AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("the Agreement"), dated as of
the July 28th, 2000 by and between Potomac Energy corporation, a Oklahoma
Corporation ("Potomac") and ▇▇▇▇▇▇▇ Coal, Inc a Utah Corporation ("▇▇▇▇▇▇▇")
and the shareholders of ▇▇▇▇▇▇▇ ("Shareholders"), who execute this Agreement
and the Investment Letter as set forth in Exhibit A of this Agreement, with
reference to the following:
A. Potomac is an Oklahoma Corporation. Potomac has authorized class
A common stock of 50 million shares, $0.001 par value, of which 18,727,243
shares are outstanding, and 0- shares of preferred stock, $0.00 par value, of
which 0- shares are outstanding.
B. Gayland is a Utah Corporation, ▇▇▇▇▇▇▇ has authorized class A
common stock of 100,000 shares, $0. par value, of which 100,000 shares are
outstanding.
C. The respective Boards of Directors of Potomac and ▇▇▇▇▇▇▇ have
deemed it advisable and in the best interests of Potomac and ▇▇▇▇▇▇▇ that
▇▇▇▇▇▇▇ be acquired by Potomac pursuant to the terms and conditions set forth
in this Agreement.
D. Potomac and ▇▇▇▇▇▇▇ propose to enter into this Agreement which
provides among other things that 100% of the outstanding shares of ▇▇▇▇▇▇▇ be
acquired by Potomac, in exchange for shares of Potomac and such additional
items all as more fully described in the Agreement.
E. The parties desire the transaction to qualify as a tax-free
reorganization under Section 368 (a)(1)(B) of the Internal Revenue Code of
1986, as amended.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
THE ACQUISITION
1.01 At the Closing, a total of 100,000 common shares, which
represents 100% of the outstanding shares of ▇▇▇▇▇▇▇, shall be acquired by
Potomac in exchange for 14,499,000 investment shares of Potomac which shall be
issued to ▇▇▇▇▇▇▇ shareholders as set forth on the signature page of this
Agreement.
1.02 At the Closing, the ▇▇▇▇▇▇▇ shareholders will deliver
certificates for the outstanding shares of ▇▇▇▇▇▇▇, duly endorsed so as to
make Potomac the sole holder thereof, free and clear of all claims and
encumbrances and Potomac shall deliver a transmittal letter directed to the
transfer agent of Potomac directing the issuance of shares to the shareholders
of ▇▇▇▇▇▇▇ as set forth on the signature page of this Agreement.
1.03 Following the reorganization, there will be a total of
33,226,243 shares, $0.001 par value, issued and outstanding in Potomac.
ARTICLE 2
THE CLOSING
1.01 The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place in the offices of Potomac Energy
Corporation ▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ at 11:00 a.m., on July 28,
2000 or at such other place or date and time as may be agreed to in writing by
the parties hereto.
ARTICLE 3
REPRESENTATION AND WARRANTIES OF
POTOMAC ENERGY CORPORATION
Potomac and its officers and directors hereby represent and warrant to
▇▇▇▇▇▇▇ as follows:
3.01 Potomac shall deliver to ▇▇▇▇▇▇▇, on or before Closing, each of
the following:
(a) Financial Statements. Audited financial statements of
Potomac including, but not limited to, balance sheets and profit and loss
statements as of March 31, 2000.
(b) Property. An accurate list and description of all property,
real or personal, owned by Potomac of a value equal to or greater than
$10,000.00. (Schedule B).
(c) Liens and Liabilities. A complete and accurate list of all
material liens, encumbrances, easements, security interests or similar
interests in or on any of the assets listed on Schedule A. (Schedule C). A
complete and accurate list of all debts, liabilities and obligations of
Potomac incurred or owing as of the date of this Agreement. (Schedule C.1).
(d) Leases and Contracts. A complete and accurate list
describing all material terms of each lease (whether of real or personal
property) and each contract, promissory note, mortgage, license, franchise, or
other written agreement to which Potomac is a party which involves or can
reasonably be expected to involve aggregate future payments or receipts by
Potomac (whether by the terms of such lease, contract, promissory note,
license, franchise or other written agreement or as a result of a guarantee of
the payment of or indemnity against the failure to pay same) of $1,000.00 or
more annually during the twelve-month period ended December 31,1999, or any
consecutive twelve-month period thereafter, except any of said instruments
which terminate or are cancelable without penalty during such twelve-month
period. (Schedule D).
(e) Loan Agreements. Complete and accurate copies of all loan
agreements and other documents with respect to obligations of Potomac for the
repayment of borrowed money. (Schedule E).
(f) Consents Required. A complete list of all agreements
wherein consent to the transaction herein contemplated is required to avoid a
default hereunder; or where notice of such transaction is required at or
subsequent to closing, or where consent to an acquisition, consolidation, or
sale of all or substantially all of the assets is required to avoid a default
thereunder. (Schedule F).
(g) Articles and Bylaws. Complete and accurate copies of the
Certificate and Articles of Incorporation and Bylaws of Potomac together with
all amendments thereto to the date hereof. (Schedule G).
(h) Shareholders. A complete list of all persons or entities
holding capital stock of Potomac or any rights to subscribe for, acquire, or
receive shares of the capital stock of Potomac (whether warrants, calls,
options, or conversion rights), including copies of all stock option plans
whether qualified or non qualified, and other similar agreements. (Schedule
H).
(i) Officers and Directors. A complete and current list of all
officers and Directors of Potomac. (Schedule I).
(j) Salary Schedule. A complete and accurate list (in all
material respects) of the names and the current salary rate for each present
employee of Potomac who received $10,000 or more in aggregate compensation
from Potomac whether in salary, bonus or otherwise, during the year 1999, or
who is presently scheduled to receive from Potomac a salary in excess of
$10,000 during the year December 1999, including in each case the amount of
compensation received or scheduled to be received, and a schedule of the
hourly rates of all other employees listed according to departments.
