EXHIBIT 1.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into this
31 day of December, 1999 by and among iEXALT, INC, a Texas corporation having
its principal place of business at 4301 Windfern, Houston, Texas 77041,
(hereinafter "iEXALT") and each of the stockholders listed on page 14-15 hereof
(hereinafter jointly and severally, "Sellers") of FIRST CHOICE MARKETING, a
corporation having its principal place of business at 7676 Hillmont, Suite
77040, Houston, Texas 77040 (hereinafter "First Choice").
RECITALS
A. Sellers own or have rights to all of the capital stock, and interests
therein, of First Choice, and
B. iExalt wishes to buy, and Sellers wish to sell, subject to the
provisions of this Agreement, all right, title and interest in such capital
stock.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties agree as follows:
1. PURCHASE AND SALE AND LICENSE
1.01. PURCHASE AND SALE OF FIRST CHOICE SHARES. iEXALT agrees to acquire
from Sellers and Sellers agree to transfer, assign, convey and deliver to iEXALT
at the Closing, all right, title and interest in 100% of the capital stock
representing an aggregate of 2,727,000 shares of common stock of First Choice
(hereinafter the "First Choice Shares") in exchange for an aggregate of
2,727,000 shares of common stock of iEXALT (hereinafter the "iEXALT Shares").
Each Seller shall receive a number of iEXALT Shares equal to one times the
number of First Choice Shares delivered by such Seller. Such exchange is
intended as an exchange exempt from qualification under the code by virtue of
Section F thereof, for which a notice must be filed pursuant to Section F of the
securities rules of the Securities Agency. Fractional shares will not be issued
for less than one full share.
1.01(a). CONSIDERATION FOR FUTURE PERFORMANCE. The Sellers have provided
iExalt with projections of earnings for years 2000, 2001 and 2002 that are
labeled "Conservative" and are attached hereto as Exhibit A.. These projections
shall serve as milestones for the issue of additional consideration to the
Sellers as follows. The issue of consideration for future performance shall be
subject to the continued performance of Mr. Tom Dahl and Mr. Kerry Haenes under
the employment contracts attached hereto and made a part of the Seller's
consideration for the purchase of the Seller.
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A. If First Choice produces earnings before interest, taxes,
depreciation and amortization, ("EBITDA"), computed in
accordance with generally accepted accounting principals, of
$4,686,918 or more in the year 2000, [Milestone No. 1], then
the Sellers shall receive 333,333 additional shares of
unregistered iExalt common stock to be distributed on a pro
rata basis to the number of shares held by each of the
Seller's shareholders on the day of Closing.
B. If First Choice produces EBITDA of $8,191,197 or more in the
year 2001, [Milestone No. 2], then the Sellers shall receive
333,333 additional shares of unregistered iExalt common stock
to be distributed on a pro rata basis to the number of shares
held by each of the Seller's shareholders on the day of
Closing.
C. If the acquired Company produces Net Revenue (EBITA) of
$18,566,714 or more in the year 2002, [Milestone No. 3], then
the Sellers shall receive 333,333 additional shares of
unregistered iExalt common stock to be distributed on a pro
rata basis to the number of shares held by each of the
Seller's shareholders on the day of Closing.
1.02. PROPRIETARY RIGHTS. In addition to the shares exchanged pursuant to
Section 1.01, effective at the Closing, Sellers hereby grant to iEXALT a
royalty-free, irrevocable, nonexclusive license (assignable by iEXALT or any
successor in interest to any of its business) to use all other intangible assets
of Sellers, including patents, patent applications, copyrights, inventions,
trade secrets, and other technical know-how, which at or prior to Closing, First
Choice uses or has used in connection with its business or operations. Such
license, with respect to copyrighted works heretofore published by any of the
Sellers, is limited to a right to use consistent with such copyrights. In
addition, Tom Dahl and Kerry Haenes, shareholders of the Seller, do hereby
convey all right, title and interest of every kind in the insurance agency or
agencies that they now own, operate or shall own or operate at any time during
the tenure of their employment with First Choice Marketing, iExalt or any
affiliated entity.
2. CLOSING
Unless extended by iEXALT, the Closing of the transactions contemplated
hereby shall be held on December 31, 1999, or on such other date as shall
mutually agreed to in writing by the parties. The date on which the Closing
occurs is herein referred to variously as the "Closing Date" and the "Closing."
At the Closing:
2.01. SELLERS. Sellers shall deliver or cause to be delivered to
iEXALT:
(a) certificates representing the First Choice shares duly endorsed
for transfer and conveyance to iEXALT,
(b) a corporate resolution of the Board of Directors and stockholders
of First Choice approving the transactions contemplated by this Agreement,
(c) the resignation of each officer and director of First Choice,
(d) a list of all accounts in which the funds or other assets of First
Choice are deposited, and
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(e) the corporate records, including the charter documents, minutes of
meetings and actions of the board of directors and minutes of meetings and
actions of the stockholders, the corporate seal and all books of accounts of
First Choice.
