EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
TOUCHSTONE RESOURCES, LTD.
AND
THE COFFEE EXCHANGE, INC.
MARCH 15, 2004
TABLE OF CONTENTS
ARTICLE I: THE PURCHASE AND SALE............................................1
ARTICLE II: THE CLOSING.....................................................2
2.1...Closing Date.....................................................2
2.2...Closing Transactions.............................................2
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................3
3.1...Organization and Qualification...................................3
3.2...Authorization; Validity and Effect of Agreement..................3
3.3...No Conflict; Required Filings and Consents.......................4
3.4...Capitalization...................................................4
3.5...Financial Statements.............................................5
3.6...Properties and Assets............................................5
3.7...No Undisclosed Liabilities.......................................5
3.8...Litigation.......................................................6
3.9...Taxes............................................................6
3.10..Insurance........................................................6
3.11..Compliance.......................................................6
3.12..Material Contracts...............................................7
3.13..Labor Relations..................................................7
3.14..Environmental Matters............................................7
3.15..Related Party Transactions.......................................8
3.16..Absence of Certain Changes or Events.............................8
3.17..Investment Intent................................................9
3.18..Brokers and Finders Fees.........................................9
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................9
4.1...Organization and Qualification..................................10
4.2...Authorization; Validity and Effect of Agreement.................10
4.3...No Conflict; Required Filings and Consents......................10
4.4...Capitalization..................................................11
4.5...SEC Reports and Financial Statements............................11
4.6...Investment Intent...............................................11
4.7...Brokers and Finders.............................................12
ARTICLE V: CERTAIN COVENANTS...............................................12
5.1...Conduct of Business by Touchstone USA...........................12
5.2...Access to Information...........................................14
5.3...Confidentiality; No Solicitation................................14
5.4...Best Efforts; Consents..........................................15
5.5...Further Assurances..............................................15
5.6...Public Announcements............................................15
5.7...Notification of Certain Matters.................................16
5.8...Prohibition on Trading in Purchaser Securities..................16
5.9...Advisory Fee....................................................16
5.10..Schedules and Exhibits..........................................16
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE STOCK PURCHASE...............17
6.1...Conditions to Obligations of the Company........................17
6.2...Conditions to Obligations of Purchaser..........................17
6.3...Other Conditions to Obligations of the Company and Purchaser....18
ARTICLE VII: INDEMNIFICATION...............................................18
7.1...Indemnification by the Company..................................18
7.2...Indemnification Procedures for Third-Party Claim................19
7.3...Indemnification Procedures for Non-Third Party Claims...........20
7.4...Limitations on Indemnification..................................20
7.5...Exclusive Remedy................................................21
ARTICLE VIII: TERMINATION..................................................21
8.1...Termination.....................................................21
8.2...Procedure and Effect of Termination.............................21
ARTICLE IX: MISCELLANEOUS..................................................22
9.1...Entire Agreement................................................22
9.2...Amendment and Modifications.....................................22
9.3...Extensions and Waivers..........................................22
9.4...Successors and Assigns..........................................23
9.5...Survival of Representations, Warranties and Covenants...........23
9.6...Headings; Definitions...........................................23
9.7...Severability....................................................23
9.8...Specific Performance............................................23
9.9...Expenses........................................................24
9.10..Notices.........................................................24
9.11..Governing Law...................................................24
9.12..Arbitration.....................................................24
9.13..Counterparts....................................................25
9.14..Certain Definitions.............................................25
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EXHIBITS
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3.1(a) Memorandum and Articles of the Company
3.1(b) Certificate of Incorporation and Bylaws of Touchstone USA
3.5 Financial Statements
3.6 Real Property
3.12 Material Contracts
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SCHEDULES
---------
3.5 Exceptions to Financial Statements
3.6 List of Real Property
3.7 Undisclosed Liabilities
3.8 Litigation
3.10 Insurance
3.11 Exceptions to Compliance
3.12 List of Material Contracts
3.13 Labor Relations
3.16 Certain Changes or Events
5.1 Exceptions to Conduct of Business
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 15th day of March, 2004, by and between TOUCHSTONE RESOURCES, LTD., a
British Columbia corporation (the "Company"), and THE COFFEE EXCHANGE, INC., a
Delaware corporation ("Purchaser").
RECITALS
WHEREAS, the Board of Directors of the Company and Purchaser have
approved, and deem it advisable and in the best interests of their respective
companies and stockholders to consummate the transactions contemplated hereby
upon the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, the Company wishes to sell to Purchaser, and Purchaser wishes to
purchase, all of the shares of common stock of Touchstone Resources USA, Inc., a
Texas corporation and wholly-owned subsidiary of the Company ("Touchstone USA")
held by the Company (the "Stock Purchase"); and
WHEREAS, for United States federal income tax purposes, it is the
intention of the parties to this Agreement that the Stock Purchase shall qualify
as a "reorganization" for federal income tax purposes within the meaning of
Section 368(a) of the Internal Revenue Code and that this Agreement shall
constitute a "plan of reorganization" for the purposes of the Internal Revenue
Code.
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
THE PURCHASE AND SALE
Upon the terms and subject to the conditions set forth in this
Agreement, on the Closing Date, the Company shall sell, and Purchaser shall
purchase, one hundred percent (100%) of the issued and outstanding shares (the
"Touchstone USA Shares") of capital stock, no par value per share ("Touchstone
USA Capital Stock"), of Touchstone USA owned by the Company, in consideration
for which Purchaser shall issue to the Company seven million (7,000,000) shares
(the "Purchaser Shares") of its common stock, $.001 par value per share
("Purchaser Common Stock").
ARTICLE II
THE CLOSING
2.1 CLOSING DATE.
The closing of the Stock Purchase (the "Closing") shall take place
at a time and on a date to be specified by the parties (the "Closing Date") at
the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇, P.C., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as may be mutually agreed upon in
writing by the parties hereto.
2.2 CLOSING TRANSACTIONS.
At the Closing, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
(a) The Company shall deliver or cause to be delivered to Purchaser
the following documents and/or shall take the following actions:
(i) Certificates evidencing all of the Touchstone USA Shares;
(ii) The certificate described in Section 6.2(c);
(iii) An incumbency certificate signed by all of the executive
officers of the Company dated at or about the Closing Date;
(iv) A certificate of good standing from the Registrar of
Companies of British Columbia dated at or about the Closing Date, to the effect
that the Company is in good standing under the laws of British Columbia;
(v) A certificate of good standing from the Secretary of State
of the State of Texas, dated at or about the Closing Date, to the effect that
Touchstone USA is in good standing under the laws of said state;
(vi) Memorandum and Articles of the Company certified by the
Registrar of Companies of British Columbia dated at or about the Closing Date;
(vii) Certificate of Incorporation of Touchstone USA certified
by the Secretary of State of the State of Texas dated at or about the Closing
Date and the Bylaws of Touchstone USA certified by the Secretary of Touchstone
USA at or about the Closing Date; and
(viii) Board resolutions of the Company dated at or about the
Closing Date authorizing the Stock Purchase, certified by the Secretary of the
Company.
(b) The Purchaser shall deliver or cause to be delivered to the
Company the following documents and/or shall take the following actions:
(i) Certificates evidencing all of the Purchaser Shares;
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(ii) The certificate described in Section 6.1(c);
(iii) An incumbency certificate signed by all of the executive
officers of Purchaser dated at or about the Closing Date;
(iv) A certificate of good standing from the Secretary of
State of the State of Delaware, dated at or about the Closing Date, to the
effect that Purchaser is in good standing under the laws of said state;
(v) Certificate of Incorporation of Purchaser certified by the
Secretary of State of the State of Delaware dated at or about the Closing Date
and the Bylaws of Purchaser certified by the Secretary of Purchaser dated at or
about the Closing Date; and
(iv) Board resolutions of Purchaser dated at or about the
Closing Date authorizing the Stock Purchase, certified by the Secretary of
Purchaser.