(Schedule J).
(k) Litigation. A complete and accurate list (in all material
respects) of all material civil, criminal, administrative, arbitration or
other such proceedings or investigations (including without limitations unfair
labor practice matters, labor organization activities, environmental matters
and civil rights violations) pending or, to the knowledge of Potomac
threatened, which may materially and adversely affect Potomac. (Schedule K).
(l) Tax Returns. Accurate copies of all Federal and State tax
returns for Potomac for the last fiscal year. (Schedule L).
(m) Agency Reports. Copies of all material reports or filings
(and a list of the categories of reports or filings made on a regular basis)
made by Potomac under ERISA, EEOC, FDA and all other governmental agencies
(federal, state or local) during the last fiscal year. (Schedule M).
(n) Banks. A true and complete list (in all material respects),
as of the date of this Agreement, showing (1) the name of each bank in which
Potomac has an account or safe deposit box, and (2) the names and addresses of
all signatories. (Schedule N).
(o) Jurisdictions Where Qualified. A list of all jurisdictions
wherein Potomac is qualified to do business and is in good standing.
(Schedule O).
(p) Subsidiaries. A complete list of all subsidiaries of
Potomac. (Schedule P). The term "Subsidiary" or "Subsidiaries" shall include
corporations, unincorporated associations, partnerships, joint ventures, or
similar entities in which Potomac has an interest, direct or indirect.
(q) Union Matters. An accurate list and description (in all
material respects) of all union contracts and collective bargaining agreements
of Potomac, if any. (Schedule Q).
(r) Employee and Consultant Contracts. A complete and accurate
list of all employee and consultant contracts which Potomac may have, other
than those listed in the schedule on Union Matters. (Schedule R).
(s) Employee Benefit Plans. Complete and accurate copies of all
salary, stock option, bonus, incentive compensation, deferred compensation,
profit sharing, retirement, pension, group insurance, disability, death
benefit or other benefit plans, trust agreements or arrangements of Potomac in
effect on the date hereof or to become effective after the date thereof,
together with copies of any determination letters issued by the Internal
Revenue Service with respect thereto. (Schedule S).
3.02 Organization, Standing and Power. Potomac is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Oklahoma with all requisite corporate power to own or lease its properties
and carry on its businesses as are now being conducted.
3.03 Qualification. Potomac is qualified and is licensed as a
foreign corporation.
3.04 Capitalization of Potomac. The authorized capital stock of
Potomac consists of 50,000,000 class A shares of Common Stock, $0.001 par
value, of which the only shares issued and outstanding are 18,727,243 issued
to shareholders listed on Schedule H, which shares were duly authorized,
validly issued and fully paid and non assessable. There are 0- preferred
shares currently outstanding. There are 0- preemptive rights with respect to
the Potomac stock.
3.05 Authority. The execution and delivery of this Agreement and
consummation of the transactions contemplated herein have been duly authorized
by all necessary corporate action, including but not limited to duly and
validly authorized action and approval by the Board of Directors, on the part
of Potomac. This Agreement constitutes the valid and binding obligation of
Potomac enforceable against it in accordance with its terms, subject to the
principles of equity applicable to the availability of the remedy of specific
performance. This Agreement has been duly executed by Potomac and the
execution and transactions contemplated by this Agreement shall not result in
any breach of any terms or provisions of Potomac's Certificate and Articles of
Incorporation or Bylaws or of any other agreement, court order or instrument
to which Potomac is a party or bound by.
3.06 Absence of Undisclosed Liabilities. Potomac has no material
liabilities of any nature, whether fixed, absolute, contingent or accrued,
which were not reflected on the financial statements set forth in Schedule A
nor otherwise disclosed in this Agreement or any of the Schedules or Exhibits
attached hereto.
3.07 Absence of Changes. Since March 31,1999, there has not been any
material adverse change in the condition (financial or other wise), assets,
liabilities, earnings or business of Potomac, except for changes resulting
from completion of those transactions described in Section 5.01.
3.08 Tax Matters. All taxes and other assessments and levies which
Potomac is required by law to withhold or to collect have been duly withheld
and collected, and have been paid over to the proper government authorities or
are held by Potomac in separate bank accounts for such payment or are
represented by depository receipts, and all such withholdings and collections
and all other payments due in connection therewith (including, without
limitation, employment taxes, both the employees' and employer's share) have
been paid over to the government or placed in a separate and segregated bank
account for such purpose. There are no known deficiencies in income taxes for
any periods and further, the representations and warranties as to the absence
of undisclosed liabilities contained in Section 3.06 includes any and all tax
liabilities of whatsoever kind or nature (including, without limitation, all
federal, state, local and foreign income, profit, franchise, sales, use and
property taxes) due or to become due, incurred in respect of or measured by
Potomac income or business prior to the Closing Date.
3.09 Options, Warrants, etc. Except as otherwise described in
Schedule H, there are no outstanding options, warrants, calls, commitments or
agreements of any character to which Potomac or its shareholders are a party
or by which Potomac or its shareholders are bound, or are a party, calling for
the issuance of shares of capital stock of Potomac or any securities
representing the right to purchase or otherwise receive any such capital stock
of Potomac.
3.10 Title to Assets. Except for liens set forth in Schedule C,
Potomac is the sole and unconditional owner of, with good and marketable title
to, all the assets listed in the schedules as owned by them and all other
property and assets are free and clear of all mortgages, liens, pledges,
charges or encumbrances of any nature whatsoever.
3.11 Agreements in Force and Effect. Except as set forth in
Schedules D and E, all material contracts, agreements, plans, promissory
notes, mortgages, leases, policies, licenses, valid and in full force and
effect on the date hereof, and Potomac has not breached any material provision
of, and is not in default in any material respect under the terms of, any such
contract, agreement, plan, promissory note, mortgage, lease, policy, license,
franchise or similar instrument which breach or default would have a material
adverse effect upon the business, operations or financial condition of
Potomac.
