EXHIBIT 10.1
STOCK EXCHANGE AGREEMENT
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This Stock Exchange Agreement (the "Agreement"), dated as of July19, 2001,
is by and among ▇▇▇▇▇▇ Industries, Inc., a Nevada corporation ("▇▇▇▇▇▇"), and
each of the persons or entities whose names appear and who are identified as
stockholders on the signature page hereof (individually, a "Stockholder" and
collectively the "Stockholders"), such persons or entities being registered
holders of capital stock of ▇▇▇▇▇ Communications Corporation, a Texas
corporation ("▇▇▇▇▇"), and ▇▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ who is a control person of
▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇").
R E C I T A L S
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WHEREAS, each Stockholder is the record and beneficial owner of the number
of shares of common stock of ▇▇▇▇▇ indicated in the table set forth as Exhibit
"A" to this Agreement (which shares are hereinafter collectively referred to as
the "▇▇▇▇▇ Stock");
WHEREAS, ▇▇▇▇▇▇ desires to acquire from the Stockholders, and the
Stockholders desire to convey to ▇▇▇▇▇▇, all of the issued and outstanding ▇▇▇▇▇
Stock owned by the Stockholders in exchange for shares of Series A Convertible
Non-Redeemable Preferred Stock, $.001 par value per share, of ▇▇▇▇▇▇ (the
"▇▇▇▇▇▇ Stock"), the designation certificate of which is attached hereto as
Exhibit "B", all on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements and the respective representations and warranties herein contained in
this Agreement, and on the terms and subject to the conditions set forth in this
Agreement, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
EXCHANGE OF SHARES
Section 1.1 ▇▇▇▇▇ Stock. At the Closing (as defined below), each
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Stockholder shall transfer, convey and deliver to ▇▇▇▇▇▇ the number of shares of
▇▇▇▇▇ Stock set forth opposite their name on Exhibit A hereto, and shall deliver
to ▇▇▇▇▇▇ stock certificates representing the ▇▇▇▇▇ Stock, duly endorsed to
▇▇▇▇▇▇ or accompanied by duly executed stock powers in form and substance
satisfactory to ▇▇▇▇▇▇.
Section 1.2 ▇▇▇▇▇▇ Stock. At the Closing, in exchange for each share
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of ▇▇▇▇▇ Stock transferred to ▇▇▇▇▇▇, ▇▇▇▇▇▇ shall issue and deliver to each
Stockholder the number of shares of ▇▇▇▇▇▇ Stock set forth opposite their name
on Exhibit A hereto. The transaction by which the transfer shall take place is
referred to in this Agreement as the "Exchange".
ARTICLE II
THE CLOSING
The Closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at 2:00 p.m. on July 19, 2001 (the "Closing Date"),
at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or at such other time and place as agreed upon among the
parties hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders hereby severally represents and warrants to ▇▇▇▇▇▇
as follows:
Section 3.1 Ownership of the ▇▇▇▇▇ Stock. Each Stockholder owns,
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beneficially and of record, that number of shares of ▇▇▇▇▇ Stock set forth
opposite the Stockholder's name on Exhibit A hereto; except for restrictions
imposed by federal and state securities laws, (i) such shares are owned by such
Stockholder free and clear of any liens, claims, equities, charges, options,
rights of first refusal, voting agreements or encumbrances; (ii) the Stockholder
has the unrestricted right and power to transfer, convey and deliver full
ownership of such shares without the consent or agreement of any other person
and without any designation, declaration or filing with any governmental
authority; and, (iii) upon the transfer of such shares to ▇▇▇▇▇▇ as contemplated
herein, ▇▇▇▇▇▇ will receive good and valid title thereto, free and clear of any
liens, claims, equities, charges, options, rights of first refusal, encumbrances
or other restrictions.
Section 3.2 Organization. If the Stockholder is either a corporation,
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limited liability company or partnership, it represents and warrants that it is
duly organized, validly existing and in good standing under the laws of the
state of its incorporation or formation, with full power and authority and all
necessary governmental and regulatory licenses, permits and authorizations to
carry on the businesses in which it is engaged, to own the properties that it
owns currently and will own at the Closing, and to perform its obligations under
this Agreement. If the Stockholder is a corporation, limited liability company
or partnership it is qualified as a foreign corporation, foreign limited
liability company or foreign partnership (which ever the case may be) and is in
good standing in each jurisdiction in which the failure to qualify would have
material adverse effect on the business, properties or condition (financial or
otherwise) of the corporate, limited liability company or partnership
Stockholder.
Section 3.3 Authorization. If the Stockholder is a person, then he or
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she is of the full age of majority, with full power, capacity and authority to
enter into this Agreement and perform the obligations contemplated hereby by and
for himself or herself and his or her spouse, if any. If the Stockholder is a
corporation, limited liability company or partnership, then all corporate,
limited liability company or partnership action on the part of the corporate,
limited liability company or partnership Shareholder necessary for the
authorization, execution, delivery and performance of this Agreement and the
transactions contemplated hereby has been taken or will be taken prior to the
Closing. All action on the part of the Stockholder necessary for the
authorization, execution, delivery and performance of this Agreement by the
Stockholder has been taken or will be taken prior to the Closing. This
Agreement constitutes a valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
Section 3.4 Pending Claims. There is no claim, suit, action or
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proceeding, whether judicial, administrative or otherwise, pending or, to the
best of the Stockholder's knowledge, threatened that would preclude or restrict
the transfer to ▇▇▇▇▇▇ of the ▇▇▇▇▇ Stock owned by the Stockholder or the
performance of this Agreement by the Stockholder.
