EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated for reference the 24th day of
September, 1996, is entered into by and among Advanced Golf Systems, Inc., a
California corporation ("AGS"), Carbite Golf Inc., a corporation organized under
the laws of the Province of British Columbia, Canada ("CGI"), and AGS
Acquisition Corp., a California corporation (the "Company"), all of the issued
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and outstanding stock of which is owned by CGI.
For and in consideration of the mutual covenants and undertakings set forth
herein, the parties hereby agree as follows:
ARTICLE 1.
THE MERGER
1.1 The Merger.
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(a) Subject to the provisions of this Agreement, at the Effective Time (as
defined in Section 1.1(b)), AGS shall be merged with and into the
Company (the "Merger") in accordance with the California General
Corporation law (the "CGCL"), whereupon the separate existence of AGS
shall cease, and the Company shall be the surviving corporation (the
"Surviving Corporation"). The Merger is, and the transactions
contemplated by this Agreement are, sometimes referred to herein as
the "Acquisition".
(b) As soon as practicable after satisfaction or, to the extent provided
hereunder, waiver of all conditions to the Merger, the Company and AGS
shall deliver to the Secretary of State of California, for filing, a
Certificate of Merger together with all other filings or recordings
required by the CGCL in connection with the Merger. The Merger shall
be consummated, the closing of the Acquisition (the "Closing") shall
occur, and the Merger shall become effective at such time as the
Certificate of Merger is duly filed with the California Secretary of
State, or at
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such later time as is specifically set forth in the Certificate of
Merger (the "Effective Time"). The date on which the Closing takes
place is sometimes hereinafter referred to as the "Closing Date". The
Closing shall take place at the offices of Carbite Inc., Suite 110,
6370 ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇▇▇▇, or at such other place
or such other time as the parties shall mutually agree.
(c) From and after the Effective Time, the Surviving Corporation shall
possess all of the rights, privileges, powers and franchises, and
shall be subject to all of the restrictions, liabilities and duties of
the Company and of AGS, all as provided under the CGCL.
1.2 Conversion of Shares. Upon the Effective Time:
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(a) The 3,956,000 common shares of AGS issued and outstanding as of the
Effective Time shall be converted into the right to receive and shall
become 700,000 units of CGI, the parent corporation of the Surviving
Corporation, each such unit (the "CGI Unit") consisting of one common
share of CGI, and one non-transferable warrant entitling the holder to
purchase one additional common share of CGI for $1.50 (Canadian) for a
period expiring on the second anniversary of the Closing.
(b) The conversion of AGS shares into CGI Units shall be as calculated in
the attached Schedule "A".
(c) The full names and addresses of the shareholders of AGS are as set out
in the attached Schedule "B".
(d) The conversion shall be deemed effected without any action on the part
of the holders thereof. Commencing at the Effective Time, however,
each holder of an outstanding certificate or certificates theretofore
representing shares of common
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stock of AGS may surrender the same to CGI, and such holder shall
thereupon be entitled upon such surrender to receive in exchange
therefor a certificate or certificates representing the number of CGI
Units into which the shares of common stock of AGS theretofore
represented by the certificate or certificates so surrendered shall
have been converted (subject to the resale restrictions and legending
as hereinafter described). Although, prior to surrender, each
outstanding certificate representing issued and outstanding common
stock of AGS shall be deemed for all purposes, except the payment of
dividends, to evidence ownership of the number of shares of CGI Units
into which the shares of common stock of AGS have been so converted,
no actual dividends or other distributions shall be paid to any
holders of record of common stock of CGI, after the Effective Time,
who have not surrendered their AGS share certificates for transfer.
Upon surrender and exchange, however, all previously withheld
dividends and distributions, without interest, shall be paid to such
holders.
(e) Dissenting AGS Shareholders. AGS shall give CGI prompt notice of any
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demands for the purchase of shares of AGS shares for cash. If any
holder of shares of AGS shares demands that AGS purchase such shares
for cash in connection with the Merger pursuant to the provisions of
Section 1300 of the CGCL, but such holder withdraws his or her demand
for such purchase (and AGS consents to such withdrawal) or becomes
ineligible to require such purchase, such shares of AGS shares shall
be converted into, and such holder shall be deemed the record owner
of, shares of CGI Common Stock and CGI Warrants determined in
accordance with Section 1.2 of this Agreement
(f) Plan of Reorganization. The parties agree that this Agreement shall
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constitute a Plan of Reorganization for purposes of Section 368 of the
Internal Revenue Code.
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ARTICLE 2.
THE SURVIVING CORPORATION
2.1 Articles of Incorporation. The Articles of Incorporation of the
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Company, as amended at the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until further amended in accordance
with applicable law.
2.2 Bylaws. The Bylaws of the Company, as amended at the Effective Time,
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shall be the Bylaws of the Surviving Corporation until further amended in
accordance with applicable law.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF AGS
AGS represents and warrants to CGI and the Company that:
3.1 Organization and Existence. AGS is a corporation duly incorporated on
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January 6, 1993, and validly existing and in good standing under the laws of the
State of California. AGS has full corporate power and authority to own and
lease the properties and assets it now owns and leases and to carry on its
business as and where such properties and assets are now owned or leased, or
where such business is now conducted. AGS has heretofore delivered to the Buyer
true and correct copies of its Articles of Incorporation and Bylaws, each as
amended to the date hereof. AGS is duly qualified or licensed to do business
and is in good standing as a foreign corporation in each jurisdiction in which
AGS owns or leases any real property or conducts any business, so as to require
such qualification or licensing, except for instances where the failure to so
qualify would not materially adversely affect the business or financial
condition of AGS. The minute books of AGS contain full and accurate records of
all meetings of the Board of Directors thereof, any committee of the Board of
Directors and the shareholders thereof, from the date of incorporation through
the date of this Agreement, and accurately reflect all transactions passed
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upon by the Board of Directors, any committees thereof or the shareholders of
AGS.