3.12 Legal Proceedings, Etc. Except as set forth in Schedule K,
there are no civil, criminal, administrative, arbitration or other such
proceedings or investigations pending or, to the knowledge of either Potomac
or the shareholders thereof, threatened, in which, individually or in the
aggregate, an adverse determination would materially and adversely affect the
assets, properties, business or income of Potomac. Potomac has substantially
complied with, and is not in default in any material respect under, any laws,
ordinances, requirements, regulations or orders applicable to its businesses.
3.13 Governmental Regulation. To the knowledge of Potomac and except
as set forth in Schedule K, Potomac is not in violation of or in default with
respect to any applicable law or any applicable rule, regulation, order, writ
or decree of any court or any governmental commission, board, bureau, agency
or instrumentality, or delinquent with respect to any report required to be
filed with any governmental commission, board, bureau, agency or
instrumentality which violation or default could have a material adverse
effect upon the business, operations or financial condition of Potomac.
3.14 Brokers and Finders. Potomac shall be solely responsible for
payment to any broker or finder retained by Potomac for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
herein.
3.15 Accuracy of Information. No representation or warranty by
Potomac contained in this Agreement and no statement contained in any
certificate or other instrument delivered or to be delivered to ▇▇▇▇▇▇▇
pursuant hereto or in connection with the transactions contemplated hereby
(including without limitation all Schedules and exhibits hereto) contains or
will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary in order to make the statements contained
herein or therein not misleading.
3.16 Subsidiaries. Potomac does have other subsidiaries or own
capital stock representing ten percent (10%) or more of the issued and
outstanding stock of any other corporation.
3.17 Consents. Except as listed in Schedule F, no consent or
approval of, or registration, qualification or filing with, any governmental
authority or other person is required to be obtained or accomplished by
Potomac or any shareholder thereof in connection with the consummation of the
transactions contemplated hereby.
3.18 Improper Payments. Neither Potomac, nor any person acting on
behalf of Potomac has made any payment or otherwise transmitted anything of
value, directly or indirectly, to (a) any official or any government or agency
or political subdivision thereof for the purpose of influencing any decision
affecting the business of Potomac (b) any customer, supplier of competitor of
Potomac or employee of such customer, supplier or competitor, for the purpose
of obtaining, retaining Potomac's existing business for Potomac or (c) any
political party or any candidate for elective political office nor has any
fund or other asset of Potomac been maintained that was not fully and
accurately recorded on the books of account of Potomac.
3.19 Copies of Documents. Potomac has made available for inspection
and copying by ▇▇▇▇▇▇▇ and its duly authorized representatives, and will
continue to do so at all times, true and correct copies of all documents which
it has filed with the Securities and Exchange Commission and all other
governmental agencies which are material to the terms and conditions contained
in this Agreement. Furthermore, all filings by Potomac with the Securities
and Exchange Commission, and all other governmental agencies, including but
not limited to the Internal Revenue Service, have contained information which
is true and correct, to the best knowledge of the Board of Directors of
Potomac, in all material respects and did not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements made therein not misleading or which could have any material
adverse effect upon the financial condition or operations of Potomac or
adversely effect the objectives of this Agreement with respect to ▇▇▇▇▇▇▇
including, but not limited to, the issuance and subsequent trading of the
shares of common stock of Potomac to be received hereby, subject to compliance
by the shareholders of ▇▇▇▇▇▇▇ with applicable law. Potomac has filed with
the Securities and Exchange Commission and each state securities regulator, or
a timely basis, all statements, applications, reports and filings required
under the Securities Act of 1933 and the Exchange Act of 1934, as amended.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
▇▇▇▇▇▇▇ COAL, INC.
▇▇▇▇▇▇▇ and its president hereby represent and warrant to Potomac as
follows:
4.01 ▇▇▇▇▇▇▇ shall deliver to Potomac, on or before Closing, the
following:
(a) Financial Statements. Audited financial statements of
▇▇▇▇▇▇▇ as of March 31, 2000. (Schedule AA).
(b) Property. An accurate list and description of all property,
real or personal, owned by ▇▇▇▇▇▇▇ of a value equal to or greater than
$1,000.00. (Schedule BB).
(c) Liens and Liabilities. A complete and accurate list of all
material liens, encumbrances, easements, security interests or similar
interests in or on any of the assets listed on Schedule AA. (Schedule CC). A
complete and accurate list of all debts, liabilities and obligations of
▇▇▇▇▇▇▇ incurred or owing as of the date of this Agreement. (Schedule CC.1).
(d) Leases and Contracts. A complete and accurate list
describing all material terms of each lease (whether of real or personal
property) and each contract, promissory note, mortgage, license, franchise, or
other written agreement to which ▇▇▇▇▇▇▇ is a party which involves or can
reasonably be expected to involve aggregate future payments or receipts by
▇▇▇▇▇▇▇ (whether by the terms of such lease, contract, promissory note,
license, franchise or other written agreement or as a result of a guarantee of
the payment of or indemnity against the failure to pay same) of $1,000.00 or
more annually during the twelve-month period ended December 31, 1999, or any
consecutive twelve-month period thereafter, except any of said instruments
which terminate or are cancelable without penalty during such twelve-month
period. (Schedule DD).
(e) Loan Agreements. Complete and accurate copies of all loan
agreements and other documents with respect to obligations of ▇▇▇▇▇▇▇ for the
repayment of borrowed money. (Schedule EE).
(f) Consents Required. A complete list of all agreements
wherein consent to the transaction herein contemplated is required to avoid a
default hereunder; or where notice of such transaction is required at or
subsequent to closing, or where consent to an acquisition, consolidation, or
sale of all or substantially all of the assets is required to avoid a default
thereunder. (Schedule FF).
(g) Articles and Bylaws. Complete and accurate copies of the
Certificate and Articles of Incorporation and Bylaws of ▇▇▇▇▇▇▇ together with
all amendments thereto to the date hereof. (Schedule GG).