2.02. IEXALT. iEXALT shall deliver to the respective Sellers a stock
certificate in the name of such Seller representing the number of iEXALT Shares
described in Section 1.01.
3. Representations and Warranties of First Choice and Sellers.
Except as set forth in the disclosure schedule delivered to iEXALT on the
date hereof, and signed by the President and Secretary of First Choice (the
"First Choice Disclosure Schedule"), the sections of which are numbered to
correspond to the subsection numbers of this Agreement, First Choice and each of
the Sellers hereby represents and warrants to iEXALT as follows:
3.01. ORGANIZATION, QUALIFICATION.
(a) First Choice is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. First Choice has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted and is duly qualified and in
good standing to do business as a foreign corporation in each jurisdiction in
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
have such power and authority or to be so duly qualified and in good standing
would not, in the aggregate, have a material adverse effect on the business,
operations or financial condition of First Choice. First Choice has no assets,
offices or operations located in any place other than within the United States.
(b) First Choice has delivered to iEXALT complete and accurate copies of
its Articles of Incorporation and Bylaws, each as amended, minutes of all its
directors' and shareholder meetings, and a shareholder list correctly setting
forth the record ownership as of the date of this Agreement of all outstanding
shares and all outstanding rights to purchase or convert into shares of the
stock of First Choice.
3.02. CAPITALIZATION. As of the Closing Date, First Choice shall have
authorized capital stock of 20,000,000 shares of Common Stock, without par
value, of which 2,727,000 shares and only 2,727,000 shares will be issued and
outstanding as of such date. All such outstanding shares of First Choice capital
stock have been duly authorized, validly issued, fully paid and nonassessable
and are not be subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of First Choice or any agreement to which First Choice
is a party or by which it is bound. As of the Closing Date there will be no
outstanding rights, warrants, options, agreements or commitments giving anyone
any right to require First Choice to sell or issue any capital stock or other
securities other than those listed on Schedule 1.04 [Warrants listed in Schedule
1.04 shall vest in equal one-third increments contingent upon iExaltFamily
reaching its annual Milestones as set forth in Paragraph 1.01(a).] Between the
date hereof and the Closing, First Choice will not, without the prior written
consent of iEXALT, issue any additional shares of stock, stock options,
warrants, convertible notes or other securities exercisable for or convertible
into shares of equity securities of First Choice. The First Choice Disclosure
contains a listing of all outstanding shareholders and persons holding rights to
acquire any equity interest in First Choice.
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3.03. SUBSIDIARIES. First Choice does not have and has never had any
subsidiaries and does not directly or indirectly own any equity interest in, or
any interest convertible into or exchangeable for any equity or similar interest
in, any corporation, partnership, joint venture or other business association or
entity.
3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. First Choice has full
corporate power to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Board of Directors, and as
of the Closing Date will have been duly and validly authorized by the
shareholders of First Choice, and no other corporate proceedings on the part of
First Choice are necessary for First Choice to authorize this Agreement or to
consummate the transactions contemplated hereby and thereby. This Agreement has
been duly and validly executed and delivered by First Choice. This Agreement
constitutes the valid and binding agreement of First Choice, enforceable against
First Choice in accordance with its terms.
3.05. APPROVALS; NO VIOLATION. Except as may be required by the Securities
Act of 1933, as amended (the "Securities Act"), state securities laws, and
applicable corporate law, there is no requirement applicable to First Choice to
make any filing with, or to obtain any permit, authorization, consent or
approval of, any governmental or regulatory authority as a condition to the
lawful consummation by First Choice of the transactions contemplated by this
Agreement. First Choice does not know of any reason why any required permit,
authorization, consent or approval could not be obtained. Neither the execution
and delivery of this Agreement by First Choice nor the consummation by First
Choice of the transactions contemplated by this Agreement will (a) conflict with
or result in any breach of any provision of the Articles of Incorporation or
Bylaws of First Choice, (b) result in a material breach or default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license
agreement, lease or other material contract, instrument or obligation to which
First Choice is a party or by which First Choice or any of its assets may be
bound, (c) or violate in any material respect any statute, rule, regulation,
order, writ, injunction or decree applicable to First Choice or any of its
assets, or (d) result in the creation of any material (individually or in the
aggregate) liens, charges or encumbrances on any of the material assets of First
Choice.
3.06. FINANCIAL STATEMENTS OF FIRST CHOICE. First Choice has delivered to
iEXALT (i) an audited balance sheet of First Choice as of September 30, 1999 and
unaudited financial statements for October and November 1999, and an unaudited
statement of operations, stockholders' equity and cash flows for the fiscal year
ended 1998, (the "First Choice Financials"). The First Choice Financials have
been prepared in accordance with generally accepted accounting principles,
applied on a consistent basis throughout the periods covered by such statements.
The First Choice Financials, with any notes thereto, are in accordance with the
books and records of First Choice and present fairly First Choice's financial
position and results of operations and cash flows as of the dates and for the
periods indicated therein.