3.2 Capitalization.
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(a) The authorized share capital of AGS consists of 10,000,000 Common
Shares.
(b) As of the date of this Agreement, there were 3,956,000 shares of AGS's
common stock issued and outstanding, according to AGS's stock records,
all of which are owned by the Shareholders of AGS (the "Shareholders")
as set forth in Schedule "A". All of the outstanding common stock of
AGS are duly authorized, validly issued, and fully paid and non-
assessable.
3.3 Subsidiaries. AGS has no subsidiaries; however, it has a 49% interest
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in Viper Bite Company, a California General Partnership.
3.4 Stock Options and Other Securities. There are no options or other
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rights to acquire from AGS, and no obligation of AGS to issue, any capital
stock, voting securities, or securities convertible into or exchangeable for
capital stock of AGS.
3.5 Authority and Approvals. Subject to obtaining the approval of the
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holders of AGS common stock in accordance with the CGCL, AGS has the corporate
power and authority to execute, deliver and perform this Agreement and to
consummate the Merger. Except for such shareholder approval, all corporate and
other proceedings required to be taken by or on behalf of AGS, including without
limitation, all actions required to be taken by the Board of Directors of AGS,
to authorize AGS to enter into and carry out this Agreement, to perform the
transactions contemplated hereby and to consummate the Merger, have been duly
and properly taken. This Agreement has been duly executed and delivered by AGS
and is valid and binding upon AGS in accordance with its terms.
3.6 Financial Statements. The books of account and related records of AGS
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in
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reasonable detail accurately and fairly reflect, in all material respects,
their respective assets, liabilities, capital, equity and transactions. The
consolidated financial statements (including the notes thereto) of AGS and its
consolidated subsidiaries for the fiscal years ended December 31, 1995 and
December 31, 1996 respectively, attached hereto as Schedule "C", are true and
correct and fairly present the consolidated financial position of AGS as of said
dates and the results of their operations and changes in shareholders' equity
and financial position for such fiscal years. Each of the AGS Subsidiaries is
included in the consolidated financial statements referred to in Schedule "C".
3.7 Liabilities. Except as set forth in Schedule "C", there are no
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material liabilities of AGS other than:
(a) Liabilities disclosed or provided for in Schedule "C", including the
notes to the Balance Sheet;
(b) Liabilities incurred in the ordinary course of business since December
31, 1996, none of which has been materially adverse to the business,
assets, financial condition or results of operations of AGS and none
of which is attributable to any period prior to December 31, 1996.
"Liabilities" shall be read in the broadest sense and shall include all
liabilities, debts and obligations, whether accrued, absolute or contingent, and
whether due or to become due. Nothing has come to the attention of AGS which
would cause it to believe that there exist any circumstances, conditions, events
or arrangements which may hereafter give rise to Liabilities except in the
ordinary and usual course of business.
3.8 Financial Statements. Upon Closing, AGS shall provide to CGI and the
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Company up-to-date Financial Statements which shall include, without limitation,
confirmation that AGS will on Closing have not less than $700,000 U.S. of net
working capital after paying off all liabilities. AGS' net working capital
would include it's pro-rata share of Viper Bite Company's
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net working capital on the Closing Date.
3.9 No Breach; Governmental Consents. The execution and delivery of this
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Agreement and the consummation of the transactions contemplated hereby will not,
and with notice or the lapse of time or both would not, result in the breach of
any of the terms or conditions of, or constitute a default under, the Articles
of Incorporation or Bylaws (or other constituent instruments) of AGS, or any
mortgage, bond, indenture, agreement, franchise or other instrument or
obligation to which AGS is a party or by which it or it's properties or assets
may be bound.
3.10 Tax Matters. (i) AGS has filed all tax returns, reports and
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declarations required to be filed for all periods prior to the Closing Date and
has not extended any time in which to file any such returns, reports or
declarations, (ii) AGS has paid, at the time and in the manner required, all
taxes shown to be due on any returns, reports and declarations and is not
delinquent in the payment of any estimated taxes, and (iii) no audit or
investigation of AGS's liability for any Taxes is pending or in progress, and
AGS has not received any notice of, and has no knowledge that, any such audit or
investigation will be commenced or is threatened. No deficiency or adjustment
in respect to Taxes which has been assessed against AGS remains unpaid, and AGS
has no knowledge of any unassessed tax deficiency proposed or threatened, or any
tax audits or investigations pending or threatened against AGS. For purposes of
this Section, the term "Tax" shall include all federal, state, local, foreign or
other governmental income, franchise, gross receipts, property, sales, use,
transfer, estimated excise, employment and other taxes of any nature whatsoever
including, without limitation all interest, penalties, fines, assessments and
deficiencies related thereto.
3.11 Affiliates. Except as listed in Schedule "D" there are no
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"affiliates" of AGS, as such term is used for purposes of Rule 145 promulgated
under the Securities Act. References to AGS throughout shall include AGS's 49%
interest in Viper Bite Company.