Section 3.5 No Default. The execution, delivery and performance of
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this Agreement by the Stockholder does not and will not constitute a violation
or default under or conflict with any contract, agreement, understanding or
commitment to which such Stockholder is a party or by which such Stockholder is
bound.
Section 3.6 Acquisition of Stock for Investment. Each Stockholder
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understands that the issuance of ▇▇▇▇▇▇ Stock will not have been registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities acts, and, accordingly, are restricted securities, and that he/she
represents and warrants to Berens that his/her present intention is to receive
and hold the ▇▇▇▇▇▇ Stock for investment only and not with a view to the
distribution or resale thereof.
Additionally, the Stockholder understands that any sale by the Stockholder
of any of the ▇▇▇▇▇▇ Stock received under this Agreement will, under current
law, require either (a) the registration of the ▇▇▇▇▇▇ Stock under the Act and
applicable state securities acts; (b) compliance with Rule 144 of the Act; or
(c) the availability of an exemption from the registration requirements of the
Act and applicable state securities acts. Unless a Registration Statement had
been filed to register the ▇▇▇▇▇▇ Stock, the Stockholder hereby agrees to
execute, deliver, furnish or otherwise provide to ▇▇▇▇▇▇ an opinion of counsel
reasonably acceptable to ▇▇▇▇▇▇ prior to any subsequent transfer of the ▇▇▇▇▇▇
Stock, that such transfer will not violate the registration requirements of the
federal or state securities acts. The Stockholder further agrees to execute,
deliver, furnish or otherwise provide to ▇▇▇▇▇▇ any documents or instruments as
may be reasonably necessary or desirable in order to evidence and record the
▇▇▇▇▇▇ Stock acquired hereby.
To assist in implementing the above provisions, the Stockholder hereby
consents to the placement of the legend, or a substantially similar legend, set
forth below, on all certificates representing ownership of the ▇▇▇▇▇▇ Stock
acquired hereby until the ▇▇▇▇▇▇ Stock has been sold, transferred, or otherwise
disposed of, pursuant to the requirements hereof. The legend shall read
substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACTS. THESE SECURITIES
MUST BE ACQUIRED FOR INVESTMENT, ARE RESTRICTED AS TO TRANSFERABILITY, AND
MAY NOT BE SOLD, , HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT
COMPLIANCE WITH THE REGISTRATION AND QUALIFICATION PROVISIONS OF APPLICABLE
FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM."
Section 3.7 Stockholder Access to Information. The Stockholder hereby
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confirms and represents that he/she: (a) has been afforded the opportunity to
ask questions of and receive answers from representatives of ▇▇▇▇▇▇ concerning
the business and financial condition, properties, operations and prospects of
▇▇▇▇▇▇ and has asked such questions as he/she desires to ask and all such
questions have been answered to the full satisfaction of the Stockholder; (b)
has such knowledge and experience in financial and business matters so as to be
capable of evaluating the relative merits and risks of the transactions
contemplated hereby; (c) has had an opportunity to engage and is represented by
an attorney of his/her choice; (d) has had an opportunity to negotiate the terms
and conditions of this Agreement; (e) has been given adequate time to evaluate
the merits and risks of the transactions contemplated hereby; and (f) has been
provided with and given an opportunity to review all SEC filings available on
▇▇▇.▇▇▇.▇▇▇.
Section 3.8 Disclosure. To the best of the Stockholder's knowledge, no
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representation or warranty of the Stockholder contained in this Agreement
(including the exhibits and schedules hereto) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
Section 3.9 Indemnification by Stockholder The Stockholder recognizes
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that the Exchange being conducted with ▇▇▇▇▇▇ is based, to a material degree,
upon the representations and warranties of Stockholder as set forth and
contained herein and the Stockholder hereby agrees to indemnify and hold
harmless ▇▇▇▇▇▇ against all damages, costs, or expenses (including reasonable
attorney's fees) arising as a result of any breach of representation or warranty
or omission made herein by the Stockholder.
