STOCK PURCHASE AGREEMENT AMONG OMNIRELIANT HOLDINGS, INC. ABAZIAS.COM, INC. AND ABAZIAS, INC. Dated December 3, 2008
AMONG
OMNIRELIANT
HOLDINGS, INC.
▇▇▇▇▇▇▇.▇▇▇,
INC.
AND
ABAZIAS,
INC.
Dated
December 3, 2008
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TABLE OF
CONTENTS
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Section
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ARTICLE
I SALE AND PURCHASE OF SHARES
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5
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ARTICLE
II PURCHASE PRICE AND PAYMENT
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5
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5
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ARTICLE
III CLOSING AND TERMINATION
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6
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6
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7
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7
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ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF THE SELLER
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ARTICLE
V REPRESENTATIONS AND WARRANTIES OF PURCHASER
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ARTICLE
VI COVENANTS
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ARTICLE
VII CONDITIONS TO CLOSING
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ARTICLE
VIII DOCUMENTS TO BE DELIVERED
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ARTICLE
IX INDEMNIFICATION
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ARTICLE
X MISCELLANEOUS
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THIS
STOCK PURCHASE AGREEMENT is made as of December 3, 2008 (the “Agreement”), among
OMNIRELIANT HOLDINGS, INC., a corporation existing under the laws of Nevada (the
“Purchaser”), ▇▇▇▇▇▇▇.▇▇▇, Inc., a Nevada corporation (the “Company”), and
ABAZIAS, INC., a Nevada corporation (the “Seller”).
W I T N E S S E T
H:
WHEREAS,
the Seller is the Parent, as defined below, of the Company and owns one thousand
(1000) shares of common stock, $0.001 par value per share (the “Shares”), of the
Company, which Shares constitute all of the issued and outstanding shares of
capital stock of the Company; and
WHEREAS,
Seller desires to sell to Purchaser, and the Purchaser desires to purchase from
Seller, the Shares for the purchase price and upon the terms and conditions
hereinafter set forth;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE I
SALE AND
PURCHASE OF SHARES
1.1
Sale and Purchase of
Shares.
Upon the
terms and subject to the conditions contained herein, on the Closing Date Seller
shall sell, assign, transfer, convey and deliver to the Purchaser, and the
Purchaser shall purchase from Seller, all Shares of the Company owned by Seller
set forth opposite such Seller's name on Schedule 1.1 attached
hereto.
ARTICLE
II
PURCHASE PRICE AND
PAYMENT
2.1 Amount of
Purchase Price.
The purchase price for the Shares
(the “Purchase Price”) shall be (i) a loan in the amount of
Five Hundred Thousand Dollars ($500,000) (the “Loan”) and; (ii) issuance of thirteen
million and one thousand (13,001,000) shares of Purchaser’s Series E zero coupon
convertible preferred stock (the “Preferred Stock”), subject to adjustment as set forth
herein. The rights and privileges of the Preferred Stock are set forth on
Exhibit A.
2.2
Payment of
Purchase Price.
The Purchaser shall pay the Purchase Price to the Seller (the “Closing Payment”), as follows:
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(i) The
Loan, in the form of the Note attached hereto as Exhibit B, made on August 12,
2008 (the “Cash Purchase Price”).
(ii) On
the Closing (as defined below), the Purchaser shall issue the Preferred Stock to
the Seller as described in Section 2.3 below.
2.3 Distribution of Preferred Stock.
Subject to the terms and
conditions of this
Agreement, at or following the Closing, the following shall
occur:
(a) Pro-Rata
Right to Preferred Stock.
Each stockholder of common stock, par value $0.001 per share of the Parent, (the
“Parent Common Stock”) issued and outstanding on the Record Date shall receive
the following: a number of shares of Preferred Stock equal to (i) the total
shares of Preferred Stock multiplied by (ii) such stockholder’s pro rata share
of Parents Common Stock owned by such stockholder of Parent (the “Pro Rata
Ratio”). By way of example, if a stockholder owned five (5%) percent of Parent
Common Stock, such stockholder would be entitled to receive 5% of Preferred
Stock of Purchaser which is derived by multiplying Preferred Stock of Purchaser
x 0.05. For purposes of this Agreement, Record Date shall mean the date on
which all stockholder’s of record of the Parent are entitled to vote on this
Agreement.
(b) Fractional
Shares. No
fraction of a share of Preferred Stock will be issued by virtue of the
Agreement, but in lieu thereof each holder of shares of Parent Common Stock who
would otherwise be entitled to receive a fraction of a share of Preferred Stock
(after aggregating all fractional shares of Preferred Stock that otherwise would
be received by such holder) shall receive from Purchaser one additional share of
Preferred Stock.
ARTICLE III
CLOSING
AND TERMINATION
3.1
Closing
Date.
Subject
to the satisfaction of the conditions set forth in Sections 7.1 and 7.2 hereof
(or the waiver thereof by the party entitled to waive that condition), the
closing of the sale and purchase of the Shares provided for in Section 1.1
hereof (the "Closing") shall take place at the offices of Sichenzia ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (or at such other place as
the parties may designate in writing) on such date as the Seller and the
Purchaser may designate. The Closing may also take place through the
delivery of documents in electronic or telefaxed format or through courier
delivery of actual signatures to counsel for the parties.
3.2
Termination of
Agreement.
This
Agreement may be terminated prior to the Closing as follows:
(a) At the
election of the Seller or the Purchaser on or after February 27, 2009 if the
Closing shall not have occurred by the close of business on such date, provided
that the terminating party is not in default of any of its obligations
hereunder;
(b) by mutual
written consent of the Seller and the Purchaser; or by the Seller or the
Purchaser if there shall be in effect a final non-appealable order of a
governmental body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby; it being
agreed that the parties hereto shall promptly appeal any adverse determination
which is not non-appealable (and pursue such appeal with reasonable
diligence).
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3.3
Procedure Upon
Termination.
In the
event of termination and abandonment by the Purchaser or the Seller, or both,
pursuant to Section 3.2 hereof, written notice thereof shall forthwith be given
to the other party or parties, and this Agreement shall terminate, and the
purchase of the Shares hereunder shall be abandoned, without further action by
the Purchaser or the Seller. If this Agreement is terminated as
provided herein, each party shall redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same.
3.4
Effect of
Termination.
With the
exception of those items listed in Section 6.6, in the event that this Agreement
is validly terminated as provided herein, then each of the parties shall be
relieved of their duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without liability to the
Purchaser, the Company or Seller; provided, further, however, that nothing in
this Section 3.4 shall relieve the Purchaser or Seller of any liability for a
breach of this Agreement and/or the confidentiality provisions of the
Confidentiality Agreement executed by the parties as of the date of this
Agreement (the “Confidentiality Agreement”), which confidentiality provisions
shall remain in full force and effect.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
For
purposes of this Agreement, any statement made to the knowledge of the Company
shall mean the knowledge of the Seller. Seller shall be deemed to
have “knowledge” of a particular fact or other matter if Seller is actually
aware of such fact or other matter, or should, by reason of his or her position
as an owner, director or executive officer of the Company, reasonably be
expected to be aware of such fact or other matter. Additionally, all
representations made by the Seller in the Note Purchase Agreement dated August
12, 2008 and attached hereto as Exhibit C shall have full force and effect shall
be incorporated herein.
The
Seller hereby represents and warrants to the Purchaser that:
4.1. Organization and Good
Standing of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation as set forth above. Except as otherwise
provided herein, the Company is not required
to be qualified to transact business in any other jurisdiction where the failure
to so qualify would have a material adverse effect on the business or operations
of the Company (“Material Adverse Affect”).
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4.2. Authority.
(a) The
Company has full power and authority (corporate and otherwise) to carry on its
business and has all permits and licenses that are necessary to the conduct of
its business or to the ownership, lease or operation of its properties and
assets, except where the failure to have such permits and licenses would not
have a Material Adverse Effect.
(b) The
execution of this Agreement and the delivery hereof to the Purchaser and the
sale contemplated herein have been, or will be prior to Closing, duly authorized
by the Company’s Board of Directors and by the Company’s stockholders having
full power and authority to authorize such actions.
(c) Subject
to any consents required under Section 4.7 below, the Company has the full legal
right, power and authority to execute, deliver and carry out the terms and
provisions of this Agreement; and this Agreement has been duly and validly
executed and delivered on behalf of Seller and the Company and constitutes a
valid and binding obligation of each Seller and the Company enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting generally
the enforcement of creditor’s rights.
(d) The
execution and delivery of this Agreement, the consummation of the transactions
herein contemplated, nor compliance with the terms of this Agreement will
violate, conflict with, result in a breach of, or constitute a default under any
statute, regulation, indenture, mortgage, loan agreement, or other agreement or
instrument to which the Company or Seller is a party or by which it or any of
them is bound, any charter, regulation, or bylaw provision of the Company, or
any decree, order, or rule of any court or governmental authority or arbitrator
that is binding on the Company or Seller in any way, except where such would not
have a Material Adverse Effect.
4.3. Capital
Stock.
(a) The
Company’s authorized capital stock consists of 1000 shares of Common Stock,
$0.001 par value per share, of which 1000 shares have been issued to Seller and
constitute the Shares as defined above. All of the Shares are duly
authorized, validly issued, fully paid and non-assessable.
(b) The
Seller are the lawful record and beneficial owners of all the Shares, free and
clear of any liens, pledges, encumbrances, charges, claims or restrictions of
any kind, except as set forth in Schedule 4.3, and have, or will have on the
Closing Date, the absolute, unilateral right, power, authority and capacity to
enter into and perform this Agreement without any other or further
authorization, action or proceeding, except as specified
herein.
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(c) There
are no authorized or outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible securities or other agreements or
arrangements of any character or nature whatever under which Seller or the
Company are or may become obligated to issue, assign or transfer any shares of
capital stock of the Company except as set forth in Schedule
4.3. Upon the delivery to Purchaser on the Closing Date of the
certificate(s) representing the Shares, Purchaser will have good, legal, valid,
marketable and indefeasible title to all the then issued and outstanding shares
of capital stock of the Company, free and clear of any liens, pledges,
encumbrances, charges, agreements, options, claims or other arrangements or
restrictions of any kind.