3.12 Adverse Developments. Since December 31, 1996 there has been no (a)
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change
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in the assets, operations, business, financial condition or capital structure,
including without limitation changes in the competitive position, sales or
earnings of AGS, or (b) adverse judgment in any lawsuit pending at the date
hereof which have had or may have a materially adverse effect on the business or
financial condition of AGS. AGS knows of no development of a nature that may
have a materially adverse effect on the business or financial condition of AGS.
3.13 Employees. AGS has advised CGI with respect to each officer of AGS
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and Viper Bite Company and each employee of AGS and Viper Bite Company receiving
a salary, as of the date hereof, all remuneration paid or to be paid during
AGS's fiscal year ending December 31, 1996, and all commitments with respect to
compensation for the year commencing January 1, 1997 the particulars of which
are set out in the attached Schedule "E". AGS covenants that it shall use its
best efforts to arrange for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to enter into an agreement to become
a full-time employee of the Company on the Effective Date.
3.14 Certain Transactions. AGS has no officer, director, or consultant
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who: (i) owns, directly or indirectly, any interest in (except less than 1%
stock holdings for investment purposes in securities of publicly-held and traded
companies), or is an officer, director, consultant, agent or employee of, any
corporation, firm association or other business entity or organization that is a
competitor, lessor, lessee, customer, supplier or distributor of AGS, (ii) owns,
directly or indirectly, in whole or in part, any property, invention, permit,
licence, or secret or confidential information that AGS is using, or (iii) has
any cause of action or other claim whatsoever (other than for indemnification
under AGS's Articles of Incorporation or Bylaws or any policy of insurance
maintained by AGS or under applicable law, or for compensation, remuneration,
fees or business expenses currently due, or under existing employment
agreements) against, or owes any amount to, AGS. There are no transactions to
which AGS is a party, on the one hand, and any such person is a party as
disclosed principal, on the other hand, and any such transactions involving AGS,
on the one hand, and any of such person, on the other hand, during the period
covered by the financial statements described in Section 3.6 hereof, which are
required in accordance with generally accepted accounting principles to be
reflected in such financial statements, have been so reflected, and each of such
transactions has been effected at prices,
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interest rates or charges that are substantially the same as those that would
have been paid or incurred in similar transactions involving AGS and
unaffiliated parties.
3.15 Brokers. Except for accountants and attorneys acting as such (and not
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as brokers, finders or in other like capacity), all negotiations on behalf of
AGS relating to this Agreement and the transactions contemplated hereby have
been carried on directly by it with AGS without the intervention of any broker,
finder, investment banker or other third party representing AGS. Except as
provided in the preceding sentence, neither AGS nor any officers, directors or
agents or AGS have engaged or authorized any broker, finder, investment banker
or other third party to act on AGS's behalf, directly or indirectly, as a
broker, finder, investment banker or in any other like capacity in connection
with this Agreement or the transactions contemplated hereby, or have consented
to or acquiesced in anyone so acting, and AGS knows of no claim for compensation
from AGS for so acting or of any basis for such claim.
3.16 Actions and Proceedings. There are no actions, suits, claims or
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legal, administrative or arbitration proceedings or investigations pending or,
to the best of knowledge of AGS, threatened, against, involving or affecting AGS
or any of it's properties, business or assets. There are no outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against, involving or affecting AGS or any of
it's properties, business or assets.
3.17 Fairness Opinion. AGS has obtained a fairness opinion regarding the
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proposed Merger in the form attached hereto as Schedule "F".
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF CGI
AND THE COMPANY
CGI and the Company represent and warrant to AGS and the shareholders
of AGS that:
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4.1 Organization and Existence. Both CGI and the Company are corporations
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duly organized, validly existing and in good standing under the laws of their
jurisdictions of incorporation, and have all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on their respective businesses as now conducted.
4.2 Capitalization of CGI. At December 31, 1996, the authorized capital
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stock of CGI consisted of 50,000,000 shares of CGI Common Stock, of which
9,118,536 shares were issued and outstanding, and 825,000 shares were reserved
for issuance upon the exercise or conversion of outstanding options, warrants,
convertible securities or other similar instruments. Except for an Agreement
and Plan of Merger, with Carbite, Inc., a California corporation, dated for
reference June 6, 1996, (the "Carbite Merger Agreement") a copy of which is
attached as Schedule "FF", no other shares were authorized or reserved for
issuance by CGI, and, except with regard to its shares reserved for issuance,
CGI had not entered into any agreement, or made any promise or commitment, to
issue shares of its Common Stock or options or warrants to purchase its Common
Stock or securities convertible into its Common Stock or other similar
instruments to any other person. There are no agreements between or among any
of CGI's shareholders with respect to the voting of any shares of CGI Common
Stock on any matter, or providing for the appointment of any voting trustee, or
any similar proxy pooling or shareholders agreement.
