SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
INTERNATIONAL REALTY GROUP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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Notes:
[LOGO / LETTERHEAD OF INTERNATIONAL REALTY GROUP, INC.]
International Realty Group, Inc.
Av. Constituyentes 647
Mexico, D.F. 11810
011-52-5277-9211
September 15, 2000
Dear Stockholder:
You are cordially invited to attend the Company's 2000 Annual Meeting
of Stockholders to be held on October 17, 2000.
The meeting will begin promptly at 10:00 a.m., local time, at the U.S.
Grant Hotel, 326 Broadway, San Diego, CA 92101-4800.
The official Notice of Meeting, Proxy Statement and Proxy Card are
included with this letter. The matters listed in the Notice of Meeting are
described in detail in the Proxy Statement.
The vote of every stockholder is important. Mailing your completed
Proxy Card will not prevent you from voting in person at the meeting if you wish
to do so. Please complete, sign, date and promptly return your Proxy Card in the
enclosed envelope. Your cooperation will be greatly appreciated.
Members of the Board of Directors and management look forward to
greeting personally those stockholders who are able to attend the meeting.
Sincerely
Bernardo Dominguez Cereceres
CHAIRMAN OF THE BOARD
INTERNATIONAL REALTY GROUP, INC.
AV. CONSTITUYENTES 647
MEXICO, D. F. 11810
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 17, 2000
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Notice is hereby given that the Annual Meeting of Stockholders (the "MEETING")
of International Realty Group, Inc., a Delaware corporation (the "COMPANY"),
will be held at the U.S. Grant Hotel, 326 Broadway, San Diego, CA 92101-4800 on
October 17, 2000, at 10:00 a.m., local time, for the following purposes:
1. To elect the Company's Board of Directors;
2. To ratify the Company's acquisition of Qualton Hotels & Resorts
Corporation and to approve the issuance of more than 20% of the
Company's Common Stock in connection with the acquisition;
3. To amend the Company's Certificate of Incorporation to change the
Company's name to "Qualton, Inc.";
4. To ratify the selection of Stark Tinter & Associates, LLC, as the
independent auditors of the Company for the fiscal year ending
December 31, 2000; and
5. To transact such other business as may properly come before the
Meeting or any adjournment or postponement of the Meeting.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on September 1,
2000 will be entitled to notice of and to vote at the Meeting and any
adjournments thereof. Each of these stockholders is cordially invited to be
present and vote at the Meeting in person.
By Order of the Board of Directors
Pablo Macedo Pizarro
SECRETARY
Mexico City, D.F., Mexico
September 15, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THIS IS IMPORTANT BECAUSE A
MAJORITY OF THE SHARES MUST BE REPRESENTED, EITHER IN PERSON OR BY PROXY, TO
CONSTITUTE A QUORUM AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN
PERSON EVEN THOUGH YOU SEND IN YOUR PROXY CARD NOW. IN ADDITION, YOU MAY REVOKE
THE PROXY AT ANY TIME BEFORE IT IS VOTED.
INTERNATIONAL REALTY GROUP, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 17, 2000
TABLE OF CONTENTS
Page
----
General Information..............................................................................................1
Shares Outstanding and Voting Rights.............................................................................3
Proposal One --Election of Directors.............................................................................5
Proposal Two --Ratification and approval of the Company's acquisition of Qualton
Hotels & Resorts Corporation and the issuance of more than 20% of the
Company's Common Stock in connection with the acquisition.......................................................15
Proposal Three --Amendment of the Company's Certificate of Incorporation
to change the Company's name to "Qualton, Inc.".................................................................18
Proposal Four --Ratification of Independent Auditors............................................................19
Other Business..................................................................................................20
INTERNATIONAL REALTY GROUP, INC.
AV. CONSTITUYENTES 647
MEXICO, D.F. 11810
011-52-5277-9211
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 17, 2000
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GENERAL INFORMATION
Your proxy in the enclosed form is solicited by the Board of Directors
(the "BOARD") of International Realty Group, Inc., a Delaware corporation (the
"COMPANY"), for use at its Annual Meeting of Stockholders to be held at the U.S.
Grant Hotel, 326 Broadway, San Diego, CA 92101-4800 on October 17, 2000, at
10:00 a.m., local time (the "MEETING"), for the purposes set forth in the
accompanying notice and at any adjournment or postponement of the Meeting. The
mailing of this Proxy Statement and the accompanying Notice of Annual Meeting
and form of Proxy Card (the "PROXY CARD") to the stockholders of the Company is
expected to commence on or about September 15, 2000.
The shares of the Company's Common Stock, par value $0.001 per share
("COMMON STOCK"), represented by proxy will be voted in accordance with the
instructions given on the Proxy Card, subject to the proper execution of the
Proxy Card and its receipt by the Company prior to the close of voting at the
Meeting or any adjournment or postponement thereof. Proxies received by the
Company on which no contrary instruction has been given will be voted:
"FOR" the election of the directors to the Board;
"FOR" the ratification and approval of the Company's acquisition of
Qualton Hotels & Resorts Corporation and the issuance of more than 20%
of the issued and outstanding shares of Common Stock in connection with
the acquisition;
"FOR" the amendment of the Company's Certificate of Incorporation to
change the Company's name to "Qualton, Inc."; and
"FOR" the ratification of the selection of Stark Tinter & Associates,
LLC, as the independent auditors of the Company for the fiscal year
ending December 31, 2000.
A stockholder giving a proxy has the power to revoke it at any time
before it is exercised by filing with the Secretary of the Company an instrument
revoking it or a duly executed proxy bearing a later date. The powers of the
proxy holders will be suspended if the person executing the Proxy Card is
present at the Meeting and votes in person.
1
Copies of solicitation material will be furnished to brokerage firms,
nominees, fiduciaries and custodians holding shares of Common Stock in their
names which are beneficially owned by others ("RECORD HOLDERS") to forward to
such beneficial owners. In addition, the Company may reimburse such persons and
the Company's transfer agent for their reasonable out-of-pocket expenses in
forwarding the solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented, if deemed desirable or
necessary, by either telephone, telegram, facsimile or personal solicitation by
directors, officers or employees of the Company. No additional compensation will
be paid for any such services. The Company reserves the right, if deemed
desirable or necessary, to retain a proxy solicitation firm to deliver
solicitation material to record holders for distribution by them to their
principals and to assist the Company in collecting proxies from such holders.
The costs of these services to the Company, exclusive of out-of-pocket costs, is
not expected to exceed $10,000. Except as described above, the Company does not
intend to solicit proxies other than by mail.
2
SHARES OUTSTANDING AND VOTING RIGHTS
RECORD DATE AND SHARES OUTSTANDING
Only holders of shares of Common Stock of record as of the close of
business on September 1, 2000 (the "RECORD DATE") are entitled to vote at the
Meeting. On the Record Date, 126,243,204 shares of Common Stock (collectively,
the "SHARES") were issued and outstanding. Each of the Shares is entitled to one
vote on all matters to be voted upon at the Meeting.
QUORUM; BROKER NON-VOTES; ABSTENTIONS
The presence, in person or by proxy duly authorized, of the holders of
a majority of the Shares will constitute a quorum for the transaction of
business at the Meeting and any adjournment or postponement thereof. The Shares
that are voted by proxy "FOR," "AGAINST" or "WITHHELD FROM" a proposal are
treated as being present at the Meeting for purposes of establishing a quorum
and are treated as Shares entitled to vote at the Meeting with respect to such
proposal.
Broker non-votes, or Shares held by a broker or nominee that are
represented at the Meeting, but with respect to which the broker or nominee is
not empowered to vote on a particular purpose, will be counted in determining
whether a quorum is present at the Meeting.
Directors are elected by a plurality of votes of the Shares present in
person or represented by proxy at the Meeting. Any Shares not voted, whether by
abstention, broker non-votes or otherwise, will not impact the election of
directors, except to the extent that the failure to vote for an individual
results in another individual receiving a larger portion of votes.
The following proposals require the approval of a majority of votes
cast at the Meeting: (i) ratification and approval of the Company's acquisition
of Qualton Hotels & Resorts Corporation and the issuance of more than 20% of the
issued and outstanding shares of Common Stock in connection with the
acquisition; and (ii) ratification of the selection of Stark Tinter &
Associates, LLC as the independent auditors of the Company for the fiscal year
ending December 31, 2000. In determining whether these proposals have been
approved, abstentions are counted as votes against the proposal and broker
non-votes are not counted as votes for or against the proposal.
The proposal to amend our Certificate of Incorporation must be approved
by the vote of a majority of the outstanding Shares. Any Shares not voted,
whether by abstention, broker non-votes or otherwise, will have the effect of
votes against this proposal.
REVOCABILITY OF PROXY
A proxy may be revoked by a stockholder at any time prior to the voting
at the Meeting by written notice to the Secretary of the Company, by submission
of another duly executed proxy bearing a later date or by voting in person at
the Meeting. Such notice or later proxy will not
3
affect a vote on any matter taken prior to the receipt thereof by the Company or
its transfer agent. The mere presence at the Meeting of the stockholder who has
appointed a proxy will not revoke the prior appointment. If not revoked, the
proxy will be voted at the Meeting in accordance with the instructions indicated
on the Proxy Card by the stockholder or, if no instructions are indicated, will
be voted:
"FOR" the election of the directors to the Board;
"FOR" the ratification and approval of the Company's acquisition of
Qualton Hotels & Resorts Corporation and the issuance of more than 20%
of the issued and outstanding shares of Common Stock in connection with
the acquisition;
"FOR" the amendment of the Company's Certificate of Incorporation to
change the Company's name to "Qualton, Inc."; and
"FOR" the ratification of the selection of Stark Tinter & Associates,
LLC, as the independent auditors of the Company for the fiscal year
ending December 31, 2000.