4.4. Basic Corporate Records. The copies of the Articles
of Incorporation of the Company (certified by the Secretary of State or other
authorized official of the jurisdiction of incorporation), and the Bylaws of the
Company, as the case may be (certified as of the date of this Agreement as true,
correct and complete by the Company’s secretary or assistant secretary), all of
which have been delivered to the Purchaser, are true, correct and complete as of
the date of this Agreement.
4.5. Minute
Books. The minute books of the Company, which shall be
exhibited to the Purchaser between the date hereof and the Closing Date, each
contain true, correct and complete minutes and records of all meetings,
proceedings and other actions of the shareholders, Boards of Directors and
committees of such Boards of Directors of the Company, if any, except where such
would not have a Material Adverse Effect and, on the Closing Date, will, to the
best of Seller’s knowledge, contain true, correct and complete minutes and
records of any meetings, proceedings and other actions of the shareholders and
the Board of Directors and committees of such Board of Directors of the
Company.
4.6. Subsidiaries, Parents and
Affiliates. Any and all businesses, entities, enterprises and
organizations in which the Company has any ownership, voting or profit and loss
sharing percentage interest (the “Subsidiaries”) as well as any and all
businesses, entities, enterprises and organizations which has any ownership,
voting or profit and loss sharing percentage interest in the Company (the
“Parents”) are identified in Schedule 4.6 hereto, together with the Company’s
interest therein. Unless the context requires otherwise or
specifically designated to the contrary on Schedule 4.6 hereto, “Company” as
used in this Agreement shall include all such Subsidiaries and
Parents. Except as set forth in Schedule 4.6, (i) the Company has
made no advances to, or investments in, nor owns beneficially or of record, any
securities of or other interest in, any business, entity, enterprise or
organization, (ii) there are no arrangements through which the Company has
acquired from, or provided to, any of the Seller or their affiliates any goods,
properties or services, and (iii) there are no rights, privileges or
advantages now enjoyed by the Company as a result of the ownership of the
Company by the Seller which, to the knowledge of the Seller or the Company, will
be lost as a result of the consummation of the transactions contemplated by this
Agreement. Each entity shown on Schedule 4.6 is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has full corporate power to own all of its property and to
carry on its business as it is now being conducted. Also set forth on
Schedule 4.6 is a list of jurisdictions in which each Subsidiary and Parent is
qualified as a foreign corporation. Such jurisdictions are the only
jurisdictions in which the ownership or leasing of property by each Subsidiary
and Parent or the conduct of its business requires it to be so
qualified.
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All of
the outstanding shares of capital stock of each Subsidiary and Parent have been
duly authorized and validly issued, are fully paid and nonassessable, and,
except as set forth on Schedule 4.6, are owned, of record and beneficially, by
the Company, and on the Closing Date will be owned by the Company, free and
clear of all liens, encumbrances, equities, options or claims
whatsoever. No Subsidiary or Parent has outstanding any other equity
securities or securities options, warrants or rights of any kind that are
convertible into equity securities of the Company, except as set forth on
Schedule 4.6.
4.7. Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with any court,
administrative agency or
commission or other governmental authority or instrumentality (“Governmental
Entity”) is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of a Form S-4 Registration
Statement (the “S-4”) with the Securities and Exchange Commission (“SEC”) in
accordance with the Securities Act of 1933, as amended (the “Securities Act”),
(ii) the filing of the Joint Proxy
Statement/Prospectus (as defined in Section 4.8) with the SEC in accordance with the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iv) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities
laws, and (v) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, individually or in the aggregate, would not be reasonably likely to have a Material Adverse
Effect.
4.8 SEC Documents; Financial
Statements. Except as
disclosed in Schedule 4.8:
(a)
The Company has filed all forms, reports and documents required to be filed with
the SEC since its October
3, 2003 merger with Hunno Technologies, Inc. All such required forms, reports and
documents (including those that the Company may file subsequent to the date
hereof) are referred to herein as the “Company SEC Reports.” As of their
respective dates, the Company SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such Company
SEC Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports (the “Company Financials”), including any Company SEC
Reports filed after the date hereof until the Closing, as of their respective
dates, (i) complied as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, (ii) was prepared in accordance
with generally accepted accounting principles (“GAAP”) applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited interim financial statements, as may be
permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly
presented the consolidated financial position of the Company and its
Subsidiaries at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of the Company as of
September 30, 2008,
is hereinafter referred to
as the “Company
Balance Sheet Date.” Except as disclosed in the
Company Financials, neither the Company nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of the Company and its Subsidiaries taken as a whole, except
liabilities (i) provided for in the Company Balance Sheet, or (ii) incurred
since the date of the Company Balance Sheet in the ordinary course of business
consistent with past practices and which would not reasonably be expected to
have a Company Material Adverse Effect except for the Loan.
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4.9 Statements;
Joint Proxy Statement/Prospectus.
None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in (i)
the S-4 will at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading and (ii) the proxy
statement/prospectus to be sent to the stockholders of the Company and
stockholders of Parent in connection with the meetings of Parent’s stockholders and Company's stockholders to consider the
adoption of this Agreement (collectively the “Company Stockholders' Meeting”)
(such joint proxy statement/prospectus as amended or supplemented is referred to
herein as the “Joint Proxy Statement/Prospectus”) shall not, on the date the
Joint Proxy Statement/Prospectus is first mailed to the Company's stockholders
and Parent's stockholders, at the time of the Company Stockholders' Meeting and
at the Closing
Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders' Meeting which has become false or misleading. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder. If at
any time prior to the
Closing Date, any event
relating to the Company or any of its affiliates, officers or directors should
be discovered by the Company which should be set forth in an amendment to the
S-4 or a supplement to the Joint Proxy Statement/Prospectus, the Company shall
promptly inform Purchaser.
4.10 Records and Books of
Account. The records and books of account of the Company
reflect all material items of income and expense and all material assets,
liabilities and accruals, have been, and to the Closing Date will be, regularly
kept and maintained in conformity with GAAP applied on a consistent basis with
preceding years.
4.11 Absence of Undisclosed
Liabilities. Except as and to the extent disclosed
in Schedule 4.11 and the Loan, there are no liabilities or obligations of the
Company of any kind whatsoever exceeding $5,000, individually or in
the aggregate, whether accrued, fixed, absolute, contingent,
determined or determinable, and including without limitation
(i) liabilities to former, retired or active employees of the Company under
any pension, health and welfare benefit plan, vacation plan or other plan of the
Company, (ii) liabilities to a parent company or subsidiary,
(iii) contingent liabilities in the nature of an endorsement, guarantee,
indemnity or warranty, and there is no condition, situation or circumstance
existing or which has existed that could reasonably be expected to result in any
liability of the Company which is of a nature that would be required to be
disclosed on its Financial Statements in accordance with GAAP, other than
liabilities and contingent liabilities incurred in the ordinary course of
business, none of which is materially adverse to the
Company.
-11-
4.12 Taxes.
(a) For
purposes of this Agreement, “Tax” or “Taxes” refers to: (i) any and
all federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities relating to taxes, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes and escheatment
payments, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity; (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being or ceasing to
be a member of an affiliated, consolidated, combined or unitary group for any
period (including, without limitation, any liability under Treas. Reg.
Section 1.1502-6 or any comparable provision of foreign, state or local
law); and (iii) any liability for the payment of any amounts of the type
described in clause (i) or (ii) as a result of any express or implied obligation
to indemnify any other person or as a result of any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
(b) (i) The
Company has timely filed all federal, state, local and foreign returns,
estimates, information statements and reports (“Tax Returns”) relating to Taxes
required to be filed by the Company with any Tax authority effective through the
Closing Date. All such Returns are true, correct and complete in all
respects, except for immaterial amounts where such would not have a Material
Adverse Effect. The Company has paid all Taxes shown to be due on
such Returns. Except as listed on Schedule 4.12 hereto, the Company
is not currently the beneficiary of any extensions of time within which to file
any Returns. The Seller and the Company have furnished and made available to the
Purchaser complete and accurate copies of all income and other Tax Returns and
any amendments thereto filed by the Company in the last three (3)
years.
(ii)
The
Company, as of the Closing Date, will have withheld and accrued or paid to the
proper authority all Taxes required to have been withheld and accrued or paid,
except for immaterial amounts where such would not have a Material Adverse
Effect.
(iii) The
Company has not been delinquent in the payment of any Tax nor is there any Tax
deficiency outstanding or assessed against the Company. The
Company
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(iv)
has not
executed any unexpired waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax.
(v)
There is
no dispute, claim, or proposed adjustment concerning any Tax liability of the
Company either (A) claimed or raised by any Tax authority in writing or
(B) based upon personal contact with any agent of such Tax authority, and
there is no claim for assessment, deficiency, or collection of Taxes, or
proposed assessment, deficiency or collection from the Internal Revenue Service
or any other governmental authority against the Company which has not been
satisfied. The Company is not a party to nor has it been notified in
writing that it is the subject of any pending, proposed, or threatened action,
investigation, proceeding, audit, claim or assessment by or before the Internal
Revenue Service or any other governmental authority, nor does the Company have
any reason to believe that any such notice will be received in the future.
Except as set forth on Schedule 4.12, neither the Internal Revenue Service nor
any state or local taxation authority has ever audited any income tax return of
the Company. The Company has not filed any requests for rulings with
the Internal Revenue Service. Except as provided to the Company’s
accountants, no power of attorney has been granted by the Company or its
affiliates with respect to any matter relating to Taxes of the
Company. There are no Tax liens of any kind upon any property or
assets of the Company, except for inchoate liens for Taxes not yet due and
payable.
(vi)
Except
for immaterial amounts which would not have a Material Adverse Effect, the
Company has no liability for any unpaid Taxes which has not been paid or accrued
for or reserved on the Financial Statements in accordance with GAAP, whether
asserted or unasserted, contingent or otherwise.
(vii)
There is
no contract, agreement, plan or arrangement to which the Company is a party as
of the date of this Agreement, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company that,
individually or collectively, would reasonably be expected to give rise to the
payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”). There is no contract, agreement, plan or arrangement to
which the Company is a party or by which it is bound to compensate any
individual for excise taxes paid pursuant to Section 4999 of the
Code.
(viii)
The
Company has not filed any consent agreement under Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by
the Company.
(ix)
The
Company is not a party to, nor has any obligation under, any tax-sharing, tax
indemnity or tax allocation agreement or arrangement.