4.3 Subsidiaries and Affiliated Entities. The attached Schedule "G" sets
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forth with respect to each corporation, partnership, joint venture or other
business entity controlled by CGI or the Company (hereinafter referred to
collectively as the "CGI Subsidiaries" and individually as "CGI Subsidiary"),
(i) the name and jurisdiction of incorporation or other organization, (ii) the
authorized, issued and outstanding shares of capital stock or other voting
interests, (iii) the record and beneficial ownership of such outstanding shares
or voting interests, and (iv) each jurisdiction in which it is duly qualified or
licensed to do business and is in good standing as a foreign corporation, and,
with respect to each other corporation, partnership, joint venture or other
business entity of which CGI, the Company, or any CGI Subsidiary owns, in the
aggregate, five
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percent or more of the outstanding shares of any class or other interests, the
information described in the foregoing clauses (i) and (ii) and the percentage
of records and beneficial ownership of each class of outstanding shares or other
interest owned by CGI, the Company and each Subsidiary. As used herein "control"
shall mean (i) the ownership of 50 percent or more of the voting securities or
other voting interests of such corporation, partnership, joint venture or other
business entity or (ii) the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
corporation, partnership, joint venture or other business entity, whether
through the ownership of voting shares, by contract or otherwise. Schedule "G"
lists the charter documents of each CGI Subsidiary, including the Articles of
Incorporation and Bylaws (or other constituent instruments), as amended, are in
full force and effect. The minute books of each CGI Subsidiary accurately
reflect all transactions from inception of each CGI Subsidiary through the date
of this Agreement passed upon by the Board of Directors (or similar governing
bodies), any committee thereof, or shareholders or other equity owners of such
CGI Subsidiary.
4.4 Options, Warrants, Etc. As of December 31, 1996, except as set forth
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in Schedule "H", there are no outstanding options, warrants, rights, calls,
subscriptions, commitments or agreements of any character whatsoever relating
to, or calling for the issuance, transfer, sale or other disposition of, or the
repurchase or other acquisition of, any shares, issued or unissued, of CGI
Common Stock or Company Common Stock, the capital stock or other voting
interests of any CGI Subsidiary or securities convertible or exchangeable into
or for any of the foregoing (collectively "Rights"), to which CGI or any
Subsidiary is a party or by which CGI or any Subsidiary is bound. Schedule "H"
sets forth with respect to all employees of CGI or a CGI Subsidiary, and all
other persons holding Rights, all Rights currently outstanding, specifying the
plan or other arrangement pursuant to which the same were granted, the exercise
price, exercise schedule, expiration date and other material terms thereof and
any applicable special terms or restrictions of grant.
4.5 Authority for Agreement. Subject to obtaining the approval of the
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Vancouver Stock Exchange, each of CGI and the Company has obtained the requisite
approvals of the
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boards of directors and shareholders of CGI and the Company, respectively, and
each of CGI and the Company has full corporate power and authority to execute
and deliver this Agreement, to perform the transactions contemplated hereby and
to consummate the Merger. All corporate and other proceedings required to be
taken by or on behalf of CGI or the Company, including without limitation, all
action required to be taken by the Board of Directors of CGI and the Company, to
authorize CGI and the Company to enter into and carry out this Agreement, to
perform the transactions contemplated hereby and to consummate the Merger, have
been duly and properly taken. This Agreement has been duly executed and
delivered by CGI and the Company and is valid and binding upon CGI and the
Company in accordance with its terms.
4.6 No Breach: Governmental Consents. The execution and delivery of this
---------------------------------
Agreement and the consummation of the transactions contemplated hereby will not,
and with notice or the lapse of time or both would not (i) result in the breach
of any of the terms or conditions of, or constitute a default under, the
Articles of Incorporation or Bylaws (or other constituent instruments) of CGI,
the Company, or any CGI Subsidiary, or any mortgage, bond, indenture, agreement,
franchise or other instrument or obligation to which CGI, the Company, or any
CGI Subsidiary is a party or by which any one of them or any of their properties
or assets may be bound, (ii) violate any judgment, order, writ, injunction or
decree of any court, administrative agency or governmental body, (iii)
constitute a violation of CGI, the Company, or any CGI Subsidiary of any law or
regulation of any jurisdiction as such law or regulation relates to CGI, the
Company, or any CGI Subsidiary or to the securities, property or business of
CGI, the Company, or any CGI Subsidiary, or (iv) result in the breach of any of
the terms or conditions of, constitute a default under, or otherwise cause any
impairment of, any license or permit. No consent, approval or authorization of,
or declaration or filing on the part of CGI, the Company or any CGI Subsidiary
with any federal, state, local or foreign governmental or regulatory authority
is required in connection with the valid execution and delivery of this
Agreement or the performance by CGI and the Company of any of the transactions
contemplated hereby.
4.7 Financial Statements. The books of account and related records of
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CGI, the
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Company, and each CGI Subsidiary in reasonable detail accurately and fairly
reflect, in all material respects, their respective assets, liabilities,
capital, equity and transactions. The consolidated financial statements
(including the notes thereto) of CGI and its consolidated subsidiaries for the
fiscal year ended December 31, 1995, attached hereto as Schedule "I", are true
and correct and fairly present the consolidated financial position of CGI, and
the CGI Subsidiaries as of said dates and the results of their operations and
changes in shareholders' equity and financial position for such fiscal years.
The consolidated financial statements (including the notes thereto) of CGI and
the CGI Subsidiaries for the nine-month period ended September 30, 1996,
included in Schedule "I" fairly present the consolidated financial position of
CGI and the CGI Subsidiaries as of the said date and the results of their
operations for such year-to-date period, were prepared in accordance with
generally accepted accounting principles, applied on a basis consistent with
prior fiscal years and include all adjustments necessary for a fair
presentation. All references herein in to the "CGI Balance Sheet" shall be
deemed to refer to the CGI balance sheet as of September 30, 1996, contained in
the consolidated financial statements of CGI as of and for the period ended on
such date and to the related notes thereto; all references herein to the
"Balance Sheet Date" shall be deemed to refer to September 30, 1996; and all
references herein to the "CGI Statement of Income" shall be deemed to refer to
the consolidated statement of income of CGI for the nine-month period ended on
the Balance Sheet Date contained in the consolidated financial statements of CGI
as of and for the period ended on such date and to the related notes thereto.