4
PROPOSAL ONE
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
The Board currently consists of four (4) directors. At the Meeting, the
stockholders will elect four (4) directors to the Board who will hold office
until their respective successors are duly elected and qualified at the next
Annual Meeting of Stockholders. The Board has nominated Bernardo Dominguez
Cereceres, Pablo Macedo Pizarro, Jaime Serra and Jorge Lopez Nunez as the four
(4) directors to be elected at the Meeting.
Management knows of no reason why any of these director nominees would
be unable or unwilling to serve. However, in the event that any director nominee
is unable or unwilling to serve, the proxies will be voted for the election of
such other person(s) for the office of director as management may recommend in
the place of such nominee.
INFORMATION REGARDING DIRECTOR NOMINEES
The following table sets forth the names, ages, principal occupations
for the periods indicated and other directorships of the four (4) director
nominees, each of whom is currently a director of the Company. Information as to
the stock ownership of each director nominee and all current directors and
executive officers of the Company as a group is set forth below under
"Securities Ownership of Certain Beneficial Owners and Management."
PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS AND OTHER DIRECTOR
NAME AGE DIRECTORSHIPS SINCE
- ------------------------------------ ----- ----------------------------------------------------------- --------
Bernardo Dominguez Cereceres 39 Mr. Dominguez Cereceres has served as Chairman of the 1996
Board since August 1996 and as Chief Executive Officer
since August 2000. Mr. Dominguez Cereceres has been
President and Chief Executive Officer of ITD, S.A. de
C.V. since 1986 and currently serves as Chairman of DSC
Corporation.
Pablo Macedo Pizarro 70 Mr. Macedo has served as a director of the Company since 1999
June 1999, as Secretary since January 2000 and as
President since August 2000. Mr. Macedo has been
Corporate Vice Chairman of ITD, S.A. de C.V. from 1992
to present. From 1984 to 1992, he was Chief Executive
Officer of Promociones Turisticas Banamex, S.A. de C.V.
5
PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS AND OTHER DIRECTOR
NAME AGE DIRECTORSHIPS SINCE
- ------------------------------------ ----- ----------------------------------------------------------- --------
Jaime Serra 56 Mr. Serra has served as a director since June 1999 and 1999
as Chief Financial Officer since August 2000. He also
served previously as the Company's Chief Executive
Officer from June 1999 to August 2000 and as Acting
Chief Financial Officer from January 2000 to August
2000. From 1995 to 1998, Mr. Serra served as a
financial and management advisor for Grupo Asesor
Mexicano, S.C. Since March 1998, Mr. Serra has served
as the President and Administrative Associate of
Urbaterra, S.C., a land development company formed under
the laws of Mexico. From January 1994 to 1995, Mr.
Serra was the Technical Director of the Asociacion de
Banqueros de Mexico A.C.; and from July 1985 to December
1993, he held various executive offices at Casa de Bolsa
Arka, S.A. de C.V., Value Casa de Bolsa, S.A. and Casa
de Bolsa, Cremi.
Jorge Lopez Nunez 62 Mr. Lopez Nunez has served as a director of the Company 1999
since June 1999. Mr. Lopez Nunez is a co-founder of
ITD, S.A. de C.V. and has served as its Vice-Chairman
since 1986. From 1984 to 1985, Mr. Lopez Nunez was
Operational and Energy Manager of Secretaria de Minas e
Industria Paraestatal. From 1982 to 1984, he was
Executive Vice President of Credito Mexicano.
VOTE REQUIRED AND BOARD RECOMMENDATION
The four (4) director nominees receiving the highest number of
affirmative votes of the Shares present in person or represented by proxy at the
Meeting and entitled to be voted for each of them will be elected as directors
of the Company. Votes withheld from any director nominee will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but have no other legal effect under Delaware law. Holders of
proxies solicited by this Proxy Statement will vote the proxies received by them
as directed on the proxy card or if no direction is made, for the election of
the Board's nominees. If any of the director nominees is unable or declines to
serve as a director at the time of the Meeting, then the proxy holders will vote
for a nominee designated by the present Board to fill the vacancy. It is not
presently expected that any of the nominees will be unable or will decline to
serve as a director.
6
THE BOARD RECOMMENDS A VOTE "FOR" THE FOUR (4) DIRECTOR NOMINEES ABOVE
LISTED.
7
INFORMATION CONCERNING EXECUTIVE OFFICERS AND DIRECTORS
Information concerning the Company's current executive officers and directors is
set forth below.
NAME AGE POSITION
- ---- --- --------
Bernardo Dominguez Cereceres............... 39 Chairman of the Board and Chief Executive Officer
Pablo Macedo Pizarro....................... 70 President, Secretary and Director
Jaime Serra ............................... 56 Chief Financial Officer and Director
Jorge Lopez Nunez.......................... 62 Director
A description of the background of each of the Company's current
executive officers and directors has been provided above under "Information
Regarding Director Nominees."
BOARD OF DIRECTORS
The Company's Bylaws provide for a range of three to nine directors,
with the current authorized number set at four (4). The Company's Certificate of
Incorporation provides that the directors will hold office until their
successors are duly elected and qualified. At each annual meeting of
stockholders, the successor to each member of the Board whose term then expires
will be elected to hold office until his respective successor is duly elected
and qualified, unless he resigns or his seat on the Board becomes vacant due to
his death, removal or other cause.
Bernardo Dominguez Cereceres, Pablo Macedo Pizarro, Jaime Serra and
Jorge Lopez Nunez currently serve as directors of the Company.
BOARD MEETINGS AND COMMITTEES
During the year ended December 31, 1999, the Board held one regular
meeting, which was attended by all of the directors.
During 1999, the Board had an Audit Committee and a Compensation
Committee. The Company does not have a Nominating Committee or a committee that
performs equivalent functions of a Nominating Committee. The Audit Committee,
composed of Messrs. Dominguez Cereceres and Macedo, is responsible for
overseeing and establishing controls for reviewing the Company's financial
statements, accounting and financial policies. The Audit Committee did not hold
any meetings during 1999. The Compensation Committee, composed of Messrs.
Dominguez Cereceres, Lopez Nunez and Serra, is responsible for reviewing and
approving, within its authority, compensation, benefits, training and other
human resource policies, and the administration of the Company's stock option
plans. The Compensation Committee did not hold any meetings during 1999.
8
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) under the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file reports
of ownership and changes in ownership with the SEC. Officers, directors and
greater than ten percent (10%) stockholders are required by regulations of the
SEC to furnish the Company with copies of all Section 16(a) forms that they
file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representation that no other
reports were required, the Company's officers, directors and greater than
ten-percent stockholders have filed all applicable Section 16(a) filing
requirements during 1999.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of the Record Date by:
- each person who is known by the Company to own beneficially more than
five percent (5%) of the outstanding Shares;
- each director of the Company;
- the Company's Chief Executive Officer and the other four (4) most
highly compensated executive officers of the Company whose total
annual salary and bonus exceeded $100,000 during 1999 (collectively,
the "NAMED EXECUTIVE OFFICERS"); and
- all directors and executive officers of the Company as a group.
Unless otherwise indicated below, to the knowledge of the Company, all
persons listed below have sole voting and investing power with respect to their
Shares, except to the extent authority is shared by spouses under applicable
community property laws, and their address is c/o International Realty Group,
Inc., Av. Constituyentes 647, Mexico, D.F. 11810.
- -------------------- -------------------------------------------------- ----------------------- ----------------------
AMOUNT AND NATURE
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENT OF CLASS (1)
- -------------------- -------------------------------------------------- ----------------------- ----------------------
Common Stock Hemisphere Developments, Ltd. (2) 53,277,320 42.2%
- -------------------- -------------------------------------------------- ----------------------- ----------------------
Common Stock DSC Corporation 63,488,878 50.3%
- -------------------- -------------------------------------------------- ----------------------- ----------------------
Common Stock Bernardo Dominguez Cereceres 63,488,878 (3) 50.3%
- -------------------- -------------------------------------------------- ----------------------- ----------------------
Common Stock Pablo Macedo Pizarro -- *
- -------------------- -------------------------------------------------- ----------------------- ----------------------
Common Stock Jaime Serra 386,438 *
- -------------------- -------------------------------------------------- ----------------------- ----------------------
Common Stock Jorge Lopez Nunez -- *
- -------------------- -------------------------------------------------- ----------------------- ----------------------
9
- -------------------- -------------------------------------------------- ----------------------- ----------------------
AMOUNT AND NATURE
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENT OF CLASS (1)
- -------------------- -------------------------------------------------- ----------------------- ----------------------
Common Stock All officers and directors as a group (4 63,875,316 (3) 50.6%
persons)
- -------------------- -------------------------------------------------- ----------------------- ----------------------
*Represents less than one percent of the class of securities.
- -------------
(1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission (the "SEC") and generally
includes voting or investment power with respect to securities.
Shares of Common Stock subject to options or warrants exercisable
within 60 days of the Record Date are deemed outstanding for
computing the percentage of the person or entity holding these
options but are not deemed outstanding for computing the percentage
of any other person. As of the Record Date, the Company had
126,243,204 shares of Common Stock outstanding.
(2) The relevant address is c/o Hemisphere, Atlantic House, 4-8
Circular Road, Douglas, Isle of Man.
(3) Includes 63,488,878 shares of Common Stock owned by DSC
Corporation, of which Bernardo Dominguez Cereceres is Chairman and
has a controlling interest. See "Certain Relationships and Related
Transactions."
EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Members of the Board are entitled to receive 500 shares of Common Stock
for each meeting attended. During 1999, no shares of Common Stock were issued
for this service.