(c) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and shall have taken all such other actions as are required under this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and
warranties to Purchaser:
3.1 ORGANIZATION AND QUALIFICATION.
The Company and Touchstone USA are duly organized, validly existing
and in good standing under the laws of their respective jurisdictions of
organization, with the corporate power and authority to own and operate their
respective businesses as presently conducted, except where the failure to be or
have any of the foregoing would not have a Material Adverse Effect. The Company
and Touchstone USA are duly qualified as foreign corporations to do business and
are in good standing in each jurisdiction where the character of their
respective properties owned or held under lease or the nature of their
respective activities makes such qualification necessary, except for such
failures to be so qualified or in good standing as would not, individually or in
the aggregate, have a Material Adverse Effect. True, correct and complete copies
of the Memorandum and Articles of the Company, and the Certificate of
Incorporation and Bylaws of Touchstone USA, each as amended the date, are
attached hereto as Exhibits 3.1(a) and (b) respectively. Touchstone USA does not
have any subsidiaries.
3.2 AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT.
The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the Stock Purchase. The execution and delivery of this Agreement by
the Company and the performance by the Company of its obligations hereunder and
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the consummation of the Stock Purchase have been duly authorized by its board of
directors and all other necessary corporate action on the part of the Company,
and no other corporate proceedings on the part of the Company is necessary to
authorize this Agreement and the Stock Purchase. This Agreement has been duly
and validly executed and delivered by the Company and, assuming that it has been
duly authorized, executed and delivered by the other parties hereto, constitutes
a legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
3.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
Neither the execution and delivery of this Agreement by the Company
nor the performance by the Company of its obligations hereunder, nor the
consummation of the Stock Purchase, will: (i) conflict with the Company's
Memorandum or Articles or Touchstone USA's Certificate of Incorporation or
Bylaws; (ii) violate any statute, law, ordinance, rule or regulation applicable
to the Company or Touchstone USA or any of their respective properties or
assets; or (iii) violate, breach, be in conflict with or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of the Company or Touchstone USA under, or result
in the creation or imposition of any Liens upon any properties, assets or
business of the Company or Touchstone USA under, any Material Contract or any
order, judgment or decree to which the Company or Touchstone USA is a party or
by which the Company or Touchstone USA or any of their respective assets or
properties is bound or encumbered except, in the case of clauses (ii) and (iii),
for such violations, breaches, conflicts, defaults or other occurrences which,
individually or in the aggregate, would not have a Material Adverse Effect.
3.4 CAPITALIZATION.
The authorized capital stock of Touchstone USA consists of 1,000,000
shares of Touchstone USA Capital Stock, all of which are issued and outstanding
and held of record and beneficially by the Company. The Touchstone USA Shares
represent all of the outstanding shares of Touchstone USA Capital Stock, and all
of the shares of Touchstone USA Capital Stock have been validly issued and are
fully paid and nonassessable. The Company has good and marketable title to the
Touchstone USA Shares, and all of the Touchstone USA Shares are owned of record
and beneficially by the Company, free and clear of any Liens. Except for this
Agreement, there are no outstanding options, warrants, agreements, conversion
rights, preemptive rights, or other rights to subscribe for, purchase or
otherwise acquire any shares of capital stock of or other equity interests in
Touchstone USA. There are no voting trusts or other agreements or understandings
to which the Company or Touchstone USA is a party with respect to the voting of
any shares of capital stock of or other equity interests in Touchstone USA, and
there is no indebtedness of the Company or Touchstone USA issued and outstanding
that has general voting rights with respect to any shares of capital stock of or
other equity interests in Touchstone USA. Except for this Agreement, there are
no outstanding obligations of any Person to repurchase, redeem or otherwise
acquire any shares of capital stock of or other equity interests in Touchstone
USA.
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3.5 FINANCIAL STATEMENTS.
Attached hereto as Exhibit 3.5 are true and complete copies of
Touchstone USA's balance sheet at December 31, 2003, 2002 and 2001, and income
statement and statement of cash flows for the fiscal years ended December 31,
2003 and 2002, and for the period commencing on Touchstone USA's inception on
May 12, 2000 and ending on December 31, 2001 (the "Financial Statements").
Except as set forth on Schedule 3.5, the Financial Statements (including the
notes thereto) present fairly in all material respects the financial position
and results of operations and cash flows of Touchstone USA at the date or for
the periods set forth therein, in each case in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as otherwise indicated
therein). The Financial Statements have been prepared from and in accordance
with the books and records of Touchstone USA.
3.6 PROPERTIES AND ASSETS.
Touchstone USA has good and marketable title to, valid leasehold
interests in, or the legal right to use, and hold free and clear of all Liens
and Encumbrances, all of the assets, properties and leasehold interests
reflected in the Financial Statements or acquired in the ordinary course of
business since the date of the Financial Statements (the "Assets"), except for
those sold or otherwise disposed of since the date of the Financial Statements
in the ordinary course of business consistent with past practice and not in
violation of this Agreement. All Assets of Touchstone USA that are used in the
operations of its business are in good operating condition and repair, subject
to normal wear and tear. Attached hereto as Exhibit 3.6 are correct and complete
copies of all leases, subleases and other material agreements or other material
instruments relating to all real property used in conducting the businesses of
Touchstone USA to which Touchstone USA is a party (collectively, the "Real
Property"), all of which are identified on Schedule 3.6. There are no pending
or, to the Company's Knowledge, threatened condemnation proceedings relating to
any of the Real Property. Except as set forth on Schedule 3.6, none of the real
property improvements (including leasehold improvements), equipment and other
Assets owned or used by Touchstone USA is subject to any commitment or other
arrangement for their sale or use by any Affiliate of Touchstone USA, or by
third parties.
3.7 NO UNDISCLOSED LIABILITIES.
Except as disclosed in the Financial Statements or Schedule 3.7,
Touchstone USA has no material liabilities, indebtedness or obligations, except
those that have been incurred in the ordinary course of business, whether known
or unknown, absolute, accrued, contingent or otherwise, and whether due or to
become due, and to the Knowledge of the Company, there is no existing condition,
situation or set of circumstances that could reasonably be expected to result in
such a liability, indebtedness or obligation.
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3.8 LITIGATION.
Except for the matters set forth in Schedule 3.8, there is no
action, claim, suit, litigation, proceeding, or governmental investigation
("Action") instituted, pending or threatened against Touchstone USA that,
individually or in the aggregate, directly or indirectly, would be reasonably
likely to have a Material Adverse Effect, nor is there any outstanding judgment,
decree or injunction, in each case against Touchstone USA, that, individually or
in the aggregate, would have or would be reasonably likely to have a Material
Adverse Effect.
3.9 TAXES.
Touchstone USA has timely filed (or has had timely filed on its
behalf) with the appropriate tax authorities all tax returns required to be
filed by it or on behalf of it, and each such tax return was complete and
accurate in all material respects, and Touchstone USA has timely paid (or has
had paid on its behalf) all material Taxes due and owing by it, regardless of
whether required to be shown or reported on a tax return, including Taxes
required to be withheld by it. No deficiency for a material Tax has been
asserted in writing or otherwise, to the Company's Knowledge, against Touchstone
USA or with respect to any of Touchstone USA's assets, except for asserted
deficiencies that either (i) have been resolved and paid in full or (ii) are
being contested in good faith. There are no material Liens for Taxes upon any of
Touchstone USA's assets that would, individually or in the aggregate, have
Material Adverse Effect.
