) will be in accordance with the books
and records of the Target and will be prepared in conformity with generally
accepted accounting principles ("GAAP") consistently applied for all periods,
and (ii) will fairly present the financial position of the Target as of the
respective dates thereof, and the results of operations, and changes in
shareholders" equity and changes in cash flow for the periods then ended, all in
accordance with GAAP consistently applied for all periods.
(b) Except as set forth on the Target Audited
Financial Statements, the Target has no debt, liability or obligations of any
nature, whether accrued, absolute, contingent, or otherwise, whether due or to
become due and whether or not the amount hereof is readily ascertainable, that
will not be reflected as a liability in the Target Audited Financial Statements
or except for liabilities incurred by the Target in the ordinary course of
business, consistent with past practices which are not otherwise prohibited by,
or in violation of, or which will not result in a breach of, the
representations, warranties, and covenants of the Target contained in this
Agreement. There will be no material loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 ("FAS NO. 5") issued by the
Financial Accounting Standards Board (the "FASB") which will not be adequately
provided for in the Target Audited Financial Statements as required by FAS No.
5.
(c) As of the date hereof and as of the closing date,
the Target does not and will not have Liabilities (as defined in Section 3.8) in
excess of One Million Seven Hundred Thousand Dollars ($1,700,000.)
3.8. ABSENCE OF UNDISCLOSED LIABILITIES. The Target does not
have any material liabilities, obligations or claims of any kind whatsoever
which are required to be set forth in financial statements prepared in
accordance with GAAP, whether secured or unsecured, accrued or unaccrued, fixed
or contingent, matured or unmatured, direct or indirect, contingent or otherwise
and whether due or to become due (referred to herein individually as a
"LIABILITY" and collectively as "LIABILITIES"), other than (a) Liabilities that
are reserved for or disclosed in the Target Audited Financial Statements, (b)
Liabilities that are set forth on SCHEDULE 3.8, (c) Liabilities incurred by the
Target in the ordinary course of business after the date of the Target Audited
Financial Statements (none of which results from, arises out of, relates to, is
in the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement or violation of law), or (d) Liabilities for Contracts (other
than any express executory obligations that might arise due to any default or
other failure of performance by the Target prior to the Closing Date).
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3.9. ABSENCE OF MATERIAL ADVERSE CHANGES. Since the date of
the Latest Target Audited Financial Statements, there has not been any (a)
material adverse change in the business, operations, properties, condition
(financial or otherwise) of the Target and the Subsidiaries, (b) damage,
destruction or loss, whether covered by insurance or not, materially and
adversely affecting the business, properties or condition (financial or
otherwise) of the Target and the Subsidiaries, taken as a whole, or (c) change
by the Target or any of the Subsidiaries in accounting methods or principles
used for financial reporting purposes, except as required by a change in
generally accepted accounting principles and concurred with by the Target"s
independent certified public accountants.
3.10. REAL PROPERTY.
(a) SCHEDULE 3.10 contains a list of all real
property owned by or leased to the Target or any of the Subsidiaries. Neither
the Target nor any Selling Stockholder has received any notification that there
is any violation of any law, ordinance or regulation with respect to such real
property that would result in a material fine or penalty or the abatement of
which would require a material capital expenditure.
(b) The Target or the applicable Subsidiary has good
and marketable title to all real property indicated on SCHEDULE 3.10 as owned by
the Company or any of the Subsidiaries, subject to (i) easements, servitudes and
rights-of-way of record or in actual or apparent use, (ii) any state of facts
that a visual inspection might reveal, (iii) rights of the public in any portion
of the premises that may fall in any public street, way or alley, (iv) zoning
laws, building laws and building restrictions of record, (v) liens for current
taxes not yet due and payable or being contested in good faith by appropriate
proceedings, (vi) liens imposed by law incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers,
material, men and the like, (vii) liens or imperfections of title that do not
materially detract or interfere with the present use or value of such real
property, and (viii) mortgages, liens, encumbrances, claims or restrictions, if
any, that do not materially detract from or interfere with the present use or
value of such real property
(c) Target has no pending or threatened condemnation
proceedings relating to any real property owned by or leased to the Target or
any of the Subsidiaries, or other matters affecting materially or adversely the
current use, occupancy, or value of any such real property.
(d) Except as listed on the Target's disclosure in
schedule, there are no leases, subleases, licenses, material concessions, or
other material agreements, written or oral granting to any party or parties the
right of use or occupancy of any portion of any real property owned by the
Target or any of the Subsidiaries.
(e) There are no outstanding options or rights of
first refusal to purchase any of the real property owned by the Target or any of
the Subsidiaries, or any portion thereof or interest therein.
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(f) The leases relating to the real property leased
by the Target or any of the Subsidiaries are valid and in full force and there
does not exist any default thereunder, except as disclosed in the disclosure
schedule, that materially detracts from or interferes with the present use or
value of such real property.
3.11. TANGIBLE PERSONAL PROPERTY.
(a) The Target and each of the Subsidiaries has good
and marketable title except as disclosed in the disclosure schedule, to all
tangible personal property it purports to own as of the date of the Target
Audited Financial Statements (except for personal property sold or otherwise
disposed of since the date of the Target Audited Financial Statements in the
ordinary course of business), free and clear of all mortgages, liens,
encumbrances, claims or restrictions other than (i) liens for current taxes not
due and payable or being contested in good faith by appropriate proceedings,
(ii) liens imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers, material, men and
the like, and (iii) mortgages, liens, encumbrances, claims or restrictions, if
any, that do not materially detract from or interfere with the present use or
value of such personal property.