If any action is brought against ▇▇▇▇▇▇ in respect of which indemnity may
be sought against the Stockholder pursuant to the foregoing paragraph, ▇▇▇▇▇▇
shall promptly notify the Stockholder in writing of the institution of such
action (but the omission to so notify the Stockholder shall not relieve it from
any liability that it may have to ▇▇▇▇▇▇ except to the extent the Stockholder is
materially prejudiced or otherwise forfeit substantive rights or defenses by
reason of such failure), and the Stockholder shall assume the defense of such
action, including the employment of counsel to be chosen by the Stockholder to
be reasonably satisfactory to ▇▇▇▇▇▇, and payment of expenses. ▇▇▇▇▇▇ shall
have the right to employ the Stockholder's or their own counsel in any such
case, but the fees and expenses of such counsel shall be at ▇▇▇▇▇▇ expense,
unless the employment of such counsel shall have been authorized in writing by
the Stockholder in connection with the defense of such action, or the
Stockholder shall not have employed counsel to take charge of the defense of
such action, or counsel employed by the Stockholder shall not be diligently
defending such action, or Berens shall have reasonably concluded that there may
be defenses available to it which are different from or additional to those
available to the Stockholder, or that representation of ▇▇▇▇▇▇ by the same
counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them (in which
case the Stockholder shall not have the right to direct the defense of such
action on behalf of ▇▇▇▇▇▇), in any of which event such fees and expenses shall
be borne by the Stockholder. Anything in this paragraph to the contrary
notwithstanding, the Stockholder shall not be liable for any settlement of, or
any expenses incurred with respect to, any such claim or action effected without
the Stockholder's written consent, which consent shall not be unreasonably
withheld. The Stockholder shall not, without the prior written consent of
▇▇▇▇▇▇ effect any settlement of any proceeding in respect of which ▇▇▇▇▇▇ is a
party and indemnity has been sought hereunder unless such settlement includes an
unconditional release of ▇▇▇▇▇▇ from all liability on claims that are the
subject matter of such proceeding.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇
▇▇▇▇▇ hereby represents and warrants to ▇▇▇▇▇▇ as follows:
Section 4.1 Organization and Capitalization. ▇▇▇▇▇ is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of Texas, with full power and authority and all necessary governmental and
regulatory licenses, permits and authorizations to carry on the businesses in
which it is engaged, to own the properties that it owns currently and will own
at the Closing. ▇▇▇▇▇ is qualified as a foreign corporation and is in good
standing in each jurisdiction in which the failure to qualify would have a
material adverse effect on the business, properties or condition (financial or
otherwise) of ▇▇▇▇▇. ▇▇▇▇▇ does not have any subsidiaries or any other
investments or ownership interest in any corporation, partnership, joint venture
or other business enterprise. The authorized capital stock of ▇▇▇▇▇ consists of
100,000 shares of common stock of which 100,000 shares are validly issued and
outstanding. There are no shares of preferred stock of ▇▇▇▇▇ authorized or
outstanding. All of such issued and outstanding shares of ▇▇▇▇▇ Stock have been
duly authorized and validly issued and are fully paid and non-assessable. The
Stockholders own 100% of the capital stock of ▇▇▇▇▇. None of the shares were
issued in violation of any preemptive rights. There are no existing warrants,
options, rights of first refusal, conversion rights, calls, commitments or other
agreements of any character pursuant to which ▇▇▇▇▇ is or may become obligated
to issue any of its stock or securities. ▇▇▇▇▇ has no obligation to repurchase,
reacquire or redeem any of its outstanding capital stock.
Section 4.2 At the time of the Closing, ▇▇▇▇▇ will own and have at
least $255,000.00 in cash and other tangible assets as set forth on Schedule
4.2.
Section 4.3 Litigation. There are no actions, suits or proceedings,
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formal or informal, pending or, to the best knowledge of ▇▇▇▇▇, threatened
against ▇▇▇▇▇, nor is ▇▇▇▇▇ subject to any order, judgment or decree, except in
all cases, whether known or unknown.
Section 4.4 Taxes. ▇▇▇▇▇ has filed all federal tax returns and reports
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due or required to be filed, and has paid all taxes, interest payments and
penalties, if any, required to be paid with respect thereto. ▇▇▇▇▇ has made
adequate provision for the payment of all taxes accruable for all periods ending
on or before the Closing Date to any taxing authority and is not delinquent in
the payment of any material tax or governmental charge of any nature.
Section 4.5 Compliance with Laws. ▇▇▇▇▇ is, and at all times prior to
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the date hereof has been, to the best of its knowledge, in compliance with all
statutes, orders, rules, and regulations applicable to it or to the ownership of
its assets or the operation of its business, except for failures to be in
compliance that would not have a material adverse effect on the business,
properties, condition (financial or otherwise) or prospects of ▇▇▇▇▇, and ▇▇▇▇▇
has no basis to expect to receive, and has not received, any order or notice of
any such violation or claim of violation of any such statute, order, rule,
ordinance or regulation.
Section 4.6 Books and Records. The books of account, minute books,
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stock record books and other records of ▇▇▇▇▇, all of which have been made
available to ▇▇▇▇▇▇, are accurate and complete in all material respects and have
been maintained in accordance with sound business practices.
Section 4.7 Title to Properties; Encumbrances. ▇▇▇▇▇ has good title to
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all of its properties and assets, real and personal, tangible and intangible,
that are material to the condition (financial or otherwise), business,
operations or prospects of ▇▇▇▇▇, free and clear of all mortgages, claims,
liens, security interests, charges, leases, encumbrances and other restrictions
of any kind and nature, except (i) as disclosed in the financial statements of
▇▇▇▇▇, (ii) statutory liens not yet delinquent, and (iii) such liens consisting
of zoning or planning restrictions, imperfections of title, easements, pledges,
charges and encumbrances, if any, as do not materially detract from the value or
materially interfere with the present use of the property or assets subject
thereto or affected thereby.