Each of the CGI Subsidiaries is included in the consolidated financial
statements referred to in Schedule "I".
4.8 Liabilities. Except as set forth in Schedule "I", there are no
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material liabilities of CGI, the Company, or any CGI Subsidiary other than:
(a) Liabilities disclosed or provided for in the Balance Sheet, including
the notes to such Balance Sheet;
(b) Liabilities incurred in the ordinary course of business since the
Balance Sheet Date, none of which has been materially adverse to the
business, assets, financial
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condition or results of operations of CGI, the Company or a CGI
Subsidiary and none of which is attributable to any period prior to
the Balance Sheet Date.
"Liabilities" shall be read in the broadest sense and shall include all
liabilities, debts and obligations, whether accrued, absolute or contingent, and
whether due or to become due. Nothing has come to the attention of CGI, the
Company or any CGI Subsidiary which would cause it to believe that there exist
any circumstances, conditions, events or arrangements which may hereafter give
rise to Liabilities except in the ordinary and usual course of business.
4.9 Tax Matters. Except as set forth in Schedule "J", (i) CGI and the
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Company have filed all returns, reports and declarations required to be filed
for all periods prior to the Closing Date and CGI and the Company have not
extended any time in which to file any such returns, reports or declarations
(ii) CGI and the Company have paid, at the time and in the manner required, all
taxes shown to be due on any returns, reports an declarations and CGI and the
Company are not delinquent in the payment of any estimated taxes; and (iii) no
audit or investigation of CGI's or the Company's liability for any Taxes is
pending or in progress, and neither CGI nor the Company has received any notice
of, and has no knowledge that, any such audit or investigation will be commenced
or is threatened. Except as set forth in Schedule "J", no deficiency or
adjustment in respect to Taxes which has been assessed against CGI or the
Company remains unpaid, and neither CGI nor the Company has any knowledge of any
proposed or threatened assessments, or any tax audits or investigations pending
or threatened against CGI or the Company. For purposes of this Section, the
term "CGI" or the "Company" shall include all subsidiaries and the affiliated,
combined or unitary group of which each such corporation is or was a member and
any and all corporations which CGI or the Company owns stock representing at
least 50 percent of the total voting power or 50 percent of the value of such
corporation. Further, CGI and the Company represent that: (i) prior to the
transaction, CGI will be in control of Company within the meaning of Section
368(c) of the Internal Revenue Code; (ii) following the transaction, Company
will not issue additional shares of its stock that would result in CGI losing
control of Company within the meaning of Section 368(c) of the Internal Revenue
Code; (iii) CGI has no plan or intention to reacquire any of its stock issued in
the transaction; (iv) CGI
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has no plan or intention to liquidate Company; to merge Company with and into
another corporation; to sell or otherwise dispose of the stock of Company; or to
cause Company to sell or otherwise dispose of any of the assets acquired in the
transaction, except for dispositions made in the ordinary course of business;
(v) following the transaction, Company will continue the historic business of
AGS or use a significant portion of AGS's business assets in a business (vi)
CGI, Company, AGS and the shareholders of AGS will pay their respective
expenses, if any, incurred in connection with the transaction; and (vii) there
is no intercorporate indebtedness existing between CGI and AGS or between
Company and AGS that was issued, acquired, or will be settled at a discount.
4.10 Affiliates. Schedule "K" lists all persons who may be deemed to be
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"affiliates" of CGI (collectively, the "CGI Affiliates" and individually a "CGI
Affiliate"), as such term is used for purposes of Rule 145 promulgated under the
Securities Act, and the record and beneficial ownership of all shares of CGI
Common Stock beneficially owned by such persons.
4.11 Adverse Developments. Since the Balance Sheet Date there has been no
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(a) change in the assets, operations, business, financial condition or capital
structure, including without limitation changes in the competitive position,
sales or earnings of CGI, the Company, and the CGI Subsidiaries or (b) adverse
judgment in any lawsuit pending at the date hereof which have had or may have a
materially adverse effect on the business or financial condition of CGI, the
Company, and the CGI Subsidiaries on a consolidated basis. Neither CGI nor the
Company knows of any development of a nature that may have a materially adverse
effect on the business or financial condition of CGI or of CGI, the Company, and
the CGI Subsidiaries taken on a consolidated basis.
4.12 Brokers. Except for accountants and attorneys acting as such (and not
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as brokers, finders or in other like capacity), all negotiations on behalf of
CGI relating to this Agreement and the transactions contemplated hereby have
been carried on directly by it with CGI without the intervention of any broker,
finder, investment banker or other third party representing CGI. Except as
provided in the preceding sentence, neither CGI nor any officers, directors or
agents of
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CGI have engaged or authorized any broker, finder, investment banker or other
third party to act on CGI's behalf, directly or indirectly, as a broker, finder,
investment banker or in any other like capacity in connection with this
Agreement or the transactions contemplated hereby, or have consented to or
acquiesced in anyone so acting, and CGI knows of no claim for compensation from
CGI or AGS.