3.10 INSURANCE.
Schedule 3.10 sets forth a list of all of Touchstone USA's key-man
life insurance policies and other insurance policies material to the current and
proposed business of Touchstone USA. Touchstone USA maintains insurance covering
its assets, business, equipment, properties, operations, employees, officers,
directors and managers with such coverage, in such amounts, and with such
deductibles and premiums as are consistent with insurance coverage provided for
other companies of comparable size and in comparable industries. All of such
policies are in full force and effect, all premiums payable have been paid in
full and Touchstone USA is in full compliance with the terms and conditions of
such policies. Touchstone USA has not received any notice from any issuer of
such policies of its intention to cancel or refusal to renew any policy issued
by it or of its intention to renew any such policy based on a material increase
in premium rates other than in the ordinary course of business. None of such
policies are subject to cancellation by virtue of the consummation of the Stock
Purchase. There is no claim by Touchstone USA pending under any of such policies
as to which coverage has been questioned or denied.
3.11 COMPLIANCE.
Except as disclosed on Schedule 3.11, Touchstone USA is in
compliance with all foreign, federal, state and local laws and regulations of
any Governmental Authority applicable to its operations or with respect to which
compliance is a condition of engaging in the business thereof, except to the
extent that failure to comply would not, individually or in the aggregate, have
a Material Adverse Effect. Touchstone USA has not received any notice asserting
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a failure, or possible failure, to comply with any such law or regulation, the
subject of which notice has not been resolved as required thereby or otherwise
to the satisfaction of the party sending the notice, except for such failure as
would not, individually or in the aggregate, have a Material Adverse Effect.
Touchstone USA holds all permits, licenses and franchises from Governmental
Entities required to conduct its business as it is now being conducted, except
for such failures to have such permits, licenses and franchises that would not,
individually or in the aggregate, have a Material Adverse Effect.
3.12 MATERIAL CONTRACTS.
Except as set forth in Schedule 3.12, Touchstone USA is not a party
to or bound by any Material Contracts. The Material Contracts constitute all of
the material agreements and instruments that are necessary and desirable to
operate the business as currently conducted by Touchstone USA and as
contemplated to be conducted. True, correct and complete copies of each Material
Contract described and listed on Schedule 3.12 are attached hereto as Exhibit
3.12. All of the Material Contracts are valid, binding and enforceable against
the respective parties thereto in accordance with their respective terms. All
parties to all of the Material Contracts have performed all obligations required
to be performed to date under such Material Contracts, and neither Touchstone
USA, nor, to the best of the Company's Knowledge, any other party, is in default
or in arrears under the terms thereof, and no condition exists or event has
occurred which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. The consummation of this Agreement and the
Stock Purchase will not result in an impairment or termination of any of the
rights of Touchstone USA under any Material Contract. None of the terms or
provisions of any Material Contract materially and adversely affects the
business, prospects, financial condition or results of operations of Touchstone
USA.
3.13 LABOR RELATIONS.
Except as described on Schedule 3.13, as of the date of this
Agreement (i) there are no activities or proceedings of any labor union to
organize any non-unionized employees of Touchstone USA; (ii) there are no unfair
labor practice charges and/or complaints pending against Touchstone USA before
the National Labor Regulations Board, or any similar foreign labor relations
governmental bodies, or any current union representation questions involving
employees of Touchstone USA; and (iii) there is no strike, slowdown, work
stoppage or lockout, or threat thereof, by or with respect to any employees of
Touchstone USA. As of the date of this Agreement, Touchstone USA is not a party
to any collective bargaining agreements. There are no controversies pending or
threatened between Touchstone USA and any of its employees, except for such
controversies that would not be reasonably likely to have a Material Adverse
Effect.
3.14 ENVIRONMENTAL MATTERS.
Except for such matters that, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect, the Company and
Touchstone USA (i) have obtained all applicable permits, licenses and other
authorizations that are required to be obtained under all applicable
Environmental Laws by Touchstone USA, respectively, in connection with
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Touchstone USA's business; (ii) are in compliance with all terms and conditions
of such required permits, licenses and authorizations, and with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in or arising from applicable
Environmental Laws in connection with Touchstone USA's business; (iii) have not
received notice of any part or present violations of Environmental Laws in
connection with Touchstone USA's business, or of any spill, release, event,
incident, condition or action or failure to act in connection with Touchstone
USA's business, that is reasonably likely to prevent continued compliance with
such Environmental Laws, or that would give rise to any common law environmental
liability or liability under Environmental Laws, or that would otherwise form
the basis of any Action against Touchstone USA based on or resulting from the
manufacture, processing, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge or release into the environment, of any
hazardous material by any Person in connection with Touchstone USA's business;
and (iv) have taken all actions required under applicable Environmental Laws to
register any products or materials required to be registered by Touchstone USA
thereunder in connection with Touchstone USA's business.
3.15 RELATED PARTY TRANSACTIONS.
(a) There is no indebtedness between the Company or any of its
subsidiaries, on the one hand, and any officer, director or Affiliate (other
than the Company or any of its subsidiaries) of Touchstone USA, on the other
hand, other than usual and customary advances made in the ordinary course of
business;
(b) No member, manager, officer, director or Affiliate of the
Company or any of its subsidiaries provides or causes to be provided any assets,
services (other than services as an, officer, manager, director or employee) or
facilities to Touchstone USA;
(c) Neither the Company nor any of its subsidiaries provides or
causes to be provided any assets, services or facilities to any officer,
director or Affiliate of Touchstone USA (other than as reasonably necessary for
them to perform their duties as officers, directors or employees);
(d) Except as disclosed in this Agreement, neither the Company nor
any of its subsidiaries beneficially owns, directly or indirectly, any
investment in or issued by any officer, director or Affiliate of Touchstone USA;
and
(e) No member, manager, officer, director or Affiliate of the
Company or any of its subsidiaries has any direct or indirect ownership interest
in any Person with which Touchstone USA competes or has a business relationship
other than an ownership interest that represents less than five percent (5%) of
the outstanding equity interests in a publicly traded company.
3.16 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth on Schedule 3.16 or as otherwise contemplated by
this Agreement, since the date of it most recent Financial Statements, (i) there
has been no change or development in, or effect on, Touchstone USA that has or
8
could reasonably be expected to have a Material Adverse Effect, (ii) Touchstone
USA has not sold, transferred, disposed of, or agreed to sell, transfer or
dispose of, any material amount of its assets other than in the ordinary course
of business, (iii) Touchstone USA has not paid any dividends or distributed any
of its assets to any shareholder, (iv) Touchstone USA has not acquired any
material amount of assets except in the ordinary course of business, nor
acquired or merged with any other business, (v) Touchstone USA has not waived or
amended any of its material contractual rights except in the ordinary course of
business, and (vi) Touchstone USA has not entered into any agreement to take any
action described in clauses (i) through (v) above.