(h) Shareholders. A complete list of all persons or entities
holding capital stock of ▇▇▇▇▇▇▇ or any rights to subscribe for, acquire, or
receive shares of the capital stock of ▇▇▇▇▇▇▇ (whether warrants, calls,
options, or conversion rights), including copies of all stock option plans
whether qualified or non qualified, and other similar agreements. (Schedule
HH).
(i). Officers and Directors. A complete and current list of all
officers and Directors of ▇▇▇▇▇▇▇. (Schedule II).
(j) Salary Schedule. A complete and accurate list (in all
material respects) of the names and the current salary rate for each present
employee of ▇▇▇▇▇▇▇ who received $10,000 or more in aggregate compensation
from ▇▇▇▇▇▇▇ whether in salary, bonus or otherwise, during the year 1999, or
who is presently scheduled to receive from ▇▇▇▇▇▇▇ a salary in excess of
$10,000 during the year ending December 31, 1999, including in each case the
amount of compensation received or scheduled to be received, and a schedule of
the hourly rates of all other employees listed according to departments.
(Schedule JJ).
(k) Litigation. A complete and accurate list (in all material
respects) of all material civil, criminal, administrative, arbitration or
other such proceedings or investigations (including without limitations unfair
labor practice matters, labor organization activities, environmental matters
and civil rights violations) pending or, to the knowledge of ▇▇▇▇▇▇▇
threatened, which may materially and adversely affect ▇▇▇▇▇▇▇. (Schedule KK).
(l) Tax Returns. Accurate copies of all Federal and State tax
returns for ▇▇▇▇▇▇▇, if any. (Schedule LL).
(m) Agency Reports. Copies of all material reports or filings
(and a list of the categories of reports or filings made on a regular basis)
made by ▇▇▇▇▇▇▇ under ERISA, EEOC, FDA and all other governmental agencies
(federal, state or local). (Schedule MM).
(n) Banks. A true and complete list (in all material respects),
as of the date of this Agreement, showing (1) the name of each bank in which
▇▇▇▇▇▇▇ has an account or safe deposit box, and (2) the names and addresses of
all signatories. (Schedule NN).
(o) Jurisdictions Where Qualified. A list of all jurisdictions
wherein ▇▇▇▇▇▇▇ is qualified to do business and is in good standing.
(Schedule OO).
(p) Subsidiaries. A complete list of all subsidiaries of
▇▇▇▇▇▇▇. (Schedule PP). The term "Subsidiary" or "Subsidiaries" shall
include corporations, unincorporated associations, partnerships, joint
ventures, or similar entities in which ▇▇▇▇▇▇▇ has an interest, direct or
indirect.
(q) Union Matters. An accurate list and description (in all
material respects) of all union contracts and collective bargaining agreements
of ▇▇▇▇▇▇▇, if any. (Schedule QQ).
(r) Employee and Consultant Contracts. A complete and accurate
list of all employee and consultant contracts which ▇▇▇▇▇▇▇ may have, other
than those listed in the schedule on Union Matters. (Schedule RR).
(s) Employee Benefit Plans. Complete and accurate copies of all
salary, stock option, bonus, incentive compensation, deferred compensation,
profit sharing, retirement, pension, group insurance, disability, death
benefit or other benefit plans, trust agreements or arrangements of ▇▇▇▇▇▇▇ in
effect on the date hereof or to become effective after the date thereof,
together with copies of any determination letters issued by the Internal
Revenue Service with respect thereto. (Schedule SS).
(t) Insurance Policies. A complete and accurate list (in all
material respects) and description of all material insurance policies naming
▇▇▇▇▇▇▇ as an insured or beneficiary or as a loss payable payee or for which
▇▇▇▇▇▇▇ has paid all or part of the premium in force on the date hereof,
specifying any notice or other information possessed by ▇▇▇▇▇▇▇ regarding
possible claims thereunder, cancellation thereof or premium increases thereon,
including any policies now in effect naming ▇▇▇▇▇▇▇ as beneficiary covering
the business activities of ▇▇▇▇▇▇▇. (Schedule TT).
(u) Licenses and Permits. A complete list of all licenses,
permits and other authorizations of ▇▇▇▇▇▇▇. (Schedule VV).
4.02 Organization, Standing and Power. ▇▇▇▇▇▇▇ is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Utah with all requisite corporate power to own or lease its properties and
carry on its businesses as is now being conducted.
4.03 Qualification. ▇▇▇▇▇▇▇ is not qualified and is not licensed as
a foreign corporation.
4.04 Capitalization of ▇▇▇▇▇▇▇. The authorized capital stock of
▇▇▇▇▇▇▇ consists of 100,000 class A shares of Common Stock, no par value,
which shares are issued to shareholders listed on Schedule HH, which shares
were duly authorized, validly issued and fully paid and non assessable. There
are no preemptive rights with respect to the ▇▇▇▇▇▇▇ stock.
4.05 Authority. The execution and delivery of this Agreement and
consummation of the transactions contemplated herein have been duly authorized
by all necessary corporate action, including but not limited to duly and
validly authorized action and approval by the Board of Directors, on the part
of ▇▇▇▇▇▇▇. This Agreement constitutes the valid and binding obligation of
▇▇▇▇▇▇▇ enforceable against it in availability of the remedy of specific
performance. This Agreement has been duly executed by ▇▇▇▇▇▇▇ and the
execution and transactions contemplated by this Agreement shall not result in
any breach of any terms or provisions of Gayland's Certificate and Articles of
Incorporation or Bylaws or of any other agreement, court order or instrument
to which ▇▇▇▇▇▇▇ is a party or bound by.
4.06 Absence of Undisclosed Liabilities. ▇▇▇▇▇▇▇ has no material
liabilities of any nature, whether fixed, absolute, contingent or accrued,
which were not reflected on the financial statements set forth in Schedule AA
nor otherwise disclosed in this Agreement or any of the Schedules or Exhibits
attached hereto.