(b) All leases relating to personal property are
valid and in full force and there does not exist any default thereunder where
such default would materially detract from or interfere with the present use or
value of such personal property.
3.12. INTELLECTUAL PROPERTY RIGHTS. SCHEDULE 3.12 contains a
list of all patents, trademarks, trade names, corporate names, service marks,
computer software, customer lists, processes, know-how and trade secrets
(collectively, the "INTELLECTUAL PROPERTY") used in or necessary for the conduct
of the business of the Target or any of the Subsidiaries as currently conducted.
The Target and each of the Subsidiaries owns, or is licensed to use, all of the
Intellectual Property. No claim has been asserted or threatened by any person
with respect to the use of such Intellectual Property or challenging or
questioning the validity or effectiveness of any such license or agreement with
respect thereto, and the use of such Intellectual Property by the Target and the
Subsidiaries do not infringe on the rights of any other person.
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3.13. TAXES.
(a) The Target and the Subsidiaries have has filed
all material returns, declarations, reports, claims for refund, or information
returns or statements relating to any Federal, State, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, custom duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto whether disputed or not (individually, a "TAX" and, collectively,
"TAXES"), and further including any schedule or attachment thereto, and any
amendment thereof, that the Target and the Subsidiaries were is required to file
under any Federal, State, local, or foreign laws (individually, a "TAX RETURN"
and, collectively, "TAX RETURNS"). All such Tax Returns were correct and
complete in all material respects. All Taxes owed by the Target and the
Subsidiaries have has been paid when due or adequate provision has been made
therefore in the applicable financial statements. There are no security
interests or liens on any of the assets or the stock or other securities of the
Target or the Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) The Target and the Subsidiaries have has withheld
and paid all Taxes required by law to have been withheld and paid in connection
with amounts paid or owing to any employee, commissioned agent, creditor,
stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax
liability of, or attributable to, the Target or the Subsidiaries (including,
without limitation, any dispute or claim with respect to any jurisdiction in
which the Target or Subsidiaries do does not currently file Tax Returns) either
(i) claimed or raised by any authority in writing, or (ii) as to which the
Target, the Subsidiaries or any Selling Stockholder has knowledge.
(d) Neither The Target nor any of the Subsidiaries
have has not waived or extended any statute of limitations in respect of any
assessment or collection of Taxes or any alleged, proposed or actual deficiency
in Taxes or agreed to any extension of time with respect to the filing of any
Tax Return.
(e) Neither the Target nor any of the Subsidiaries
have filed a consent under Section 341(f) of the Internal Revenue Code (the
"CODE").
(f) Neither the Target nor any of the Subsidiaries
have made any payments, or is obligated to make payments, and is not a party to
any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code.
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(g) Neither the Target nor any of the Subsidiaries
have any liability for the Taxes of any person or entity other than the Target
and the Subsidiaries (i) under Section 1.1502-6 of the Treasury Regulations (or
any similar provision of State, local or foreign law), (ii) as a transferee or
successor, (iii) by contract, or (iv) otherwise.
3.14. LITIGATION. Other than as set forth on SCHEDULE 3.14,
there is no legal, administrative, arbitration or other proceeding, suit, claim
or action of any nature or investigation, review or audit of any kind pending or
threatened against or involving the Target or any of the Subsidiaries or their
assets or properties.
3.15. EMPLOYEE BENEFIT PLANS.
(a) The Target and the Subsidiaries have complied in
all material respects with all applicable laws relating to the employment of
labor, including, without limitation, the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and those relating to wage, hours, collective
bargaining, unemployment insurance, workers" compensation, equal employment
opportunity and the payment of withholding taxes, including income and social
security taxes, and has withheld (and paid over to the appropriate authorities)
all amounts required by law or agreement to be held from the wages or salaries
of its employees.
(b) With respect to each employee welfare benefit
plan of the Target or any of the Subsidiaries, as defined in Section 3(1) of
ERISA (a "WELFARE PLAN"), and any deferred benefit plan of the Target or any of
the Subsidiaries, as defined in Section 3(2) of ERISA (a "PENSION PLAN"), there
are no actions, suits or investigations or claim pending or to the best of
Seller"s knowledge, threatened with respect to the assets thereof, other than
routine claims for benefits.
(c) Neither the Target nor any of the Subsidiaries
has made contributions to or currently has any obligation to contribute to (or
any other liability, including any potential liability) with respect to any
Welfare or Pension Plan under which any employee was or may be entitled to any
benefit that is a "Multiemployer Plan" as defined in Section 4001 of ERISA or
any "Multiemployer Plan" within the meaning of Section 3(37) of ERISA. In
addition, there are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to the Target or any
of the Subsidiaries.
3.16. ENVIRONMENTAL AND SAFETY LAWS.
11
(a) The Target and the Subsidiaries have has complied
with all Environmental Requirements (as defined below) and all health and safety
laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced against the
Target and the Subsidiaries alleging any failure to so comply, except in each
case where the failure to comply would not have a material adverse effect on the
Target and the Subsidiaries, taken as a whole. The Target and the Subsidiaries
have has obtained and been in compliance with all of the terms and conditions of
all permits, licenses and other authorizations that are required under, and has
complied with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables that are
contained in, all Environmental Requirements and health and safety laws, except
in each case where the failure to comply would not have a material adverse
effect on the Target and the Subsidiaries, taken as a whole.