3.07. UNDISCLOSED LIABILITIES.
(a) First Choice does not have any material liabilities, whether absolute,
accrued, contingent or otherwise, and whether due or to become due, except for
those liabilities which (i) are accrued or fully reserved against in the balance
sheet of the First Choice Financials; or (ii) Section 3.07 of the First Choice
Disclosure Schedule lists all liabilities and contingent liabilities of First
Choice, which are not reflected in the First Choice Financials.
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(b) The amounts accrued for sales returns and allowances in the First
Choice Financials are adequate to meet all foreseeable returns of products and
other adjustments (including, but not limited to, price protection and inventory
rotation).
3.08. ABSENCE OF CHANGES. Since December 16, 1999, there has not been:
(a) any material adverse change in the business, assets, liabilities,
financial condition, results of operations or prospects of First Choice taken
as a whole;
(b) any material damage, destruction or casualty loss, whether or not
covered by insurance, to any. assets or properties of First Choice that
amounts to more than $5,000 in the aggregate;
(c) any increase in the compensation payable or to become payable by First
Choice to its employees (other than adjustments consistent with prior practice)
or any increase in any bonus, insurance, pension or other employee benefit plan
or program, payment or arrangement (other than adjustments consistent with prior
practice) made to, for or with any such directors, officers or employees except
as contemplated by this Agreement;
(d) any termination or notification of intended termination of a
relationship with any material customer or supplier of First Choice;
(e) any entry by First Choice into any commitment or transaction exceeding
$5,000 in any instance (including, without limitation, any borrowing or capital
expenditure;
(f) any material change by First Choice in accounting methods,
principles or practices;
(g) any repurchase or retirement of any securities of First Choice, or any
declaration, payment or setting aside for payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the capital
stock of First Choice;
(h) any act, omission or event which would be prohibited after the date of
this Agreement under Section 4.1 hereof;
(i) any sales returns or allowances not adequately provided for by the
reserve in the Unaudited Financial Statements;
(j) recognition of revenue on any transaction where a substantial or
contingent right of return exists; or
(k) any agreement, whether in writing or otherwise, to take any action
described in this Section 3.08.
3.09. PROPERTIES AND INVENTORIES. First Choice has good and marketable
title to, valid leasehold interests in or other valid right to use all of the
material assets used in its operations or necessary for the conduct of its
business, subject to no security interests, licenses, encumbrances, restrictions
or adverse claims, except as disclosed in the notes to the First Choice
Financials and except for any lien for taxes not yet due and payable and except
for any statutory liens for which payment is not delinquent. All of such assets
are in good operating condition, normal wear and tear excepted, and are adequate
and suitable for the purposes for which they are presently being used. First
Choice is not aware of any need to replace or substantially modify any material
physical asset of First Choice in order to use such asset in the manner in which
it is currently being used in First Choice's business as presently conducted. It
is understood that phone and computer systems will need to upgraded and expanded
as the business grows. First Choice's inventory of finished goods, work in
progress, materials and supplies is salable and is usable in the ordinary course
of business.
3.10. REAL PROPERTY. Section 3.10 of the First Choice Disclosure Schedule
contains a list and description of all real property owned and all real property
leased by First Choice. Prior to the Closing, First Choice will provide iEXALT
with copies of all of the referenced leases. First
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Choice has either fee simple title or enforceable leasehold interests in all
property shown in the First Choice Disclosure Schedule.
3.11. INSURANCE. First Choice has fire and casualty insurance policies,
with extended coverage (subject to deductibles) covering the material assets,
properties and business of First Choice. All such policies, together with any
life insurance policies maintained by First Choice, are identified in Section
3.11 of the First Choice Disclosure Schedule. Prior to the Closing, First Choice
will make copies of each of such policies available to iEXALT. First Choice has
not, to its knowledge, done anything by way of action or inaction which might
invalidate any of such policies in whole or in part.
3.12. LITIGATION. Except as set forth in Section 3.12 of the First Choice
Disclosure Schedule, First Choice is not engaged in, nor has it been threatened
with, any material litigation (which for this purpose shall mean a potential
liability in excess of $5,000) or potential liabilities in the aggregate in
excess of $5,000, arbitration, investigation or other legal proceeding relating
to First Choice or its business, property or employee benefit plans or policies,
nor, to the knowledge of First Choice, is there any valid basis for any such
proceeding. No employee, former employee, consultant or former consultant has
made a claim against First Choice which, if not resolved, could result in
litigation.