4.07 Absence of Changes. Since March 31, 2000, there has not been
any material adverse change in the condition (financial or other wise),
assets, liabilities, earnings or business of ▇▇▇▇▇▇▇, except for changes
resulting from completion of those transactions described in Section 5.01.
4.08 Tax Matters. All taxes and other assessments and levies which
▇▇▇▇▇▇▇ is required by law to withhold or to collect have been duly withheld
and collected, and have been paid over to the proper government authorities or
are held by ▇▇▇▇▇▇▇ in separate bank accounts for such payment or are
represented by depository receipts, and all such withholdings and collections
and all other payments due in connection therewith (including, without
limitation, employment taxes, both the employees' and employer's share) have
been paid over to the government or placed in a separate and segregated bank
account for such purpose. There are no known deficiencies in income taxes for
any periods and further, the representations and warranties as to the absence
of undisclosed liabilities contained in Section 4.06 includes any and all tax
liabilities of whatsoever kind or nature (including, without limitation, all
federal, state, local and foreign income, profit, franchise, sales, use and
property taxes) due or to become due, incurred in respect of or measured by
▇▇▇▇▇▇▇ income or business prior to the Closing Date.
4.09 Options, Warrants, etc. Except as otherwise described in
Schedule HH, there are no outstanding options, warrants, calls, commitments or
agreements of any character to which ▇▇▇▇▇▇▇ or its shareholders are a party
or by which ▇▇▇▇▇▇▇ or its shareholders are bound, or are a party, calling for
the issuance of shares of capital stock of ▇▇▇▇▇▇▇ or any securities
representing the right to purchase or otherwise receive any such capital stock
of ▇▇▇▇▇▇▇.
4.10 Title to Assets. Except for liens set forth in Schedule CC,
▇▇▇▇▇▇▇ is the sole and unconditional owner of, with good and marketable title
to, all the assets listed in the schedules as owned by them and all other
property and assets are free and clear of all mortgages, liens, pledges,
charges or encumbrances of any nature whatsoever.
4.11 Agreements in Force and Effect. Except as set forth in
Schedules DD and EE, all material contracts, agreements, plans, promissory
notes, mortgages, leases, policies, licenses, franchises or similar
instruments to which ▇▇▇▇▇▇▇ is a party are valid and in full force and effect
on the date hereof, and ▇▇▇▇▇▇▇ has not breached any material provision of,
and is not in default in any material respect under the terms of, any such
contract, agreement, plan, promissory note, mortgage, lease, policy, license,
franchise or similar instrument which breach or default would have a material
adverse effect upon the business, operations or financial condition of
▇▇▇▇▇▇▇.
4.12 Legal Proceedings, Etc. Except as set forth in Schedule KK,
there are no civil, criminal, administrative, arbitration or other such
proceedings or investigations pending or, to the knowledge of either ▇▇▇▇▇▇▇
or the shareholders thereof, threatened, in which, individually or in the
aggregate, an adverse determination would materially and adversely affect the
▇▇▇▇▇▇▇, properties, business or income of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ has substantially
complied with, and is not in default in any material respect under, any laws,
ordinances, requirements, regulations or orders applicable to its businesses.
4.13 Governmental Regulation. To the knowledge of ▇▇▇▇▇▇▇ and except
as set forth in Schedule KK, ▇▇▇▇▇▇▇ is not in violation of or in default with
respect to any applicable law or any applicable rule, regulation, order, writ
or decree of any court or any governmental commission, board, bureau, agency
or instrumentality, or delinquent with respect to any report required to be
filed with any governmental commission, board, bureau, agency or
instrumentality which violation or default could have a material adverse
effect upon the business, operations or financial condition of ▇▇▇▇▇▇▇.
4.14 Brokers and Finders. ▇▇▇▇▇▇▇ shall be solely responsible for
payment to any broker or finder retained by ▇▇▇▇▇▇▇ for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
herein.
4.15 Accuracy of Information. No representation or warranty by
▇▇▇▇▇▇▇ contained in this Agreement and no statement contained in any
certificate or other instrument delivered or to be delivered to Potomac
pursuant hereto or in connection with the transactions contemplated hereby
(including without limitation all Schedules and exhibits hereto) contains or
will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary in order to make the statements contained
herein or therein not misleading. ▇▇▇▇▇▇▇ and its officers and directors make
no representation or warranty as to the value of the Steam Power Plant
contained in the Appraisal provided by ▇▇▇▇▇▇▇ and is relying exclusively on
the Appraisal Reports of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ and others, which have been
furnished to Potomac.
4.16 Subsidiaries. Except as listed in Schedule PP, ▇▇▇▇▇▇▇ does not
have any other subsidiaries or own capital stock representing ten percent
(10%) or more of the issued and outstanding stock of any other corporation.
4.17 Consents. Except as listed in Schedule FF, no consent or
approval of, or registration, qualification or filing with, any governmental
authority or other person is required to be obtained or accomplished by
▇▇▇▇▇▇▇ or any shareholder thereof in connection with the consummation of the
transactions contemplated hereby.
4.18 Improper Payments. No person acting on behalf of ▇▇▇▇▇▇▇ has
made any payment or otherwise transmitted anything of value, directly or
indirectly, to (a) any official or any government or agency or political
subdivision thereof for the purpose of influencing any decision affecting the
business of ▇▇▇▇▇▇▇ (b) any customer, supplier of competitor of ▇▇▇▇▇▇▇, or
employee of such customer, supplier or competitor, for the purposes of
obtaining, retaining or Potomac's business for ▇▇▇▇▇▇▇, or (c) any political
party or any candidate for elective political office nor has any fund or other
asset of ▇▇▇▇▇▇▇ been maintained that was not fully and accurately recorded on
the books of account of ▇▇▇▇▇▇▇.