(b) The Target and the Subsidiaries have no liability
for, and have not handled or disposed of, any Hazardous Substance (as defined
below), arranged for the disposal of any Hazardous Substance, exposed any
employee or other individual to any Hazardous Substance, or owned or operated
any property or facility in any manner that could form the basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against the Target and the Subsidiaries giving rise to any
liability for damage to any site, location or body of water (surface or
subsurface), for any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental Requirement or health and
safety law, except where any such liability would not have a material adverse
effect on the Company and the Subsidiaries, taken as a whole.
(c) None of the following exists at any real property
or facility owned or operated by the Target or the Subsidiaries: (i) underground
storage tanks, (ii) asbestos-containing materials in any form or condition,
(iii) materials or equipment containing polychlorinated biphenyls, or (iv)
landfills, surface impoundments or disposal areas.
(d) "ENVIRONMENTAL REQUIREMENTS" means all applicable
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises and similar items, or
all governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states or political subdivisions thereof
and all applicable judicial, administrative and regulatory decrees, judgments,
and orders that are adopted and in effect as of the Closing and that relate to
the protection of human health or the environment, including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
investigation and remediation of emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pollutants, contaminants
or hazardous or toxic substances, materials or wastes whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of chemical substances, materials or wastes, whether
solid, liquid or gaseous in nature.
12
(e) The term "HAZARDOUS SUBSTANCES" shall include
without limitation: (i) those substances included within the definition of
"Hazardous Substances," "Hazardous Materials," "Toxic Substances" or "Solid
Waste" in CERCLA (42 U.S.C. sections 9601 et seq.), RCRA (42 U.S.C. sections
6901 et seq.), the Hazardous Materials Transportation Action (49 U.S.C. Sections
1801 et seq.) and the TSCA (15 U.S.C. sections 2601 et seq.) and the regulations
promulgated thereunder; (ii) those substances listed in the United States
Department of Transportation Table of Hazardous Materials (49 CFR 172.101 and
amendments thereto); and (iii) such other substances, materials and wastes that,
prior to or as of the Closing, are classified as hazardous or toxic under
federal, state or local laws or regulations and that are regulated as such under
such laws.
3.17. ACCOUNTS RECEIVABLE. All accounts receivable that are reflected
on the Target Audited Financial Statements or that have arisen since the date of
the Target Audited Financial Statements (except such accounts receivable as have
been collected since the Target Audited Financial Statements) in excess of
reserves for doubtful accounts are valid and enforceable claims and arise out of
bona fide transactions in the ordinary course of business in conformity with the
applicable purchase orders, agreements and specifications. Such accounts
receivable are subject to no valid defenses or offsets, except such discounts as
are customarily offered to customers in the ordinary course of business and
routine customer complaints or warranty demands that are not material in nature.
3.18. INVENTORY. All inventory of the Target and the
Subsidiaries, whether reflected on the Target Audited Financial Statements or
otherwise, consists of a quality and quantity usable and salable in the ordinary
course of business. The value of all items of obsolete inventory and of
inventory of below standard quality has been written down to realizable market
value, and the value at which such inventory is carried reflects the Target's
normal inventory valuation policy of stating its inventory at the lower of cost
or market value, in each case in accordance with generally accepted accounting
principles.
3.19. BROKERS OR FINDERS. The Target and the Selling
Stockholders have engaged no broker, agent, finder or investment advisor in
connection with the transactions contemplated by this Agreement, and no broker,
agent or finder is entitled to any brokerage or finder's fee or other commission
in respect of this Agreement or the transactions contemplated hereby.
3.20. EMPLOYEES.
(a) No executive, key employee or group of employees
has any plans to terminate employment with the Target or any of the
Subsidiaries.
(b) Neither the Target nor any of the Subsidiaries is
a party to or bound by any collective bargaining agreement. Neither the Target
nor any of the Subsidiaries have experienced any strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes since the
organization of the Target.
(c) Except as set forth on SCHEDULE 3.20, neither the
Target nor any of the Subsidiaries is a party to, and/or is bound by, any
employment contract with any of its employees.
13
3.21. INSURANCE. The Target and the Subsidiaries are insured
under, or are the owners and beneficiaries under, as appropriate, the policies
listed in SCHEDULE 3.21, copies of which policies of insurance have been
provided to the Company.
3.22. CONTRACTS AND COMMITMENTS; NO DEFAULT.
(a) Except as set forth in SCHEDULE 3.22, the Target:
(i) has no written or oral contract,
commitment, agreement or arrangement with any person which (A) requires payments
individually in excess of Twenty Five Thousand Dollars ($25,000) annually or in
excess of One Hundred Thousand Dollars ($100,000) over its term (including
without limitation periods covered by any option to extend or renew by either
party) and (B) is not terminable on thirty (30) days" or less notice without
cost or other Liability; (ii) does not pay any person or entity cash
remuneration at the annual rate (including without limitation guaranteed
bonuses) of more than Fifty Thousand ($50,000) for services rendered;
(iii) is not restricted by agreement from
carrying on its businesses or any part thereof anywhere in the world or from
competing in any line of business with any person or entity;
(iv) is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any person or entity;
(v) is not party to any agreement, contract,
commitment or loan to which any of its directors, officers or shareholders or
any Affiliate (or former Affiliate) thereof is a party;
(vi) is not subject to any outstanding sales
or purchase contracts, commitments or proposals which is anticipated to result
in any loss upon completion or performance thereof;
(vii) is not party to any purchase or sale
contract or agreement that calls for aggregate purchases or sales in excess over
the course of such contract or agreement of One Hundred Thousand Dollars
($100,000) or which continues for a period of more than twelve months (including
without limitation periods covered by any option to renew or extend by either
party) which is not terminable on sixty (60) days" or less notice without cost
or other Liability at or any time after the Closing; and Subject to disclosure
(viii) has no distributorship, dealer,
manufacturer's representative, franchise or similar sales contract relating to
the payment of a commission.