Section 4.8 Disclosure. To the best of ▇▇▇▇▇'▇ knowledge, no
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representation or warranty of ▇▇▇▇▇ contained in this Agreement (including the
exhibits and schedules hereto) contains any untrue statement or omits to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
Section 4.9 Employee Benefit Plans . ▇▇▇▇▇ is not a party to any
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employee benefit plan.
Section 4.10 No Pending Transactions . Except for the transactions
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contemplated by this Agreement, ▇▇▇▇▇ is not a party to or bound by or the
subject of any agreement, undertaking, commitment or discussions or negotiations
with any person that could result in (i) the sale, merger, consolidation or
recapitalization of ▇▇▇▇▇ or any of its Subsidiaries or material investees,
(ii) the sale of all or substantially all of the assets of ▇▇▇▇▇ or any of its
Subsidiaries, or (iii) a change of control of more than five percent of the
outstanding capital stock of ▇▇▇▇▇ or any of its Subsidiaries.
Section 4.11 Indemnification by ▇▇▇▇▇. ▇▇▇▇▇ recognizes that the
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Exchange being conducted with ▇▇▇▇▇▇ is based, to a material degree, upon the
representations and warranties of ▇▇▇▇▇ as set forth and contained herein and
▇▇▇▇▇ hereby agrees to indemnify and hold harmless ▇▇▇▇▇▇ against all damages,
costs, or expenses (including reasonable attorney's fees) arising as a result of
any breach of representation or warranty or omission made herein by ▇▇▇▇▇.
If any action is brought against ▇▇▇▇▇▇ in respect of which indemnity may
be sought against ▇▇▇▇▇ pursuant to the foregoing paragraph, ▇▇▇▇▇▇ shall
promptly notify ▇▇▇▇▇ in writing of the institution of such action (but the
omission to so notify ▇▇▇▇▇ shall not relieve it from any liability that it may
have to ▇▇▇▇▇▇ except to the extent ▇▇▇▇▇ is materially prejudiced or otherwise
forfeit substantive rights or defenses by reason of such failure), and ▇▇▇▇▇
shall assume the defense of such action, including the employment of counsel to
be chosen by ▇▇▇▇▇ to be reasonably satisfactory to ▇▇▇▇▇▇, and payment of
expenses. ▇▇▇▇▇▇ shall have the right to employ ▇▇▇▇▇' or their own counsel in
any such case, but the fees and expenses of such counsel shall be at ▇▇▇▇▇▇
expense, unless the employment of such counsel shall have been authorized in
writing by ▇▇▇▇▇ in connection with the defense of such action, or ▇▇▇▇▇ shall
not have employed counsel to take charge of the defense of such action, or
counsel employed by ▇▇▇▇▇ shall not be diligently defending such action, or
Berens shall have reasonably concluded that there may be defenses available to
it which are different from or additional to those available to ▇▇▇▇▇, or that
representation of ▇▇▇▇▇▇ by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
differing interests between them (in which case ▇▇▇▇▇ shall not have the right
to direct the defense of such action on behalf of ▇▇▇▇▇▇), in any of which event
such fees and expenses shall be borne by ▇▇▇▇▇. Anything in this paragraph to
the contrary notwithstanding, ▇▇▇▇▇ shall not be liable for any settlement of,
or any expenses incurred with respect to, any such claim or action effected
without ▇▇▇▇▇' written consent, which consent shall not be unreasonably
withheld. ▇▇▇▇▇ shall not, without the prior written consent of ▇▇▇▇▇▇ effect
any settlement of any proceeding in respect of which ▇▇▇▇▇▇ is a party and
indemnity has been sought hereunder unless such settlement includes an
unconditional release of ▇▇▇▇▇▇ from all liability on claims that are the
subject matter of such proceeding.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇ AND
MR. MARC ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, and ▇▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇") as a control person of
▇▇▇▇▇▇, hereby represent and warrant to the Stockholders as follows:
Section 5.1 Organization and Capitalization. ▇▇▇▇▇▇ is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of Nevada, with full power and authority and all necessary governmental
and regulatory licenses, permits and authorizations to carry on the businesses
in which it is engaged, to own the properties that it owns currently and will
own at the Closing, and to perform its obligations under this Agreement. ▇▇▇▇▇▇
is qualified as a foreign corporation and is in good standing in each
jurisdiction in which the failure to qualify would have a material adverse
effect on the business, properties or condition (financial or otherwise) of
▇▇▇▇▇▇. ▇▇▇▇▇▇ does not have any subsidiaries or any other investments or
ownership interest in any corporation, partnership, joint venture or other
business enterprise, except as set forth in Schedule 5.1. Immediately prior to
the Closing Date the authorized capital stock of ▇▇▇▇▇▇ consists of (i)
50,000,000 shares of common stock, $.001 par value per share, of which
26,143,495 shares are validly issued and outstanding, and (ii) 10,000,000 shares
of preferred stock $.001 par value per share, none of which are issued and
outstanding. All of such issued and outstanding shares of the stock of ▇▇▇▇▇▇
have been and all of the shares of ▇▇▇▇▇▇ Stock to be issued hereby will be, at
the Closing, duly authorized and validly issued and are and will be at the
Closing fully paid and non-assessable. None of the shares that were issued and
none of the shares to be issued hereby will be in violation of any preemptive
rights. ▇▇▇▇▇▇ has no obligation to repurchase, reacquire or redeem any of its
outstanding capital stock. There are no outstanding ▇▇▇▇▇▇ derivative
securities (options, warrants, convertibles, rights and the like).