4.19 Copies of Documents. ▇▇▇▇▇▇▇ has made available for inspection
and copying by Potomac and its duly authorized representatives, and will
continue to do so at all times, true and correct copies of all documents which
it has filed with governmental agencies which are material to the terms and
conditions contained in this Agreement. Furthermore, all filings by ▇▇▇▇▇▇▇
with governmental agencies, including but not limited to the Internal Revenue
Service, have contained information which is true and correct in all material
respects and did not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements made therein not
misleading or which could have any material adverse effect upon the financial
condition or operations of ▇▇▇▇▇▇▇ or adversely effect the objectives of this
Agreement.
4.20 Investment Intent of Shareholders. Each shareholder of ▇▇▇▇▇▇▇
represents and warrants to Potomac that the shares of ▇▇▇▇▇▇▇ being acquired
pursuant to this Agreement are being acquired for his or her own account and
for investment and not with a view to the public resale or distribution of
such shares and further acknowledges that the shares being issued have not
been registered under the Securities Act and are "restricted securities" as
that term is defined in Rule 144 promulgated under the Securities Act and must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO THE
EFFECTIVE TIME OF THE ACQUISITION
5.01 Conduct and Transactions of Potomac. During the period from the
date hereof to the date of Closing, Potomac shall:
(a) Conduct its operations in the ordinary course of business,
including but not limited to, paying all obligations as they mature, complying
with all applicable tax laws, filing all tax returns required to be filed and
paying all taxes due;
(b) Maintain its records and books of account in a manner that
fairly and correctly reflect its income, expenses, assets and liabilities.
Potomac shall not during such period, except in the ordinary course of
business, without the prior written consent of ▇▇▇▇▇▇▇:
(a) Sell, dispose of or encumber any of its properties or assets
except for payment of brokers or finders fees;
(b) Declare or pay any dividends on shares of its capital stock
or make any other distribution of assets to the holders thereof;
(c) Issue, reissue or sell, or issue options or rights to
subscribe to, or enter into any contract or commitment to issue, reissue or
sell, any shares of its capital stock or acquire or agree to acquire any
shares of its capital stock;
(d) Except as otherwise contemplated and required by this
Agreement, amend its Articles of Incorporation or merge or consolidate with or
into any other corporation or sell all or substantially all of its assets or
change in any manner the rights of its capital stock or other securities;
(e) Pay or incur any obligation or liability, Potomac or
contingent more than $10,000;
(f) Incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise become responsible for obligations of any
other party, or make loans or advances to any other party;
(g) Make any material change in its insurance coverage:
(h) Increase in any manner the compensation, direct or indirect,
of any of its officers or executive employees; except in accordance with
existing employment contracts;
(i) Enter into any agreement or make any commitment to any labor
union or organization;
(j) Make any capital expenditures.
5.02 Conduct and Transactions of ▇▇▇▇▇▇▇. During the period from the
date hereof to the date of Closing, ▇▇▇▇▇▇▇ shall:
(a) Obtain an investment letter from each shareholder of ▇▇▇▇▇▇▇
in a form substantially like that attached hereto as Exhibit A.
(b) Conduct the operations of ▇▇▇▇▇▇▇ in the ordinary course of
business.
▇▇▇▇▇▇▇ shall not during such period, except in the ordinary course of
business, without the prior written consent of Potomac:
(a) Sell, dispose of or encumber any of the properties or assets
of ▇▇▇▇▇▇▇;
(b) Declare or pay any dividends on shares of its capital stock
or make any other distribution of assets to the holders thereof;
(c) Issue, reissue or sell, or issue options or rights to
subscribe to, or enter into any contract or commitment to issue, reissue or
sell, any shares of its capital stock or acquire or agree to acquire any
shares of its capital stock;
(d) Except as otherwise contemplated and required by this
Agreement, amend its Articles of Incorporation or merge or consolidate with or
into any other corporation or sell all or substantially all of its assets or
change in any manner the rights of its capital stock or other securities;
(e) Pay or incur any obligation or liability, direct or
contingent;
(f) Incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise become responsible for obligations of any
other party, or make loans or advances to any other party;
(g) Make any material change in its insurance coverage:
(h) Increase in any manner the compensation, direct or indirect,
of any of its officers or executive employees; except in accordance with
existing employment contracts;
(i) Enter into any agreement or make any commitment to any labor
union or organization;
(j) Make any material capital expenditures.
(k) Allow any of the foregoing actions to be taken by any
subsidiary of ▇▇▇▇▇▇▇.
ARTICLE 6
RIGHTS OF INSPECTION
6.01 During the period from the date of this Agreement to the date of
Closing of the acquisition, Potomac and ▇▇▇▇▇▇▇ agree to use their best
efforts to give the other party, including its representatives and agents,
full access to the premises, books and records of each of the entities, and to
furnish the other with such financial and operating data and other information
including, but not limited to, copies of all legal documents and instruments
referred to on any schedule or exhibit hereto, with respect to the business
and properties of Potomac or ▇▇▇▇▇▇▇, as the case may be, as the other shall
from time to time request; provided, however, if there are any such
investigations: (1) they shall be conducted in such manner as not to
unreasonably interfere with the operation of the business of the other parties
and (2) such right of inspection shall not affect in any way whatsoever any of
the representations or warranties given by the respective parties hereunder.
In the event of termination of this Agreement, Potomac and ▇▇▇▇▇▇▇ will each
return to the other all documents, work papers and other materials obtained
from the other party in connection with the transactions contemplated hereby,
and will take such other steps necessary to protect the confidentiality of
such material.
ARTICLE 7
CONDITIONS TO CLOSING
7.01 Conditions to Obligations of ▇▇▇▇▇▇▇. The obligation of ▇▇▇▇▇▇▇
to perform this Agreement is subject to Closing unless waived in writing by
▇▇▇▇▇▇▇.