3.17 INVESTMENT INTENT.
The Purchaser Shares being acquired in connection with the Stock
Purchase are being acquired for the Company's own account for investment
purposes only and not with a view to, or with any present intention of,
distributing or reselling any of such Purchaser Shares. The Company acknowledges
and agrees that the Purchaser Shares have not been registered under the
Securities Act or under any state securities laws, and that the Purchaser Shares
may not be, directly or indirectly, sold, transferred, offered for sale,
pledged, hypothecated or otherwise disposed of without registration under the
Securities Act and applicable state securities laws, except pursuant to an
available exemption from such registration. The Company also acknowledges and
agrees that neither the SEC nor any securities commission or other Governmental
Authority has (a) approved the transfer of the Purchaser Shares or passed upon
or endorsed the merits of the transfer of the Purchaser Shares, this Agreement
or the Stock Purchase; or (b) confirmed the accuracy of, determined the adequacy
of, or reviewed this Agreement. The Company has such knowledge, sophistication
and experience in financial, tax and business matters in general, and
investments in securities in particular, that it is capable of evaluating the
merits and risks of this investment in the Purchaser Shares, and the Company has
made such investigations in connection herewith as it deemed necessary or
desirable so as to make an informed investment decision without relying upon
Purchaser for legal or tax advice related to this investment. The Company is an
"accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act.
3.18 BROKERS AND FINDERS FEES.
Neither the Company or Touchstone USA nor any of their respective
officers, directors, employees or managers has employed any broker or finder or
incurred any liability for any investment banking fees, brokerage fees,
commissions or finders fees in connection with the Stock Purchase for which the
Company or Touchstone USA has or could have any liability.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Purchaser hereby makes the following representations and warranties to the
Company:
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4.1 ORGANIZATION AND QUALIFICATION.
Purchaser is duly organized, validly existing and in good standing
under the laws of its jurisdiction of its organization, with the corporate power
and authority to own and operate its business as presently conducted, except
where the failure to be or have any of the foregoing would not have a Material
Adverse Effect. Purchaser is duly qualified as a foreign corporation or other
entity to do business and is in good standing in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except for such failures to be so
qualified or in good standing as would not have a Material Adverse Effect.
4.2 AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT.
Purchaser has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the Stock Purchase. The execution and delivery of this Agreement by
Purchaser and the performance by Purchaser of its obligations hereunder and the
consummation of the Stock Purchase have been duly authorized by its Board of
Directors and all other necessary corporate action on the part of Purchaser and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Stock Purchase. This Agreement has been duly
and validly executed and delivered by Purchaser and, assuming that it has been
duly authorized, executed and delivered by the other parties hereto, constitutes
a legal, valid and binding obligation of Purchaser, in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
Neither the execution and delivery of the Agreement by Purchaser nor
the performance by Purchaser of its obligations hereunder, nor the consummation
of the Stock Purchase, will: (i) conflict with Purchaser's Certificate of
Incorporation or Bylaws; (ii) violate any statute, law, ordinance, rule or
regulation, applicable to Purchaser or any of the properties or assets of
Purchaser; or (iii) violate, breach, be in conflict with or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of Purchaser, or result in the creation or
imposition of any Lien upon any properties, assets or business of Purchaser
under, any Material Contract or any order, judgment or decree to which Purchaser
is a party or by which it or any of its assets or properties is bound or
encumbered except, in the case of clauses (ii) and (iii), for such violations,
breaches, conflicts, defaults or other occurrences which, individually or in the
aggregate, would not have a Material Adverse Effect on its obligation to perform
its covenants under this Agreement.
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4.4 CAPITALIZATION.
(a) The authorized capital stock of Purchaser consists of 50,000,000
shares of Purchaser Common Stock and 5,000,000 shares of preferred stock, no par
value per share. There are currently 6,671,000 shares of Purchaser Common Stock
issued and outstanding, and no shares of preferred stock issued and outstanding.
All shares of capital stock of Purchaser outstanding as of the date of this
Agreement have been duly authorized and validly issued, are fully paid and
nonassessable, and are free of preemptive rights.
(b) The Purchaser Shares have been duly authorized and, when issued
and paid for in accordance with this Agreement, will be validly issued, fully
paid and non-assessable shares of Purchaser Common Stock with no personal
liability resulting solely from the ownership of such shares and will be free
and clear of all liens, charges, restrictions, claims and encumbrances imposed
by or through Purchaser.
4.5 SEC REPORTS AND FINANCIAL STATEMENTS.
Purchaser has filed with the SEC, and has heretofore made available
to the Company, true and complete copies of, all forms, reports, schedules,
statements and other documents required to be filed by it under the Exchange Act
or the Securities Act (as such documents have been amended since the time of
their filing, collectively, the "Purchaser SEC Documents"). As of their
respective dates or, if amended, as of the date of the last such amendment, the
Purchaser SEC Documents, including any financial statements or schedules
included therein (i) did not 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 made therein, in light of the circumstances under
which they were made, not misleading, and (b) complied in all material respects
with the applicable requirements of the Exchange Act and the Securities Act, as
the case may be, and the applicable rules and regulations of the SEC thereunder.
Each of the financial statements included in the Purchaser SEC Documents have
been prepared from, and are in accordance with, the books and records of
Purchaser, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the financial positions and the results of
operations and cash flows of Purchaser as of the dates thereof or for the
periods presented therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments not material in amount).
4.6 INVESTMENT INTENT.
The Touchstone USA Shares being acquired in connection with the
Stock Purchase are being acquired for Purchaser's own account for investment
purposes only and not with a view to, or with any present intention of,
distributing or reselling any of such Touchstone USA Shares. Purchaser
acknowledges and agrees that the Touchstone USA Shares have not been registered
under the Securities Act or under any state securities laws, and that the
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Touchstone USA Shares may not be, directly or indirectly, sold, transferred,
offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act and applicable state securities laws,
except pursuant to an available exemption from such registration. Purchaser also
acknowledges and agrees that neither the SEC nor any securities commission or
other Governmental Authority has (a) approved the transfer of the Touchstone USA
Shares or passed upon or endorsed the merits of the transfer of the Touchstone
USA Shares, this Agreement or the Stock Purchase; or (b) confirmed the accuracy
of, determined the adequacy of, or reviewed this Agreement. Purchaser has such
knowledge, sophistication and experience in financial, tax and business matters
in general, and investments in securities in particular, that it is capable of
evaluating the merits and risks of this investment in the Touchstone USA Shares,
and Purchaser has made such investigations in connection herewith as it deemed
necessary or desirable so as to make an informed investment decision without
relying upon the Company for legal or tax advice related to this investment.
Purchaser is an "accredited investor" within the meaning of Rule 501 promulgated
under the Securities Act
4.7 BROKERS AND FINDERS.
Neither the Company nor any of its officers, directors, employees or
managers has employed any broker or finder or incurred any liability for any
investment banking fees, brokerage fees, commissions or finders' fees in
connection with the Stock Purchase for which Purchaser has or could have any
liability.
ARTICLE V
CERTAIN COVENANTS
5.1 CONDUCT OF BUSINESS BY TOUCHSTONE USA.
(a) Except (i) as expressly permitted by this Agreement, (ii) as
required by applicable law or any Material Contract to which Touchstone USA is a
party or by which any Touchstone USA Shares is bound, (iii) with the consent of
Purchaser or (iv) as set forth on Schedule 5.1, during the period commencing
with the date of this Agreement and continuing until the Closing Date,
Touchstone USA shall conduct its business in all material respects in the
ordinary and usual course consistent with past practice and use its commercially
reasonable efforts to preserve intact its business organizations and
relationships with third parties and keep available the services of its present
officers and employees.