(x)
None of
the Company’s assets are tax exempt use property within the meaning of
Section 168(h) of the Code.
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4.13 Accounts
Receivable. The accounts receivable are, and will be,
actual bona fide receivables from transactions in the ordinary course of
business representing valid and binding obligations of others for the total
dollar amount shown thereon, and as of the date of the Agreement are not subject
to any recoupments, set-offs, or counterclaims. To the best of Seller’s
knowledge, except as set forth on Schedule 4.13, all such accounts receivable
are, and will be, collectible in amounts not less than the amounts (net of
reserves) carried on the books of the Company and will be paid in accordance
with their terms. Except as listed on Schedule 4.13 hereto, all such
accounts receivable are and will be actual bona fide receivables from
transactions in the ordinary course of business.
4.14 Inventory. The
inventories of the Company are listed on Schedule 4.14 attached
hereto. The Company will maintain the inventory in the normal and
ordinary course of business from the date hereof through the Closing
Date.
4.15.
Machinery and
Equipment. Except for items disposed of in the ordinary course
of business, all machinery, tools, furniture, fixtures, equipment, vehicles,
leasehold improvements and all other tangible personal property (hereinafter
“Fixed Assets”) of the Company currently being used in the conduct of its
business, together with any machinery or equipment that is leased or operated by
the Company, are in fully serviceable working condition and
repair. Said Fixed Assets shall be maintained in such condition from
the date hereof through the Closing Date. Except as described on
Schedule 4.15 hereto, all Fixed Assets owned, used or held by the Company are
situated at its business premises and are currently used in its
Business. Schedule 4.15 describes all Fixed Assets owned by or an
interest in which is claimed by any other person (whether a customer, supplier
or other person) for which the Company is responsible (copies of all agreements
relating thereto being attached to said Schedule 4.15), and all such property is
in the Company’s actual possession and is in such condition that upon the return
of such property in its present condition to its owner, the Company will not be
liable in any amount to such owner. There are no outstanding
requirements or recommendations by any insurance company that has issued a
policy covering either (i) such Fixed Assets or (ii) any liabilities
of the Company relating to operation of the Business, or by any board of fire
underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on any Fixed Assets or any changes
in the operations of the Business, any equipment or machinery used therein, or
any procedures relating to such operations, equipment or
machinery. All material Fixed Assets of the Company are set forth on
Schedule 4.15 hereto.
4.16
Real
Property Matters. The real property owned by the Company is
listed on Schedule 4.16. Other than those items listed on Schedule
4.16 the Company does not own any real property as of the date hereof and has
not owned any real property during the three years preceding the date
hereof.
4.17 Leases. All
leases of real and personal property of the Company are described in Schedule
4.17, are in full force and effect and, to Seller’s knowledge, constitute legal,
valid and binding obligations of the respective parties thereto enforceable in
accordance with their terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting generally
the enforcement of creditor’s rights, and have not been assigned or encumbered
by Company or the Seller. The Company has performed in all material
respects the obligations
required to be performed by it under all such leases to date and it is not in
default in any material respect under any of said leases, except as set forth in
Schedule 4.17, nor has it made any leasehold improvements required to be removed
at the termination of any lease, except signs. To Seller’s knowledge,
no other party to any such lease is in material default
thereunder. Except as noted on Schedule 4.17, none of the leases
listed thereon require the consent of a third party in connection with the
transfer of the Shares.
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4.18 Patents,
Software, Trademarks, Etc. The Company owns, or possesses
adequate licenses or other rights to use, all patents, software, trademarks,
service marks, trade names and copyrights and trade secrets, if any, necessary
to conduct its business as now operated by it. The patents, software,
trademarks, service marks, copyrights, trade names and trade secrets, if any,
registered in the name of or owned or used by or licensed to the Company and
applications for any thereof (hereinafter the “Intangibles”) are described or
referenced in Schedule 4.18. Seller hereby specifically acknowledge
that all right, title and interest in and to all patents and software listed on
Schedule 4.18 as patents owned by the Company are owned by the Company or the
Company has a right to use same and that the ownership of such patents and
software will be transferred as part of the Company to Purchaser as part of the
transaction contemplated hereby. No officer, director, shareholder or
employee of the Company or the Seller or any relative or spouse of any such
person owns any patents or patent applications or any inventions, software,
secret formulae or processes, trade secrets or other similar rights, nor is any
of them a party to any license agreement, used by or useful to the Company or
related to its business except as listed in Schedule 4.18. All of
said Intangibles are valid and in good standing to the best of Seller’s
knowledge, and are free and clear of all liens, security interests, charges,
restrictions and encumbrances of any kind whatsoever, and have not been licensed
to any third party except as described in Schedule 4.18. The Company
has not been charged with, nor to Seller’s knowledge has it infringed or is it
threatened to be charged with infringement of, any patent, proprietary rights or
trade secrets of others in the conduct of its business, and, to the date hereof,
neither the Seller nor the Company has received any notice of conflict with or
violation of the asserted rights in intangibles or trade secrets of
others. The Company is not now manufacturing any goods under a
present permit, franchise or license, except as set forth in said Schedule
4.18. The consummation of the transactions contemplated hereby will
not alter or impair any rights of the Company in any such Intangibles or in any
such permit, franchise or license, except as described in Schedule
4.18. The Intangibles and the Company’s tooling, manufacturing and
engineering drawings, process sheets, specifications, bills of material and
other like information and data are in such form and of such quality and will be
maintained in such a manner that the Company can, following the Closing, design,
produce, manufacture, assemble and sell the products and provide the services
heretofore provided by it so that such products and services meet applicable
specifications and conform with the standards of quality and cost of production
standards heretofore met by it. To Seller’s knowledge, the Company
has the sole and exclusive right to use its corporate and trade names in the
jurisdictions where it transacts business.
4.19 Insurance
Policies. There is set forth in Schedule 4.19 a list and brief
description of all insurance policies on the date hereof held by the Company or
on which it pays premiums, including, without limitation, life insurance and
title insurance policies, which description includes the premiums payable by it
thereunder. Schedule 4.19 also sets forth, in the case of any life
insurance policy held by the Company, the name of the insured under such policy,
the
cash surrender value thereof and any loans thereunder. All such
insurance premiums in respect of such coverage have been, and to the Closing
Date will be, paid in full, if due and owing. All claims, if any,
made against the Company which are covered by such policies have been, or are
being, settled or defended by the insurance companies that have issued such
policies. Up to the Closing Date, such insurance coverage will be
maintained in full force and effect and will not be cancelled, modified or
changed without the express written consent of the Purchaser, except to the
extent the maturity dates of any such insurance policies expire prior to the
Closing Date or where such cancellation would not have a Material Adverse
Effect. No such policy has been, or to the Closing Date will be,
cancelled by the issuer thereof, and, to the knowledge of the Sellers and the
Company, between the date hereof and the Closing Date, there shall be no
increase in the premiums with respect to any such insurance policy caused by any
action or omission of the Sellers or of the Company, except where the foregoing
would not have a Material Adverse Effect. Upon the Closing Date, all
life insurance policies maintained by the Company shall be assigned to each
respective Seller.
-15-
4.20 Banking and
Personnel Lists. The Sellers and the Company will deliver
to the Purchaser prior to the Closing Date the following accurate lists and
summary descriptions relating to the Company:
(i) The
name of each bank in which the Company has an account or safe deposit box and
the names of all persons authorized to draw thereon or have access
thereto.
(ii) The
names, current annual salary rates and total compensation for the preceding
fiscal year of all of the present directors and officers of the Company, and any
other employees whose current base accrual salary or annualized hourly rate
equivalent is $20,000 or more, together with a summary of the bonuses,
percentage compensation and other like benefits, if any, paid or payable to such
persons for the last full fiscal year completed, together with a schedule of
changes since that date, if any.
(iii) A
schedule of workers’ compensation payments of the Company over the past five
full fiscal years and the fiscal year to date, a schedule of claims by employees
of the Company against the workers’ compensation fund for any reason over such
period, identification of all compensation and medical benefits paid to date on
each such claim and the estimated amount of compensation and medical benefits to
be paid in the future on each such claim.
(iv) The
name of all pensioned employees of the Company whose pensions are unfunded and
are not paid or payable pursuant to any formalized pension arrangements, their
agent and annual unfunded pension rates.
4.21 Lists of Contracts,
Etc. There is included in Schedule 4.21 a list of the
following items (whether written or oral) relating to the Company and/or the
Seller, which list identifies and fairly summarizes each item (collectively,
“Contracts”):
(ii) All
joint venture contracts of the Company or the Seller or affiliates
relating to the business of the Company;
-16-
(iii) All
contracts of the Company relating to (a) obligations for borrowed money,
(b) obligations evidenced by bonds, debentures, notes or other similar
instruments, (c) obligations to pay the deferred purchase price of property
or services, except trade accounts payable arising in the ordinary course of
business, (d) obligations under capital leases, (e) debt of others
secured by a lien on any asset of the Company, and (f) debts of others
guaranteed by the Company;
(iv) All
agreements of the Company relating to the supply of raw materials for and the
distribution of the products of its business, including without limitation all
sales agreements, manufacturer’s representative agreements and distribution
agreements of whatever magnitude and nature, and any commitments
therefore;
(v) All
contracts that individually provide for aggregate future payments to or from the
Company of $5,000 or more, to the extent not included in (i) through (iii)
above;
(vi) All
contracts of the Company that have a term exceeding one year and that may not be
cancelled without any liability, penalty or premium, to the extent not included
in (i) through (v) above;
(vii) A
complete list of all outstanding powers of attorney granted by the Company;
and
(viii) All
other contracts of the Company or the Seller material to the business, assets,
liabilities, financial condition, results of operations or prospects of the
business of the Company taken as a whole to the extent not included
above.
Except as set forth in Schedule 4.21,
(i) all contracts, agreements and commitments of the Company set forth in
Schedule 4.21 are valid, binding and in full force and effect, and
(ii) neither the Company nor, to the best of Seller’s knowledge, any other
party to any such contract, agreement, or commitment has materially breached any
provision thereof or is in default thereunder. True and complete
copies of the contracts, leases, licenses and other documents referred to in
Schedule 4.21 will be delivered to the Purchaser, certified by the Secretary or
Assistant Secretary of the Company as true, correct and complete copies, not
later than one business day before the Closing Date.