3.13. PURCHASE, SALE AND OTHER AGREEMENTS.
(a) All of the following (whether written or oral) to which First Choice
is a party or to which First Choice is subject are identified in Section 3.13 of
the First Choice Disclosure Schedule:
(i) every contract or agreement for the purchase by First Choice of
inventory, supplies, equipment or other real or personal property, or the
procurement of services, except individual purchase orders, or aggregate
purchase orders to a single vendor, involving payments of less than $5,000;
(ii) lease of equipment, machinery or other personal property
involving aggregate annual payments in excess of $1,000;
(iii) contract or agreements for the sale or lease of products or
furnishing of services by First Choice, except individual purchase orders, or
aggregate purchase orders from a single customer, involving payments of less
than $1,000;
(iv) joint venture, partnership or other contract or arrangement
involving the sharing of profits;
(v) contract or agreement, other than in the ordinary course of business,
relating to the purchase or acquisition, by merger or otherwise, of a
significant portion of the business, assets or securities of First Choice by any
other person or of any other person by First Choice;
(vi) contract or agreement containing a covenant or covenants which
purport to limit to a material extent the ability or right of First Choice to
engage in any lawful business activity or compete with any person or entity; or
(vii) material contract or agreement not otherwise described in this
Section 3.13 which is not terminable by and without penalty to First Choice
within six months after the date of this Agreement.
(b) A complete and accurate copy of each written contract, agreement and
other document identified in Section 3.13 of the First Choice Disclosure
Schedule will be made available to iEXALT prior to the Closing. Each contract,
agreement or arrangement identified in Section 3.13 of the First Choice
Disclosure Schedule is, except to the extent fully performed at the date hereof,
in full force and effect and valid and binding in accordance with its terms in
all
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material respects; there is no material default under any such material
contract, agreement or arrangement; and no party to any such contract, agreement
or arrangement has notified First Choice that it intends to cancel, withdraw,
modify or amend such contract, agreement or arrangement.
3.14. LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS. To the best of First
Choice's knowledge, First Choice owns, is licensed or otherwise entitled to use,
or can obtain the right to use on a basis which is commercially reasonable, all
patents, trademarks, trade names, service marks, copyrights, and other
proprietary rights, and necessary to the business of First Choice as currently
conducted or as contemplated by its current business plan. Section 3.14(a) of
the First Choice Disclosure Schedule lists all First Choice patents and
registered trademarks, trade names and service marks and copyrights, and
applications for any of the foregoing, and all licenses, the subject matter of
which is incorporated into any First Choice product, to which First Choice is a
party (the "First Choice Intellectual Property"), other than licenses to readily
available commercial software. Except as set forth in Section 3.14(b) of the
First Choice Disclosure Schedule, no claims (including any request to enter into
a license agreement) have been asserted or threatened by any person (i) to the
effect that any activity in which First Choice is engaged infringes on any
patents or other proprietary rights, (ii) against the use by First Choice of any
trademarks, trade names, technology, know-how or processes necessary for the
operation of the business of First Choice as currently conducted or presently
contemplated, or (iii) challenging or questioning the validity or effectiveness
of any of the First Choice Intellectual Property; and First Choice is not aware
of any valid basis for any such claim. To the best of its knowledge, no party is
infringing the First Choice Intellectual Property.
3.15. EMPLOYEES.
(a) Section 3.15(a) of the First Choice Disclosure Schedule identifies all
consulting or employment agreements and other agreements with individual
consultants or employees to which First Choice is a party and which are either
currently effective or will become effective at the Closing, as well as any
employee handbooks, policy manuals and job application forms used by First
Choice. Copies of all such written agreements will be delivered to iEXALT prior
to the Closing. Also shown on Section 3.15(a) of the First Choice Disclosure
Schedule are the names and dates of hire of each full-time employee of First
Choice and as of December 1999, each such person's base salary (excluding sales
commissions and bonuses) and accrued vacation pay. No officer, manager or other
key employee of First Choice has notified First Choice of an intention to
terminate employment or to seek a material change in his terms of employment,
except as identified in the First Choice Disclosure Schedule.
(b) Section 3.15(b) of the First Choice Disclosure Schedule contains a
complete list of "Plans" consisting of each employment, severance or other
similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for insurance coverage, workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits or deferred compensation, profit sharing, bonuses,
stock options, stock appreciation rights, stock purchases or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
which is maintained or administered by First Choice, or to which First Choice
contributes, and which covers any employee or former employee of First Choice or
under which First Choice has any liability, including" employee welfare benefit
plan," "employee benefit plan" and "employee pension benefit plan" as defined
under ERISA;
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(c) With respect to the Plans, First Choice shall deliver to iEXALT prior
to the Closing, a copy of each Plan and any amendment(s) thereto, together with
(i) any written descriptions or summaries thereof, (ii) all trust agreements,
insurance contracts, annuity contracts or other funding instruments, and (iii)
the last two annual reports (IRS Form 5500 Series, together with all required
schedules) prepared in connection with any such Plan. The Plans comply, to the
extent applicable, with the requirements of ERISA and the Code, and any Plan
intended to be qualified under Section 401(a) of the Code has been determined by
the Internal Revenue Service (the "IRS") to be so qualified;
(d) Section 3.15(d) of the First Choice Disclosure Schedule identifies all
collective bargaining agreements to which First Choice is a party or by which
First Choice is bound. There are no strikes or labor disputes or lawsuits,
unfair labor or unlawful employment practice charges, contract grievances or
similar charges or actions pending or threatened by any of the employees, former
employees or employment applicants of First Choice that could have a material
adverse effect on First Choice.