EXECUTIVE COMPENSATION
The following table shows, for the three (3) years ended December 31,
1999, the cash and other compensation awarded to, earned by or paid to the Named
Executive Officers:
10
SUMMARY COMPENSATION TABLE
- ----------------------- -------- ------------------------------------------- ------------------------------------------ ------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------- ------------------------------------------
AWARDS PAYOUTS
------------------------------------------- ------------------------------------------
NAME AND PRINCIPAL RESTRICTED SECURITIES ALL OTHER
POSITION OTHER ANNUAL STOCK UNDERLYING LTIP COMPENSATION
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS
($) ($) ($) ($) (#) ($)
YEAR
- ----------------------- -------- --------------- -------- ------------------ ------------- ----------------- ---------- ------------
Jaime Serra, Chief 1999 -- -- -- -- -- -- --
Financial Officer (1)
- ----------------------- -------- --------------- -------- ------------------ ------------- ----------------- ---------- ------------
Richard M. Bradbury, 1999 60,500 -- -- -- -- -- --
Former President (2)
- ----------------------- -------- --------------- -------- ------------------ ------------- ----------------- ---------- ------------
1998 100,000(3) -- -- -- 2,000,000(5) -- --
- ----------------------- -------- --------------- -------- ------------------ ------------- ----------------- ---------- ------------
1997 100,000(4) -- -- -- -- -- --
- ----------------------- -------- --------------- -------- ------------------ ------------- ----------------- ---------- ------------
- ------------------
(1) Mr. Serra served as Chief Executive Officer from June 8, 1999 to
August 29, 2000, as Acting Chief Financial Officer of the Company from
January 27, 2000 to August 29, 2000, and as Chief Financial Officer of
the Company since August 29, 2000.
(2) Mr. Bradbury resigned as President effective December 31, 1999.
(3) Includes accrued and deferred salary of $44,750.
(4) Includes accrued and deferred salary of $71,858.
(5) These stock options terminated in their entirety effective December
31, 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR - (INDIVIDUAL GRANTS)
- ------------------------------ ---------------------- ----------------------- ---------------------- ------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN FISCAL EXERCISE OR BASE EXPIRATION
NAME GRANTED(#) YEAR PRICE ($/SH) DATE
- ------------------------------ ---------------------- ----------------------- ---------------------- ------------------------------
Jaime Serra (1) -- -- -- --
- ------------------------------ ---------------------- ----------------------- ---------------------- ------------------------------
Richard M. Bradbury (2) -- -- -- --
- ------------------------------ ---------------------- ----------------------- ---------------------- ------------------------------
- -----------
(1) Mr. Serra served as Chief Executive Officer from June 8, 1999 to
August 29, 2000, as Acting Chief Financial Officer of the Company
from January 27, 2000 to August 29, 2000, and as Chief Financial
Officer of the Company since August 29, 2000.
(2) Mr. Bradbury resigned as President effective December 31, 1999.
11
OPTION EXERCISES IN 1999
Set forth below is information with respect to exercises of stock options by the
Named Executive Officers during 1999 and the year-end value of all unexercised
stock options held by these persons.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/SAR VALUES
- ----------------------------------------------------------- ------------------------------- -----------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS AT
YEAR-END (#) FISCAL YEAR-END ($)
- -------------------------- --------------- ---------------- ------------- ----------------- --------------- -------------------
SHARES
ACQUIRED ON VALUE REALIZED
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------------- ---------------- ------------- ----------------- --------------- -------------------
Jaime Serra -- -- -- -- -- --
- -------------------------- --------------- ---------------- ------------- ----------------- --------------- -------------------
Richard M. Bradbury 200,000 27,000 (1) -- -- -- --
- -------------------------- --------------- ---------------- ------------- ----------------- --------------- -------------------
- ------------
(1) Based on an exercise price of $0.135 per share of Common Stock
pursuant to the terms and conditions of a prior employment agreement
between the Company and Mr. Bradbury.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company served on the compensation
committee of another entity or on any other committee of the board of
directors of another entity performing similar functions during 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION OF QUALTON HOTELS & RESORTS CORPORATION. On September 1,
2000, the Company entered into an agreement pursuant to which the Company
will acquire 100% of the issued and outstanding shares of capital stock of
Qualton Hotels & Resorts Corporation, a Marshall Islands corporation. The
following officers, directors and stockholders of the Company are
affiliated with Qualton Hotels & Resorts Corporation and/or Qualton Group
Corporation, a Marshall Islands corporation and the owner of all of the
issued and outstanding shares of capital stock of Qualton Hotels & Resorts
Corporation:
- Mr. Dominguez Cereceres currently serves as Chairman of the Board of
Directors of both Qualton Hotels & Resorts Corporation and Qualton
Group Corporation, and Messrs. Macedo and Lopez Nunez are directors of
both Qualton Hotels & Resorts Corporation and Qualton Group
Corporation; and
12
- DSC Corporation, of which Mr. Dominguez Cereceres is Chairman and has
a controlling interest, is the controlling stockholder of Qualton
Group Corporation.
The Company has agreed to issue and deliver to Qualton Group Corporation
an aggregate of One Hundred Sixty-Three Million Five Hundred Forty Thousand
(163,540,000) shares of Common Stock pursuant to this acquisition, which will
result:
- in the direct ownership by Qualton Group Corporation of approximately
56% of the total issued and outstanding shares of Common Stock; and
- in the direct and indirect (as the controlling stockholder of Qualton
Group Corporation) ownership by DSC Corporation of approximately 78%
of the total issued and outstanding shares of Common Stock.
See "Proposal Two -- Ratification and approval of the Company's acquisition of
Qualton Hotels & Resorts Corporation and the issuance of more than 20% of the
Company's Common Stock in connection with the acquisition."
ACQUISITION OF THE REMAINING CAPITAL STOCK OF CLUSTER IMMOBILIARA DE
IXTAPA, S.A. DE C.V. In addition to its pre-existing 75% ownership interest
in Cluster Inmobiliaria de Ixtapa, S.A. de C.V., a company formed under the
laws of Mexico ("Cluster Ixtapa"), the Company acquired, effective August 29,
2000, the remaining 25% ownership interest in Cluster Ixtapa from DSC
Corporation in exchange for 11,275,973 shares of Common Stock and the
cancellation of $1,166,604 of outstanding inter-company debt owed by ITD,
S.A. de C.V., a subsidiary of DSC Corporation, to the Company. Mr. Dominguez
Cereceres is Chairman and has a controlling interest in DSC Corporation.
SALE OF APPRAISAL GROUP INTERNATIONAL, INC. Effective as of December 31,
1999, the Company sold all of the outstanding shares of capital stock of
Appraisal Group International, Inc., a Florida corporation ("AGII"), to Mr.
Bradbury, the Company's former President and a former director, in exchange for
certain shares of Common Stock owned by Mr. Bradbury. The purchase price for
AGII's outstanding capital stock was agreed upon by the parties after
arms-length negotiations and consisted of: (i) 800,000 shares of Common Stock
that Mr. Bradbury transferred to the Company on the closing date of the
transaction; and (ii) up to 400,000 shares of Common Stock that Mr. Bradbury
will transfer to the Company pursuant to the terms and conditions of a related
escrow agreement. Under the escrow arrangement, Mr. Bradbury, from time to time
between March 1, 2000 and March 1, 2003, has the option to reduce the number of
the additional 400,000 escrow shares that he will transfer to the Company if,
among other things, the then fair market value of Common Stock exceeds $0.50 per
share. The remaining shares will be released from escrow on March 1, 2003.
CONVERSION OF 5% CONVERTIBLE PROMISSORY NOTES. On January 8, 1999, the
Company issued an aggregate of 105,638,300 shares of Common Stock to ITD, S.A.
de C.V. (formerly known as DSC, S.A. de C.V.) and Hemisphere Developments, Ltd.,
upon the conversion of certain 5% Convertible Promissory Notes that were issued
to ITD, S.A. de C.V. and Hemisphere on August 19, 1996. Mr. Bernardo Dominguez
Cereceres, the Company's Chairman of the
13
Board and Chief Executive Officer, also serves as Chairman of ITD, S.A. de C.V.
On August 4, 2000, ITD, S.A. de C.V. transferred 52,100,070 shares of Common
Stock to DSC Corporation.
URBATERRA, S.C. Urbaterra, S.C., a civil entity formed under the laws of
Mexico, currently provides management support and administrative services to the
Company, including the preparation of financial statements, office space and
support and other administrative services, in exchange for a services fee of
approximately $30,000 per quarter. Mr. Serra, the Company's Chief Financial
Officer and a director, is an equity owner and has served as the President and
Administrative Associate of Urbaterra, S.C. since January 9, 1999.
14
PROPOSAL TWO
RATIFICATION AND APPROVAL OF THE COMPANY'S ACQUISITION OF QUALTON HOTELS &
RESORTS CORPORATION AND THE ISSUANCE OF MORE THAN 20% OF THE COMPANY'S COMMON
STOCK IN CONNECTION WITH THE ACQUISITION
(ITEM 2 ON THE PROXY CARD)
The Board requests that the Company's stockholders vote on a proposal
to ratify and approve the Company's acquisition of Qualton Hotels & Resorts
Corporation (the "QUALTON ACQUISITION"), and the issuance of more than 20% of
the issued and outstanding shares of Common Stock in connection with the
acquisition.
THE QUALTON ACQUISITION
Effective September 1, 2000, the Company entered into a stock purchase
agreement (a copy of which is attached hereto as EXHIBIT A, the "PURCHASE
AGREEMENT") with Qualton Group Corporation, Qualton Hotels & Resorts Corporation
and its subsidiaries.
Pursuant to the terms and conditions of the Purchase Agreement, the
Company has agreed to issue and deliver an aggregate of One Hundred Sixty-Three
Million Five Hundred Forty Thousand (163,540,000) shares of Common Stock (the
"ACQUISITION SHARES"), in exchange for all of the issued and outstanding shares
of capital stock of Qualton Hotels & Resorts Corporation.