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(b) True and complete copies (or summaries, in the
case of oral items) of all items disclosed pursuant to this SECTION 3.22 have
been made available to the Company for review. Except as set forth in SCHEDULE
3.22, all such items are valid and enforceable by and against the Target in
accordance with their respective terms, the Target is not, except as previously
disclosed, in breach, violation or default, however defined, in the performance
of any of its obligations thereunder, and no facts and circumstances exist
which, whether with the giving of due notice, lapse of time, or both, would
constitute such a breach, violation or default thereunder or thereof; and to the
best knowledge of the Target, no other parties thereto are in breach, violation
or default, however defined, thereunder or thereof, and no facts or
circumstances exist which, whether with the giving of due notice, lapse of time,
or both, would constitute such a breach, violation or default thereunder or
thereof.
3.23. FULL DISCLOSURE. No representations or warranties made
by the Target and the Selling Stockholders in this Agreement, in any of the
exhibits or schedules attached to this Agreement, or in the schedules attached
hereto, or in any other statements furnished or to be furnished by the Target
and the Selling Stockholders to the Company pursuant to this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary to make any statement contained herein or therein not misleading.
Copies of all documents heretofore or hereafter delivered or made available to
the Company by the Target and the Selling Stockholders pursuant hereto were or
will be complete and accurate records of such documents.
4. Representations, Warranties and Covenants of the Company. The
Company represents, warrants and covenants to Target and each of the Selling
Stockholders as follows.
4.1. ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada and has full corporate power and authority to enter
into and perform its obligations under this Agreement.
4.2. CAPITALIZATION. The authorized capital stock of the
Company consists of 40,000,000 shares of Common Stock, $0.001 par value, of
which 39,335,642 shares are issued and outstanding. All issued and outstanding
shares of Common Stock immediately prior to the Closing are duly authorized,
validly issued, fully paid and non-assessable. There are no outstanding options,
warrants, rights, subscriptions, calls, contracts or other agreements to issue,
purchase or acquire, or securities convertible into, shares of capital stock or
other securities of any kind representing an ownership interest in the Company.
15
4.3. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
requisite corporate power and authority, to enter into and to carry out all of
the terms of the Documents. All corporate action on the part of the Company
necessary for the authorization, execution, delivery and performance of the
Documents by the Company has been taken and no further authorization on the part
of the Company is required to consummate the transactions provided for in the
Documents. When executed and delivered by the Company, the Documents shall
constitute the valid and legally binding obligation of the Company, enforceable
in accordance with their respective terms, except as limited by applicable
bankruptcy, insolvency reorganization and moratorium laws and other laws
affecting enforcement of creditor's rights generally and by general principles
of equity.
4.4. NO DEFAULT OR LEGAL RESTRICTIONS. The Company is not in
violation of its articles of incorporation, bylaws or other governing documents.
The Company is not in default under, or in breach of any term or provision of,
any contract, agreement, lease, license, commitment, mortgage, indenture, bond,
note, instrument or other obligation where such default or breach would have a
material adverse effect on the Company, taken as a whole. The execution and
delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby do not and will not violate the articles of
incorporation, bylaws or other governing documents of the Company, and, except
where any such conflict, breach, default or violation would not have a material
adverse effect on the Company, taken as a whole, the execution and delivery of
this Agreement by the Company and the consummation of the transactions
contemplated hereby do not and will not (a) conflict with or result in any
breach of (or create in any party the right to accelerate, terminate, modify or
cancel) any terms, conditions or provisions of, or constitute a default under,
or require the consent of any party to, or result in the imposition of any lien
or encumbrance upon any asset or property of the Company pursuant to the terms
and conditions of, any contract to which the Company is now a party or by which
any of them or any of their respective properties, assets or rights may be bound
or affected, (b) violate any provision of any law, rule or regulation of any
administrative agency or governmental body, or any order, writ, injunction or
decree of any court, administrative agency, governmental body or arbitrator, or
(c) require any filing with, or license, permit, consent or other governmental
approval of, any federal, state or local governmental body or governmental
agency (including, without limitation, the Securities and Exchange Commission,
other than the filing of a Form D and similar state securities laws filings).
4.5. COMPLIANCE WITH LAW. The Company is not in violation of
any federal, state, local or foreign law, ordinance, regulation, judgment,
decree, injunction or order of any court or other governmental entity. The
Company has procured and are currently in possession of all licenses, permits
and other governmental authorizations required by federal, state or local laws
for the operation of the business of the Company in each jurisdiction in which
the Company is currently conducting business, where the failure to possess such
licenses, permits and authorizations would have a material adverse effect on the
Company, taken as a whole, and there is no basis for revoking any such license,
permit or other authorization. Such licenses are in full force and effect and
there is no basis for any fines, penalties, or revocation of such licenses.