Section 5.2 Subsidiaries. ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇,
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Inc. and ▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., all of which are Nevada corporations, are the
only subsidiaries. All of the outstanding capital stock of, or other ownership
interests in, each Subsidiary is owned by ▇▇▇▇▇▇, directly or indirectly, free
and clear of any lien or any other limitation or limitation or restriction
(including restrictions on the right to vote). All outstanding shares of the
capital stock of any Subsidiary have been duly authorized and validly issued
and are fully paid and non-assessable and are free of any preemptive rights.
There are no outstanding securities of any Subsidiary convertible into or
evidencing the right to purchase or subscribe for any shares of capital stock of
any Subsidiary, there are no outstanding or authorized options, warrants, calls,
subscriptions, rights, commitments or any other agreements of any character
obligating any Subsidiary to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase or subscribe for
any shares of such stock, and there are no agreements or understandings with
respect to the voting, sale, transfer or registration of any shares of capital
stock of any Subsidiary.
Section 5.3 Authorization. All corporate action on the part of ▇▇▇▇▇▇
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necessary for the authorization, execution, delivery and performance of this
Agreement by ▇▇▇▇▇▇ has been taken or will be taken prior to the Closing.
▇▇▇▇▇▇ has the requisite corporate power and authority to execute, deliver and
perform this Agreement. This Agreement has been duly executed and delivered by
▇▇▇▇▇▇, and constitutes a valid and binding obligation of ▇▇▇▇▇▇, enforceable
against ▇▇▇▇▇▇ in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
Section 5.4 Litigation. There are no claims, actions, suits or
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proceedings, formal or informal, pending or, to the best knowledge of ▇▇▇▇▇▇ or
▇▇. ▇▇▇▇▇▇, threatened against ▇▇▇▇▇▇, nor is ▇▇▇▇▇▇ subject to any order,
judgment or decree.
Section 5.5 SEC Reports. During the last twelve months, ▇▇▇▇▇▇ has
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filed with the SEC all of the reports required to be filed with the SEC pursuant
to Section 15(d) of the Securities Exchange Act of 1934, as amended. ▇▇▇▇▇▇ has
filed with the SEC, its Form 10-KSB for the year ended December 31, 2000, and
its Form 10-QSB for the quarter ended March 31, 2001. To the best of ▇▇▇▇▇▇ and
▇▇. ▇▇▇▇▇▇ knowledge, as of their respective dates, the SEC Filings did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 5.6 Taxes. Except for 941 payroll taxes of approximately
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$86,000, ▇▇▇▇▇▇ has filed all federal, state or local tax returns and reports
due or required to be filed and has paid all taxes, interest payments and
penalties, if any, required to be paid with respect thereto, and has made
adequate provision for the payment of all taxes accruable for all periods ending
on or before the Closing Date to any taxing authority and is not delinquent in
the payment of any material tax or governmental charge of any nature.
Section 5.7 Financial Information. ▇▇▇▇▇▇ has delivered to the
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Stockholders the audited balance sheet of ▇▇▇▇▇▇ as of December 31, 2000,
together with the related statements of income, changes in shareholder's equity
and cash flow for the years then ended, including the related notes, all
certified by ▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, certified public accountants. In
addition, ▇▇▇▇▇▇ has delivered to the Stockholders its interim unaudited
financial statements as filed with the SEC for the three month periods ended
March 31, 2001 (the audited and unaudited balance sheet and interim financial
statements are collectively referred to the as the "Financial Statements").
Such Financial Statements, including the related notes, are in accordance with
the books and records of ▇▇▇▇▇▇ and fairly present the financial position of
▇▇▇▇▇▇ and the results of operations and changes in financial position of ▇▇▇▇▇▇
as of the dates and for the periods indicated, in each case in conformity with
generally accepted accounting principles applied on a consistent basis. Except
as, and to the extent reflected or reserved against in the Financial Statements,
▇▇▇▇▇▇ as of the date of the financial statements has no material liability or
obligation of any nature, whether absolute, accrued, continued or otherwise, not
fully reflected or reserved against in the Financial Statements. As of the
Closing Date, except as set forth in Schedule 5.7, there will not have been any
adverse change in the financial condition or other operations, business,
properties or assets of ▇▇▇▇▇▇ from that reflected in the latest financial
statements of ▇▇▇▇▇▇ furnished to the Stockholders pursuant hereto.