Upon the expected closing of the Qualton Acquisition on or about
October 18, 2000:
- Qualton Hotels & Resorts Corporation will become a wholly-owned
subsidiary of the Company;
- Qualton Hotels & Resorts Corporation will continue to own 99% of
the issued and outstanding shares of capital stock of its
subsidiaries, with the remaining 1% in each case to be owned by
the Company;
- Qualton Group Corporation will own approximately 56% of the total
issued and outstanding shares of Common Stock, with DSC
Corporation, as the controlling stockholder of Qualton Group
Corporation, beneficially owning approximately 78% of the total
issued and outstanding shares of Common Stock. See "Certain
Relationships and Related Transactions."
STOCKHOLDER APPROVAL OF THE QUALTON ACQUISITION UNDER THE DELAWARE GENERAL
CORPORATION LAW
The Company seeks stockholder ratification of the Purchase Agreement
and approval of the Qualton Acquisition in accordance with Section 144(a)(3) of
the Delaware General Corporation Law (the "DELAWARE LAW") because of the
affiliation of certain officers, directors
15
and stockholders of the Company with Qualton Hotels & Resorts Corporation and
Qualton Group Corporation.
Under Section 144(a)(3) of the Delaware General Corporation Law (the
"DELAWARE LAW"), the Company's execution of the Purchase Agreement and the
consummation of the Qualton Acquisition will not be deemed void or voidable
solely because members of the Board have a financial interest in the transaction
if the Purchase Agreement and the consummation of the Qualton Acquisition is
fair as to the Company as of the time it is authorized, approved or ratified by
the Board or the Company's stockholders.
The Board has taken, among others, the following actions to address the
fairness as to the Company and its stockholders of the terms and conditions of
the Purchase Agreement and the consummation of the Qualton Acquisition:
- The Board determined the purchase price of Qualton Hotels &
Resorts Corporation after thorough review and consideration of a
number of factors, including an independent third-party appraisal
of the fair market value of Qualton Hotels & Resorts Corporation;
- The Board determined the price per share of Common Stock issuable
pursuant to the Qualton Acquisition after thorough review and
consideration of a number of factors, including the most recent
trading prices per share of Common Stock, the price per share of
Common Stock in past transactions, an independent third-party
valuation of Common Stock and the incorporation of a premium to
Common Stock determined by the independent appraiser; and
- The Purchase Agreement provides for, among other things,
customary representations, warranties, closing conditions and
covenants of Qualton Group Corporation, Qualton Hotels & Resorts
Corporation and its subsidiaries with respect to the Qualton
Acquisition.
In addition, Section 144(a)(3) of the Delaware Law provides that the
Company's execution of the Purchase Agreement and the consummation of the
Qualton Acquisition will not be deemed void or voidable if the Purchase
Agreement and Qualton Acquisition are specifically approved in good faith by a
vote of the stockholders after the material facts as to each director's or
officer's relationship or interest in the Purchase Agreement and Qualton
Acquisition are disclosed to the Company's stockholders. Although the Board
believes that the terms and conditions of the Purchase Agreement and the
consummation of the Qualton Acquisition are fair as to the Company, the Board is
submitting for stockholder ratification and approval the Purchase Agreement and
Qualton Acquisition. Failure to receive stockholder ratification of the Purchase
Agreement and approval of the Qualton Acquisition will not affect, however, the
Company's consummation of the Qualton Acquisition.
16
APPROVAL OF MORE THAN 20% OF THE ISSUED AND OUTSTANDING SHARES OF CAPITAL STOCK
AND VOTING STOCK OF THE COMPANY
The Company also seeks stockholder approval of the issuance of more
than 20% of the issued and outstanding shares of Common Stock in connection with
the Qualton Acquisition. Under Rule 4460(i)(1)(D)(ii) of the Nasdaq Stock
Market, Inc., a company that is listed on the Nasdaq National Market or the
Nasdaq Small-Cap Market must receive stockholder approval prior to the issuance
of more than 20% of its Common Stock or more than 20% of its voting power
outstanding before the issuance of stock for less than the greater of book or
market value of the stock.
While the Company currently is not listed on the Nasdaq National Market
or the Nasdaq Small-Cap Market, the Company seeks stockholder approval of the
issuance of more than 20% of the issued and outstanding shares of Common Stock
pursuant to the Qualton Acquisition, because the Company may apply to list on
Nasdaq in the future. Accordingly, the Company is submitting for stockholder
approval the issuance of the Acquisition Shares, given that Nasdaq may evaluate
the Company's ongoing compliance with Nasdaq rules in evaluating whether to list
the Company. The approval or rejection of this proposal, however, will not
affect the issuance of the Acquisition Shares or the consummation of the Qualton
Acquisition because the Company currently is not required to receive stockholder
approval prior to the issuance of the Acquisition Shares under Nasdaq rules.
VOTE REQUIRED
An affirmative vote by the holders of a majority of the Shares present
in person or represented by proxy at the Meeting is required to ratify the
Company's acquisition of Qualton Hotels & Resorts Corporation and to approve the
issuance of more than 20% of the issued and outstanding shares of Common Stock
in connection with the acquisition.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION AND APPROVAL OF THE
COMPANY'S ACQUISITION OF QUALTON HOTELS & RESORTS CORPORATION AND THE ISSUANCE
OF MORE THAN 20% OF THE COMPANY'S COMMON STOCK IN CONNECTION WITH THE
ACQUISITION.
17
PROPOSAL THREE
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
(ITEM 3 ON THE PROXY CARD)
The Board requests that the Company's stockholders to vote on a
proposal to amend the Company's Certificate of Incorporation to change the name
of the Company to "Qualton, Inc." The Board unanimously has approved this
amendment to the Certificate of Incorporation. The purpose of the proposed name
change is to reflect the Company's acquisition of all of the issued and
outstanding shares of capital stock of Qualton Hotels & Resorts Corporation
pursuant to the terms and conditions of the Purchase Agreement.
Upon the consummation of the proposed name change, existing
stockholders will not need to surrender stock certificates. Instead, when
certificates are presented for transfer, new certificates bearing the name
"Qualton, Inc." will be issued. If there exists any circumstance that would make
the consummation of the name change inadvisable in the judgment of the Board
(including the failure by the Company and Qualton Hotels & Resorts Corporation
to close the Qualton Acquisition), then the proposed amendment to the
Certificate of Incorporation may be terminated by the Board either before or
after approval of the name change by the Company's stockholders.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Shares is
required to adopt the proposal to amend the Certificate of Incorporation to
effect the proposed name change.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE COMPANY'S NAME TO "QUALTON,
INC."
18
PROPOSAL FOUR
RATIFICATION OF INDEPENDENT AUDITORS
(ITEM 4 ON THE PROXY CARD)
The Board has selected Stark Tinter & Associates, LLC as the Company's
independent auditors for the fiscal year ending December 31, 2000, and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Meeting. Stark Tinter & Associates,
LLC has audited the Company's financial statements since February 28, 2000. Its
representatives are expected to be present at the Meeting, will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Stark Tinter & Associates,
LLC as the Company's independent auditors is not required by the Company's
By-Laws or otherwise. The Board is submitting the selection of Stark Tinter &
Associates, LLC to the stockholders for ratification as a matter of good
corporate practice. In the event that the stockholders fail to ratify the
selection, the Board will reconsider whether or not to retain that firm. Even if
the selection is ratified, the Board in its discretion may direct the
appointment of a different independent accounting firm at any time during the
year if the Board determines that such a change could be in the best interests
of the Company and its stockholders.
VOTE REQUIRED
The affirmative vote by the holders of a majority of the Shares present
in person or represented by proxy at the Meeting is required for approval of
ratification of the independent auditors.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION OF
STARK TINTER & ASSOCIATES, LLC TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
19
OTHER BUSINESS
The Company is not aware of any other matters to be presented at the
Meeting. If any other matters are properly brought before the Meeting, it is the
intention of the persons named in the enclosed Proxy Card to vote the shares
that they represent in accordance with their best judgment.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals that stockholders desire to have included in the Company's
proxy materials for next year's Annual Meeting of Stockholders must be received
by the Secretary of the Company at the Company's offices at Av. Constituyentes
647, Mexico, D.F. 11810 no later than May 18, 2001, and must satisfy the
conditions established by the SEC for stockholder proposals to be included in
such proxy materials.
A stockholder who intends to present for next year's Annual Meeting of
Stockholders a proposal that is not discussed in the related proxy materials
should notify the Company of such proposal on or before August 1, 2001.
Otherwise, the individuals designated as proxies by the Company in connection
with next year's Annual Meeting of Stockholders will have discretionary
authority to vote for or against such proposal at this meeting.
FORM 10-KSB
A copy of the Company's Annual Report for fiscal year 1999 is being
mailed with this Proxy Statement to stockholders entitled to notice of the
Meeting. At any stockholder's written request, the Company will provide without
charge, a copy of the Annual Report for fiscal year 1999 which incorporates the
Form 10-KSB as filed with the SEC, including the financial statements and a list
of exhibits. If copies of exhibits are requested, a copying charge of $0.20 per
page will be made. Requests should be sent to the Secretary of the Company at
the Company's offices at Av. Constituyentes 647, Mexico, D.F. 11810.
By Order of the Board of Directors
Pablo Macedo Pizarro
SECRETARY
20
---------------------------------------------------------------
STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 1, 2000.