4.13 Actions and Proceedings. Except as set forth in Schedule "L", there
-----------------------
are no actions, suits, claims or legal, administrative or arbitration
proceedings or investigations pending or, to the best knowledge of CGI or any
CGI Subsidiary, threatened, against, involving or affecting CGI or any CGI
Subsidiary or any of their respective properties or assets. There are no
outstanding judgments, orders, writs, injunctions or decrees of any court,
governmental agency or arbitration tribunal against, involving or affecting CGI
or any CGI Subsidiary or any of their respective properties or assets.
4.14 Securities Filings. CGI has timely filed all documents and reports
------------------
required to be filed by it with the Vancouver Stock Exchange and the Securities
Commission of the Province of British Columbia. Such filings, which have been
provided to AGS and upon which AGS has relied in entering into this Agreement,
do not contain any material misstatement of fact and do not omit to state any
fact necessary to make the statements made therein not misleading.
4.15 Prior Issuances. All issuances of securities by CGI prior to the date
---------------
of this Agreement have been made in full compliance with applicable law. CGI is
not aware of any pending litigation, threatened claim, or unasserted possible
claim seeking damages or recision as a consequence of any such issuance.
ARTICLE 5.
COVENANTS OF THE PARTIES
AGS, CGI, and the Company agree that:
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5.1 Shareholder Approval. AGS agrees to take appropriate action to call a
--------------------
shareholders' meeting (the "AGS Shareholders' Meeting") to be held at the
earliest practicable date to consider approval of the transactions contemplated
by this Agreement. Subject to receiving the fairness opinion described in
Section 6.3(d), AGS's Board of Directors shall recommend that the shareholders
approve such transactions and shall use reasonable commercial efforts to secure
such approval. CGI, as the sole shareholder of the Company, shall vote its
shares of common stock of the Company to approve the Merger.
5.2 Termination. This Agreement may be terminated, notwithstanding prior
-----------
approval hereof and of the transactions contemplated hereby by the Boards of
Directors of CGI, the Company, and AGS or by the shareholders of AGS or by CGI
as the sole shareholder of the Company, (i) by CGI and the Company or by AGS,
respectively, if the Closing shall not have occurred on or before April 30,
1997, or any later date to which such date may be extended by agreement of the
parties, such termination to be effective five business days after notice by the
terminating party or parties to the other party or parties or (ii) by mutual
consent of the parties hereto at any time prior to the Effective Time. In the
event of any termination pursuant to this Section 5.2, the parties shall be
released from all liabilities and obligations arising under this Agreement with
respect to matters contemplated by this Agreement, other than for damages to the
extent arising from a prior breach of this Agreement.
5.3 Best Efforts. Subject to the terms and conditions of this Agreement,
------------
each party will use its best efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the Acquisition as soon as
practicable after the satisfaction of the conditions set forth in Article 5
hereof.
5.4 Public Announcements. The parties will consult with each other before
--------------------
issuing any press release or making any public statement with respect to this
Agreement and the Acquisition, and, except as may be required by applicable law
or any listing agreement with any national securities exchange, will not issue
any such press release or make any such public
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statement prior to such consultation and without the approval of the other.
5.5 Further Assurances. At and after the Effective Time, the officers and
------------------
directors of the Surviving Corporation will be authorized to execute and deliver
in the name and on behalf of AGS, any deeds, bills of sale, assignments or
assurances and to take and do, in the name and on behalf of AGS, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title, and interest in, to and under
any of the rights, properties or assets of AGS acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger.
5.6 Conduct of Business. Each party shall conduct its business only in
-------------------
the ordinary and usual course, and make no change in any respect in any of its
business policies or practices without the prior written consent of the other
parties.
5.7 Notice of Actions and Proceedings. Each party shall promptly notify
---------------------------------
the other parties of any actions, claims or legal, administrative or arbitration
proceedings or investigations threatened or commenced against it, which, if
pending on the date hereof, would have been required to be described in a
schedule previously delivered pursuant to this Agreement or which otherwise
relate to, or affect, its business or assets in any material respect or the
consummation of the Merger and the transactions contemplated hereby.
5.8 Satisfaction of Conditions. Neither AGS, CGI, nor the Company shall
--------------------------
take or omit to take any action that would result in non-satisfaction of any of
the conditions set forth in Article 6 hereof. Each of AGS, CGI, and the Company
shall exercise reasonable commercial efforts to cause or facilitate the
satisfaction of each condition set forth in Article 6 hereof. Without limiting
the generality of the foregoing, except to the extent required by this Agreement
or consented to in advance in writing by CGI and AGS, each party to this
Agreement shall not: (i) effect any amendment to or change its Articles of
Incorporation or Bylaws, (ii) effect any change in its authorized capital stock
or the shares of its capital stock reserved for issuance, (iii) issue or sell,
or agree to issue or sell, any of its capital stock or effect any subdivision,
-19-
combination or other recapitalization affecting its capital stock (except for
the issuance of shares reserved for issuance under Warrants as set forth in
Sections 1.2(a)), (iv) grant or agree to grant any Warrants in addition to those
set forth in Section 1.2(a) or amend or agree to amend any Warrants therein set
forth or permit the exercise thereof otherwise than in accordance with their
terms or as contemplated hereby; (v) declare, pay or set aside any dividends or
other distribution or payments on its capital stock, or redeem or repurchase any
shares of its capital stock; (vi) incur or assume any Liability, except
Liabilities arising in the ordinary and usual course of business; (vii) pay or
satisfy any Liability except Liabilities existing on the Balance Sheet Date or
Liabilities thereafter incurred in accordance with subsection (vi) hereof, or
pay any Liability other than in the ordinary course of business; (vii) grant or
modify the terms of any bonus or make any payment to any officer, director,
consultant or agent or commit or agree to make or pay the same (other than
normal salaries or other periodic payments in effort on the date hereof); or
(viii) make any loans or advances to any officer, director, consultant or agent.