(b) Without limiting the generality of Section 5.1(a), during the
period commencing with the date of this Agreement and continuing until the
Closing Date, Touchstone USA shall not:
(i) adopt or propose any change in its certificate of
organization, operating agreement or other constitutional documents, except for
changes which would not have an adverse impact on Touchstone USA;
(ii) (A) issue, authorize or sell any securities, (B) issue,
authorize or sell any securities convertible into, or options with respect to,
or warrants to purchase or rights to subscribe for, any securities, (C) split,
combine, reclassify or make any other change in its issued and outstanding
securities, (D) redeem, purchase or otherwise acquire any of its securities, or
(E) declare any dividend or make any distribution with respect to its
securities;
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(iii) (A) increase in any manner the compensation of, or enter
into any new bonus or incentive agreement or arrangement with, any of its
directors, officers, employees or managers other than increases in compensation
in the ordinary course of business and consistent with past practice and that
are not material in the aggregate, (B) pay or agree to pay any pension,
retirement allowance or other employee benefit to any director, officer,
employee or manager, whether past or present, other than as required by
applicable law, contracts or plan documents in effect on the date of this
Agreement, (C) enter into any new employment, severance, consulting, or other
compensation agreement with any director, officer, employee or manager or other
person other than in connection with any new hires or promotions in the ordinary
course and consistent with past practice, or (D) commit itself to any additional
pension, profit-sharing, deferred compensation, group insurance, severance pay,
retirement or other employee benefit plan, fund or similar arrangement, or adopt
or amend or commit itself to adopt or amend any of such plans, funds or similar
arrangements in existence on the date hereof;
(iv) (A) enter into, extend, renew or terminate any Material
Contract, or make any change in any of its Material Contracts, (B) reclassify
any assets or liabilities, or (C) do any other act that (x) would cause any
representation or warranty of the Company in this Agreement to be or become
untrue in any material respect, or (y) could reasonably be expected to have a
Material Adverse Effect;
(v) (A) sell, transfer, lease or otherwise dispose of any of
its assets other than in the ordinary course of business consistent with prior
practice, (B) create or permit to exist any new Lien or Encumbrance on any of
its assets (C) assume, incur or guarantee any obligation for borrowed money
other than in the ordinary course of business consistent with past practices,
(D) enter into any joint venture, partnership or other similar arrangement, (E)
make any investment in or purchase any securities of any Person, (F) incur any
indebtedness, issue or sell any new debt securities, enter into any new credit
facility or make any capital expenditures, or (G) merge or consolidate with any
other Person or acquire any other Person or a business, division or product line
of any other Person (except as provided for in this Agreement);
(vi) make any change in any method of accounting or accounting
practice except as required (A) by reason of a concurrent change in law, SEC
guidelines or GAAP, or (B) by reason of a change in Touchstone USA's method of
accounting practices that, due to law, SEC guidelines or requirements, or GAAP,
requires a change in any method of accounting or accounting practice; or
(vii) settle or compromise any material Tax liability, make or
change any material Tax election, or file any tax return other than a tax return
filed in the ordinary course of business and prepared in a manner consistent
with past practice.
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5.2 ACCESS TO INFORMATION.
At all times prior to the Closing or the earlier termination of this
Agreement in accordance with the provisions of Article VIII, and in each case
subject to Section 5.3 below, each party hereto shall provide to the other party
(and the other party's authorized representatives) reasonable access during
normal business hours and upon reasonable prior notice to the premises,
properties, books, records, assets, liabilities, operations, contracts,
personnel, financial information and other data and information of or relating
to such party (including without limitation all written proprietary and trade
secret information and documents, and other written information and documents
relating to intellectual property rights and matters), and will cooperate with
the other party in conducting its due diligence investigation of such party,
provided that the party granted such access shall not interfere unreasonably
with the operation of the business conducted by the party granting access, and
provided that no such access need be granted to privileged information or any
agreements or documents subject to confidentiality agreements.
5.3 CONFIDENTIALITY; NO SOLICITATION.
(a) Confidentiality. Each party shall hold, and shall cause its
respective Affiliates and representatives to hold, all Confidential Information
made available to it in connection with the Stock Purchase in strict confidence,
shall not use such information except for the sole purpose of evaluating the
Stock Purchase and shall not disseminate or disclose any of such information
other than to its directors, officers, managers, employees, shareholders,
interest holders, Affiliates, agents and representatives, as applicable, who
need to know such information for the sole purpose of evaluating the Stock
Purchase (each of whom shall be informed in writing by the disclosing party of
the confidential nature of such information and directed by such party in
writing to treat such information confidentially). If this Agreement is
terminated pursuant to the provisions of Article VIII, each party shall
immediately return to the other party all such information, all copies thereof
and all information prepared by the receiving party based upon the same. The
above limitations on use, dissemination and disclosure shall not apply to
Confidential Information that (i) is learned by the disclosing party from a
third party entitled to disclose it; (ii) becomes known publicly other than
through the disclosing party or any third party who received the same from the
disclosing party, provided that the disclosing party had no Knowledge that the
disclosing party was subject to an obligation of confidentiality; (iii) is
required by law or court order to be disclosed by the parties; or (iv) is
disclosed with the express prior written consent thereto of the other party. The
parties shall undertake all necessary steps to ensure that the secrecy and
confidentiality of such information will be maintained in accordance with the
provisions of this subsection (a). Notwithstanding anything contained herein to
the contrary, in the event a party is required by court order or subpoena to
disclose information that is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party, at the
expense of the non-disclosing party, in obtaining a protective or similar order
with respect to such information; and (iii) provide only that amount of
information as the disclosing party is advised by its counsel is necessary to
strictly comply with such court order or subpoena.
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(b) No Solicitation. Except as otherwise contemplated in this
Agreement, the Company shall not, directly or indirectly, solicit any inquiries
or proposals for, or enter into or continue or resume any discussions with
respect to or enter into any negotiations or agreements relating to the sale or
exchange of, the Touchstone USA Shares or all or a substantial part of
Touchstone USA's assets. The Company shall promptly notify Purchaser if any such
proposal or offer, or any inquiry or contact with any Person or entity with
respect thereto, is made.
5.4 BEST EFFORTS; CONSENTS.
Subject to the terms and conditions herein provided, each of the
Company and Purchaser agrees to use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the Stock Purchase and to cooperate with the others in connection with the
foregoing, including using its reasonable efforts to (i) obtain all waivers,
consents and approvals from other parties to loan agreements, leases, mortgages
and other contracts necessary for the consummation of the Stock Purchase, (ii)
make all filings with, and obtain all consents, approvals and authorizations
that are required to be obtained from, Governmental Authorities or stock
exchanges, (iii) lift or rescind any injunction, restraining order, decree or
other order adversely affecting the ability of the parties hereto to consummate
the Stock Purchase, (iv) effect all necessary registrations and filings and
submissions of information requested by Governmental Authorities, and (v)
fulfill all conditions to this Agreement. Each of the Company and Purchaser
shall use all reasonable efforts to prevent the entry, enactment or promulgation
of any threatened or pending preliminary or permanent injunction or other order,
decree or ruling or statute, rule, regulation or executive order that would
adversely affect the ability of the parties hereto to consummate the Stock
Purchase.
5.5 FURTHER ASSURANCES.
Subject to Section 5.4, each of the parties hereto agrees to use its
reasonable best efforts before and after the Closing Date to take or cause to be
taken all action, to do or cause to be done, and to assist and cooperate with
the other party hereto in doing, all things necessary, proper or advisable under
applicable laws to consummate and make effective, in the most expeditious manner
practicable, the Stock Purchase, including, but not limited to: (i) the
satisfaction of the conditions precedent to the obligations of any of the
parties hereto; (ii) to the extent consistent with the obligations of the
parties set forth in Section 5.4, the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the performance of the obligations hereunder; and (iii) the execution and
delivery of such instruments, and the taking of such other actions, as the other
party hereto may reasonably require in order to carry out the intent of this
Agreement.