BY AND AMONG
QUALTON GROUP CORPORATION, A MARSHALL ISLANDS CORPORATION
QUALTON HOTELS & RESORTS CORPORATION, A MARSHALL ISLANDS CORPORATION
HOTELERA QUALTON, S.A. DE C.V., A CORPORATION ORGANIZED
UNDER THE LAWS OF MEXICO
IMPULSORA TURISTICA DE ACAPULCO, S.A. DE C.V., A CORPORATION ORGANIZED
UNDER THE LAWS OF MEXICO
IMPULSORA TURISTICA DE IXTAPA, S.A. DE C.V., A CORPORATION ORGANIZED
UNDER THE LAWS OF MEXICO
AND
INTERNATIONAL REALTY GROUP, INC., A DELAWARE
CORPORATION
FOR THE PURCHASE OF ALL OF THE OUTSTANDING SHARES OF CAPITAL STOCK
OF
QUALTON HOTELS & RESORTS CORPORATION, A MARSHALL ISLANDS CORPORATION
---------------------------------------------------------------
TABLE OF EXHIBITS
EXHIBIT A - DEFINED TERMS
EXHIBIT B - SCHEDULE OF EXCEPTIONS
EXHIBIT C - LEGAL OPINION OF MARSHALL ISLANDS COUNSEL
EXHIBIT D - LEGAL OPINION OF MEXICO COUNSEL
i
THIS STOCK PURCHASE AGREEMENT, dated as of September 1, 2000 (this
"AGREEMENT"), is made and entered into by and among:
(i) Qualton Group Corporation, a Marshall Islands corporation
("SELLER");
(ii) Qualton Hotels & Resorts Corporation, a Marshall Islands
corporation and wholly-owned subsidiary of Seller ("TARGET");
(iii) Hotelera Qualton, S.A. de C.V., a corporation formed under the
laws of Mexico and a subsidiary of Target ("HOTELERA QUALTON");
(iv) Impulsora Turistica de Acapulco, S.A. de C.V., a corporation
formed under the laws of Mexico and a subsidiary of Target ("ITA");
(v) Impulsora Turistica de Ixtapa, S.A. de C.V., a corporation formed
under the laws of Mexico and a subsidiary of Target ("ITI", and collectively
with Hotelera Qualton and ITA, the "SUBSIDIARIES"); and
(vi) International Realty Group, Inc., a Delaware corporation
("BUYER");
with reference to the following facts:
RECITALS
A. Seller is the beneficial owner of all of the outstanding shares of
capital stock of Target (collectively, the "TARGET STOCK").
B. Buyer wishes to acquire Target by purchasing all of the Target Stock
from Seller, and Seller wishes to sell the Target Stock to Buyer, subject to the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows (unless otherwise specified,
definitions of capitalized terms are set forth in EXHIBIT A attached hereto):
1. PURCHASE AND SALE OF THE STOCK.
1.1 SALE OF THE TARGET STOCK; ISSUANCE OF BUYER STOCK. Subject to the
terms and conditions set forth in this Agreement, Seller hereby agrees to sell
and transfer to Buyer, and Buyer hereby agrees to purchase from Seller, all of
the Target Stock. As consideration for the purchase of all of the Target Stock
from Seller, Buyer shall issue and deliver to Seller an aggregate of One Hundred
Sixty-Three Million Five Hundred Forty Thousand (163,540,000) shares of Buyer's
Common Stock, $0.001 par value per share (the "BUYER STOCK"), in accordance with
SECTION 1.3.
1.2 CLOSING. The closing (the "CLOSING") shall take place at the
offices of Morrison & Foerster LLP, 12636 High Bluff Drive, Suite 300, San
Diego, California
1
92130-2071, on October 17, 2000 at 10:00 a.m., or at such other place or at such
other date and time as Seller and Buyer may mutually agree (the "CLOSING DATE").
1.3 DELIVERY. At the Closing, (a) Seller shall deliver to Buyer the
certificate(s) representing all of the Target Stock and (b) Buyer will issue
irrevocable transfer instructions to Buyer's transfer agent to effect the
issuance and delivery of the Buyer Stock to Seller. Each of Buyer and Seller
also shall deliver to each other such other documents required to be delivered
by such party hereunder.
2. REPRESENTATIONS AND WARRANTIES OF SELLER, TARGET AND THE SUBSIDIARIES.
As an inducement for Buyer to enter into this Agreement and except as
set forth in the Schedule of Exceptions attached hereto as EXHIBIT B, each of
Seller, Target and the Subsidiaries represents and warrants that each of the
following statements is true and correct as of the date hereof and as of the
Closing Date:
2.1 ORGANIZATION, POWER, ETC. OF SELLER AND TARGET. Each of Seller and
Target: (i) is a corporation duly organized, validly existing and in good
standing under the laws of the Marshall Islands; (ii) is duly qualified to do
business as a foreign corporation in the jurisdictions in which Seller and
Target, respectively, conducts the Business; and (iii) has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Target has all requisite corporate power and
authority to own, operate and lease its assets, and to conduct the Business.
SCHEDULE 2.1 contains (x) a complete and correct summary of all powers of
attorney executed on behalf of Target, each of which is validly issued and duly
authorized by Target, (y) a complete and correct list of the officers and
directors of Seller and Target and (z) complete and correct copies of the
charter documents or equivalent organizational documents, in each case as
amended or restated, of Seller and Target. Neither Seller nor Target is in
violation of any of the provisions of its respective charter documents or
equivalent organizational documents, in each case as amended or restated.
2.2 ORGANIZATION, POWER, ETC. OF THE SUBSIDIARIES. Each of the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of Mexico. Each of the Subsidiaries has all the
requisite power and authority to (i) own, operate and lease its assets, and to
conduct the Business and (ii) execute and deliver this Agreement and to perform
its obligations hereunder. SCHEDULE 2.2 contains (x) a complete and correct
summary of all powers of attorney executed on behalf of any of the Subsidiaries,
each of which is validly issued and duly authorized by such Subsidiary, (y) a
complete and correct list of the officers and directors of each of the
Subsidiaries and (z) complete and correct copies of the charter documents or
equivalent organizational documents, in each case as amended or restated, of
each of the Subsidiaries. None of the Subsidiaries are in violation of any of
the provisions of their respective charter documents or equivalent
organizational documents, in each case as amended or restated. Except for the
Subsidiaries, there are no other subsidiaries or affiliated entities of Target.
2
2.3 CAPITALIZATION.
2.3.1 TARGET CAPITALIZATION. The authorized capital stock of
Target consists of [[______]] shares of common stock, [[_______]] par value per
share, of which: (i) all of the issued and outstanding shares of the Target
Stock are owned by Seller, free and clear of all liens, charges, security
interests, encumbrances or claims of any kind; and (ii) such shares of the
Target Stock are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by statute, Target's charter
documents or any agreement to which such Target is a party or bound. Holders of
the Target Stock have the rights, preferences, privileges and restrictions set
forth in Target's charter documents, copies of which have been provided to
Buyer's counsel. All of the issued and outstanding shares of Target were issued
in compliance with all applicable U.S. federal and state securities laws and the
laws of the Marshall Islands or applicable exemptions thereunder. There are no
options, warrants, calls or other rights (including registration rights),
agreements, arrangements or commitments of any character, presently outstanding,
that (x) obligate Target to issue, deliver or sell shares of its capital stock
or debt securities, (y) obligate Target to grant, extend or enter into any such
option, warrant, call or other such right, agreement, arrangement or commitment
or (z) obligate Target to repurchase, redeem or otherwise acquire any shares of
the Target Stock.
2.3.2 CAPITALIZATION OF THE SUBSIDIARIES. SCHEDULE 2.3.2
contains a complete and correct list of all stockholders of each of the
Subsidiaries and the number of shares owned by each, of which: (i) all of the
issued and outstanding shares of capital stock of such Subsidiary are owned by
the entities listed next to such Subsidiary's name in SCHEDULE 2.3.2, free and
clear of all pledges, liens, encumbrances or claims of any kind; and (ii) such
shares of capital stock are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, such
Subsidiary's charter documents or any agreement to which such Subsidiary is a
party or bound. Holders of shares of each of the Subsidiaries' capital stock
have the rights, preferences, privileges and restrictions set forth in such
Subsidiary's charter documents, copies of which have been provided to Buyer's
counsel. All of the issued and outstanding shares of each Subsidiary's capital
stock were issued in compliance with all applicable laws of Mexico. There are no
options, warrants, calls or other rights (including registration rights),
agreements, arrangements or commitments of any character, presently outstanding,
that (x) obligate any of the Subsidiaries to issue, deliver or sell shares of
its capital stock or debt securities, (y) obligate any of the Subsidiaries to
grant, extend or enter into any such option, warrant, call or other such right,
agreement, arrangement or commitment or (z) obligate any of the Subsidiaries to
repurchase, redeem or otherwise acquire any shares of such Subsidiary's capital
stock.
3
2.4 AUTHORIZATION OF AGREEMENTS. The execution, delivery and
performance of this Agreement by Seller, Target and each of the Subsidiaries,
and the consummation by Seller, Target and each of the Subsidiaries of the
Transactions, have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by Seller, Target and each of the
Subsidiaries and constitutes the legal, valid and binding obligation of Seller,
Target and each of the Subsidiaries, enforceable against each of them in
accordance with its terms.
2.5 EFFECT OF AGREEMENT. The execution, delivery and performance of
this Agreement by each of Seller, Target and each of the Subsidiaries, and the
consummation by them of the Transactions, will not: (i) conflict with or violate
any of the charter documents or the equivalent organizational documents, in each
case as amended or restated, of Seller, Target or any of the Subsidiaries; (ii)
conflict with or violate any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively, "LAWS") in
effect as of the date of this Agreement and applicable to Seller, Target or any
of the Subsidiaries or by which any of their respective properties is bound or
subject; or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of any lien, charge,
security interest, encumbrance or claim of any kind on, any of the properties or
assets of Seller, Target or any of the Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Seller, Target or any of the
Subsidiaries is a party or by which Seller, Target or any of the Subsidiaries or
any of its properties is bound or subject.
2.6 GOVERNMENTAL APPROVALS. No approval, authorization, consent or
order or action of or filing with any court, administrative agency or other
governmental authority, domestic or foreign, is required to be obtained by any
of Seller, Target or the Subsidiaries for the execution and delivery by each of
Seller Target and the Subsidiaries of this Agreement or the consummation by them
of the Transactions, except for applicable requirements under the laws of Mexico
relating to the acquisition of the capital stock of the Subsidiaries by entities
or persons not formed under the laws of Mexico.