5.9 Registration and Listing of Securities. CGI shall exercise its best
--------------------------------------
efforts to obtain the necessary permits, registrations, qualifications,
exemptions, listings, and approvals, including, without limitation, a permit
under the CGCL, registration or exemption from registration of the issuance of
the shares of CGI common stock issued hereunder and the shares underlying the
CGI Warrants under the laws of the Province of British Columbia, and the listing
of such shares on the Vancouver Stock Exchange, to cause such shares, upon their
issuance, to be freely tradeable, without legend or restriction, on the
Vancouver Stock Exchange. Following the Effective Time, CGI will make all
filings with the Vancouver Stock Exchange, the securities regulatory authorities
of the Province of British Columbia, and any other relevant regulatory
authorities or otherwise to assure that such shares remain freely tradeable,
without legend or restriction, on the Vancouver Stock Exchange.
5.10 Tax Compliance. All parties to this Agreement intend that this
--------------
transaction will qualify as a tax-free reorganization pursuant to Section 368 of
the Internal Revenue Code of 1986. Consequently, all parties agree to file all
tax returns and filings consistent with this treatment and agree not to take any
inconsistent position on any document, report, filing or for
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any other purpose.
ARTICLE 6.
CONDITIONS TO THE MERGER
6.1 Conditions to the Obligations of Each Party. The obligations of the
-------------------------------------------
parties to consummate the Merger are subject to the satisfaction of the
following conditions at Closing:
(a) The shareholders of AGS shall have approved and adopted this Agreement
and the Merger, by a 95% or more majority vote of the holders of the
issued and outstanding stock of AGS, and not more than five percent of
the holders of the common stock of AGS shall have exercised
dissenters' rights under the CGCL;
(b) No provision of any applicable law or regulation, and no judgment,
injunction, order or decree shall prohibit the consummation of the
Acquisition, and no action, suit, proceeding or investigation shall
have been instituted and be continuing before a court or before or by
any governmental body or agency, or have been threatened, and be
unresolved, by any governmental body or agency, to restrain or prevent
the consummation of the Merger or the other transactions contemplated
hereby, or seeking damages in the event of the consummation of the
Merger or the transactions contemplated hereby.
6.2 Conditions to the Obligations of CGI and the Company. The obligations
----------------------------------------------------
of CGI and the Company to consummate the Merger are subject to the satisfaction
of the following:
(a) AGS shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to
the Closing.
(b) The representations and warranties of AGS contained in this Agreement
pursuant hereto shall be true and correct in all material respects at
and as of the Closing as
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if made at and as of such time.
(c) The holders of not less than 95% of all AGS common stock entitled to
vote thereon shall have approved the Merger at the AGS Shareholders'
Meeting.
(d) CGI shall have received all exchange, state and provincial securities
law or "blue sky" permits and other authorizations, including but not
limited to the approval of the Vancouver Stock Exchange, necessary to
carry out the transactions contemplated hereby. The shares CGI Common
Stock to be issued to the shareholders of AGS as of the Closing will
be approved for listing on the Vancouver Stock Exchange, will not bear
any restrictive legend, and will freely tradeable when issued.
(e) The California Department of Corporations shall have approved the
transactions contemplated by this Agreement after a hearing held
pursuant to Section 25142 of the CGCL.
(f) CGI and AGS shall have received from counsel to AGS: (i) an opinion,
acceptable in form and substance to counsel for each of AGS and CGI,
that the Merger will qualify as a tax-free reorganization pursuant to
section 368(a) of the Internal Revenue Code of 1986, and (ii) an
opinion, in a form acceptable to CGI and its solicitors, as to the
title of AGS's interest and title to its assets, including without
restriction, its 49% interest in Viper Bite Company, and the execution
by AGS of this Agreement.
(g) On the Closing Date, AGS's working capital, including it's pro-rata
share of Viper Bite Company and determined without consideration of
the effects of the Merger, shall not be less than $700,000 U.S. The
net working capital of Viper Bite Company (current assets less current
liabilities) including the net working capital allocated to AGS's 49%
interest shall not be less than $900,000 Canadian.
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(h) AGS shall have received a certificate, executed by the President of
AGS, dated as of the Closing Date, to the effect that the conditions
set forth in Section 6.2(a) through (j) have been satisfied.
(i) CGI shall have received such other certificates, documents and
instruments from or on behalf of AGS as CGI shall reasonably request
as being necessary or appropriate in connection with the consummation
of the transactions contemplated by this Agreement.
(j) All actions by or in respect of, or filings with, any governmental
body, agency or official, whether necessary or required to permit the
consummation of the Acquisition so that the Surviving Corporation
shall be able to continue to carry on the business of AGS
substantially in the manner now conducted shall have been taken, made,
or obtained.
(k) CGI and the Company shall have received, or be satisfied that they
will receive, any material consents, approvals, or waivers from third
parties required to consummate the Acquisition, or made necessary as a
result of the Acquisition.