4.6. SEC REPORTS. The Company has delivered to Target and the
Selling Stockholders the Parent's Annual Report on Form 10-KSB for the year
ending December 31, 2002, its Quarterly Report on Form 10-QSB for the period
ending March 31, 2003, its Quarterly Report on Form 10-QSB for the period ending
June 30, 2003, its Quarterly Report on Form 10-QSB for the period ending
September 30, 2003, its Definitive Information Statement dated January 7, 2004,
its Current Report on Form 8-K dated January 23, 2004, its Current Report on
Form 8-K dated February 24, 2004, its definitive information statement dated
March 15, 2004, and its current report on form 8-K dated April 1, 2004
(collectively, the "SEC REPORTS"). The information in the SEC Reports was true
and correct in all material respects as of the dates thereof and did not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, as of the dates thereof.
16
4.7. ABSENCE OF MATERIAL ADVERSE CHANGES. Since the date of
the latest SEC Report, there has not been any (a) material adverse change in the
business, operations, properties, condition (financial or otherwise) of the
Company, (b) damage, destruction or loss, whether covered by insurance or not,
materially and adversely affecting the business, properties or condition
(financial or otherwise) of the Company, taken as a whole, or (c) change by the
Company in accounting methods or principles used for financial reporting
purposes, except as required by a change in generally accepted accounting
principles and concurred with by the Company's independent certified public
accountants.
4.8. TAXES.
(a) The Company has filed, or will file, all Tax
Returns relating to any Tax. All such Tax Returns were, or will be, correct and
complete in all material respects. All Taxes owed by the Company have been paid
when due or adequate provision has been made therefore in the applicable
financial statements. There are no security interests or liens on any of the
assets or the stock or other securities of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) The Company has withheld and paid all Taxes
required by law to have been withheld and paid in connection with amounts paid
or owing to any employee, commissioned agent, creditor, stockholder, or other
third party.
(c) There is no dispute or claim concerning any Tax
liability of, or attributable to, the Company (including, without limitation,
any dispute or claim with respect to any jurisdiction in which the Company does
not currently file Tax Returns) either (i) claimed or raised by any authority in
writing, or (ii) as to which the Company has knowledge.
(d) The Company has not waived or extended any
statute of limitations in respect of any assessment or collection of Taxes or
any alleged, proposed or actual deficiency in Taxes or agreed to any extension
of time with respect to the filing of any Tax Return.
(e) The Company has not filed a consent under the
Code.
(f) The Company has not made any payments, nor is it
obligated to make payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code.
(g) The Company does not have any liability for the
Taxes of any person or entity other than the Company (i) under Section 1.1502-6
of the Treasury Regulations (or any similar provision of State, local or foreign
law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.
4.9. LITIGATION. There is no legal, administrative,
arbitration or other proceeding, suit, claim or action of any nature or
investigation, review or audit of any kind pending or threatened against or
involving the Company or its assets or properties.
17
4.10. CONTRACTS AND COMMITMENTS; NO DEFAULT.
(a) Except as set forth in SCHEDULE 4.10, the
Company:
(i) has no written or oral contract,
commitment, agreement or arrangement with any person which (A) requires payments
individually in excess of Twenty Five Thousand Dollars ($25,000) annually or in
excess of One Hundred Thousand Dollars ($100,000) over its term (including
without limitation periods covered by any option to extend or renew by either
party) and (B) is not terminable on thirty (30) days" or less notice without
cost or other liability; (ii) does not pay any person or entity cash
remuneration at the annual rate (including without limitation guaranteed
bonuses) of more than Fifty Thousand ($50,000) for services rendered;
(iii) is not restricted by agreement from
carrying on its businesses or any part thereof anywhere in the world or from
competing in any line of business with any person or entity;
(iv) is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any person or entity;
(v) is not party to any agreement, contract,
commitment or loan to which any of its directors, officers or shareholders or
any Affiliate (or former Affiliate) thereof is a party;
(vi) is not subject to any outstanding sales
or purchase contracts, commitments or proposals which is anticipated to result
in any loss upon completion or performance thereof;
(vii) is not party to any purchase or sale
contract or agreement that calls for aggregate purchases or sales in excess over
the course of such contract or agreement of One Hundred Thousand Dollars
($100,000) or which continues for a period of more than twelve months (including
without limitation periods covered by any option to renew or extend by either
party) which is not terminable on sixty (60) days" or less notice without cost
or other Liability at or any time after the Closing; and
(viii) has no distributorship, dealer,
manufacturer's representative, franchise or similar sales contract relating to
the payment of a commission.
18
(b) True and complete copies (or summaries, in the
case of oral items) of all items disclosed pursuant to this SECTION 4.10 have
been made available to the Target and the Selling Stockholders for review.
Except as set forth in SCHEDULE 4.10, all such items are valid and enforceable
by and against the Company in accordance with their respective terms, the
Company is not in breach, violation or default, however defined, in the
performance of any of its obligations thereunder, and no facts and circumstances
exist which, whether with the giving of due notice, lapse of time, or both,
would constitute such a breach, violation or default thereunder or thereof; and
to the best knowledge of the Company, no other parties thereto are in breach,
violation or default, however defined, thereunder or thereof, and no facts or
circumstances exist which, whether with the giving of due notice, lapse of time,
or both, would constitute such a breach, violation or default thereunder or
thereof.