2.7 FINANCIAL STATEMENTS.
2.7.1 Seller has furnished to Buyer the (a) Balance Sheet and
(b) Statement of Operations. Such Financial Statements have been prepared in
accordance with accounting methods and procedures used by Target consistently
applied throughout the periods involved. The Balance Sheet fairly presents the
condition of Target as of the date thereof, and the Statement of Operations
fairly present the results of operations of Target for the period indicated.
2.7.2 Neither Target nor any of the Subsidiaries has any
obligations, contingent or otherwise, including, without limitation, liabilities
for Charges, long-term leases or unusual forward or long-term commitments that
are not reflected in the Balance Sheet.
4
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet Date,
except as set forth in SCHEDULE 2.8, neither Target nor any of the Subsidiaries
has:
2.8.1 MATERIAL OBLIGATIONS. Incurred any material obligation
or liability (fixed or contingent), except normal trade or business obligations
incurred in the ordinary course of business and consistent with past practice,
and except in connection with this Agreement and the Transactions;
2.8.2 DISCHARGE OR SATISFACTION OF LIENS. Discharged or
satisfied any lien, charge, security interest, encumbrance or claim of any kind
or paid any obligation or liability (fixed or contingent), other than pursuant
to the terms of such obligation, or in the ordinary course of business and
consistent with past practice;
2.8.3 ADDITIONAL LIENS. Mortgaged, pledged or subjected to any
lien, charge, security interest, encumbrance or claim of any kind on any of its
assets or properties (other than mechanic's, materialman's and similar statutory
liens arising in the ordinary course of business and consistent with past
practice and purchase money security interests);
2.8.4 ACQUISITION OR DISPOSITION OF ASSETS. Transferred,
leased or otherwise disposed of any of its material assets or properties or
acquired any assets or properties except in the ordinary course of business and
consistent with past practice;
2.8.5 COMPROMISE OF DEBTS OR CLAIMS. Cancelled or compromised
any debt or claim, except in the ordinary course of business and consistent with
past practice;
2.8.6 WAIVER OF RIGHTS. Waived or released in writing any
rights of value;
2.8.7 RIGHTS IN LICENSES, TRADEMARKS, PATENTS. Transferred or
granted any rights under any intellectual property licenses, patents,
inventions, trademarks, tradenames, servicemarks or copyrights or with respect
to any know-how (other than licenses granted by Target in the ordinary course of
business and consistent with past practice);
2.8.8 EMPLOYEE COMPENSATION. Made or granted any wage or
salary increase applicable generally to any group or classification of employees
of Target or any of the Subsidiaries (other than in connection with Seller's,
Target's or such Subsidiary's general salary plan), entered into any written
employment contract with any officer or employee of Target or any of the
Subsidiaries, or made any loan to, or entered into any transaction of any other
nature with, any officer or employee of Target or any of the Subsidiaries.
2.8.9 MATERIAL CONTRACTS. Entered into any material
transaction, contract or commitment, except for contracts listed in SCHEDULE
2.10 and this Agreement and the Transactions;
5
2.8.10 MATERIAL ADVERSE CHANGE. Suffered any material adverse
change in the operations or condition (financial or other) of the Business.
2.9 TITLE TO PROPERTIES, ABSENCE OF LIENS AND ENCUMBRANCES. Except as
set forth in the last sentence of this section, each of Target and the
Subsidiaries has good and marketable title to all of its assets and properties
listed on SCHEDULE 2.10 or as are reflected in the Financial Statements, free
and clear of all mortgages, liens, charges, security interests or other
encumbrances of any nature whatsoever, other than (a) liens for taxes not yet
due, (b) imperfections in title, if any, not material in amount and which,
individually or in the aggregate, do not materially interfere with the conduct
of the Business or with the use of the property subject thereto, (c) such
secured indebtedness as is disclosed in the Financial Statements covering the
assets and properties referred to therein, and (d) liens arising in the ordinary
course of business and consistent with past practice. With respect to the assets
and properties leased by Target and the Subsidiaries listed in SCHEDULE 2.10,
each of Target and the Subsidiaries is in compliance in all material respects
with such leases and hold valid leasehold interests free and clear of any liens,
charges, security interests, encumbrances or claims of any kind. Neither Target
nor any of the Subsidiaries is obligated under or a party to, any option, right
of first refusal or any other contractual right to purchase, acquire, sell,
assign or dispose of any real property owned or leased by Target or such
Subsidiary.
2.10 LIST OF REAL PROPERTIES, CONTRACTS AND OTHER DATA. Attached hereto
as SCHEDULE 2.10 is a list setting forth the following with respect to each of
Target and the Subsidiaries:
2.10.1 REAL PROPERTIES. All real properties owned by each of
Target and the Subsidiaries;
2.10.2 LEASES. All material leases of real or personal
property to which Target or any of the Subsidiaries is a party;
2.10.3 PATENTS AND TRADEMARKS. All patents, trademarks,
tradenames, servicemarks and copyrights, and registrations therefor, unexpired
as of the date hereof, and all applications pending on the date hereof for
patents, trademarks, tradenames, servicemarks and copyrights, and all other
proprietary rights, owned or held by Target or any of the Subsidiaries and used
by Target or any of the Subsidiaries in connection with the Business, and all
licenses granted by or to Target or any of the Subsidiaries and all other
agreements to which Target or any of the Subsidiaries is a party that relate to
any items of the categories mentioned above;
2.10.4 EMPLOYEE COMPENSATION PLANS AND BENEFITS. All
collective bargaining agreements, employment and consulting agreements,
executive compensation plans, bonus plans, deferred compensation agreements,
employee pension plans or retirement plans, employee profit sharing plans,
employee stock purchase and stock option plans, group life insurance,
hospitalization insurance or other plans or arrangements providing for benefits
to employees of Target or any of the Subsidiaries;
6
2.10.5 HOTEL MANAGEMENT CONTRACTS. All contracts, agreements
and commitments of Target and/or the Subsidiaries with or relating to Hotel
Qualton Puerto Plata, Hotel Qualton Puerto Vallarta, Hotel Qualton Acapulco or
Hotel Qualton Ixtapa (collectively, the "Hotel Contracts");
2.10.6 OTHER CONTRACTS. All contracts, agreements and
commitments (including, without limitation, mortgages, indentures and loan
agreements) to which Target or any of the Subsidiaries is a party, or to which
any of Target's or the Subsidiaries' assets or properties are subject and which
are not specifically referred to in SECTIONS 2.10.1, 2.10.2, 2.10.3, 2.10.4 or
2.10.5, except for any contracts, agreements or commitments under purchase
orders, sales orders, supply contracts and other contracts, agreements or
commitments (a) incurred in the ordinary course of business and consistent with
past practice, by Target or any of the Subsidiaries or (b) to Target or any of
the Subsidiaries of less than Five Thousand United States Dollars (US$5,000).
With respect to each Hotel Contract and other contract, agreement and commitment
listed in SCHEDULE 2.10: (i) such agreement is legal, valid, binding,
enforceable and in full force and effect; (ii) such agreement will continue to
be legal, valid, binding, enforceable and in full force and effect following the
consummation of the transactions contemplated hereby; (iii) no party is in
breach or default, and no event has occurred that with notice or lapse of time
would constitute a breach or default, or permit termination, modification of any
term or condition or acceleration, under such agreement; and (iv) no party has
repudiated any provision of such agreement; and
2.11 AVAILABILITY OF DOCUMENTS. True and complete copies of all
documents referred to in the schedules hereto have been provided or made
available to Buyer. Except as disclosed in such schedules, none of Seller,
Target or the Subsidiaries has been notified in writing of any claim that any
contract referred to in such schedules is not valid and enforceable in
accordance with its terms for the periods stated therein, or that there is under
any such contract any existing default or event of default or event that with
notice or lapse of time or both would constitute such a default.
2.12 LITIGATION. Except as set forth in SCHEDULES 2.12 and 2.13: (i)
there is no claim, action, suit, litigation, proceeding, arbitration or
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or threatened against Target or any of the
Subsidiaries or any its respective properties or rights; and (ii) neither Target
nor any of the Subsidiaries is subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement with or
continuing investigation by, any governmental entity, or any judgment, order,
writ, injunction, decree or award of any governmental entity or arbitrator. In
respect of the matters relating to or arising in connection with the actions set
forth in SCHEDULES 2.12 and 2.13, there is no fact, event, condition,
circumstance or other matter which either has, or is reasonably likely to have
resulted in, an event or determination having a material adverse effect on the
Business. Each of Target and the Subsidiaries has delivered to Buyer copies of
all pleadings, correspondence and other documents relating to each matter
disclosed in SCHEDULES 2.12 and 2.13.
7
2.13 LABOR MATTERS. Except as set forth in SCHEDULES 2.12 and 2.13,
there are no unfair labor practice or labor arbitration proceedings against
Target or any of the Subsidiaries pending or, to the Seller's Knowledge,
threatened against Target's or any of the Subsidiaries, and there are no
organizational efforts presently being made or threatened involving any of
Target's or the Subsidiaries' employees. Since the Balance Sheet Date, none of
Seller, Target or the Subsidiaries has received notice of any material claim
that, with respect to the Business, Target or any of the Subsidiaries, has not
complied with any laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining, the payment
of social security and similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that Target or any of the Subsidiaries
is liable for any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing.
2.14 PATENT, TRADEMARK, ETC. CLAIMS. Except as set forth in SCHEDULE
2.14, since the Balance Sheet Date, no person has made or, to the Seller's
Knowledge, threatened to make any claims that the operation of the Business is
in violation or infringement of any patent, patent license, tradename,
trademark, servicemark, copyright, know-how or other proprietary or trade rights
of any third party.