There are no pending disputes with
customers or vendors of the Company regarding quality or return of goods
involving amounts in dispute with any one customer or vendor, whether for
related or unrelated claims, in excess of $5,000 except as described on Schedule
4.21 hereto, all of which will be resolved to the reasonable satisfaction of
Purchaser prior to the Closing Date. To the best knowledge of Seller
and the Company, there has not been any event, happening, threat or fact that
would lead them to believe that any of said customers or vendors will terminate
or materially alter their business relationship with the Company after
completion of the transactions contemplated by this Agreement.
-17-
4.22 Compliance
With the Law. The Company is not in violation of any
applicable federal, state, local or foreign law, regulation or order or any
other, decree or requirement of any governmental, regulatory or administrative
agency or authority or court or other tribunal (including, but not limited to,
any law, regulation order or requirement relating to securities, properties,
business, products, manufacturing processes, advertising, sales or employment
practices, terms and conditions of employment, occupational safety, health and
welfare, conditions of occupied premises, product safety and liability, civil
rights, or environmental protection, including, but not limited to, those
related to waste management, air pollution control, waste water treatment or
noise abatement), except where such would not have a Material Adverse
Effect. Except as set forth in Schedule 4.22, the Company and/or the
Seller have not been and is not now charged with, or to the best knowledge of
the Seller or the Company under investigation with respect to, any violation of
any applicable law, regulation, order or requirement relating to any of the
foregoing, nor, to the best knowledge of Seller or the Company after due
inquiry, are there any circumstances that would or might give rise to any such
violation. The Company has filed all reports required to be filed
with any governmental, regulatory or administrative agency or authority, except
where the failure to file such would not have a Material Adverse
Effect.
4.23 Litigation; Pending Labor
Disputes. Except as specifically set forth in Schedule
4.23:
(i) There
are no legal, administrative, arbitration or other proceedings or governmental
investigations pending or, to the best knowledge of Seller or the Company,
threatened, against the Seller or the Company, relating to its business or the
Company or its properties (including leased property), or the transactions
contemplated by this Agreement, nor is there any basis known to the Company or
Seller for any such action.
(ii) There
are no judgments, decrees or orders of any court, or any governmental
department, commission, board, agency or instrumentality binding upon Seller or
the Company relating to its business or the Company the effect of which is to
prohibit any business practice or the acquisition of any property or the conduct
of any business by the Company or which limit or control or otherwise would have
a Material Adverse Affect on its method or manner of doing
business.
(iii) No
work stoppage has occurred and is continuing or, to the knowledge of Seller or
the Company, is threatened affecting its business, and to the best of Seller’s
knowledge, no question involving recognition of a collective bargaining agent
exists in respect of any employees of the Company.
4.24 Absence of Certain Changes
or Events. The Company has not, since the Company Balance
Sheet Date , and except in the ordinary course of business consistent with past
practice:
(i) Incurred
any material obligation or liability (absolute, accrued, contingent or
otherwise), except in the ordinary course of its business consistent with past
practice or in connection with the performance of this Agreement, and any such
obligation
or liability incurred in the ordinary course is not materially adverse, except
for claims, if any, that are adequately covered by
insurance;
-18-
(ii) Discharged
or satisfied any lien or encumbrance, or paid or satisfied any obligations or
liability (absolute, accrued, contingent or otherwise) other than
(a) liabilities shown or reflected on the Company Balance Sheet, and
(b) liabilities incurred since the Company Balance Sheet Date in
the ordinary course of business that were not materially adverse;
(iii) Increased
or established any reserve or accrual for taxes or other liability on its books
or otherwise provided therefore, except (a) as disclosed on the Company
Balance Sheet, or (b) as may have been required under GAAP due to income
earned or expenses accrued since the Company Balance Sheet Date and as disclosed
to the Purchaser in writing;
(iv) Mortgaged,
pledged or subjected to any lien, charge or other encumbrance any of its assets,
tangible or intangible;
(v) Sold
or transferred any of its assets or cancelled any debts or claims or waived any
rights, except in the ordinary course of business and which has not been
materially adverse;
(vi) Disposed
of or permitted to lapse any patents or trademarks or any patent or trademark
applications material to the operation of its business;
(vii) Incurred
any significant labor trouble or granted any general or uniform increase in
salary or wages payable or to become payable by it to any director, officer,
employee or agent, or by means of any bonus or pension plan, contract or other
commitment increased the compensation of any director, officer, employee or
agent;
(viii) Authorized
any capital expenditure for real estate or leasehold improvements, machinery,
equipment or molds in excess of $5,000.00 in the aggregate;
(ix) Except
for this Agreement or as otherwise disclosed herein or in any schedule to this
Agreement, entered into any material transaction;
(x)
Issued any stocks, bonds, or other corporate securities, or made any declaration
or payment of any dividend or any distribution in respect of its capital stock;
or
(xi) Experienced
damage, destruction or loss (whether or not covered by insurance) individually
or in the aggregate having a Material Adverse Effect on any of its properties,
assets or business, or experienced any other material adverse change or changes
individually or in the aggregate affecting its financial condition, assets,
liabilities or business (a “Material Adverse Change”).
-19-
4.25 Product Warranties and Product Liabilities. The product
warranties and return policies of the Company in effect on the date hereof and
the types of products to which they apply are described on Schedule 4.25
hereto. Schedule 4.25 also sets forth all product liability claims
involving amounts in controversy in excess of $5,000 that are currently either
pending or, to the best of the Seller’s and the Company’s knowledge, threatened
against the Company. The Seller have no knowledge of any reason why
the future cost of performing all such obligations and paying all such product
liability claims with respect to goods manufactured, assembled or furnished
prior to the Closing Date will not exceed the average annual cost thereof for
said past three year period.
4.26 Assets. The
assets of the Company are listed on Schedule 4.26 attached
hereto. Except as described in Schedule 4.26, the assets of the
Company are, and together with the additional assets to be acquired or otherwise
received by the Company prior to the Closing, will at the Closing Date be,
sufficient in all material respects to carry on the operations of the Business
as now conducted by the Company. The Company is the only business
organization through which the business is conducted. Except as set
forth in Schedule 4.17 or Schedule 4.26, all assets used by the Seller and the
Company to conduct the business of the Company are, and will on the Closing Date
be, owned by the Company.
4.27 Absence of Certain
Commercial Practices. Neither the Company nor Seller has made
any payment (directly or by secret commissions, discounts, compensation or other
payments) or given any gifts to another business concern, to an agent or
employee of another business concern or of any governmental entity (domestic or
foreign) or to a political party or candidate for political office (domestic or
foreign), to obtain or retain business for the Company or to receive favorable
or preferential treatment, except for gifts and entertainment given to
representatives of customers or potential customers of sufficiently limited
value and in a form (other than cash) that would not be construed as a bribe or
payoff.
4.28 Licenses, Permits, Consents
and Approvals. The Company has, and at the Closing Date will
have, all licenses, permits or other authorizations of governmental, regulatory
or administrative agencies or authorities (collectively, “Licenses”) required to
conduct the business, except for any failures of such which would not have a
Material Adverse Effect. All material Licenses of the Company are listed on
Schedule 4.28 hereto. At the Closing, the Company will have all such
Licenses which are material to the conduct of the business and will have renewed
all Licenses which would have expired in the interim. Except as
listed in Schedule 4.28, no registration, filing, application, notice, transfer,
consent, approval, order, qualification, waiver or other action of any kind
(collectively, a “Filing”) will be required as a result of the sale of the
Shares by Seller in accordance with this Agreement (a) to avoid the loss of
any License or the violation, breach or termination of, or any default under, or
the creation of any lien on any asset of the Company pursuant to the terms of,
any law, regulation, order or other requirement or any contract binding upon the
Company or to which any such asset may be subject, or (b) to enable
Purchaser (directly or through any designee) to continue the operation of the
Company and the business substantially as conducted prior to the Closing
Date. All such Filings will be duly filed, given, obtained or taken
on or prior to the Closing Date and will be in full force and effect on the
Closing Date.
-20-
4.29 Environmental Matters. Except as set forth on Schedule 4.29
hereto:
(a) The
operations of the Company and the Seller, to the best knowledge of Seller, are
in compliance with all applicable laws promulgated by any governmental entity
which prohibit, regulate or control any hazardous material or any hazardous
material activity (“Environmental Laws”) and all permits issued pursuant to
Environmental Laws or otherwise except for where noncompliance or the absence of
such permits would not, individually or in the aggregate, have a Material
Adverse Effect;
(b) The
Company has obtained all permits required under all applicable Environmental
Laws necessary to operate its business, except for any failures of such which
would not have a Material Adverse Effect;
(c) The
Company is not the subject of any outstanding written order or Contract with any
governmental authority or person respecting Environmental Laws or any violation
or potential violations thereof; and
(d) The
Company has not received any written communication alleging either or both that
the Company may be in violation of any Environmental Law, or any permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law.
4.30 Broker. The
Seller has not retained any broker in connection with any transaction
contemplated by this Agreement. Purchasers shall not be obligated to
pay any fee or commission associated with the retention or engagement by the
Seller of any broker in connection with any transaction contemplated by this
Agreement.
4.31 Related Party
Transactions. Except as described in Schedule 4.31, all
transactions during the past five years between the Company and any current or
former shareholder or any entity in which the Company or any current or former
shareholder had or has a direct or indirect interest have been fair to the
Company as determined by the Board of Directors. No portion of the
sales or other on-going business relationships of the Company is dependent upon
the friendship or the personal relationships (other than those customary within
business generally) of Seller, except as described in Schedule
4.31. During the past five years, the Company has not forgiven or
cancelled, without receiving full consideration, any indebtedness owing to it by
Seller.
4.32 Patriot
Act. The Company and the Seller certify that the Company and
the Seller have not been designated, and is not owned or controlled, by a
“suspected terrorist” as defined in Executive Order 13224. The
Company and the Seller hereby acknowledge that the Purchaser seeks to comply
with all applicable laws concerning money laundering and related
activities. In furtherance of those efforts, the Company and the
Seller hereby represent, warrant and agree that: (i) none of the cash
or property that the Seller have contributed or paid or will contribute and pay
to the Company has been or shall be derived from, or related to, any activity
that is deemed criminal under United States law; and (ii) no contribution or
payment by the Company to the Purchaser, to the extent that they are within the
Company’s control shall cause the Purchaser to be in violation of the United
States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. The Seller shall
promptly notify the Purchaser if any of these representations ceases to be true
and accurate regarding the Seller or
the Company. The Seller agrees to provide the Purchaser any
additional information regarding the Company that the Purchaser reasonably
requests to ensure compliance with all applicable laws concerning money
laundering and similar activities.