(e) To First Choice's knowledge, no employee of First Choice is obligated
under any agreement or judgment that would conflict with such employee's
obligation to use his best efforts to promote the interests of First Choice or
would conflict with First Choice's business as conducted or proposed to be
conducted. To First Choice's knowledge, no employee of First Choice is in
violation of the terms of any employment agreement or any other agreement
relating to such employee's relationship. with any previous employer and no
litigation is pending or threatened with regard thereto.
3.16. BORROWING AND GUARANTEES. Section 3.16 of the First Choice
Disclosure Schedule identifies all agreements and undertakings pursuant to which
First Choice (a) is borrowing or is entitled to borrow any money, (b) is lending
or has committed itself to lend any money, or (c) is or may become a guarantor
or surety with respect to the obligations of any person. Complete and accurate
copies of all such written agreements will be delivered to iEXALT prior to the
Closing.
3.17. BANK ACCOUNTS AND POWERS OF ATTORNEY. Section 3.17 of the First
Choice Disclosure Schedule identifies all bank and credit card accounts used in
connection with the operations of First Choice whether or not such accounts are
held in the name of First Choice and lists their respective signatories, and
lists the names of all persons holding a power of attorney from First Choice and
summarizes the terms thereof.
3.18. COMPLIANCE WITH CONTRACTS. First Choice has performed all material
obligations required to be performed by it as of the date of this Agreement
under each material contract, obligation, commitment, agreement, undertaking,
arrangement or lease referred to in this Agreement or the First Choice
Disclosure Schedule and has not received any notice that it is in default
thereunder. To its knowledge no other party is in default under such material
agreements. The Merger and the actions contemplated thereby will not conflict
with or result in a breach of the terms, conditions or provisions of any such
material agreement or cause any acceleration of maturity of any such material
agreements.
3.19. COMPLIANCE WITH LAWS. First Choice has substantially complied
with all laws, regulations, judgments, decrees or orders of any court or
governmental agency or entity applicable in any material respect to the
conduct of its business.
3.20. TAXES. All United States, foreign, state and local tax returns and
reports (collectively "Returns") required to be filed to date with respect to
the operations of First Choice have been accurately prepared in all material
respects and duly filed, or an extension therefrom has been duly obtained, and,
except for taxes contested in good faith and disclosed in Section
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2.20 of the First Choice Disclosure Schedule, all taxes payable have been paid
when due; there is no examination or audit known to First Choice or any claim,
asserted deficiency or assessment for additional taxes in progress, pending, or
threatened, nor to the knowledge of First Choice is there any reasonable basis
for the assertion of any such claim, deficiency or assessment; no material
special charges, penalties, fines, liens, or similar encumbrances have been
asserted against First Choice with respect to payment of or failure to pay any
taxes which have not been paid or resolved without further liability to First
Choice. First Choice has not executed or filed with any taxing authority any
agreements extending the period for assessment or collection of any taxes.
Proper amounts have been withheld by First Choice from its employees'
compensation payments for all periods in compliance with the tax withholding
provisions of applicable federal and state laws. First Choice is not a party to
any tax-sharing or tax-allocation agreement, nor does First Choice owe any
amounts under any tax-sharing or tax-allocation agreement. As used in this
Agreement, "Taxes" means all taxes, however denominated, imposed by any federal,
territorial, state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without limiting
the generality of the foregoing, all income or profits taxes (including but not
limited to, federal income taxes and state income taxes), payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers' compensation, Pension
Benefit Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected.
3.21. TRANSACTIONS WITH ASSOCIATES OF MANAGEMENT. No executive officer or
director of First Choice has, either directly or indirectly through another
entity, any material interest in any property or assets of First Choice (except
as a shareholder).
3.22. ACCOUNTS RECEIVABLE. All accounts receivable reflected on the
balance sheet of First Choice at November 30, 1999 are bona fide, arose in the
ordinary course of business in the aggregate amount thereof and, to the best of
First Choice's knowledge, are collectible (less any reserve for doubtful
accounts and normal discounts) in the ordinary course of business.
3.23. INVESTMENT BANKING AND FINDER FEES. First Choice has not incurred
nor will incur any obligation for investment banking or finder fees in
connection with this Agreement or the transactions contemplated hereby with the
exception of a consulting fee of 87,000 shares of unrestricted common stock to
be paid for the consulting services of Consulting & Strategy International in
relationship to this Agreement.
3.24. TRANSACTION EXPENSES. The costs and expenses incurred by First
hoice in conjunction with the transactions contemplated hereby (including
contractual bonuses paid as a result of the transaction) will be paid by the
Sellers.