2.15 USE OF REAL PROPERTY. Except as set forth in SCHEDULE 2.15, the
owned and leased real properties listed in SCHEDULE 2.10 are used and operated
in compliance and conformity with all applicable leases, contracts, commitments,
licenses and permits, to the extent that the failure so to conform would,
individually or in the aggregate, materially and adversely affect the operations
or condition (financial or other) of the Business. None of Sellers, Target or
the Subsidiaries has received notice of any violation of any applicable zoning
or building regulation, ordinance or other law relating to the real property of
Target or any of the Subsidiaries and, to Seller's Knowledge, there is no such
violation.
2.16 ACCOUNTS RECEIVABLE. Except as disclosed in SCHEDULE 2.16, the
accounts receivable reflected on the Balance Sheet, and all accounts receivable
arising between the Balance Sheet Date and the date hereof, arose from
transactions in the ordinary course of business, and the goods or services
involved have been sold and delivered to the account obligor, and no further
goods or services are required to be provided in order to complete the sales and
to entitle Target or any of the Subsidiaries or the assignees to collect the
accounts receivable in full. No such account has been assigned or pledged to any
other person, firm or corporation and no defense or setoff to any such account
has been asserted by the account obligor or, to Seller's Knowledge, exists.
2.17 COMPLIANCE WITH LAW. Neither Target nor any of the Subsidiaries
(a) is in default with respect to any order of any court or governmental
authority to which Target or such Subsidiary is a party or is subject that
applies to the Business or any of its assets, (b) is in violation of any Laws to
which it is subject, or (c) has failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the conduct of the
Business, which default, violation or failure to obtain might, individually or
in the aggregate, materially and adversely affect the operations or condition
(financial or other) of the Business.
8
2.18 CONTRACTS. Except as set forth in SCHEDULE 2.18, there are no
disputes with customers, vendors or other third parties of Target or any of the
Subsidiaries with respect to performance by Target or the Subsidiaries under any
Hotel Contract or other contract, agreement and commitment listed in SCHEDULE
2.10, that (a) may result in the termination of such Hotel Contract or other
contract, agreement or commitment or (b) requiring, or that could require,
payment by Target or any of the Subsidiaries, or performance of services or
delivery of assets or properties of Target or any of the Subsidiaries, in excess
of Five Thousand United States Dollars (US$5,000). None of the Hotel Contracts
or other contracts, agreements or commitments listed in SCHEDULE 2.10 is
terminable upon the consummation of the Transactions contemplated hereby.
2.19 COMMISSIONS. None of Seller, Target, the Subsidiaries or any of
their respective directors, officers, employees or agents has employed or
incurred any liability to any broker, finder or agent for any brokerage fees,
finder fees, commissions or other amounts with respect to the Transactions.
2.20 INVESTMENT REPRESENTATIONS.
2.20.1 INVESTMENT INTENTION. Seller is acquiring the Buyer
Stock for its own account, for investment purposes only and not with a view to,
or any present intention of, the distribution thereof. Seller will not, directly
or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any shares of the Buyer Stock (or solicit any offers to buy, purchase
or otherwise acquire any shares of the Buyer Stock), except in compliance with
the Securities Act of 1933, as amended (the "SECURITIES ACT"). Seller
acknowledges that the shares of the Buyer Stock have not been registered under
the Securities Act or the securities laws of any state or other jurisdiction and
cannot be disposed of unless they are subsequently registered under the
Securities Act and any applicable state laws or exemption from such registration
is available.
2.20.2 ACCREDITED INVESTOR. Seller is an "accredited investor"
(as that term is defined in Rule 501 of Regulation D under the Securities Act)
and by reason of its business and financial experience, it has such knowledge,
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risks of the prospective investment, Seller
represents and warrants that it maintains its principal place of business
indicated for Seller on SCHEDULE 2.20 and that Seller is organized under the
laws of the state indicated for Seller in the recitals of this Agreement.
2.20.3 DUE DILIGENCE; DISCLOSURE OF INFORMATION. Seller has
performed a due diligence investigation of Buyer and its industry. Seller
further represents that it has had the opportunity to ask questions and receive
answers from Buyer's management regarding Buyer's business, management and
financial affairs, as well as the terms and conditions of the issuance of shares
of the Buyer Stock. Seller has received a copy of the following documents
relating to Buyer: (i) the Annual Report on Form 10-KSB for the year ended
December 31, 1999; (ii) the Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000; and (iii) the Current Reports on Form 8-K filed by Buyer with the
SEC on the following dates since December 31, 1999: March 6, 2000 and March 15,
9
2000. Seller acknowledges that it has reviewed carefully the risk factors
contained in the above referenced reports.
2.20.4 RESTRICTED SECURITIES. Seller understands that the
shares of the Buyer Stock that it is acquiring are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from Buyer in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances. In
this connection, Seller represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby
under the Securities Act.
2.20.5 SECURITIES LAWS COMPLIANCE. Seller acknowledges and
understands that Buyer is relying upon the representations and warranties set
forth in this Section 2.20 for compliance with applicable federal and state
securities laws.
2.21 TAXES. Except as set forth in SCHEDULE 2.21, each of Target and
the Subsidiaries has timely filed or will timely file all Tax Returns that it
was or is required to file prior to the date hereof. All such Tax Returns were
correct and complete when filed. All Taxes owed by each of Target and the
Subsidiaries (whether or not shown on any Tax Return) have been paid. Neither
Target nor any of the Subsidiaries is currently the beneficiary of any extension
of time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where Target or any of the Subsidiaries did not file
a Tax Return that it is or may be subject to taxation by that jurisdiction.
There are no security interests on any of the assets of the Target or the
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax. There is no dispute or claim concerning any Tax liability of Target
or any of the Subsidiaries claimed or raised by any governmental entity.
2.22 CERTAIN BUSINESS PRACTICES. None of Target, the Subsidiaries, nor
any director, officer, stockholder, agent or employee of Target or such
Subsidiary has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
2.23 DISCLOSURE. No representation or warranty made by Seller, Target
or any of the Subsidiaries, nor any document, written information, statement,
financial statement, certificate, schedule or exhibit prepared and furnished or
to be prepared and furnished by Seller, Target or any of the Subsidiaries, or
its representatives pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements of facts contained herein or therein not misleading in light of the
circumstances under which they were furnished.
10
2.24 GUARANTIES. Neither Target nor any of the Subsidiaries is a
guarantor or otherwise is liable for any liability or obligation (including
indebtedness) of any other person or third-party entity.
3. REPRESENTATIONS AND WARRANTIES OF BUYER.
As an inducement for Seller and Target to enter into this Agreement,
Buyer represents and warrants that each of the following statements is true
and correct as of the date hereof and as of the Closing Date:
3.1 ORGANIZATION, POWER, ETC. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business as a foreign corporation in the
jurisdictions in which Buyer conducts its business, except where the failure to
so qualify will not have a material adverse effect on Buyer's ability to perform
its obligations hereunder. Buyer has all requisite corporate power and authority
to acquire the Target Stock to deliver this Agreement and to perform its
obligations hereunder.
3.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and performance
of this Agreement by Buyer, and the consummation by it of the Transactions, have
been duly authorized by all necessary corporate action. This Agreement has been
duly executed and delivered by Buyer and constitutes the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms.
3.3 EFFECT OF AGREEMENTS. The execution, delivery and performance by
Buyer of this Agreement, and the consummation by it of the Transactions, will
not violate the Certificate of Incorporation or By-laws of Buyer or any
judgment, award or decree or any material indenture, agreement or other
instrument to which Buyer is a party, or by which Buyer or its properties or
assets are bound, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under, any such indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the properties
or assets of Buyer, except to the extent the effect thereof will not be
materially adverse to Buyer's ability to fulfill its obligations under this
Agreement.
3.4 GOVERNMENTAL APPROVALS. No approval, authorization, consent or
order or action of or filing with any court, administrative agency or other
governmental authority is required to be obtained by Buyer for the execution and
delivery by Buyer of this Agreement or the consummation by it of the
Transactions.
3.5 COMMISSIONS. Neither Buyer nor any of its directors, officers,
employees or agents has employed or incurred any liability to any broker, finder
or agent for any brokerage fees, finder fees, commissions or other amounts with
respect to the Transactions.
3.6 LIMITATION ON REPRESENTATIONS AND WARRANTIES.
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3.6.1 Except as and to the extent expressly set forth in this
SECTION 3, included on any schedule hereto or included in any writing delivered
by Buyer to Seller, Target and/or any of the Subsidiaries concurrently herewith
or subsequent hereto expressly pursuant to this Agreement, Buyer makes no other
representation or warranty and disclaims all liability and responsibility for
any representation, warranty, statement or information (financial or otherwise)
made or communicated (orally or in writing) to the Seller, Target and/or any of
the Subsidiaries or any of its stockholders, employees, agents, consultants or
representatives.
3.6.2 Buyer makes no representation or warranty to Seller,
Target or any of the Subsidiaries regarding the probable success or
profitability of Buyer. Without limiting the foregoing, Buyer makes no
representation or warranty to Seller, Target or any of the Subsidiaries with
respect to the revenues or profitability of Buyer for the quarter ending
September 30, 2000.
4. COVENANTS OF SELLER.
4.1 CONDUCT OF BUSINESS. During the period from the date hereof up to
and including the Closing Date, except if Buyer consents otherwise in writing,
each of Target and the Subsidiaries shall use their best efforts to:
4.1.1 ORDINARY COURSE. Conduct the Business only in the
ordinary course of business and consistent with past practice.
4.1.2 PRESERVATION OF GOODWILL. Preserve the goodwill of
Target's and such Subsidiary's suppliers, customers, distributors and other
third parties having business relations with Target and such Subsidiary.
4.1.3 MAINTAIN INSURANCE. Maintain the insurance policies of
Target and such Subsidiary existing as of the date hereof against loss or damage
to the assets and properties of Target and such Subsidiary.
4.1.4 SALE OF ASSETS. Not transfer or encumber any of the
assets of Target and such Subsidiary except for any transfer or encumbrance in
the ordinary course of business and consistent with past practice or where the
book value of the transferred or encumbered assets does not exceed Five Thousand
U.S. Dollars (US$5000) individually or in the aggregate.