-21-
4.33 Disclosure. All statements contained in any schedule,
certificate, opinion, instrument, or other document delivered by or on behalf of
the Seller or the Company pursuant hereto shall be deemed representations and
warranties by each Seller and the Company herein. No statement,
representation or warranty by the Seller or the Company in this Agreement or in
any schedule, certificate, opinion, instrument, or other document furnished or
to be furnished to the Purchaser pursuant hereto contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to be stated therein or necessary to make the statements contained
therein not misleading or necessary in order to provide a prospective purchaser
of the business of the Company with full and fair disclosure concerning the
Company, its business, and the Company’s affairs.
ARTICLE V
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
5.1
Organization and Good
Standing.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada.
5.2
Authority.
(a) The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been, or will prior to Closing be, duly
and validly approved and acknowledged by all necessary corporate action on the
part of the Purchaser.
(b) The
execution of this Agreement and the delivery hereof to the Seller and the
purchase contemplated herein have been, or will be prior to Closing, duly
authorized by the Purchaser’s Board of Directors having full power and authority
to authorize such actions.
5.3
Conflicts; Consents of Third
Parties.
(a) The
execution and delivery of this Agreement, the acquisition of the Shares by
Purchaser and the consummation of the transactions herein contemplated, and the
compliance with the provisions and terms of this Agreement, are not prohibited
by the Articles of Incorporation or Bylaws of the Purchaser and will not
violate, conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any court order, indenture, mortgage, loan
agreement, or other agreement or instrument to which the Purchaser is a party or
by which it is bound.
(b)
No
consent, approval, order or authorization of, or registration, declaration or
filing with any court, administrative agency or commission or other Governmental
Authority or instrumentality is required by or with respect to the Purchaser in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of a S-4 with
the SEC in accordance with the Securities Act, (ii) the filing of the
Joint Proxy Statement/Prospectus (as defined in Section 4.9) with the SEC in
accordance with the Exchange Act, (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, and (v) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
-22-
5.4 SEC Documents; Financial
Statements. Except as disclosed in Schedule 5.4:
(a) The Purchaser has filed all forms,
reports and documents required to be filed with the SEC since the initial filing
date of the registration statement for the Purchaser's initial public offering.
All such required forms, reports and documents (including those that the
Purchaser may file subsequent to the date hereof) are referred to herein as the
“Purchaser SEC Reports.” As of their respective dates, the Purchaser SEC Reports
(i) were prepared in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Purchaser SEC Reports, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. None of the
Purchaser's Subsidiaries is subject to the periodic reporting requirements of
the Exchange Act.(b)Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Purchaser SEC Reports (the “Purchaser Financials”), including any Purchaser SEC
Reports filed after the date hereof until the Closing, as of their respective
dates, (i) complied as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, (ii) was prepared in accordance
with generally accepted accounting principles (“GAAP”) applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited interim financial statements, as may be
permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly
presented the consolidated financial position of the Purchaser and its
Subsidiaries at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not, or are not expected to be, material in
amount. The balance sheet of the Purchaser as of September 30 30, 2008 is hereinafter referred to as the
“Purchaser Balance Sheet Date.” Except as disclosed in the Purchaser
Financials, neither the Purchaser nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of the Purchaser and its Subsidiaries taken as a whole, except
liabilities (i) provided for in the Purchaser Balance Sheet, or (ii) incurred
since the date of the Purchaser Balance Sheet in the ordinary course of business
consistent with past practices and which would not reasonably be expected to
have a Purchaser Material Adverse Effect.
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5.5 Statements;
Joint Proxy Statement/Prospectus.
None of the information supplied or to
be supplied by the Purchaser for inclusion or incorporation by
reference in (i) the S-4
will at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading and (ii) the
Joint Proxy Statement/Prospectus
shall not, on the date the
Joint Proxy Statement/Prospectus is first mailed to the Company's stockholders
and Parent's stockholders, at the time of the Company Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting which has become false or
misleading. The Joint Proxy Statement/Prospectus will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and regulations
thereunder. If
at any time prior to the
Closing Date, any event relating to the Purchaser or any of its affiliates, officers or
directors should be discovered by the Purchaser which should be set forth in an
amendment to the S-4 or a supplement to the Joint Proxy Statement/Prospectus,
the Purchaser shall
promptly inform the Company.
5.6 Litigation.
There are
no legal proceedings pending or, to the best knowledge of the Purchaser,
threatened that are reasonably likely to prohibit or restrain the ability of the
Purchaser to enter into this Agreement or consummate the transactions
contemplated hereby.
5.7 Investment
Intention.
The
Purchaser is acquiring the Shares for its own account, for investment purposes
only and not with a view to the distribution (as such term is used in Section
2(11) of the Securities Act) thereof. Purchaser understands that the
Shares have not been registered under the Securities Act and cannot be sold
unless subsequently registered under the Securities Act or an exemption from
such registration is available.
5.8
Broker.
The
Purchaser has not retained any broker in connection with any transaction
contemplated by this Agreement. Seller shall not be obligated to pay
any fee or commission associated with the retention or engagement by the
Purchaser of any broker in connection with any transaction contemplated by this
Agreement
5.9
Patriot
Act. The Purchaser certifies that neither the Purchaser nor
any of its subsidiaries has been designated, and is not owned or controlled, by
a “suspected terrorist” as defined in Executive Order 13224. The
Purchaser hereby acknowledges that the Company and the Seller seek to comply
with all applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Purchaser hereby represents, warrants and
agrees that: (i) none of the cash or property that the Purchaser has
contributed or paid or will contribute and pay to the Seller has been or shall
be derived from, or related to, any activity that is deemed criminal under
United States law; and (ii) no contribution or payment by the Purchaser or any
of its subsidiaries to the Seller, to the extent that they are within the
Purchaser’s control shall cause the Seller or the Company to be in violation of
the United States Bank Secrecy Act, the United States International Money
Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. The
Purchaser shall promptly notify the Seller if any of these representations
ceases to be true and accurate regarding the Purchaser or any of its
subsidiaries. The Purchaser agrees to provide the Seller any
additional information regarding the Purchaser or any of its subsidiaries that
the Seller reasonably request to ensure compliance with all applicable laws
concerning money laundering and similar activities.
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5.10
Due Authorization of
Preferred Stock. The shares of the Preferred
Stock, when delivered to the Seller, shall be validly issued and outstanding as
fully paid and non-assessable, free and clear of any liens, pledges,
encumbrances, charges, agreements, options, claims or other arrangements or
restrictions of any kind.
ARTICLE VI
COVENANTS
6.1
(a) As
promptly as practicable after the execution of this Agreement, Company and
Purchaser shall jointly prepare and Purchaser shall file with the SEC the S-4,
which shall include a document or documents that will constitute (i) the
prospectus forming part of the registration statement on the S-4 and (ii) the
Joint Proxy Statement/Prospectus. Each of the parties hereto shall
use all commercially reasonable efforts to cause the S-4 to become effective as
promptly as practicable after the date hereof, and, prior to the effective date
of the S-4, the parties hereto shall take all action required under any
applicable laws in connection with the issuance of the Shares and the Preferred
Stock. Each of the Company and Purchaser shall provide promptly to the other
such information concerning its business and financial statements and affairs
as, in the reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Joint Proxy Statement/Prospectus
and the S-4, or in any amendments or supplements thereto, and cause its counsel
and auditors to cooperate with the other's counsel and auditors in the
preparation of the Joint Proxy Statement/Prospectus and the S-4.
(b) As
promptly as practicable after the effective date of the S-4, the Joint Proxy
Statement/Prospectus shall be mailed to the stockholders of the Company and of
Parent. Each of the parties hereto shall cause the Joint Proxy
Statement/Prospectus to comply as to form and substance with respect to such
party in all material respects with the applicable requirements of (i) the
Exchange Act, (ii) the Securities Act, and (iii) the rules and regulations of
the OTCBB. As promptly as practicable after the date of this Agreement, each of
the Company and Parent will prepare and file any other filings required to be
filed by it under the Exchange Act, the Securities Act or
any other Federal, foreign or Blue Sky or related laws relating to the
transactions contemplated by this Agreement (the “Other Filings”). Each of the
Company and Purchaser will notify the other promptly upon the receipt of any
(i) comments from the SEC or its staff or any other government officials,
(ii) notice that the S-4 has become effective, (iii) the issuance of any stop
order, (iv) notice of the suspension of the qualification of the common stock
representing the Shares issuable in connection with the transaction contemplated
herein for offering or sale in any jurisdiction, or (v) request by the SEC or
its staff or any other government officials for amendments or supplements to the
S-4, the Joint Proxy Statement/Prospectus or any Other Filing or for additional
information and, except as may be prohibited by any Governmental Entity, will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC or its staff or any other
government officials, on the other hand, with respect to the S-4, the Joint
Proxy Statement/Prospectus, the Agreement or any Other Filing. Each
of the Company and Purchaser will cause all documents that it is responsible for
filing with the SEC or other regulatory authorities under this Section 6.1(b) to
comply in all material respects with all applicable requirements of law and the
rules and regulations promulgated thereunder.
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(c) Each
of Parent, Company and the Purchaser shall promptly inform the others of any
event which is required to be set forth in an amendment or supplement to the
Joint Proxy Statement/Prospectus, the S-4 or any Other Filing and each of
Parent, the Company and Purchaser shall amend or supplement the Joint Proxy
Statement/Prospectus to the extent required by law to do so. No amendment or
supplement to the Joint Proxy Statement/Prospectus or the S-4 shall be made
without the approval of Parent and the Company, which approval shall not be
unreasonably withheld or delayed. Each of the parties hereto shall advise the
other parties hereto, promptly after it receives notice thereof, of the time
when the S-4 has become effective or any supplement or amendment has been filed,
of the issuance of any stop order, of the suspension of the qualification of the
Parent Common Stock issuable in connection with the Merger for offering or sale
in any jurisdiction, or of any request by the SEC for an amendment of the Joint
Proxy Statement/Prospectus or the S-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
(d) Each of Parent, Company and
Purchaser shall keep the S-4 continuously effective under the Securities Act
until all securities covered by the S-4 have been sold, or may be sold without
restrictions pursuant to Rule 144, as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to
the Company’s transfer agent and the affected Holders (the “Effectiveness
Period”).