3.25. INVESTMENT REPRESENTATIONS. Sellers understand and acknowledge that
the iEXALT Shares will not be registered under the Securities Act nor qualified
under the securities law of Texas, by virtue of exemptions thereto. Each of the
Sellers (either alone or in conjunction with his or her professional advisers)
has such experience and knowledge in investment, financial and business matters
in investments similar to the stock of the iEXALT that they are capable of
protecting their own interest in connection therewith and qualifying for such
exemptions. Further, each Seller is acquiring the iEXALT Shares for investment
purposes only for Seller's own account, and not on behalf of any other person
nor with a view to, or for resale in
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connection with any distribution thereof. Sellers understand that the
certificates representing the iEXALT Shares will be stamped with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION
OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED.
3.26. SECURITIES LAWS. If state of domicile of principal office of First
Choice is different than state of domicile or principal office of iEXALT based
in part on the representations of iEXALT, the transfer and conveyance of the
First Choice Shares and the issuance and delivery on the iEXALT Shares as
provided for in this Agreement is exempt from registration or qualification
under any "Blue Sky," securities or similar laws of the state of Texas by virtue
of exemptions available thereunder.
3.27. VALUE OF IEXALT SHARES. Each Seller has received and reviewed to
such Seller's satisfaction such documents and corporate and financial records of
iEXALT, and has had answered all questions with regard thereto that such Seller
deemed necessary or appropriate to evaluate the business, operations and assets
of iEXALT and the value of its common stock. Sellers are relying solely on their
own evaluation and analysis in determining the value of the iEXALT Shares and
not on any representation of value or worth made by iEXALT.
3.28. TAX CONSEQUENCES. Although the exchange of shares and subsequent
liquidation of First Choice contemplated by this Agreement, which liquidation
shall be completed as promptly as commercially feasible following the Closing,
is intended to be a "tax free reorganization" pursuant to Section 368(a)(1)(C)
of the Internal Revenue Code of 1986, as amended, and in reliance in part on
Revenue Ruling 67-274, Seller understands that no assurance is given by iEXALT
that such transaction shall be deemed by the Internal Revenue Service to be a
transaction upon which no gain or loss is recognized. Each Seller assumes the
obligation for the payment of taxes, if any, related to any gain or loss to such
Seller as a result of the transactions contemplated by this Agreement.
4. Representations and Warranties of iEXALT.
iEXALT hereby represents and warrants to the Sellers as follows:
4.01. CAPITALIZATION. The authorized capital stock of IEXALT consists of
100,000,000 shares of common stock, of which 22,487,166 shares are issued and
outstanding, all of which outstanding shares are duly authorized, validly
issued, fully paid and nonassessable. In addition, iEXALT has agreed to issue to
options to officers, employees and directors of and consultants to iEXALT
covering an aggregate of 3,011,000 shares of common stock. iEXALT has no other
outstanding subscriptions, warrants, options, rights, agreements or arrangements
to issue its capital stock or other securities. iEXALT is under no obligation to
purchase, redeem or otherwise acquire any of its securities.
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4.02. ISSUANCE AND DELIVERY OF IEXALT SHARES. The issuance and delivery of
the iEXALT Shares has been duly authorized, and such shares, when issued and
delivered in accordance with the terms of this Agreement, shall be duly
authorized, validly issued, fully paid and nonassessable.
4.03. ORGANIZATION. iEXALT (a) is a corporation (i) duly organized,
validly existing and in good standing under the laws of the State of Nevada, and
(ii) duly qualified and in good standing as a foreign corporation in each state
in which it does business, except where the failure to so qualify would not have
a materially adverse effect on its business or assets, and (b) has the corporate
power and authority to own its properties and to carry on its business as now
being conducted.
4.04. AUTHORITY, BINDING AGREEMENT. This Agreement has been approved by
the Board of Directors of iEXALT. No consents, authorizations or approvals,
whether of a governmental agency or instrumentality or otherwise, are necessary
in order to enable iEXALT to enter into and perform this Agreement. This
Agreement constitute legal, valid and binding obligations of iEXALT and is
enforceable against iEXALT in accordance with its terms.
4.05. FINANCIAL CONDITION. The business, assets, liabilities and financial
condition of iEXALT are, in all material respects, as set forth in the financial
statements and other representations filed with the SEC, which financial
statements (i) have been prepared in conformity with generally accepted
accounting principles, consistently applied, and (ii) do not fail to state any
material fact necessary to make the information therein not misleading.
4.06. LITIGATION. There is no suit, action or other legal or
administrative proceeding pending or threatened against iEXALT, and to its
knowledge, no circumstances exist or have occurred which may lead to any suit,
action, proceeding or investigation which could materially and adversely affect
its business, assets or financial condition. iEXALT has received no notice from
any federal, state or local governmental agency asserting any violation by
iEXALT of any law, ordinance or regulation.
5. Conditions to the Closing.
The obligations of the parties hereunder are subject to the satisfaction
at or by the Closing of each of the conditions set forth below. Any of such
conditions may be waived by the other party but only in writing.