(a) Representations and Warranties. There shall be no
information disclosed in the schedules delivered by Potomac which in the
opinion of ▇▇▇▇▇▇▇ would materially adversely affect the proposed transaction
and intent of the parties as set forth in this Agreement. The representations
and warranties of Potomac set forth in Article 3 hereof shall be true and
correct in all material respects as of the date of this Agreement and as of
the Closing as though made on and as of the Closing, except as otherwise
permitted by this Agreement.
(b) Performance of Obligations. Potomac shall have in all
material respects performed all agreements required to be performed by it
under this Agreement and shall have performed in all material respects any
actions contemplated by this Agreement prior to or on the Closing and Potomac
shall have complied in all material respects with the course of conduct
required by this Agreement.
(c) Corporate Action. Minutes, certified copies of corporate
resolutions and/or other documentary evidence satisfactory to counsel for
▇▇▇▇▇▇▇ that Potomac has submitted this Agreement and any other documents
required hereby to such parties for approval as provided by applicable law.
(d) Consents. Execution of this Agreement by the shareholders
of ▇▇▇▇▇▇▇ and any consents necessary for or approval of any party listed on
any Schedule delivered by Potomac whose consent or approval is required
pursuant thereto shall have been obtained.
(e) Financial Statements. ▇▇▇▇▇▇▇ shall have been furnished
with financial statements of Potomac including, but not limited to, balance
sheets and profit and loss statements as of March 31, 2000. Such financial
statements shall have been prepared in conformity with generally accepted
accounting principles on a basis consistent with those of prior periods and
fairly present the financial position of Potomac as of March 31, 2000.
(f) Statutory Requirements. All statutory requirements for the
valid consummation by Potomac of the transactions contemplated by this
Agreement shall have been fulfilled.
(g) Governmental Approval. All authorizations, consents,
approvals, permits and orders of all federal and state governmental agencies
required to be obtained by Potomac for consummation of the transactions
contemplated by this Agreement shall have been obtained.
(h) Employment Agreements. Existing Potomac employment
agreements will have been delivered to Counsel for ▇▇▇▇▇▇▇.
(i) Changes in Financial Condition of Potomac. There shall not
have occurred any material adverse change in the financial condition or in the
operations of the business of Potomac, except expenditures in furtherance of
this Agreement.
(j) Absence of Pending Litigation. Potomac is not engaged in or
threatened with any suit, action, or legal, administrative or other
proceedings or governmental investigations pertaining to this Agreement or the
consummation of the transactions contemplated hereunder.
(k) Authorization for Issuance of Stock. ▇▇▇▇▇▇▇ shall have
received in form and substance satisfactory to Counsel for ▇▇▇▇▇▇▇ a letter
instructing and authorizing the Registrar and Transfer Agent for the shares of
common stock of Potomac to issue stock certificates representing ownership of
Potomac common stock to ▇▇▇▇▇▇▇ in accordance with the terms of this Agreement
and a letter from said Registrar and Transfer Agent acknowledging receipt of
the letter of instruction and stating to the effect that the Registrar and
Transfer Agent holds adequate supplies of stock certificates necessary to
comply with the letter of instruction and the terms and conditions of this
Agreement.
7.02 Conditions to Obligations of Potomac. The obligation of Potomac
to perform this Agreement is subject to the satisfaction of the following
conditions on or before the Closing unless waived in writing by Potomac.
(a) Representations and Warranties. There shall be no
information disclosed in the schedules delivered by ▇▇▇▇▇▇▇, which in the
opinion of Potomac would materially adversely affect the proposed transaction
and intent of the parties as set forth in this Agreement. The representations
and warranties of ▇▇▇▇▇▇▇ set forth in Article 4 hereof shall be true and
correct in all material respects as of the date of this Agreement and as of
the Closing as though made on and as of the Closing, except as otherwise
permitted by this Agreement.
(b) Performance of Obligations. ▇▇▇▇▇▇▇ shall have in all
material respects performed all agreements required to be performed by it
under this Agreement and shall have performed in all material respects any
actions contemplated by this Agreement prior to or on the Closing and ▇▇▇▇▇▇▇
shall have complied in all respects with the course of conduct required by
this Agreement.
(c) Corporate Action. Minutes, certified copies of corporate
resolutions and/or other documentary evidence satisfactory to Counsel for
Potomac that ▇▇▇▇▇▇▇ has submitted this Agreement and any other documents
required hereby to such parties for approval as provided by applicable law.
(d) Consents. Any consents necessary for or approval of any
party listed on any Schedule delivered by ▇▇▇▇▇▇▇, whose consent or approval
is required pursuant thereto, shall have been obtained.
(e) Financial Statements. Potomac shall have been furnished
with an internal unaudited financial statement of ▇▇▇▇▇▇▇ for the period ended
March 31,2000. Such financial statements shall fairly present the financial
position of ▇▇▇▇▇▇▇ as of March 31, 2000.
(f) Statutory Requirements. All statutory requirements for the
valid consummation by ▇▇▇▇▇▇▇ of the transactions contemplated by this
Agreement shall have been fulfilled.
(g) Governmental Approval. All authorizations, consents,
approvals, permits and orders of all federal and state governmental agencies
required to be obtained by ▇▇▇▇▇▇▇ for consummation of the transactions
contemplated by this Agreement shall have been obtained.
(h) Employment Agreements. Existing ▇▇▇▇▇▇▇ employment
agreements will have been delivered to Counsel for Potomac.
(i) Changes in Financial Condition of Potomac. There shall not
have occurred any material adverse change in the financial condition or in the
operations of the business of Potomac, except expenditures in furtherance of
this Agreement.
(j) Absence of Pending Litigation. Potomac is not engaged in or
threatened with any suit, action, or legal, administrative or other
proceedings or governmental investigations pertaining to this Agreement or the
consummation of the transactions contemplated hereunder.