4.11 BROKERS OR FINDERS. The Company has not dealt with any
broker or finder in connection with the transactions contemplated hereby. The
Company has not incurred, nor shall it incur, directly or indirectly, any
liability for any brokerage or finders' fees, agent commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
4.12 FULL DISCLOSURE. No representations or warranties made by
the Company in this Agreement, in any of the exhibits or schedules attached to
this Agreement, or in the schedules attached hereto, or in any other statements
furnished or to be furnished by the Company to the Target and the Selling
Stockholders pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make any statement
contained herein or therein not misleading. Copies of all documents heretofore
or hereafter delivered or made available to the Target and the Selling
Stockholders pursuant hereto were or will be complete and accurate records of
such documents.
5. Deliveries at Closing.
5.1 COMPANY'S DELIVERIES AT CLOSING. At the Closing, the
Company shall deliver or cause to be delivered to Target and the Selling
Stockholders all of the following:
(a) The Convertible Preferred Stock;
(b) A certificate of an officer of the Company, in a
form and substance reasonably acceptable to the Target, dated as of the Closing
Date, certifying that (i) all representations and warranties of the Company made
herein are true and correct as of the Closing Date; and (ii) the Company has
performed and complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by the Company on or prior to the Closing.
(c) Certified resolutions of the Board of Directors
of the Company authorizing the consummation of the transactions contemplated by
this Agreement;
(d) Any notices of sales required to be filed with
the applicable federal and state agencies, which will be filed within the
applicable periods therefor; and
19
(e) Such other documents and instruments as shall be
reasonably necessary to effect the transactions contemplated hereby.
5.2. SELLING STOCKHOLDERS' AND TARGET'S DELIVERIES AT CLOSING.
At the Closing, the Selling Stockholders shall deliver or cause to be delivered
to the Company all of the following:
(a) Original certificates representing the Target
Shares to be exchanged pursuant to this Agreement;
(b) Stock Assignments Separate from Certificate in
the form and substance satisfactory to the Company and duly executed by each of
the Selling Stockholders regarding the Target Shares;
(c) A certificate of an officer of the Target, in a
form and substance reasonably acceptable to the Company, dated as of the Closing
Date, certifying that (i) all representations and warranties of the Target made
herein are true and correct as of the Closing Date; and (ii) the Target has
performed and complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by the Target on or prior to the Closing.
(d) A certificate of Xxxxxx Xxxxxxxx, as a
representative of the Selling Stockholders, in a form and substance reasonably
acceptable to the Company, dated as of the Closing Date, certifying that (i) all
representations and warranties of the Selling Stockholders made herein are true
and correct as of the Closing Date; and (ii) the Selling Stockholders have
performed and complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by the Selling Stockholders on or prior to the Closing.
(e) Certified resolutions of the Board of Directors
of Target authorizing the consummation of the transactions contemplated by this
Agreement;
(f) A certificate of good standing of Target from the
State of Kentucky as of the most recent practicable date ;and
(g) Such other documents and instruments as shall be
reasonably necessary to effect the transactions contemplated hereby.
20
6. Covenants.
6.1. [INTENTIONALLY OMITTED].
6.2. [INTENTIONALLY OMITTED].
6.3. [INTENTIONALLY OMITTED].
6.4. FORM 8-K. The Company shall prepare a Current Report on
Form 8-K regarding the acquisition contemplated herein and cause such Current
Report to be filed with the Securities and Exchange Commission no later than
fifteen (15) days following the Closing Date. The Company shall prepare an
amendment to Current Report on Form 8-K containing the Target Financial
Statements described in Section 3.7 herein and cause such amendment to be filed
with the Securities and Exchange Commission no later than seventy-five (75) days
following the Closing Date.
6.5. FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the
terms and conditions herein provided, the parties hereto will use their best
efforts to take or cause to be taken all actions and do or cause to be done all
things necessary, proper or advisable under applicable laws to consummate and
make effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation obtaining all consents of any person or
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not in
limitation of the foregoing, it is the intent of the parties to consummate the
transactions contemplated herein at the earliest practicable time, and they
respectively agree to exert their best efforts to that end, including without
limitation: (i) the removal or satisfaction, if possible, of any objections to
the validity or legality of the transactions contemplated herein; and (ii) the
satisfaction of the conditions to consummation of the transactions contemplated
hereby.
21
6.6. FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(a) Each party hereto will, at and after the Closing,
execute and deliver such instruments and take such other actions as the other
party or parties, as the case may be, may reasonably require in order to carry
out the intent of this Agreement. Without limiting the generality of the
foregoing, at any time after the Closing, at the request of the Company and
without further consideration, the Target and the Selling Stockholders will
execute and deliver such instruments of sale, transfer, conveyance, assignment
and confirmation and take such action as the Company may reasonably deem
necessary or desirable in order to more effectively transfer, convey and assign
to the Company, and to confirm the Company's title to, the Target Shares.
(b) At all times from the date hereof until the
Closing, each party will promptly notify the other in writing of the occurrence
of any event which it reasonably believes will or may result in a failure by
such party to satisfy the conditions and covenants specified in Articles 5 and 6
hereof.
6.7. PUBLIC ANNOUNCEMENTS. On or after the Closing Date, the
Company and the Target shall issue a press release (the "PRESS RELEASE") in a
form and substance acceptable to both parties disclosing the execution of this
Agreement. Other than the Press Release, none of the parties hereto will make
any public announcement with respect to the transactions contemplated herein
without the prior consent of the other parties, which consent will not be
unreasonably withheld or delayed; provided, however, that any of the parties
hereto may at any time make any announcements which are required by applicable
law so long as the party so required to make an announcement promptly upon
learning of such requirement notifies the other parties of such requirement and
discusses with the other parties in good faith the exact proposed wording of any
such announcement.