5.01. COMPLIANCE WITH TERMS. On the Closing Date, all the terms,
conditions and covenants of this Agreement to be complied with and performed by
the respective parties shall have been complied with and performed in all
material respects.
5.02. NO MATERIAL CHANGE IN FIRST CHOICE. There shall be no material
change in the business, assets, liabilities or financial condition of First
Choice from that set forth in Schedule A hereto; and there shall be no
significant change in the personnel of First Choice unless consented to in
writing.
5.03. CONSENTS.
(a) First Choice shall have obtained the consent to assignment of contract
from all third parties to any contracts, agreements or contractual rights with
First Choice to the extent such consent is required by such agreement or by
applicable law as a result of the transactions contemplated hereby, unless
iEXALT shall have in writing consented to the termination of such contract,
agreement or right or waived the consent with respect thereto.
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(b) iEXALT shall have completed a due diligence review which shall support
the representations of the Sellers. This Agreement shall be subject to the final
approval of the Board of Directors of iExalt after the completion of due
diligence.
5.04. NO MATERIAL CHANGE IN IEXALT. There shall be no material change
in the business, assets, liabilities or financial condition of iEXALT from
that set forth in Schedule 4.05 hereto.
5.05. EMPLOYMENT AGREEMENTS. Mr. Tom Dahl and Mr. Kerry Haenes shall
each have executed and delivered an employment contract in the form attached
hereto as Schedule 5.05.
5.06. OPINIONS OF COUNSEL. At or before the Closing:
a) iEXALT shall have received an opinion of counsel for First Choice,
dated as of the Closing, to the effect that:
(i) First Choice is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas, and has the corporate power
and authority to own its properties and to carry on its business as now being
conducted. To the knowledge of such counsel, First Choice is duly qualified and
in good standing as a foreign corporation in each state in which it does
business, except where the failure to so qualify would not have a materially
adverse effect on its business or assets.
(ii) No consents, authorizations or approvals, whether of First Choice
(other than the approvals provided for herein), governmental agencies or
instrumentalities or otherwise, are necessary in order to enable Sellers to
enter into and perform this Agreement. This Agreement constitute legal, valid
and binding obligations of the Sellers and is enforceable against the Sellers in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting enforcement of creditors' rights generally or by principles governing
the availability of equitable remedies.
(iii) Based in part on the representations of iEXALT, the transfer and
conveyance of the First Choice Shares and the issuance and delivery of the
iEXALT Shares, in each case pursuant to the terms of this Agreement, is exempt
from registration or qualification under any "Blue Sky," securities or similar
laws of the state of Texas by virtue of exemptions thereto.
b) First Choice shall have received an opinion of counsel for iEXALT,
dated as of the Closing, to the effect that:
(i) iEXALT is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, and has the corporate power and
authority to own its properties and to carry on its business as now being
conducted. To the knowledge of such counsel, iEXALT is duly qualified and in
good standing as a foreign corporation in each state in which it does business,
except where the failure to so qualify would not have a materially adverse
effect on its business or assets.
(ii) All corporate and other actions required to be taken by or on the
part of iEXALT to authorize it to enter into and perform this Agreement have
been duly taken. No consents, authorizations or approvals, whether of
governmental agencies or instrumentalities or otherwise, are necessary in order
to enable iEXALT to enter into and perform this Agreement. This Agreement
constitute legal, valid and binding obligations of iEXALT and is enforceable
against iEXALT in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting enforcement of creditors' rights generally or by principles
governing the availability of equitable remedies.
6. Covenants
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6.01. WAIVER. Each of the Sellers hereby waives any claim or cause of
action such Seller may have against Tom Dahl, the officers and/or directors of
First Choice and/or the officers and/or Directors of iExalt, Inc. based on a
claim that the consideration for the iEXALT Shares, as initially negotiated on
behalf of Sellers, was insufficient or otherwise inadequate.
6.03. RIGHT OF FIRST REFUSAL. No Seller (nor any estate of a Seller, in
the event of a Seller's death) shall dispose of any of his or her iEXALT Shares
which are restricted under SEC Rule 144, until such Seller shall have first
offered, for a period of thirty (30) days, to sell such shares to iEXALT at the
same sales price and terms of payment as if the shares had been sold on the day
notice was provided to iExalt. If iEXALT does not purchase all of the shares
offered before the expiration of the foregoing 30 day period, then such Seller
may dispose of such shares in any lawful manner during a period of one hundred
and eighty (180) days following the end of such notice period, except that such
Seller shall not sell any shares to any other person at a lower price or upon
more favorable terms than those offered to iEXALT. The foregoing rights of first
refusal shall terminate upon the closing of an underwritten public offering of
iEXALT Common Stock pursuant to a registration statement under the Securities
Act.