6.2
Access to Information.
The
Seller and the Company agree that, prior to the Closing Date, the Purchaser
shall be entitled, through its officers, employees and representatives
(including, without limitation, its legal advisors and accountants), to make
such investigation of the properties, businesses and operations of the Company
and its Subsidiaries or Parents and such examination of the books, records and
financial condition of the Company and its Subsidiaries or Parents as it
reasonably requests and to make extracts and copies of such books and
records. Any such investigation and examination shall be conducted
during regular business hours and under reasonable
circumstances, and the Seller shall cooperate, and shall cause the Company and
its Subsidiaries or Parents to cooperate, fully therein. No
investigation by the Purchaser prior to or after the date of this Agreement
shall diminish or obviate any of the representations, warranties, covenants or
agreements of the Seller contained in this Agreement or any other agreement
referenced herein. In order that the Purchaser may have full
opportunity to make such physical, business, accounting and legal review,
examination or investigation as it may reasonably request of the affairs of the
Company and its Subsidiaries and Parents, the Seller shall cause the officers,
employees, consultants, agents, accountants, attorneys and other representatives
of the Company and its Subsidiaries and Parents to cooperate fully with such
representatives in connection with such review and examination. It is
agreed and understood that all information provided pursuant to this Section 6.1
is subject to the terms and conditions of the Confidentiality/Standstill
Agreement.
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6.3
Conduct of the Business Pending the Closing.
(a) Except as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Purchaser, prior to the Closing the Seller shall, and shall cause
the Company to:
(i) Conduct
the respective businesses of the Company only in the ordinary course consistent
with past practice;
(ii) Use its
best efforts to (A) preserve its present business operations, organization
(including, without limitation, management and the sales force) and goodwill of
the Company and (B) preserve its present relationship with parties having
business dealings with the Company;
(iii) Maintain
(A) all of the assets and properties of the Company in their current condition,
ordinary wear and tear excepted and except for dispositions in the ordinary
course of business and (B) insurance upon all of the properties and assets of
the Company in such amounts and of such kinds comparable to that in effect on
the date of this Agreement;
(iv) (A)
maintain the books, accounts and records of the Company in the ordinary course
of business consistent with past practices, (B) continue to collect accounts
receivable and pay accounts payable utilizing normal procedures and without
discounting or accelerating payment of such accounts, and (C) comply with all
contractual and other obligations applicable to the operation of the Company;
and
(v) Comply in
all material respects with applicable laws.
(b) Except as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Purchaser, prior to the Closing the Seller shall not, and shall
cause the Company not to:
(i) Declare,
set aside, make or pay any dividend or other distribution in respect of the
capital stock of the Company or repurchase, redeem or otherwise acquire any
outstanding shares of the capital stock or other securities of, or other
ownership interests in, the Company; Transfer,
issue, sell or dispose of any shares of capital stock or other securities of the
Company or grant options, warrants, calls or other rights to purchase or
otherwise acquire shares of the capital stock or other securities of the
Company;
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(ii) Effect
any recapitalization, reclassification, stock split or like change in the
capitalization of the Company;
(iii) Amend the
Articles of Incorporation or Bylaws of the Company;
(iv) (A)
materially increase the annual level of compensation of any employee of the
Company, (B) increase the annual level of compensation payable or to become
payable by the Company to any of its executive officers, (C) grant any unusual
or extraordinary bonus, benefit or other direct or indirect compensation to any
employee, director or consultant, (D) increase the coverage or benefits
available under any (or create any new) severance pay, termination pay, vacation
pay, Company awards, salary continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation, insurance, pension or other
employee benefit plan or arrangement made to, for, or with any of the directors,
officers, employees, agents or representatives of the Company or otherwise
modify or amend or terminate any such plan or arrangement or (E) enter into any
employment, deferred compensation, severance, consulting, non-competition or
similar agreement (or amend any such agreement) to which the Company is a party
or involving a director, officer or employee of the Company in his or her
capacity as a director, officer or employee of the Company;
(v) Except
for trade payables and for indebtedness for borrowed money incurred in the
ordinary course of business and consistent with past practice, borrow monies for
any reason or draw down on any line of credit or debt obligation, or become the
guarantor, surety, endorser or otherwise liable for any debt, obligation or
liability (contingent or otherwise) of any other party, or change the terms of
payables or receivables;
(vi) Subject
to any lien (except for leases that do not materially impair the use of the
property subject thereto in their respective businesses as presently conducted),
any of the properties or assets (whether tangible or intangible) of the
Company;
(vii) Acquire
any material properties or assets or sell, assign, transfer, convey, lease or
otherwise dispose of any of the material properties or assets (except for fair
consideration in the ordinary course of business consistent with past practice)
of the Company except, with respect to the items listed on Schedule 6.3(b)(viii)
hereto, as previously consented to by the Purchaser;
(viii) Cancel or
compromise any debt or claim or waive or release any material right of the
Company except in the ordinary course of business consistent with past
practice;
(ix) Enter
into any commitment for capital expenditures out of the ordinary
course;
(x) Permit
the Company to enter into any transaction or to make or enter into any Contract
which by reason of its size or otherwise is not in the ordinary course of
business consistent with past practice; Permit
the Company to enter into or agree to enter into any merger or consolidation
with any corporation or other entity, and not engage in any new business or
invest in, make a loan, advance or capital contribution to or otherwise acquire
the securities of any other party;
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(xi) Except
for transfers of cash pursuant to normal cash management practices, permit the
Company to make any investments in or loans to, or pay any fees or expenses to,
or enter into or modify any Contract with, Seller or any affiliate of Seller;
or
(xii) Agree to
do anything prohibited by this Section 6.3 or anything which would make any of
the representations and warranties of the Seller in this Agreement or any other
agreement referenced herein untrue or incorrect in any material respect as of
any time through and including the Closing.
6.4
Consents.
The
Seller shall use their best efforts, and the Purchaser shall cooperate with the
Seller, to obtain at the earliest practicable date all consents and approvals
required to consummate the transactions contemplated by this Agreement,
including, without limitation, the consents and approvals referred to in Section
4.7 hereof; provided, however, that neither the Seller nor the Purchaser shall
be obligated to pay any consideration therefore to any third party from whom
consent or approval is requested.
6.5 Other
Actions.
Each of
the Seller and the Purchaser shall use its best efforts to (i) take all actions
necessary or appropriate to consummate the transactions contemplated by this
Agreement, and (ii) cause the fulfillment at the earliest practicable date of
all of the conditions to their respective obligations to consummate the
transactions contemplated by this Agreement.
6.6
No Solicitation; Alternate
Transaction.
(i) The
Seller will not, and will not cause or permit the Company or any of the
Company's directors, officers, employees, representatives or agents
(collectively, the "Representatives") to, directly or indirectly, (i) discuss,
negotiate, undertake, authorize, recommend, propose or enter into, either as the
proposed surviving, merged, acquiring or acquired corporation, any transaction
involving a merger, consolidation, change of control, business combination,
purchase or disposition of any amount of the assets or capital stock or other
equity interest in the Company other than the transactions contemplated by this
Agreement (an "Alternate Transaction"), (ii) facilitate, encourage, solicit or
initiate discussions, negotiations or submissions of proposals or offers in
respect of an Alternate Transaction, (iii) furnish or cause to be furnished, to
any party, any information concerning the business, operations, properties or
assets of the Company in connection with an Alternate Transaction, or (iv)
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other party to do or seek any of the
foregoing. The Seller will inform the Purchaser in writing
immediately following the receipt by Seller, the Company or any Representative
of any proposal or inquiry in respect of any Alternate Transaction.
(ii) If the
Seller, the Company or any of the Company's directors, officers, employees,
representatives or agents enters into definitive documentation with respect
to,
or accepts in principal a proposal with respect to an Alternate Transaction
prior to the Closing Date, then Seller and Company, jointly and severally
shall pay to Purchasers an amount in cash equal to the
lesser of: (a) the sum of: (i) the documented out-of-pocket third party expenses
Purchasers have incurred in respect of the transactions contemplated by this
Agreement or (ii) Fifty Thousand Dollars ($50,000) (collectively, the “Expense
Reimbursement’’). The Expense Reimbursement shall he paid Purchaser on such date
as Seller and/or Company formally enter into definitive documents, or accepts
any proposal relating to an Alternate Transaction.
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6.7
Publicity.
None of
the Seller nor the Purchaser shall issue any press release or public
announcement concerning this Agreement or the transactions contemplated hereby
without obtaining the prior written approval of the other party hereto, which
approval will not be unreasonably withheld or delayed, unless, in the sole
judgment of the Purchaser or the Seller, disclosure is otherwise required by
applicable law, rule or regulation or by the applicable rules of any stock
exchange on which the Purchaser lists securities, provided that, to the extent
required by applicable law, the party intending to make such release shall use
its best efforts consistent with such applicable law to consult with the other
party with respect to the text thereof.
6.8
Use of
Name.
The
Seller hereby agree that upon the consummation of the transactions contemplated
hereby, the Purchaser and the Company shall have the sole right to the use of
the name "▇▇▇▇▇▇▇.▇▇▇ Incorporated" and the Seller shall not, and shall not
cause or permit any affiliate to, use such name or any variation or simulation
thereof.
6.9
Employment
Agreements.
On or
prior to the Closing Date, each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ (each
“Employee and collectively, the “Employees”) shall enter into an employment
agreement with the Company, substantially in the form of agreement attached
hereto as Exhibit D-1 (the “Employment Agreements”) and Strategic Capital
Advisors shall enter into a consulting agreement for prior services rendered
substantially in the form of agreement attached hereto as Exhibit D-2 (the
“Consulting Agreement”).