6.9. TAX MATTERS; COOPERATION AND RECORDS RETENTION. The
Target and the Company will (i) each provide the other with such assistance as
may reasonably be requested by any of them in connection with the preparation of
any Tax Return, audit or other examination by any taxing authority or judicial
or administrative proceedings relating to liability for Taxes, (ii) each retain
and provide the other with any records or other information which may be
relevant to such Tax Return, audit or examination, proceeding or determination,
and (iii) each provide the other with any final determination of such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax Return of the other for any period. Without limiting the
generality of the foregoing, the Target and the Company will retain, until the
applicable statutes of limitations (including all extensions) have expired,
copies of all Tax Returns, supporting work schedules and other records or
information which may be relevant to such Tax Returns for all Tax periods or
portions thereof ending on or before the Closing and will not destroy or
otherwise dispose of any such records without first providing the other party
with a reasonable opportunity to review and copy the same.
22
7. Survival and Indemnification.
7.1. SURVIVAL. The representations and warranties of each
party hereto shall survive the execution of and delivery of this Agreement and
the consummation of the transactions contemplated hereby and the same shall be
effective for a period of five (5) years from the Closing Date and no longer.
The covenants and agreements contained in this Agreement shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and the same shall be effective in accordance
with their respective terms.
7.2. MUTUAL INDEMNIFICATION. Subject to the limitations set
forth in this Article 7, each party each agrees to indemnify and save harmless
each other party from and against any and all losses, liabilities, expenses
(including, without limitation, reasonable fees and disbursements of counsel),
claims, liens, damages or other obligations whatsoever (collectively, "CLAIMS")
that may actually and reasonably be payable by virtue of or which may actually
and reasonably result from the inaccuracy of any of their respective
representations or the breach of any of their respective warranties, covenants
or agreements made in this Agreement or in any certificate, schedule or other
instrument delivered pursuant to this Agreement; provided, however, that no
claim for indemnity may be made hereunder if the facts giving rise to such Claim
were in writing and known to the party seeking indemnification hereunder, such
facts constituted a breach of the conditions to closing of the party seeking
indemnification and the party seeking indemnification elected in any event to
consummate the transactions contemplated by this Agreement. In addition, to the
extent that applicable insurance coverage is available and paid to the party
seeking indemnification hereunder with respect to the Claim for which
indemnification is being sought, such amounts of insurance actually paid shall
be deducted from the amount of the Claim for which indemnification may be sought
hereunder and the indemnified party may recover only the amount of the loss
actually suffered by the party to be indemnified. To the extent that such
insurance payment is received subsequent to payment by the indemnifying party
hereunder, the indemnified party shall reimburse the indemnifying party, up to
the amount previously paid by the indemnifying party, for the amount of such
insurance payment.
7.3. PROCEDURES FOR INDEMNIFICATION. Each party agrees to give
each other party prompt written notice of any event or assertion of which it has
knowledge concerning any such Claim and as to which it may request
indemnification hereunder, and each party will cooperate with the other in
determining the validity of any such Claim. The indemnifying party hereunder
shall have the right to participate in, or control the defense of (with counsel
reasonably satisfactory to the indemnified party), any such Claim for which
indemnification has been requested hereunder. Each party agrees not to settle or
compromise any such Claim without the prior written consent of each other party.
The giving of notice to the indemnifying party as provided herein and the
opportunity to participate or control the defense of the Claim for which
indemnification is sought shall be a prerequisite to any obligation of the
indemnifying party to indemnify the indemnified party hereunder. Following
indemnification as provided hereunder, the indemnifying party shall be
subrogated to all rights of the indemnified party against all other parties with
respect to the Claim for which indemnification has been made.
23
7.4. LIMITATIONS ON INDEMNIFICATION. Notwithstanding the
provisions of Section 7.2 hereof, no claim for indemnification by any party
hereunder may be made unless the amount of the Claim for which indemnification
is sought exceeds $25,000. The maximum aggregate liability of the Target and the
Selling Stockholders to the Company for all claims arising under the Documents
shall equal the aggregate principal amount of the Purchase Price.
8. Miscellaneous.
8.1. CUMULATIVE REMEDIES. Any person having any rights under
any provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages by reason of any breach of any provision of
this Agreement, and to exercise all other rights granted by law, which rights
may be exercised cumulatively and not alternatively.
8.2. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, this Agreement and any of the rights, interests or obligations
hereunder may not be assigned by any of the parties hereto. All covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective permitted successors
and assigns of the parties hereto whether so expressed or not.
8.3. SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement or the other documents.
8.4. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts when taken together will constitute one and
the same agreement.
8.5. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject matter
thereof, and supersedes all prior and contemporaneous agreements and
understandings.
8.6. EXPENSES AND ATTORNEY FEES. The Company, Target and the
Selling Stockholders shall each pay all of their respective legal and due
diligence expenses in connection with the transactions contemplated by this
Agreement, including, without limiting the generality of the foregoing, legal
and accounting fees.