(l) No court, arbitrator, or governmental body, agency or official shall
have issued any order restraining or prohibiting the effective
operation of the business of AGS after the Closing, and no proceeding
challenging this Agreement or seeking to prohibit, alter, prevent or
materially delay the Acquisition shall have been instituted and be
pending.
(m) Except as permitted by this Agreement, there shall have been no
material adverse change in the properties, business, financial or
operating condition of AGS.
(n) CGI and the Company shall have received such other certificates,
documents and
-23-
instruments from or on behalf of AGS as shall reasonably request as
being necessary or appropriate in connection with the consummation of
the transactions contemplated by this Agreement.
(o) The Company shall have entered into a full-time employment agreement
with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ on mutually acceptable terms.
6.3 Conditions to the Obligation of AGS. The obligation of AGS to
-------------------------------------
consummate the Merger is subject to the satisfaction of the following
conditions:
(a) CGI and the Company shall have performed in all material respects all
of their obligations hereunder required to be performed by them at or
prior to the Closing.
(b) The representations and warranties of CGI and the Company contained in
this Agreement shall be true and correct in all material respects at
and as of the Closing as if made at and as of such time.
(c) AGS shall have received such other certificates, documents and
instruments from or on behalf of CGI and the Company as AGS shall
reasonably request as being necessary or appropriate in connection
with the consummation of the transactions contemplated by this
Agreement.
(d) AGS shall have received an opinion, acceptable in form and substance
to each of AGS and CGI, from KPMG, in the form attached as Schedule
"F", to the effect that the Merger is fair and reasonable in all
material respects to the shareholders of AGS and that (i) the value of
the CGI Warrants and (ii) the amounts paid to dissenting shareholders
is less than ten percent of the value of the CGI Common Stock issued
pursuant to Section 1.2(b) of this Agreement or such other amount as
may be agreed.
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ARTICLE 7.
MISCELLANEOUS
7.1 Amendment and Waiver. This Agreement may be amended, modified,
--------------------
superseded or cancelled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by AGS, CGI and the Company. The failure of any party at any time or
times to require performance of any provision hereof shall in no manner affect
the right of such party at a later time to enforce the same. No waiver by any
party of the breach of any term, provision, covenant or condition contained
herein as a condition to such party's obligation hereunder, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be or construed
as a further or continuing waiver of any such condition or of any breach or a
waiver of any other condition or of any breach of any other term, covenant,
representation or warranty of this Agreement. Subject to applicable law, this
Agreement may be amended upon authorization by the parties hereto before or
after the AGS Shareholders' Meeting at any time prior to the Effective Time;
provided, however, that, without the vote required by the CGCL, no such
amendment effected after the AGS Shareholders' Meeting shall diminish the
consideration to be delivered in exchange for AGS common stock as described in
Section 1.2(b) hereof.
7.2 Necessary Acts. All parties to this Agreement shall perform any and
--------------
all acts as well as execute any and all documents that reasonably may be
necessary or appropriate to fully carry out the provisions and intent of this
Agreement.
7.3 Notices. All notices, requests and other communications to any party
-------
hereunder shall be in writing (including telecopy or similar writing) and shall
be given as follows:
If to CGI or the Company to:
-25-
Carbite Golf Inc. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ - ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇
If to AGS, to: ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address as may be designated by any of the foregoing
individuals by written notice given in conformity herewith. Each such notice,
request, or other communication shall be effective, if given by telecopy, when
such telecopy is transmitted to the telecopy number specified in this Section
and the appropriate confirmation of receipt is received, or, if given by any
other means, when delivered at the address specified in this Section.
7.4 Survival of Representations, Warranties and Covenants. The
-----------------------------------------------------
representations, warranties, and covenants included or provided herein, or in
any schedule or certificate or other document delivered pursuant hereto, shall
survive the Closing Date.
7.5 Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Provided that no assignment of any rights or delegation
of any obligations provided for herein may be made by any party hereto without
the express prior written consent of the other parties.
7.6 Governing Law. This Agreement shall be construed in accordance with
-------------
and governed by the laws of the State of California, without giving effect to
the principles of conflict of laws.
7.7 Headings. The headings of the articles and sections of this Agreement
--------
have been inserted solely for convenience of reference and shall in no way
restrict or modify any of the
-26-
terms or provisions hereof.
7.8 Gender and Number. The masculine, feminine, or neuter gender and the
-----------------
singular or plural number shall each be deemed to include the others whenever
the context so indicates.
7.9 Entire Agreement. This Agreement and the Agreements contemplated by
----------------
the Exhibits hereto constitute the entire agreement and supersede all prior
agreements and understandings (including any representations and warranties made
by any party), both written and oral, among the parties with respect to the
subject matter hereof.
7.10 Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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7.11 Dissenters' Rights. CGI agrees that, if the Merger becomes effective,
------------------
it will promptly pay to any dissenting shareholders of AGS the amounts, if any,
to which they are entitled under the provisions of the CGCL.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
duly executed on its behalf under its corporate authority, effective as of the
day and year first above written.
ADVANCED GOLF SYSTEMS INC.
By: _________________________ ___________________________
▇▇▇ ▇▇▇▇▇▇, President ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice-President
CARBITE GOLF INC.
By: ___________________________ ___________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chairman ▇▇▇▇▇ ▇▇▇▇▇▇, Director
AGS ACQUISITION CORP.
By: ____________________
Its President