6.10 Non-Competition.
For
a period of two years after the later of the Closing Date or the termination of
each Employee’s Employment Agreement by the Company, each Employee agrees not to
engage in any of the following competitive activities: (a) engaging directly or
indirectly in any business or activity substantially similar to any business or
activity engaged in (or scheduled to be engaged) by the Company or the Purchaser
in any areas where the Company or the Purchaser engage in business; (b) engaging
directly or indirectly in any business or activity competitive with any business
or activity engaged in (or scheduled to be engaged) by the Company or the
Purchaser in any areas where the Company or the Purchaser engage in business;
(c) soliciting or taking away any employee, agent, representative, contractor,
supplier, vendor, customer, franchisee, lender or investor of the Company or the
Purchaser, or attempting to so solicit or take away; (d) interfering with any
contractual or other relationship between the Company or the Purchaser
and any employee, agent, representative, contractor, supplier, vendor, customer,
franchisee, lender or investor; or (e) using, for the benefit of any person or
entity other than the Company, any confidential information of the Company or
the Purchaser. Nothing in this Section 6.10 shall be deemed, however, to prevent
Employees from owning securities of any publicly-owned corporation engaged in
any such business, provided that the total amount of securities of each class
owned by such individual in such publicly-owned corporation (other than
Purchaser) does not exceed two percent (2%) of the outstanding securities of
such class. In addition, no Seller shall make any negative statement of any kind
concerning the Company, the Purchaser or their affiliates, or their directors,
officers or agents, except as such may be compelled by legal proceeding or
governmental action or authority.
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6.11 Additional
Funding.
During the six months after the Closing
Date, Purchaser will provide additional non-debt funding to the Company of Five
Hundred Thousand Dollars ($500,000.00) to be used by the Company for general
working capital or such other purposes in furtherance of the business of the
Company as Company and Purchaser shall mutually agree. This money
will be advanced in amounts and at times during this six month period at the
request of the officers of the Company as determined in their sole and absolute
discretion. If any requested advance is not made by the end of a
seven (7) day period, Purchaser shall distribute 13,001,000, or such greater
number of shares if more than 13,001,000 shares of Preferred Stock are issued as
consideration at closing, to the extent that the shares of Preferred Stock are
convertible into more than 13 million one thousand (13,001,000) Shares of common
stock pursuant to the adjustment provisions of section 4.3 of the Certificate of
Designations, to the same shareholders of the Company in the same amounts as the
shares of Preferred Stock distributed to such Company shareholders at Closing.
The holders of a majority of such shares shall be entitled to make one demand to
the Purchaser to register such shares on a registration
statement.
ARTICLE VII
CONDITIONS
TO CLOSING
7.1
Conditions Precedent to
Obligations of Purchaser.
The
obligation of the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Purchaser in whole or in part to the extent permitted by applicable
law):
(a) all
representations and warranties of the Seller contained herein shall be true and
correct as of the date hereof;
(b) all
representations and warranties of the Seller contained herein qualified as to
materiality shall be true and correct, and the representations and warranties of
the Seller contained herein not qualified as to materiality shall be true and
correct in all material respects, at and as of the Closing Date with the same
effect as though those representations and warranties had been made again at and
as of that time; the
Seller shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by them on or prior to the Closing Date;
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(c) the
Purchaser shall have been furnished with certificates (dated the Closing Date
and in form and substance reasonably satisfactory to the Purchaser) executed by
each Seller certifying as to the fulfillment of the conditions specified in
Sections 7.1(a), 7.1(b) and 7.1(c) hereof;
(d) the
Purchaser shall have been furnished with duly authorized shareholder and Board
of Director resolutions of Seller and the Company authorizing the entry by
Seller and the Company into this Agreement;
(e) Certificates
representing 100% of the Shares shall have been, or shall at the Closing be,
validly delivered and transferred to the Purchaser, free and clear of any and
all liens;
(f) The SEC
shall have declared the S-4 effective. No stop order suspending the
effectiveness of the S-4 or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Joint
Proxy Statement/Prospectus, shall have been initiated or threatened in writing
by the SEC.
(g) there
shall not have been or occurred any Material Adverse Change;
(h) the
Seller shall have obtained all consents and waivers referred to in Section 4.7
hereof, in a form reasonably satisfactory to the Purchaser, with respect to the
transactions contemplated by this Agreement;
(i) no legal
proceedings shall have been instituted or threatened or claim or demand made
against the Seller, the Company, or the Purchaser seeking to restrain or
prohibit or to obtain substantial damages with respect to the consummation of
the transactions contemplated hereby, and there shall not be in effect any order
by a governmental body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
hereby;
(j) the
Purchaser shall have received the written resignations of each director of the
Company,
the
Employment Agreements shall have been executed by Purchaser, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇ and Consulting Agreement executed by Strategic Capital
Advisors.
7.2
Conditions Precedent to Obligations of the Seller.
The
obligations of the Seller to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Seller in whole or in part to the extent permitted by applicable
law):
(a) all
representations and warranties of the Purchaser contained herein shall be true
and correct as of the date hereof; all
representations and warranties of the Purchaser contained herein qualified as to
materiality shall be true and correct, and all representations and warranties of
the Purchaser contained herein not qualified as to materiality shall be true and
correct in all material respects, at and as of the Closing Date with the same
effect as though those representations and warranties had been made again at and
as of that date;
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(b) the
Purchaser shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by Purchaser on or prior to the Closing Date;
(c) The
SEC shall have declared the S-4 effective. No stop order suspending
the effectiveness of the S-4 or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Joint
Proxy Statement/Prospectus, shall have been initiated or threatened in writing
by the SEC.
(d) the
Seller shall have been furnished with certificates (dated the Closing Date and
in form and substance reasonably satisfactory to the Seller) executed by the
Chief Executive Officer and Chief Financial Officer of the Purchaser certifying
as to the fulfillment of the conditions specified in Sections 7.2(a), 7.2(b) and
7.2(c); and
(e) no legal
proceedings shall have been instituted or threatened or claim or demand made
against the Seller, the Company, or the Purchaser seeking to restrain or
prohibit or to obtain substantial damages with respect to the consummation of
the transactions contemplated hereby, and there shall not be in effect any order
by a governmental body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
hereby.
ARTICLE VIII
DOCUMENTS
TO BE DELIVERED
8.1
Documents to be Delivered by
the Seller.
At the
Closing, the Seller shall deliver, or cause to be delivered, to the Purchaser
the following:
(a) stock
certificates representing the Shares referred to in Section 7.1(f) hereof, duly
endorsed in blank or accompanied by stock transfer powers and with all requisite
stock transfer tax stamps attached;
(b) the
certificates referred to in Section 7.1(e) hereof;
(c) copies of
all consents and waivers referred to in Section 7.1(i) hereof;
(d) written
resignations of each of the directors of the Company;
(e) certificate
of good standing with respect to the Company issued by the Secretary of State of
the State of incorporation, and for each state, if any, in which the Company is
qualified to do business as a foreign corporation; such
other documents as the Purchaser shall reasonably request.
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8.2
Documents to be
Delivered by the Purchaser.
At the
Closing, the Purchaser shall deliver to the Seller the following:
(a) the
Closing Payment (provided that the Preferred Stock may be delivered within three
(3) business days of the Closing Date pursuant to Section 2.2(ii); provided,
however, if the Closing Payment is not delivered at Closing, the Purchaser shall
deliver irrevocable instructions to the Purchaser’s Transfer Agent to deliver
the Closing Payment as required under this Agreement);
(b) the
certificates referred to in Section 7.2(e) hereof;
(c) Employment
Agreements and Consulting Agreement, substantially in the forms of Exhibits D-1
and D-2 hereto, duly executed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ and Strategic
Capital Advisors, respectively;
(d) such
other documents as the Seller shall reasonably request.
ARTICLE IX
INDEMNIFICATION
9.1
Indemnification.
(a) Subject
to Sections 9.2 and 10.2 hereof, Seller hereby agree to indemnify and hold the
Purchaser, the Company, and their respective directors, officers, employees,
affiliates, agents, successors and assigns (collectively, the "Purchaser
Indemnified Parties") harmless from and against:
(i) any and
all liabilities of the Company of every kind, nature and description, absolute
or contingent, existing as against the Company prior to and including the
Closing Date or thereafter coming into being or arising by reason of any state
of facts existing, or any transaction entered into, on or prior to the Closing
Date, except to the extent that the same have been fully provided for in the
Schedules attached hereto or were incurred in the ordinary course of business
between the Company Balance Sheet Date and the Closing Date;
(ii) any and
all losses, liabilities, obligations, damages, costs and expenses based upon,
attributable to or resulting from the failure of any representation or warranty
of the Seller set forth in Section 4 hereof, or any representation or warranty
contained in any certificate delivered by or on behalf of the Seller pursuant to
this Agreement, to be true and correct in all respects as of the date
made;
(iii) any and
all losses, liabilities, obligations, damages, costs and expenses based upon,
attributable to or resulting from the breach of any covenant or other agreement
on the part of the Seller under this Agreement;
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(iv) any and
all notices, actions, suits, proceedings, claims, demands, assessments,
judgments, costs, penalties and expenses, including reasonable attorneys' and
other professionals' fees and disbursements (collectively, "Expenses") incident
to any and all losses, liabilities, obligations, damages, costs and expenses
with respect to which indemnification is provided hereunder (collectively,
"Losses").
(b) Subject
to Sections 9.2 and 10.2 hereof, Purchaser hereby agrees to indemnify and hold
the Seller and their respective affiliates, agents, successors and assigns
(collectively, the "Seller Indemnified Parties") harmless from and
against:
(i) any and
all Losses based upon, attributable to or resulting from the failure of any
representation or warranty of the Purchaser set forth in Section 5 hereof, or
any representation or warranty contained in any certificate delivered by or on
behalf of the Purchaser pursuant to this Agreement, to be true and correct as of
the date made;
(ii) any and
all Losses based upon, attributable to or resulting from the breach of any
covenant or other agreement on the part of the Purchaser under this Agreement or
arising from the ownership or operation of the Company from and after the
Closing Date, unless such claim is for a pre-Closing matter; and
(iii) any and
all Expenses incident to the foregoing.
9.2 Limitations on
Indemnification for Breaches of Representations and
Warranties.