5.6 PUBLIC ANNOUNCEMENTS.
The Company and Purchaser shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Stock Purchase or this Agreement, and shall not issue any other press
release or make any other public statement without prior consent of the other
parties, except (i) as may be required by law, (ii) with respect to Purchaser,
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by obligations pursuant to rules or regulations of the Exchange Act, the
Securities Act, any rule or regulation promulgated thereunder or any rule or
regulation of the National Association of Securities Dealers, or (iii), with
respect to the Company, by obligations pursuant to rules or regulations of the
securities laws of British Columbia, any rule or regulation promulgated
thereunder or any rule or regulation of the TSX Venture Exchange.
5.7 NOTIFICATION OF CERTAIN MATTERS.
Each party hereto shall promptly notify the other party in writing
of any events, facts or occurrences that would result in any breach of any
representation or warranty or breach of any covenant by such party contained in
this Agreement.
5.8 PROHIBITION ON TRADING IN PURCHASER SECURITIES.
The Company acknowledges that information concerning the matters
that are the subject matter of this Agreement may constitute material non-public
information under United States federal securities laws, and that United States
federal securities laws prohibit any Person who has received material non-public
information relating to Purchaser from purchasing or selling securities of
Purchaser, or from communicating such information to any Person under
circumstances in which it is reasonably foreseeable that such Person is likely
to purchase or sell securities of Purchaser. Accordingly, until such time as any
such non-public information has been adequately disseminated to the public, the
Company shall not purchase or sell any securities of Purchaser, or communicate
such information to any other Person.
5.9 ADVISORY FEE.
Upon the consummation of the Stock Purchase, the Company shall pay
an advisory fee to HMA Advisors, Inc. consisting of 280,000 shares of Purchaser
Common Stock.
5.10 SCHEDULES AND EXHIBITS.
Each of the parties hereto shall utilize its reasonable best efforts
to produce all Schedules and Exhibits required to be produced by it under this
Agreement prior to the execution hereof. In the event that any party has not
produced all Schedules and Exhibits required to be produced by it hereunder
prior to the execution of this Agreement, all such Schedules and Exhibits shall
be produced by such party within ten (10) Business Days thereafter, but in no
event shall such Schedules and Exhibits be delivered less than three (3)
Business Days prior to the Closing. The Schedules and Exhibits produced
subsequent to the execution of this Agreement shall be given such force and
effect as though such Schedules and Exhibits were produced on the date of
execution of this Agreement.
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ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE STOCK PURCHASE
6.1 CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to consummate the Stock Purchase
shall be subject to the fulfillment, or written waiver by the Company, at or
prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Purchaser set out in this
Agreement shall be true and correct in all material respects at and as of the
time of the Closing as though such representations and warranties were made at
and as of such time;
(b) Purchaser shall have performed and complied in all material
respects with all covenants, conditions, obligations and agreements required by
this Agreement to be performed or complied with by Purchaser on or prior to the
Closing Date;
(c) There shall be delivered to the Company an officer's certificate
of Purchaser to the effect that the conditions set forth in Section 6.1(a) and
(b) have been satisfied;
(d) Purchaser shall have delivered to the Company any certificates
evidencing the Purchaser Shares in accordance with Section 2.2(a)(ii)(A); and
(e) The Company shall have received written approval by the TSX
Venture Exchange of the transactions contemplated herein.
6.2 CONDITIONS TO OBLIGATIONS OF PURCHASER.
The obligations of Purchaser to consummate the Stock Purchase shall
be subject to the fulfillment, or written waiver by Purchaser, at or prior to
the Closing, of each of the following conditions:
(a) The representations and warranties of the Company set out in
this Agreement shall be true and correct in all material respects at and as of
the time of the Closing as though such representations and warranties were made
at and as of such time;
(b) the Company shall have performed and complied in all material
respects with all covenants, conditions, obligations and agreements required by
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date;
(c) There shall be delivered to Purchaser an officer's certificate
of the Company to the effect that the conditions set forth in Section 6.2(a) and
(b) hereof have been satisfied;
(d) the Company shall have delivered to the Company any certificates
evidencing the Touchstone USA Shares in accordance with Section 2.2(a)(i)(A);
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(e) The Company Financial Statements and records of the Company
shall be of such quality that, in the judgment of the Company, an audit of the
Company's Financial Statements can be completed within sixty (60) days after the
Closing in accordance with applicable SEC rules and regulations, including
Regulation S-X promulgated under the Securities Act;
(f) the Company or Touchstone USA shall have paid in full or
restructured the terms of any and all other outstanding indebtedness which is
accelerated, in whole or in part, upon consummation of the Stock Purchase to the
satisfaction of Purchaser;
(g) Purchaser shall have completed a due diligence review of the
business, operations, financial condition and prospects of the Company and
Touchstone USA and shall have been satisfied with the results of its due
diligence review in its sole and absolute discretion; and
(h) Touchstone Louisiana, Inc., a Delaware corporation and
wholly-owned subsidiary of Purchaser, shall have completed its purchase of the
Company's ten percent (10%) membership interest in LS Gas, LLC, a Delaware
limited liability company and the general partner of Louisiana Shelf Partners,
L.P., a Delaware limited partnership.
6.3 OTHER CONDITIONS TO OBLIGATIONS OF THE COMPANY AND PURCHASER.
The obligations of the Company and Purchaser to consummate the Stock
Purchase shall be subject to the fulfillment, or written waiver by each of the
Company and Purchaser, at or prior to the Closing, of each of the following
conditions:
(a) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Stock Purchase shall have been secured; and
(b) No statute, rule, regulation, executive order, decree,
preliminary or permanent injunction, or restraining order shall have been
enacted, entered, promulgated or enforced by any Governmental Authority that
prohibits or restricts the consummation of the Stock Purchase.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY.
From and after the Closing Date, the Company shall indemnify and
hold harmless Purchaser and its respective officers and directors (each an
"Indemnified Party"), from and against any and all demands, claims, actions or
causes of action, judgments, assessments, losses, liabilities, damages or
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penalties and reasonable attorneys' fees and related disbursements
(collectively, "Claims") suffered by such Indemnified Party resulting from or
arising out of (i) any inaccuracy in or breach of any of the representations or
warranties made my the Company at the time they were made, and, except for
representations and warranties that speak as of a specific date or time (which
need only be true and correct as of such date or time), on and as of the Closing
Date, (ii) any breach or nonfulfillment of any covenants or agreements made by
the Company, and (iii) any misrepresentation made by the Company, in each case
as made herein or in the Schedules or Exhibits annexed hereto or in any closing
certificate, schedule or any ancillary certificates or other documents or
instruments furnished by the Company pursuant hereto or in connection with the
Stock Purchase.
7.2 INDEMNIFICATION PROCEDURES FOR THIRD-PARTY CLAIM.
(a) Upon obtaining knowledge of any Claim by a third party which has
given rise to, or is expected to give rise to, a claim for indemnification
hereunder, Purchaser shall give written notice ("Notice of Claim") of such claim
or demand to the Company, specifying in reasonable detail such information as
the Indemnified Party may have with respect to such indemnification claim
(including copies of any summons, complaint or other pleading which may have
been served on it and any written claim, demand, invoice, billing or other
document evidencing or asserting the same). Subject to the limitations set forth
in Section 7.2(b) hereof, no failure or delay by Purchaser in the performance of
the foregoing shall reduce or otherwise affect the obligation of the Company to
indemnify and hold the Indemnified Party harmless, except to the extent that
such failure or delay shall have actually adversely affected the Company's
ability to defend against, settle or satisfy any Claims for which the
Indemnified Party entitled to indemnification hereunder.