ARTICLE 8
MATTERS SUBSEQUENT TO CLOSING
8.01 Covenant of Further Assurance. The parties covenant and agree
that they shall, from time to time, execute and deliver or cause to be
executed and delivered all such further instruments of conveyance, transfer,
assignments, receipts and other instruments, and shall take or cause to be
taken such further or other actions as the other party or parties to this
Agreement may reasonably deem necessary in order to carry out the purposes and
intent of this Agreement.
ARTICLE 9
NATURE AND SURVIVAL OF REPRESENTATIONS
9.01 All statements contained in any written certificate, schedule,
exhibit or other written instrument delivered by Potomac or ▇▇▇▇▇▇▇ pursuant
hereto, or otherwise adopted by Potomac, by its written approval, or by
▇▇▇▇▇▇▇ by its written approval, or in connection with the transactions
contemplated hereby, shall be deemed representations and warranties by Potomac
or ▇▇▇▇▇▇▇ as the case may be. All representations, warranties and agreements
made by either party shall survive for the period of the applicable statute of
limitations and until the discovery of any claim, loss, liability or other
matter based on fraud, if longer.
ARTICLE 10
TERMINATION OF AGREEMENT AND ABANDONMENT OF REORGANIZATION
10.1 Termination. Anything herein to the contrary notwithstanding,
this Agreement and any agreement executed as required hereunder and the
acquisition contemplated hereby may be terminated at any time before the
closing date as follows:
(a) By mutual written consent of the Boards of Directors of
Potomac and ▇▇▇▇▇▇▇.
(b) By the Board of Directors of Potomac if any of the
conditions set forth in Section 7.02 shall not have been satisfied.
(c) By the Board of Directors of ▇▇▇▇▇▇▇ if any of the
conditions set forth in Section 7.01 shall not have been satisfied.
10.02 Terminations of Obligations and Waiver of Conditions; Payment of
Expenses. In the event this Agreement and the acquisition are terminated and
abandoned pursuant to this Article 10 hereof, this Agreement shall become void
and of no force and effect and there shall be no liability on the part of any
of the parties hereto, or their respective directors, officers, shareholders
or controlling persons to each other. Each party hereto will pay all costs
and expenses incident to its negotiation and preparation of this Agreement and
any of the documents evidencing the transactions contemplated hereby,
including fees, expenses and disbursements of counsel.
ARTICLE 11
EXCHANGE OF SHARES: FRACTIONAL SHARES
11.01 Exchange of Shares. At the Closing, Potomac shall issue a
letter to the transfer agent of Potomac with a copy of the resolution of the
Board of Directors of Potomac authorizing the issuance of Potomac shares as
set forth on the signature page of this Agreement.
11.02 Restrictions on Shares Issued to ▇▇▇▇▇▇▇. Due to the fact that
▇▇▇▇▇▇▇ will receive shares of Potomac common stock in connection with the
acquisition which have not been registered under the 1933 Act by virtue of the
exemption provided in Section 4(2) of such Act, those shares of Potomac will
contain the following legend:
The shares represented by this certificate have
not been registered under the Securities Act of 1933.
The shares have been acquired for investment and may
not be sold or offered for sale in the absence of an
effective Registration Statement for the shares under
the Securities Act of 1933 or an opinion of counsel
to the Corporation that such registration is required.
ARTICLE 12
MISCELLANEOUS
12.01 Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of Utah excluding the conflicts of
laws.
12.02 Notices. All notices necessary or appropriate under this
Agreement shall be effective when personally delivered or deposited in the
United States mail, postage prepaid, certified or registered, return receipt
requested, and addressed to the parties last known address which addresses are
currently as follows:
If to "Potomac"
Potomac Energy Corporation
▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
If to "▇▇▇▇▇▇▇"
▇▇▇▇▇▇▇ Coal, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
12.03 Amendments and Waiver. The parties hereby may, by mutual agreement
in writing signed by each party, amend this Agreement in any respect. Any
term or provision of this Agreement may be waived in writing at any time by
the party which is entitled to the benefits thereof, such waiver right shall
include, but not be limited to, the right of either party to:
(a) Extent the time for the performance of any of the
obligations of the other;
(b) Waive any inaccuracies of representations by the other
contained in this Agreement or in any document delivered pursuant hereto:
(c) Waive compliance by the other with any of the covenants
contained in this Agreement, and performance of any obligations by the other;
and
(d) Waive the fulfillment of any condition that is precedent to
the performance by the party so waiving of any of its obligations under this
Agreement. Any writing on the part of a party relating to such amendment,
extension or waiver as provided in this Section 12.03 shall be valid if
authorized or ratified by the Board of Directors of such Party.
12.04 Remedies not Exclusive. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or
in equity or by statute or otherwise. The election of any one or more
remedies by Potomac or ▇▇▇▇▇▇▇ shall not constitute a waiver of the right to
pursue other available remedies.
12.05 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.06 Benefit. This Agreement shall be binding upon, and inure to
the benefit of, the respective successors and assigns of Potomac and ▇▇▇▇▇▇▇.
12.07 Entire Agreement. This Agreement and the Schedules and
Exhibits attached hereto, represent the entire agreement of the undersigned
regarding the subject matter hereof, and supersede all prior written or oral
understandings or agreements between the parties.
12.08 Each Party to Bear its Own Expense. Potomac and ▇▇▇▇▇▇▇ shall
each bear their own respective expenses incurred in connection with the
negotiation, execution, closing, and performance of this Agreement, including
counsel fees and accountant fees.
12.09 Captions and Section Headings. Captions and section headings
used herein are for convenience only and shall not control or affect the
meaning or construction of any provisions of this Agreement.
Executed as of the date first written above.
Potomac Energy Corporation ▇▇▇▇▇▇▇ Coal, Inc.
/s/ ▇. ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
By: _________________________ By: __________________________
▇. ▇. ▇▇▇▇▇, President ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇. President
7/28/00 7/28/00
Dated: _______________________ Dated: ________________________