An
indemnifying party shall not have any liability under Section 9.1(a)(ii) or
Section 9.1(b)(i) hereof unless the aggregate amount of Losses and Expenses to
the indemnified parties exceeds $10,000 (the “Basket”) (except for Losses and
Expenses based upon, attributable to or resulting from the failure of any
representation or warranty to be true and correct under Section 4, for which the
Basket shall not apply) and, in such event, the indemnifying party shall be
required to pay the entire amount of such Losses and Expenses in excess of the
Basket. Notwithstanding anything else contained herein, the maximum
liability Seller shall be required to pay hereunder, in the aggregate, shall be
the aggregate amount of cash and shares of the Purchaser (valued as of their
date of issuance) paid or delivered to the Seller (the “Cap”). In
addition, if any Loss or Expense of Purchaser is covered by insurance, Seller
shall not be required to indemnify Purchaser for the amount of such Losses or
Expenses to the extent of such insurance proceeds and Seller shall only pay
Purchaser the excess of the Losses and Expenses, if any, over such insurance
proceeds, subject to the Cap. Following the Closing, other than in
cases of fraud, this Article 9 shall be the sole and exclusive remedy of the
parties hereto and their successors and assigns with respect to any and all
claims for Losses and Expenses sustained or incurred arising out of this
Agreement.
9.3
Indemnification
Procedures.
(a) In the
event that any legal proceedings shall be instituted or that any claim or demand
("Claim") shall be asserted by any person or entity in respect of which payment
may be sought under Section 9.1 hereof (regardless of the Basket referred to
above), the indemnified party shall reasonably and promptly cause written notice
of the assertion of any Claim of which it has knowledge which is covered by this
indemnity to be forwarded to the indemnifying party. The indemnifying
party shall have the right, at its sole option and expense, to be represented by
counsel of its choice, which must be reasonably satisfactory to the indemnified
party, and to defend against, negotiate, settle or otherwise deal with any Claim
which relates to any Losses indemnified against hereunder. If the
indemnifying party elects to defend against, negotiate, settle or otherwise deal
with any Claim which relates to any Losses indemnified against hereunder, it
shall within five (5) days (or sooner, if the nature of the Claim so requires)
notify the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Claim which relates to any Losses indemnified against hereunder,
fails to notify the indemnified party of its election as herein provided or
contests its obligation to indemnify the indemnified party for such Losses under
this Agreement, the indemnified party may defend against, negotiate, settle or
otherwise deal with such Claim. If the indemnified party defends any
Claim, then the indemnifying party shall reimburse the indemnified party for the
Expenses of defending such Claim upon submission of periodic
bills. If the indemnifying party shall assume the defense of any
Claim, the indemnified party may participate, at his or its own expense, in the
defense of such Claim; provided, however, that such indemnified party shall be
entitled to participate in any such defense with separate counsel at the expense
of the indemnifying party if, (i) so requested by the indemnifying party to
participate or (ii) in the reasonable opinion of counsel to the indemnified
party, a conflict or potential conflict exists between the indemnified party and
the indemnifying party that would make such separate representation advisable;
and provided, further, that the indemnifying party shall not be required to pay
for more than one such counsel for all indemnified parties in connection with
any Claim. The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
Claim.
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(b) After any
final judgment or award shall have been rendered by a court, arbitration board
or administrative agency of competent jurisdiction and the expiration of the
time in which to appeal therefrom, or a settlement shall have been consummated,
or the indemnified party and the indemnifying party shall have arrived at a
mutually binding agreement with respect to a Claim hereunder, the indemnified
party shall forward to the indemnifying party notice of any sums due and owing
by the indemnifying party pursuant to this Agreement with respect to such matter
and the indemnifying party shall be required to pay all of the sums so due and
owing to the indemnified party by wire transfer of immediately available funds
within 10 business days after the date of such notice.
(c) The
failure of the indemnified party to give reasonably prompt notice of any Claim
shall not release, waive or otherwise affect the indemnifying party's
obligations with respect thereto except to the extent that the indemnifying
party can demonstrate actual loss and prejudice as a result of such
failure.
(d) With
respect to amounts payable by Seller hereunder to the Purchaser hereunder, it is
agreed that Seller shall first be obligated to pay all amounts in cash, up to
the cash value of the Preferred Stock actually received by the Seller pursuant
to Article II of this Agreement. Seller may then deliver shares of
Purchaser Preferred Stock to the Purchaser to pay any additional amounts due
hereunder. Any shares of Purchaser common stock so used to make
payments hereunder shall be valued at the closing price of such shares on the
day prior to the date of delivery to the Purchaser, endorsed for
transfer. Any additional amounts which Seller shall be required to
pay after the delivery of any shares of Purchaser common stock shall be made in
cash.
ARTICLE X
MISCELLANEOUS
10.1
Payment of Sales, Use or
Similar Taxes.
All
sales, use, transfer, intangible, recordation, documentary stamp or similar
Taxes or charges, of any nature whatsoever, applicable to, or resulting from,
the transactions contemplated by this Agreement shall be borne by the
Seller.
10.2
Survival of Representations
and Warranties.
The
parties hereto hereby agree that the representations and warranties contained in
this Agreement or in any certificate, document or instrument delivered in
connection herewith, shall survive the execution and delivery of this Agreement,
and the Closing hereunder, regardless of any investigation made by the parties
hereto; provided, however, that any claims or actions with respect thereto
(other than claims for indemnifications with respect to the representation and
warranties contained in Sections 4.3, 4.11, 4.28 and 5.8 which shall
survive for periods coterminous with any applicable statutes of limitation)
shall terminate unless within twenty four (24) months after the Closing Date
written notice of such claims is given to the Seller or such actions are
commenced.
10.3
Expenses.
Except as
otherwise provided in this Agreement, the Seller and the Purchaser shall each
bear its own expenses incurred in connection with the negotiation and execution
of this Agreement and each other agreement, document and instrument contemplated
by this Agreement and the consummation of the transactions contemplated hereby
and thereby, it being understood that in no event shall the Company bear any of
such costs and expenses.
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10.4
Further
Assurances.
The
Seller and the Purchaser each agrees to execute and deliver such other documents
or agreements and to take such other action as may be reasonably necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.
10.5
Submission to Jurisdiction;
Consent to Service of Process.
(a) The
parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of
any federal or state court located within the State of Florida over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees that all claims in
respect of such dispute or any suit, action proceeding related thereto may be
heard and determined in such courts. The parties hereby irrevocably
waive, to the fullest extent permitted by applicable law, any objection which
they may now or hereafter have to the laying of venue of any such dispute
brought in such court or any defense of inconvenient forum for the maintenance
of such dispute. Each of the parties hereto agrees that a judgment in
any such dispute may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
(b) Each of
the parties hereto hereby consents to process being served by any party to this
Agreement in any suit, action or proceeding by the mailing of a copy thereof in
accordance with the provisions of Section 10.9.
(c) If any legal action or any arbitration
or other proceeding is brought for the enforcement or interpretation of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with or related to this Agreement, the
successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs in connection with that action or proceeding, in
addition to any other relief to which it or they may be
entitled.
10.6
Entire Agreement; Amendments
and Waivers.
This Agreement (including the schedules
and exhibits hereto )represents the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought. No action taken pursuant to this Agreement,
including without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by
law.
10.7
Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without giving effect to
principles regarding conflict of laws.
10.8
Table of Contents and
Headings.
The table
of contents and section headings of this Agreement are for reference purposes
only and are to be given no effect in the construction or interpretation of this
Agreement.
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10.9
Notices.
All
notices and other communications under this Agreement shall be in writing and
shall be deemed given when delivered personally, mailed by certified mail,
return receipt requested, or via recognized overnight courier service with all
charges prepaid or billed to the account of the sender to the parties (and shall
also be transmitted by facsimile to the parties receiving copies thereof) at the
following addresses (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision):
|
(a)
|
Purchaser:
|
OmniReliant
Holdings, Inc.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention
▇▇▇▇ ▇▇▇▇▇▇▇▇
Copy
to:
▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇)
▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
(b)
|
Seller
and Company:
|
Abazias,
Inc.
▇▇▇▇ ▇▇
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
10.10 Severability.
If any
provision of this Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect.
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10.11
Binding Effect; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights
in any person or entity not a party to this Agreement except as provided
below. No assignment of this Agreement or of any rights or
obligations hereunder may be made by either the Seller or the Purchaser (by
operation of law or otherwise) without the prior written consent of the other
parties hereto and any attempted assignment without the required consents shall
be void.
[intentionally
blank]
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IN WITNESS WHEREOF, the parties hereto
have executed or caused to be duly executed this Stock Purchase Agreement as of
the date first set forth above.
OMNIRELIANT
HOLDINGS, INC.
By: 
▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇▇▇▇▇.▇▇▇,
INC.
By: 
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Chief
Executive Officer
ABAZIAS,
INC.
By:
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Chief
Executive Officer
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EXHIBITS
|
Exhibit
A
|
Certificate
of Designations of OmniReliant Holdings, Inc.’s Preferred
Stock
|
|
Exhibit
B
|
Secured
Convertible Promissory Note dated August 12,
2008
|
|
Exhibit
C
|
Note
Purchase Agreement dated August 12, 2008 by and between Abazias, Inc. and
OmniReliant Holdings, Inc.
|
|
Exhibit
D-1
|
Employment
Agreements of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇.
|
|
Exhibit
D-2
|
Consulting
Agreement by and between Strategic Capital Advisors and OmniReliant
Inc.
|
SCHEDULES
Schedule
1.1
Shares
Schedule
4.3
Capital Stock
Schedule
4.6
Subsidiaries, Parents and Affiliates.
Schedule
4.8
SEC Documents; Financial Statements
Schedule
4.11 Absence
of Undisclosed Liabilities
Schedule
4.12 Taxes
Schedule
4.13 Accounts
Receivable
Schedule
4.14 Inventory
Schedule
4.15 Machinery
and Equipment
Schedule
4.16 Real
Property Matters
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Schedule
4.17 Leases
Schedule
4.18 Patents,
Software, Trademarks, Etc.
Schedule
4.19 Insurance
Policies
Schedule
4.21 Lists
of Contracts, Etc.
Schedule
4.22 Compliance
With the Law
Schedule
4.23 Litigation;
Pending Labor Disputes
Schedule
4.25 Product
Warranties and Product Liabilities
Schedule
4.26 Assets
Schedule
4.28 Licenses,
Permits, Consents and Approvals
Schedule
4.29 Environmental
Matters
Schedule
4.31 Related
Party Transactions
Schedule
6.3(b)(viii) Conduct
of Business
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