Each Seller understands that the certificates representing the iEXALT
Shares shall bear a legend substantially as follows:
"The transfer, sale, assignment, encumbrance, or alienation of the shares
represented by this certificate is restricted by a "right of first
refusal" provision in favor of the issuer contained in a stock purchase
agreement among the issuer and certain of its shareholders, dated December
30, 1999. A copy of such agreement is available for inspection during
normal business hours at the principal executive office of the issuer. All
terms and conditions of such restrictive provision are incorporated herein
by reference."
Any transfer, sale, assignment, encumbrance, or alienation of any iEXALT
Shares (voluntarily or involuntarily) other than according to the terms of this
Section 6.03 is void.
7. MISCELLANEOUS.
7.01. OTHER DOCUMENTS. Sellers shall, at any time after the Closing upon
the request of iEXALT, execute and deliver to iEXALT such documents or
instruments of conveyance, license or assignment or take such other action as is
reasonably necessary to complete the transfer of the First Choice Shares or
other transactions contemplated by this Agreement or to perfect the interest of
iEXALT therein. Further, the parties agree to take all actions and file such
documents required to comply with Nevada securities laws, including the filing
any notices as contemplated by Section 1.01.
7.02. COSTS. Except as otherwise specifically provided herein, iEXALT
shall pay the transfer cost applicable to the transfer of iEXALT Shares
hereunder. Each party hereto shall bear the costs of their respective counsel
and all other legal fees and costs related thereto. Both iEXALT and Sellers each
hold the other harmless from any obligation for the payment of any finder's fees
or commissions in connection with the transactions contemplated by this
Agreement as a result of any action of the indemnifying party.
7.03. INVALIDITY, MODIFICATION AND WAIVER. If any provision of this
Agreement shall be held to be invalid or void, the remaining provisions shall
nevertheless remain in effect. No
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provision of this Agreement may be modified and the performance or observance
thereof may not be waived except by written agreement of the parties affected
thereby. No waiver of any violation or nonperformance of any provision of this
Agreement shall be deemed to be a waiver of any subsequent violation or
nonperformance of the same or any other provision of this Agreement.
7.04. DISPUTES, CHOICE OF LAW. This Agreement, the performance of the
parties hereunder and any disputes related hereto shall be governed by the laws
of the state of Texas and subject to the exclusive jurisdiction of the courts
therein. If either party shall initiate a legal proceeding to enforce its rights
hereunder, the prevailing party in such legal proceedings shall be entitled to
recover from the other party all costs, expenses and reasonable attorney's fees
incurred in connection with such proceedings.
7.05. ABANDONMENT. If this Agreement shall fail to Close as provided for
in Section 2 as a result of a failure of any of the conditions precedent set
forth in Section 5, all further obligations of the parties hereto under this
Agreement shall terminate without further liability, and each party shall bear
its own costs incident to the negotiation, preparation and anticipated Closing
of this Agreement. In such event, each party shall return any data, material or
assets of the other party received by it in contemplation of the Closing.
7.06. ENTIRE AGREEMENT. This Agreement is and represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any prior or contemporaneous discussions or agreements related
thereto.
7.07. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be originals and enforceable, and together
shall constitute a single agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized representative as of the date first
written above.
iEXALT INC. FIRST CHOICE MARKETING, INC.
by -------------------------- by -----------------------------
Jack I. Tompkins, Tom Dahl, CEO
Chairman/CEO
Date: ----------------------- Date: ---------------------------
by -------------------------- by -----------------------------
Secretary Secretary
Date: ------------------------ Date: ---------------------------
SELLERS:
- ---------------------------- --------------------------------
Ronny Brown Joey Klein
- ---------------------------- --------------------------------
John P. Burns Rebecca Newton
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- ---------------------------- --------------------------------
Thomas K. Burns Carolyn Stewart
- ---------------------------- --------------------------------
Tim P. Burns Ronald Stewart
- ---------------------------- --------------------------------
T.J. Burns Josephine Stice
- ---------------------------- --------------------------------
Cheryl Byrne Larry A. Washburn
- ---------------------------- --------------------------------
Dan K. Chisholm Stephen Smith
- ---------------------------- --------------------------------
Tom Dahl Kerry Haenes
- ---------------------------- --------------------------------
Gerald Denton Frank Fisher, Jr.
- ---------------------------- --------------------------------
Danny B. Haenes Steve Tebo
- ----------------------------
Terry Isaacson
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ATTACHMENTS
EXHIBIT A FINANCIAL STATEMENTS
EXHIBIT B CONTRACTS, AGREEMENTS, LEASES
EXHIBIT C THIRD PARTY CONSENTS
EXHIBIT D SELLER'S CORPORATE APPROVALS
EXHIBIT E COVENANT NOT TO COMPETE
SCHEDULE 1.02(a) ASSETS OF SELLER
SCHEDULE 1.04 ADDITIONAL LIABILITIES & STOCK
OPTIONS/WARRANTS
SCHEDULE 2.01 LIENS AND ENCUMBRANCES
SCHEDULE 2.07 LITIGATION
SCHEDULE 3.16 NOTES & DEBT INSTRUMENTS
SCHEDULE 3.20 TAX RETURNS