Section 5.8 Compliance with Laws. ▇▇▇▇▇▇ is, and at all times prior to
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the date hereof has been, to the best of ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ knowledge, in
compliance with all statutes, orders, rules, ordinances and regulations
applicable to it or to the ownership of its assets or the operation of its
businesses, except for failures to be in compliance that would not have a
material adverse effect on the business, properties, condition (financial or
otherwise) or prospects of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ have no basis to
expect, nor has received, any order or notice of any such violation or claim of
violation of any such statute, order, rule, ordinance or regulation.
Section 5.9 Title to Properties; Encumbrances. ▇▇▇▇▇▇ has good and
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marketable title to all of its properties and assets, real and personal,
tangible and intangible, that are material to the condition (financial or
otherwise), business, operations or prospects of ▇▇▇▇▇▇, free and clear of all
mortgages, claims, liens, security interests, charges, leases, encumbrances and
other restrictions of any kind and nature, except (i) as disclosed in the
Financial Statements of ▇▇▇▇▇▇, (ii) statutory liens not yet delinquent, and
(iii) such liens consisting of zoning or planning restrictions, imperfections of
title, easements, pledges, charges and encumbrances, if any, as do not
materially detract from the value or materially interfere with the present use
of the property or assets subject thereto or affected thereby.
Section 5.10 Disclosure. To the best of ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇
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knowledge, no representation or warranty of ▇▇▇▇▇▇ or ▇▇. ▇▇▇▇▇▇ contained in
this Agreement (including the exhibits and schedules hereto) contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
Section 5.11 No Default. The execution, delivery and performance of
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this Agreement by ▇▇▇▇▇▇ does not and will not constitute a violation or default
under or conflict with any contract, agreement, understanding or commitment to
which it is a party or by which it is bound or the Certificate of Incorporation
or By-Laws of ▇▇▇▇▇▇ or any statute, regulation, law, ordinance, judgment,
decree, writ, injunction, order or ruling of any government entity, except that
there will not be a sufficient number of shares of ▇▇▇▇▇▇ common stock
authorized if all shares of the preferred stock issued in the transaction
contemplated hereby are converted.
Section 5.12 Material Agreements; Action. Except for the debt of
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approximately $33,000 owed to ▇▇▇▇▇▇ ▇▇▇▇▇▇, there are no material contracts,
agreements, commitments, understandings or proposed transactions, whether
written or oral, to which ▇▇▇▇▇▇ or any of its Subsidiaries is a party or by
which it is bound that involve or relate to: (i) any of their respective
officers, directors, stockholders or partners or any Affiliate thereof; (ii) the
sale of any of the assets of ▇▇▇▇▇▇ or any of its Subsidiaries other than in the
ordinary course of business; (iii) covenants of ▇▇▇▇▇▇ or any of its
Subsidiaries not to compete in any line of business or with any person in any
geographical area or covenants of any other person not to compete with ▇▇▇▇▇▇ or
any of its Subsidiaries in any line of business or in any geographical area;
(iv) the acquisition by ▇▇▇▇▇ or any of its Subsidiaries of any operating
business or the capital stock of any other Person; (v) the borrowing of money or
(vi) the expenditure of more than $25,000 in the aggregate or the performance
by ▇▇▇▇▇▇ or any Subsidiary extending for a period more than one year from the
date hereof, other than in the ordinary course of business. There have been
made available to ▇▇▇▇▇ and its representatives true and complete copies of all
such agreements. All such agreements are in full force and effect. Neither
▇▇▇▇▇▇ nor any of its Subsidiaries is in default under any such agreements nor
is any other party to any such agreements in default thereunder in any respect.
Section 5.13 Pending Claims. There is no claim, suit, action or
---------------
proceeding, whether judicial, administrative or otherwise, pending or, to the
▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ knowledge, threatened that would preclude or restrict the
transfer to the Stockholders of the ▇▇▇▇▇▇ Stock or the performance of this
Agreement by ▇▇▇▇▇▇.
Section 5.14 Insurance . ▇▇▇▇▇▇ and its Subsidiaries maintain adequate
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insurance with respect to their respective businesses and are in compliance with
all material requirements and provisions thereof.
Section 5.15 Employee Benefit Plans . ▇▇▇▇▇▇ is not a party to any
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employee benefit plan.
Section 5.16 No Pending Transactions . Except for the transactions
-------------------------
contemplated by this Agreement, neither ▇▇▇▇▇▇ nor any Subsidiary is a party to
or bound by or the subject of any agreement, undertaking, commitment or
discussions or negotiations with any person that could result in (i) the sale,
merger, consolidation or recapitalization of ▇▇▇▇▇▇ or any Subsidiary, (ii) the
sale of all or substantially all of the assets of ▇▇▇▇▇▇ or any Subsidiary, or
(iii) a change of control of more than five percent of the outstanding capital
stock of ▇▇▇▇▇▇ or any Subsidiary.
Section 5.17 No Undisclosed Liabilities . To the best of ▇▇▇▇▇▇ and
----------------------------
▇▇. ▇▇▇▇▇▇ knowledge, neither ▇▇▇▇▇▇ nor or any Subsidiary has any obligation
or liability (contingent or otherwise) that would be required to be reflected in
the financial statements of the Company in accordance with GAAP except as
reflected in ▇▇▇▇▇▇ Balance Sheet, in Schedule 5.7, or incurred in the ordinary
course of business in an amount not in excess of $7,500.