(b) If the claim or demand set forth in the Notice of Claim given by
Purchaser pursuant to Section 7.2(a) hereof is a claim or demand asserted by a
third party, the Company shall have fifteen (15) days after the date on which
Notice of Claim is given to notify Purchaser in writing of its election to
defend such third party claim or demand on behalf of the Indemnified Party. If
the Company elects to defend such third party claim or demand, Purchaser shall
make available to the Company and its agents and representatives all records and
other materials that are reasonably required in the defense of such third party
claim or demand and shall otherwise cooperate with, and assist the Company in
the defense of, such third party claim or demand, and so long as the Company is
defending such third party claim in good faith, the Indemnified Party shall not
pay, settle or compromise such third party claim or demand. If the Company
elects to defend such third party claim or demand, the Indemnified Party shall
have the right to participate in the defense of such third party claim or
demand, at such Indemnified Party's own expense. In the event, however, that
such Indemnified Party reasonably determines that representation by counsel to
the Company of both the Company and such Indemnified Party could reasonably be
expected to present counsel with a conflict of interest, then the Indemnified
Party may employ separate counsel to represent or defend it in any such action
or proceeding and the Company will pay the fees and expenses of such counsel. If
the Company does not elect to defend such third party claim or demand or does
not defend such third party claim or demand in good faith, the Indemnified Party
shall have the right, in addition to any other right or remedy it may have
hereunder, at the Company's expense, to defend such third party claim or demand;
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provided, however, that (i) such Indemnified Party shall not have any obligation
to participate in the defense of, or defend, any such third party claim or
demand; (ii) such Indemnified Party's defense of or its participation in the
defense of any such third party claim or demand shall not in any way diminish or
lessen the obligations of the Company under the agreements of indemnification
set forth in this Article VII; and (iii) such Indemnified Party may not settle
any claim without the consent of the Company, which consent shall not be
unreasonably withheld or delayed.
(c) The Company and Purchaser, and the other Indemnified Party, if
any, shall cooperate fully in all aspects of any investigation, defense,
pre-trial activities, trial, compromise, settlement or discharge of any claim in
respect of which indemnity is sought pursuant to this Article VII, including,
but not limited to, by providing the other party with reasonable access to
employees and officers (including as witnesses) and other information.
(d) Except for third party claims being defended in good faith, the
Company shall satisfy its obligations under this Article VII in respect of a
valid claim for indemnification hereunder which is not contested by the Company
in good faith in cash within thirty (30) days after the date on which Notice of
Claim is given.
7.3 INDEMNIFICATION PROCEDURES FOR NON-THIRD PARTY CLAIMS.
In the event any Indemnified Party should have an indemnification
claim against the Company under this Agreement that does not involve a claim by
a third party, the Indemnified Party shall promptly deliver notice of such claim
to the Company in writing and in reasonable detail. The failure by any
Indemnified Party to so notify the Company shall not relieve the Company from
any liability that it may have to such Indemnified Party, except to the extent
that the Company has been actually prejudiced by such failure. If the Company
does not notify the Indemnified Party within fifteen (15) Business Days
following its receipt of such notice that the Company disputes such claim, such
claim specified by the Company in such notice shall be conclusively deemed a
liability of the Company under this Article VII and the Company shall pay the
amount of such liability to the Indemnified Party on demand, or in the case of
any notice in which the amount of the claim is estimated, on such later date
when the amount of such claim is finally determined. If the Company disputes its
liability with respect to such claim in a timely manner, the Company and the
Indemnified Party shall proceed in good faith to negotiate a resolution of such
dispute and, if not resolved through negotiations, such dispute shall be
submitted to arbitration pursuant to Section 9.12.
7.4 LIMITATIONS ON INDEMNIFICATION.
No claim for indemnification under this Article VII shall be
asserted by, and no liability for such indemnity shall be enforced against, the
Company to the extent the Indemnified Party has theretofore received
indemnification or otherwise been compensated for such Claim. In the event that
an Indemnified Party shall later collect any such amounts recovered under
insurance policies with respect to any Claim for which it has previously
received payments under this Article VII from the Company, such Indemnified
Party shall promptly repay to the Company such amount recovered.
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7.5 EXCLUSIVE REMEDY.
The indemnification provisions of this Article VII (i) shall, in the
case of the representatives and warranties, be the exclusive remedy following
the Closing with respect to breaches thereof, (ii) shall apply without regard
to, and shall not be subject to, any limitation by reason of set-off, limitation
or otherwise and (iii) are intended to be comprehensive and not to be limited by
any requirements of law concerning prominence of language or waiver of any legal
right under any law (including, without limitation, rights under any workers
compensation statute or similar statute conferring immunity from suit). The
obligations of the parties set forth in this Article VII shall be conditioned
upon the Closing having occurred.
ARTICLE VIII
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing:
(a) by mutual consent of the Company and Purchaser;
(b) by the Company and Purchaser if the Closing shall not have
occurred on or before April 30, 2004 (the "Outside Date");
(c) the Company or Purchaser if any Governmental Authority shall
have issued an injunction, order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting any material portion of the
Stock Purchase and such injunction, order, decree, ruling or other action shall
have become final and nonappealable;
(d) by the Company or Purchaser upon written notice to the other
party if any of the conditions to the Closing set forth in Section 6.3 shall
have become incapable of fulfillment by the Outside Date and shall not have been
waived in writing by the Company or Purchaser, respectively.
(e) by the Company upon written notice to Purchaser if any of the
conditions to the Closing set forth in Section 6.1 shall have become incapable
of fulfillment by the Outside Date and shall not have been waived in writing by
the Company; or
(f) by Purchaser upon written notice to the Company if any of the
conditions to the Closing set forth in Section 6.2 shall have become incapable
of fulfillment by the Outside Date and shall not have been waived in writing by
Purchaser.
8.2 PROCEDURE AND EFFECT OF TERMINATION.
In the event of termination of this Agreement pursuant to Section
8.1 hereof, written notice thereof shall forthwith be given by the terminating
party to the other party, and, except as set forth below, this Agreement shall
21
terminate and be void and have no effect and the Stock Purchase shall be
abandoned without any further action by the parties hereto; provided that, if
such termination shall result from the failure of a party to perform a covenant,
obligation or agreement in this Agreement or from the breach by the Company or
Purchaser of any representation or warranty contained herein, such party shall
be fully liable for any and all damages incurred or suffered by the other party
as a result of such failure or breach. If this Agreement is terminated as
provided herein:
(a) each party hereto shall redeliver, and shall cause its agents
(including, without limitation, attorneys and accountants) to redeliver, all
documents, work papers and other material of each party hereto relating to the
Stock Purchase, whether obtained before or after the execution hereof; and
(b) each party agrees that all Confidential Information received by
the Company or Purchaser with respect to the other party, this Agreement or the
Stock Purchase shall be kept confidential notwithstanding the termination of
this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties and
supercedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereto, and no party
shall be liable or bound to any other party in any manner by any warranties,
representations, guarantees or covenants except as specifically set forth in
this Agreement. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.
9.2 AMENDMENT AND MODIFICATIONS.
This Agreement may not be amended, modified or supplemented except
by an instrument or instruments in writing signed by the party against whom
enforcement of any such amendment, modification or supplement is sought.