24
8.7. WAIVER OF CONDITIONS. At any time or times during the
term hereof, the Company may waive fulfillment of any one or more of the
conditions to its obligations in whole or in part, and Target or the Selling
Stockholders may waive fulfillment of any one or more of the foregoing
conditions to their obligation, in whole or in part, by delivering to the other
party a written waiver or waivers of fulfillment thereof to the extent specified
in such written waiver or waivers. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
8.8. LAW GOVERNING. This Agreement shall be construed and
interpreted in accordance with and governed and enforced in all respects by the
laws of the State of Kentucky.
8.9 DISPUTED MATTERS. Except as otherwise provided in this
Agreement, each party hereby agrees that any suit, action or proceeding arising
out of or relating to this Agreement shall be brought in either the United
States District Court for the Eastern District of Kentucky or a Superior Court
of the State of Kentucky in the County of Pike, and the parties hereby
irrevocably and unconditionally submit to the jurisdiction of such courts. The
parties hereby agree to waive trial by jury in any such suit, action or
proceeding. The parties irrevocably waive and agree not to raise any objection
any of them might now or hereafter have to the bringing of any such suit, action
or proceeding in any such court including, without limitation, any objection
that the place where such court is located is an inconvenient forum. Each party
agrees that any judgment or order against that party in any such suit, action or
proceeding brought in such a court shall be conclusive and binding upon that
party and consents to any such judgment or order being recognized and enforced
in the courts of its jurisdiction of incorporation or organization or any other
courts, by registration or entry of such judgment or order, by a suit, action or
proceeding upon such judgment or order, or any other means available for
enforcement of judgments or orders.
8.10. [INTENTIONALLY OMITTED].
8.11. DELIVERY BY FAX. Delivery of an executed counterpart of
the Agreement or any exhibit attached hereto by facsimile transmission shall be
equally as effective as delivery of an executed hard copy of the same. Any party
delivering an executed counterpart of this Agreement or any exhibit attached
hereto by facsimile transmission shall also deliver an executed hard copy of the
same, but the failure by such party to deliver such executed hard copy shall not
affect the validity, enforceability or binding nature effect of this Agreement
or such exhibit.
8.12. GENDER NEUTRAL PRONOUNS. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the referenced person, persons, entity or entities
may require.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties to this Agreement has executed
or caused this Agreement to be executed as of the date first above written.
"PARENT"
XXXXXXX INTERNATIONAL, INC.,
a Utah corporation
By:/S/ XXXXXXX X. XXXXXXX
------------------------------------------
Xxxxxxx X. Xxxxxxx, President
"COMPANY"
QUEST MINING & MINERALS, LTD.
a Nevada corporation
By:/S/ XXXXXXX X. XXXXXXX
------------------------------------------
Xxxxxxx X. Xxxxxxx, President
"TARGET" "SELLING STOCKHOLDERS"
GWENCO, INC. Signatures Appear on Exhibit A
a Kentucky corporation
By:/S/ XXXXXX XXXXXXXX
Xxxxxx Xxxxxxxx, President
26
EXHIBIT A
SELLING STOCKHOLDERS
27
Signature of Selling Stockholder Target Shares
200
/S/ XXXXXX XXXXXXXX
Xxxxxx Xxxxxxxx
28
SCHEDULE 1.2.1
XXXXXXX INTERNATIONAL, INC.
SERIES B CONVERTIBLE PREFERRED STOCK
SUMMARY OF TERMS
ISSUER: Xxxxxxx International, Inc., a Utah corporation (the
"Company")
TYPE OF SECURITIES: 1,600,000 Shares of Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), initially
convertible into shares of common stock of the
Company ("Common Stock") on a one-for-one basis.
TERMS OF THE SERIES B PREFERRED STOCK
DIVIDENDS: The Series B Preferred Stock will participate
pro-rata, on an as-converted basis, with the Series A
Preferred Stock, in dividends paid on the Common
Stock.
LIQUIDATION PREFERENCE: In the event of any liquidation, dissolution or
winding up of the Company, the holders of the Series
B Preferred Stock shall be entitled to receive, in
preference to the holders of Common Stock, an amount
equal to $2.50 plus any declared but unpaid dividends
(the "Liquidation Preference").
The remaining assets will be distributed ratably
among the holders of Series B Preferred Stock, the
Series A Preferred Stock, and Common Stock on an
as-if-converted basis.
A merger, acquisition, sale or exclusive licensing of
substantially all of the assets of the Company in
which the then-existing shareholders of the Company
do not own a majority of the outstanding shares of
the capital stock of the surviving corporation shall
be deemed to be a liquidation.
AUTOMATIC CONVERSION: The Series B Preferred Stock shall be automatically
converted into Common Stock, at the then applicable
conversion price, in the event that, during any
period of fifteen (15) consecutive trading days
beginning after the closing, the average closing
price per share of the Company's Common Stock (or, if
after the Reorganization, the Public Company's Common
Stock) as reported on a national securities exchange,
the NASDAQ NMS or Small Cap Market, or the OTC
Bulletin Board, equals or exceeds $4.00 (subject to
anti-dilution, recapitalization, and reorganization
adjustments).
ANTI-DILUTION PROTECTION: The conversion price of the Series B Preferred Stock
will be subject to proportional adjustment for stock
splits, stock dividends, recapitalizations, and the
like.
REDEMPTION RIGHTS: None.
VOTING RIGHTS: The Series B Preferred Stock will vote together with
the Common Stock and not as a separate class. Each
share of Series B Preferred Stock shall have a number
of votes equal to the number of shares of Common
Stock then issuable upon the conversion of such share
of Series B Preferred Stock.
29