Section 5.18 Indemnification by ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇. ▇▇▇▇▇▇ and Mr.
----------------------------------------
▇▇▇▇▇▇ recognize that the Exchange being conducted with the Stockholders is
based, to a material degree, upon the representations and warranties of ▇▇▇▇▇▇
and ▇▇. ▇▇▇▇▇▇ as set forth and contained herein and ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇
(collectively the "Indemnifying Parties") hereby agree to jointly and severally
indemnify and hold harmless the Stockholders against all damages, costs, or
expenses (including reasonable attorney's fees) arising as a result of any
breach of representation or warranty or omission made herein by the Indemnifying
Parties.
If any action is brought against ▇▇▇▇▇ or the Stockholders (collectively
the "Indemnified Parties") in respect of which indemnity may be sought against
the Indemnifying Parties pursuant to the foregoing paragraph, the Indemnified
Parties shall promptly notify the Indemnifying Parties in writing of the
institution of such action (but the omission to so notify the Indemnifying
Parties shall not relieve the Indemnifying Parties from any liability that the
Indemnifying Parties may have to such Indemnified Parties except to the extent
the Indemnifying Parties are materially prejudiced or otherwise forfeit
substantive rights or defenses by reason of such failure), and the Indemnifying
Parties shall assume the defense of such action, including the employment of
counsel to be chosen by the Indemnifying Parties to be reasonably satisfactory
to the Indemnified Parties, and payment of expenses. The Indemnified Parties
shall have the right to employ the Indemnifying Parties counsel, or the
Indemnified Parties' own counsel in any such case, but the fees and expenses of
such counsel shall be at the Indemnified Party's expense, unless the employment
of such counsel shall have been authorized in writing by the Indemnifying
Parties in connection with the defense of such action, or the Indemnifying
Parties shall not have employed counsel to take charge of the defense of such
action, or counsel employed by the Indemnifying Parties shall not be diligently
defending such action, or the Indemnified Parties shall have reasonably
concluded that there may be defenses available to it which are different from or
additional to those available to the Indemnifying Parties, or that
representation of such Indemnified Party and the Indemnifying Parties by the
same counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them (in which
case the Indemnifying Parties shall not have the right to direct the defense of
such action on behalf of the Indemnified Parties), in any of which event such
fees and expenses shall been borne by the Indemnifying Parties. Anything in
this paragraph to the contrary notwithstanding, the Indemnifying Parties shall
not be liable for any settlement of, or any expenses incurred with respect to,
any such claim or action effected without the Indemnifying Parties' written
consent, which consent shall not be unreasonably withheld. The Indemnifying
Parties shall not, without the prior written consent of the Indemnified Parties
effect any settlement of any proceeding in respect of which any Indemnified
Parties is a party and indemnity has been sought hereunder unless such
settlement includes an unconditional release of such Indemnified Parties from
all liability on claims that are the subject matter of such proceeding.
ARTICLE VI
CLOSING; DELIVERY
Section 6.1(a) Closing Documents of the Stockholders. The obligations of
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▇▇▇▇▇▇ to effect the transactions contemplated hereby are subject to the
delivery by the Stockholders at Closing of certificates evidencing their ▇▇▇▇▇
Stock duly endorsed for transfer by the Stockholders to ▇▇▇▇▇▇ as contemplated
by this Agreement, in form and substance satisfactory to counsel for ▇▇▇▇▇▇.
Section 6.1(b) Closing Documents of ▇▇▇▇▇▇. The obligations of the
------------------------------
Stockholders to effect the transactions contemplated hereby are subject to
▇▇▇▇▇▇ delivering to the Stockholders either (i) certificates evidencing ▇▇▇▇▇▇
Stock, duly executed for issuance by ▇▇▇▇▇▇ to the Stockholders as contemplated
by this Agreement or (ii) letter of instructions from a duly authorized officer
of ▇▇▇▇▇▇ to American Registrar & Transfer (▇▇▇▇▇▇'▇ transfer agent),
instructing the transfer agent to duly issue stock certificates evidencing the
shares of ▇▇▇▇▇▇ Stock to the Stockholders, all as contemplated by this
Agreement, in form and substance satisfactory to counsel for the Stockholders.
Section 6.1(c) Conditions to the Obligations of ▇▇▇▇▇▇ and the
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Stockholders. The obligations of ▇▇▇▇▇▇ and the Stockholders to effect the
transactions contemplated hereby are further subject to the following condition:
(i) No action, suit or proceeding by or before any court or any
governmental or regulatory authority shall have been commenced or threatened,
and no investigation by any governmental or regulatory authority shall have been
commenced or threatened, seeking to restrain, prevent or challenge the
transactions contemplated hereby or seeking judgments against ▇▇▇▇▇▇ or the
Stockholders.
(ii) The representations and warranties of ▇▇▇▇▇▇, the Stockholders and
▇▇. ▇▇▇▇▇▇ set forth in this Agreement shall be true and correct in all material
respects on the Closing Date.