9.3 EXTENSIONS AND WAIVERS.
At any time prior to the Closing, the parties hereto entitled to the
benefits of a term or provision may (a) extend the time for the performance of
any of the obligations or other acts of the parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document, certificate or writing delivered pursuant hereto, or (c) waive
compliance with any obligation, covenant, agreement or condition contained
herein. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument or instruments in writing
22
signed by the party against whom enforcement of any such extension or waiver is
sought. No failure or delay on the part of any party hereto in the exercise of
any right hereunder shall impair such right or be construed to be a waiver of,
or acquiescence in, any breach of any representation, warranty, covenant or
agreement.
9.4 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided, however,
that no party hereto may assign its rights or delegate its obligations under
this Agreement without the express prior written consent of the other party
hereto. Except as provided in Article VII, nothing in this Agreement is intended
to confer upon any person not a party hereto (and their successors and assigns)
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations and warranties contained herein shall survive
the Closing and shall thereupon terminate eighteen (18) months after the
Closing, except that (i) the representations contained in Sections 3.1, 3.2,
3.4, 3.5, 3.7, 4.1, 4.2, 4.4 and 4.5 shall survive indefinitely, and (ii) the
representations contained in Sections 3.9 and 3.14 shall survive until the
expiration of the applicable statute of limitations with respect to the matter
at issue. All covenants and agreements contained herein which by their terms
contemplate actions following the Closing shall survive the Closing and remain
in full force and effect in accordance with their terms. All other covenants and
agreements contained herein shall not survive the Closing and shall thereupon
terminate.
9.6 HEADINGS; DEFINITIONS.
The Section and Article headings contained in this Agreement are
inserted for convenience of reference only and will not affect the meaning or
interpretation of this Agreement. All references to Sections or Articles
contained herein mean Sections or Articles of this Agreement unless otherwise
stated. All capitalized terms defined herein are equally applicable to both the
singular and plural forms of such terms.
9.7 SEVERABILITY.
If any provision of this Agreement or the application thereof to any
Person or circumstance is held to be invalid or unenforceable to any extent, the
remainder of this Agreement shall remain in full force and effect and shall be
reformed to render the Agreement valid and enforceable while reflecting to the
greatest extent permissible the intent of the parties.
9.8 SPECIFIC PERFORMANCE.
The parties hereto agree that in the event that the Company fails to
consummate the Stock Purchase in accordance with the terms of this Agreement,
irreparable damage would occur, no adequate remedy at law would exist and
damages would be difficult to determine, and that Purchaser shall be entitled to
specific performance in such event, without the necessity of posting a bond or
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proving the inadequacy of money damages as a remedy, in addition to any other
remedy at law or in equity.
9.9 EXPENSES.
Whether or not the Stock Purchase is consummated, and except as
otherwise expressly set forth herein, all legal and other costs and expenses
incurred in connection with the Stock Purchase shall be paid by the party
incurring such expenses.
9.10 NOTICES.
All notices hereunder shall be sufficiently given for all purposes
hereunder if in writing and delivered personally, sent by documented overnight
delivery service or, to the extent receipt is confirmed, telecopy, telefax or
other electronic transmission service to the appropriate address or number as
set forth below.
If to Purchaser: with a copy to:
The Coffee Exchange, Inc. ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Esquire
President
If to the Company: with a copy to:
Touchstone Resources, Ltd. Dumoulin Black
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Vancouver, British Columbia V6C 2T5
Canada ▇▇▇ ▇▇▇ Attention: ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, President
9.11 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the laws that might
otherwise govern under applicable principles of conflicts of laws thereof,
except to the extent that the laws of British Columbia shall apply to the
internal corporate governance of the Company.
9.12 ARBITRATION.
If a dispute arises as to the interpretation of this Agreement, it
shall be decided in an arbitration proceeding conforming to the Rules of the
American Arbitration Association applicable to commercial arbitration then in
effect at the time of the dispute. The arbitration shall take place in Texas.
The decision of the Arbitrators shall be conclusively binding upon the parties
24
and final, and such decision shall be enforceable as a judgment in any court of
competent jurisdiction. The parties shall share equally the costs of the
arbitration.
9.13 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same agreement.
9.14 CERTAIN DEFINITIONS.
As used herein:
(a) "Affiliate" shall have the meanings ascribed to such term in
Rule 12b-2 of the Exchange Act;
(b) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which federally chartered financial institutions are not open for
business in the City of Houston, Texas;
(c) "Confidential Information" shall mean the existence and contents
of this Agreement and the Schedules and Exhibits hereto, and all proprietary
technical, economic, environmental, operational, financial and/or business
information or material of one party which, prior to or following the Closing
Date, has been disclosed by the Company, on the one hand, or Purchaser, on the
other hand, in written, oral (including by recording), electronic, or visual
form to, or otherwise has come into the possession of, the other.
(d) "Encumbrances" shall mean any security or other property
interest or right, claim, lien, pledge, option, charge, security interest,
contingent or conditional sale, or other title claim or retention agreement,
interest or other right or claim of third parties, whether perfected or not
perfected, voluntarily incurred or arising by operation of law, and including
any agreement (other than this Agreement) to grant or submit to any of the
foregoing in the future;
(e) "Environmental Law" shall mean any applicable statute, rule,
regulation, law, bylaw, ordinance or directive of any Governmental Authority
dealing with the pollution or protection of natural resources or the indoor or
ambient environment or with the protection of human health or safety;
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended;
(g) "GAAP" shall mean United States generally accepted accounting
principles as in effect on the date or for the period with respect to which such
principles are applied;
(h) "Governmental Authority" shall mean any nation or government,
any state, municipality or other political subdivision thereof and any entity,
body, agency, commission or court, whether domestic, foreign or multinational,
25
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any executive official thereof;
(i) "Knowledge" shall mean (i) with respect to an individual,
knowledge of a particular fact or other matter, if such individual is aware of
such fact or other matter, and (ii) with respect to a Person that is not an
individual, knowledge of a particular fact or other matter if any individual who
is serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, knowledge of such fact or other matter;
(j) "Liens" shall mean liens, pledges, charges, claims, security
interests, purchase agreements, options, title defects, restrictions on transfer
or other encumbrances, or any agreements (other than this Agreement) to do any
of the foregoing, of any nature whatsoever, whether consensual, statutory or
otherwise;
(k) "Material Adverse Effect" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of (i) in
the case of the Company, the Company and its subsidiaries, if any, which is
material to the Company and its subsidiaries, if any, taken as a whole, or (ii)
in the case of Purchaser, Purchaser and its subsidiaries, if any, which is
material to Purchaser and its subsidiaries, if any taken as a whole;
(l) "Person" shall mean any individual, corporation, partnership,
association, trust or other entity or organization, including a governmental or
political subdivision or any agency or institution thereof;
(m) "SEC" shall mean the Securities and Exchange Commission;
(n) "Securities Act" shall mean the Securities Act of 1933, as
amended; and
(o) "Tax" shall mean all taxes (whether U.S. federal, state, local
or non-U.S.) based upon or measured by income and any other tax whatsoever,
including, without limitation, gross receipts, profits, sales, levies, imposts,
deductions, charges, rates, duties, use, occupation, value added, ad valorem,
transfer, franchise, withholding, payroll and social security, employment,
excise, stamp duty or property taxes, together with any interest, penalties,
charges or fees imposed with respect thereto.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COFFEE EXCHANGE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President
TOUCHSTONE RESOURCES, LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: President