(iii) ▇▇▇▇▇▇, the Stockholders and ▇▇. ▇▇▇▇▇▇ shall have performed and
complied with all agreements, obligations, covenants and conditions required by
this Agreement to be performed or complied with on or prior to the Closing Date.
(iv) The parties shall have received corporate resolutions of the Board
of Directors of ▇▇▇▇▇▇, certified by an officer of ▇▇▇▇▇▇, which approves the
transactions contemplated herein and authorizes the execution, delivery and
performance of this Agreement and the documents referred to herein to which it
is or is to be a party dated as of the Closing Date.
(v) The Board of Directors of ▇▇▇▇▇▇ shall have appointed one
additional director to its Board of Directors.
(vi) The following related transactions or events shall have taken
place prior to Closing:
(a) ▇▇▇▇▇▇ Partnership Ltd. shall have executed a letter containing
instructions to cancel certificate #1948 in the amount of
7,000,000 shares of common stock pursuant to the stock redemption
agreement attached hereto as Exhibit "C";
(a) The Escrow Agreement attached hereto as Exhibit "D" shall have
been executed;
(b) ▇▇▇▇ ▇▇▇▇▇▇ resigns as a director of ▇▇▇▇▇▇;
(c) ▇▇▇▇▇▇ ▇▇▇▇▇ shall be appointed as a director of ▇▇▇▇▇▇; and
(d) ▇▇▇▇▇▇ Partnership Ltd. shall have entered into a letter
agreement attached hereto as Exhibit "E".
ARTICLE VII
POST CLOSING COVENANTS
Shareholders Meeting. Immediately subsequent to the Closing of the
---------------------
transactions contemplated herein ▇▇▇▇▇▇ covenants and agrees that it will take
all steps necessary to call and conduct and Meeting of Shareholders for the
purpose of (i) changing its name, (ii) election of directors to its Board of
Directors, and (iii) authorizing a 1 for 5 reverse stock split of its shares of
common stock outstanding.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices. All notices and other communications provided
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for herein shall be in writing and shall be deemed to have been duly given to
the following persons, if delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid, or overnight air
courier guaranteeing next day delivery:
(a) If to ▇▇▇▇▇▇:
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
Three Riverway, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to ▇▇. ▇▇▇▇▇▇:
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
Three Riverway, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(b) If to the Stockholders, to:
The addresses listed on Exhibit A, attached hereto.
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
Section 8.2 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, which consent will not
be unreasonably withheld. This Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective heirs,
personal representatives, successors and assigns.
Section 8.3 Counterparts. This Agreement may be executed in any number
------------
of counterparts, which taken together shall constitute one and the same
instrument and each of which shall be considered an original for all purposes.
Section 8.4 Section Headings. The section headings contained in this
-----------------
Agreement are for convenient reference only and shall not in any way affect the
meaning or interpretation of this Agreement.
Section 8.5 Entire Agreement. This Agreement, the documents to be
-----------------
executed hereunder and the exhibits and schedules attached hereto constitute the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties pertaining to the subject
matter hereof, and there are no warranties, representations or other agreements
among the parties in connection with the subject matter hereof except as
specifically set forth herein or in documents delivered pursuant hereto. No
supplement, amendment, alteration, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the parties hereto.
All of the exhibits and schedules referred to in this Agreement are hereby
incorporated into this Agreement by reference and constitute a part of this
Agreement.
Section 8.6 Validity. The invalidity or unenforceability of any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 8.7 Survival. The respective representations, warranties,
--------
covenants and agreements set forth in this Agreement shall survive the Closing
for a period of two (2) years from the execution hereof.
Section 8.8 Public Announcements. The parties hereto agree that prior
--------------------
to making any public announcement or statement with respect to the transactions
contemplated by this Agreement, the party desiring to make such public
announcement or statement shall consult with the other parties hereto and
exercise their best efforts to (i) agree upon the text of a joint public
announcement or statement to be made by all of such parties or (ii) obtain
approval of the other parties hereto to the text of a public announcement or
statement to be made solely by the party desiring to make such public
announcement; provided, however, that if any party hereto is required by law to
make such public announcement or statement, then such announcement or statement
may be made without the approval of the other parties.
Section 8.9 Gender. All personal pronouns used in this Agreement shall
------
include the other genders, whether used in the masculine, feminine or neuter
gender, and the singular shall include the plural, and vice versa, whenever
appropriate.
Section 8.10 Choice of Law. This Agreement shall be governed by, and
--------------
construed in accordance with, the laws of the State of Texas, without regard to
principles of conflict of laws.
Section 8.11 Costs and Expenses. Each of the parties hereto shall each
------------------
pay their own respective fees and disbursements incurred in connection with this
Agreement.
[Signatures Appear On The Next Page]
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed effective as of the day and year first above written.
▇▇▇▇▇▇ Industries, Inc.
By:
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/s/ ▇▇▇▇ ▇▇▇▇▇▇, President
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/s/ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, individually
STOCKHOLDERS:
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/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
Address:
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/s/ ▇▇▇▇ ▇▇▇▇▇
Address:
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/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address:
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