4.1.5 EMPLOYMENT CONTRACTS. Not enter into any employment
contract with any employees of Target or such Subsidiary or increase any
compensation of any employer of Target or such Subsidiary (other than in the
ordinary course of business and consistent with past practice).
4.1.6 MAINTENANCE OF ASSETS. Maintain all of the assets of
Target and such Subsidiary in good repair, order and condition, reasonable wear
and tear excepted, and, except for properties and assets otherwise disposed of,
sold or consumed in the ordinary course of business and consistent with past
practice or where the book value of
12
disposed, sold or consumed properties or assets do not exceed Five Thousand U.S.
Dollars (US$5000) individually or in the aggregate.
4.1.7 AMENDMENTS TO CONTRACTS. Not materially amend Hotel
Contract or other contract, agreement and commitment listed in SCHEDULE 2.10.
4.2 REPRESENTATIONS TRUE. Until the Closing Date, each of Seller,
Target and the Subsidiaries will use all reasonable efforts to prevent the
occurrence of any event that would cause any of their respective representations
and warranties set forth in this Agreement not to be true and correct in any
material respect.
4.3 ACCESS. Subject to SECTION 9.1, each of Target and the Subsidiaries
will (a) during ordinary business hours and upon reasonable notice to Seller,
permit Buyer and its authorized representatives to have access to all assets,
plant, properties, employees' records, contracts, and accounting books and
records and documents of Target and such Subsidiary, subject to Seller, Target
or such Subsidiary obtaining any necessary consents with respect to personal
information concerning its employees, (b) furnish as soon as reasonably
practicable to Buyer or its authorized representatives such other information
with respect to the Business as Buyer may from time to time request, and (c)
otherwise cooperate in the examination or audit of Target and such Subsidiary by
Buyer.
4.4 PERMITS. As promptly as practicable after the date hereof, Seller,
Target and the Subsidiaries will make all filings with governmental bodies and
other regulatory authorities, and use all reasonable efforts to obtain all
permits, approvals, authorizations and consents of all third parties, necessary
for Seller to consummate the Transactions. As soon as practicable following
receipt of any written request from Buyer, each of Seller, Target and the
Subsidiaries will furnish to Buyer all information that is in Seller's, Target's
and such Subsidiary's possession and not otherwise available to Buyer, which
Buyer may request in connection with any such filing to be made by Buyer.
4.5 MINORITY STOCKHOLDERS OF THE SUBSIDIARIES. On and after the Closing
Date, Bernardo Dominguez Cereceres shall effect the transfer of his shares of
capital stock of each Subsidiary as set forth in SCHEDULE 2.3.2 to Buyer, free
and clear of all pledges, liens, encumbrances or claims of any kind. Seller
shall provide Buyer with all written evidence of such transfer requested by
Buyer, including, without limitation, any relevant documentation from the
government of Mexico relating to the acquisition of the capital stock of such
Subsidiary by an entity or person not formed under the laws of Mexico.
5. COVENANTS OF BUYER.
5.1 REPRESENTATIONS TRUE. Until the Closing Date, Buyer will use all
reasonable efforts to prevent the occurrence of any event that would cause any
of its representations and warranties set forth in this Agreement not to be true
and correct in any material respect.
5.2 PERMITS. As promptly as practicable after the date hereof, Buyer
will make all filings with governmental bodies and other regulatory authorities,
and use all reasonable
13
efforts to obtain all permits, approvals, authorizations and consents of all
third parties, necessary for Buyer to consummate the Transactions.
6. CONDITIONS PRECEDENT.
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer under this Agreement are subject, at the option of Buyer, to the
satisfaction or waiver of each of the following conditions at or prior to the
Closing Date:
6.1.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each of Seller, Target and the Subsidiaries
(but specifically excluding Section 2.8.10) contained in this Agreement or in
any certificate or document delivered to Buyer pursuant hereto shall be true and
correct in all material respects on and as of the Closing Date as though made at
and as of that date (except where such representation and warranty is made as of
a date specifically set forth therein), and each of Seller, Target and the
Subsidiaries shall have delivered to Buyer a certificate to that
effect.
6.1.2 COMPLIANCE WITH COVENANTS. Each of Seller, Target and
the Subsidiaries shall have performed and complied with all terms,
agreements, covenants and conditions of this Agreement to be performed or
complied with by them at the Closing Date, and each of Seller, Target and the
Subsidiaries shall have delivered to Buyer certificates to that effect.
6.1.3 ALL PROCEEDINGS TO BE SATISFACTORY. All corporate and
other proceedings to be taken by Seller, Target and the Subsidiaries in
connection with the Transactions and all documents incident thereto shall be
satisfactory in form and substance to Buyer and its counsel, and Buyer and said
counsel shall have received all such certified or other copies of such documents
as it may request.
6.1.4 OPINION OF COUNSEL FOR SELLER. Buyer shall have received
from Seller the favorable opinions of counsel in the Marshall Islands and
Mexico, each dated the Closing Date, in the forms attached hereto as EXHIBITS C
and D, respectively.
6.1.5 LEGAL ACTIONS OR PROCEEDINGS. No legal action or
proceeding shall have been instituted or threatened by any governmental agency
seeking to restrain, prohibit, invalidate or otherwise affect the consummation
of the Transactions.
6.1.6 THIRD PARTY AGREEMENTS. All Hotel Contracts and other
contracts, agreements and commitments set forth in SCHEDULE 2.10.6 shall be in
full force and effect, and neither Target nor any of the Subsidiaries shall have
received notice of termination or breach of such third party agreements.
6.1.7 CONSENTS OBTAINED. Each of Seller, Target and the
Subsidiaries shall have obtained all consents and approvals (including,
without limitation, any consents and approvals with respect to the Hotel
Contracts and other contracts, agreements and commitments set forth in
SECTION 2.10.6) required for the execution, delivery and performance of this
Agreement by each of Seller, Target and the Subsidiaries and the consummation
of the Transactions, except where the failure to obtain such consents or
approvals is a result of a breach by Buyer.
6.1.8 STOCKHOLDER APPROVAL. Buyer shall have received
stockholder approval of the issuance of the Buyer Stock and the consummation
of the Transactions.
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6.1.9 STOCK CERTIFICATE(S). Seller shall have delivered all of
the certificate(s) representing the Target Stock in accordance with SECTION 1.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of
Seller, Target and the Subsidiaries under this Agreement are subject, at the
option of Seller, to the satisfaction or waiver of each of the following
conditions at or prior to the Closing Date:
6.2.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer contained in this Agreement or in any
certificate or document delivered to Seller pursuant hereto shall be true and
correct in all material respects on and as of the Closing Date as though made at
and as of that date (except where such representation and warranty is made as of
a date specifically set forth therein), and Buyer shall have delivered to Seller
a certificate to such effect.
6.2.2 COMPLIANCE WITH COVENANTS. Buyer shall in all material
respects have performed and complied with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by it at the
Closing Date, and Buyer shall have delivered to Seller a certificate to that
effect.
6.2.3 ALL PROCEEDINGS TO BE SATISFACTORY. All corporate and
other proceedings to be taken by Buyer in connection with the Transactions and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Seller and its counsel, and Seller and said counsel shall have
received all such certified or other copies of such documents as it may
reasonably request.
6.2.4 LEGAL ACTIONS OR PROCEEDINGS. No legal action or
proceeding shall have been instituted or threatened by any governmental agency
seeking to restrain, prohibit, invalidate or otherwise affect the consummation
of the Transactions.
6.2.5 CONSENTS OBTAINED. Buyer shall have obtained all
consents and approvals required for the execution, delivery and performance of
this Agreement by Buyer and the consummation of the Transactions, except where
the failure to obtain such consents or approvals is a result of a breach by
Seller or Target or the Subsidiaries (including, without limitation, a breach of
SECTION 9.3 hereof).
6.2.6 STOCK CERTIFICATE(S). Buyer shall have caused the
delivery of all of the certificate(s) representing the Buyer Stock in accordance
with SECTION 1.
7. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS.
7.1 SURVIVAL OF REPRESENTATIONS. The representations and warranties set
forth in SECTIONS 2.1 through 2.24 shall survive the execution and delivery of
this Agreement for a period of five years from the Closing Date, except that (i)
the representations and warranties set forth in SECTIONS 2.3, 2.4 and 2.9 shall
survive indefinitely and (ii) the representations and warranties set forth in
SECTION 2.21 shall survive until the expiration of all applicable statutes of
limitation.
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7.2 AGREEMENTS TO INDEMNIFY.
7.2.1 SELLER INDEMNITY. Subject to the terms and conditions of
this ARTICLE 7, each of Seller, Target and the Subsidiaries hereby agree to
indemnify, defend and hold Buyer harmless from and against all Losses incurred
by Buyer resulting from a breach of any representation, warranty or covenant of
Seller, Target or any of the Subsidiaries made pursuant to this Agreement.
7.2.2 BUYER INDEMNITY. Subject to the terms and conditions of
this ARTICLE 7, Buyer hereby agrees to indemnify, defend and hold Seller
harmless from and against all Losses incurred by Seller resulting from a breach
of any representation, warranty or covenant of Buyer contained in or made
pursuant to this Agreement.
7.3 CONDITIONS OF INDEMNIFICATION. The respective obligations and
liabilities of Indemnifying Party to the Indemnified Party under SECTION 7.2
with respect to claims resulting from the assertion of liability by third
parties shall be subject to the following terms and conditions:
7.3.1 NOTICE. Within 20 days after receipt of notice of commencement of
any action or the assertion of any claim by a third party, the Indemnified Party
shall give the Indemnifying Party written notice thereof together with a copy of
such claim, process or other legal pleading, and the Indemnifying Party shall
have the right to undertake the defense thereof by representatives of its own
choosing;
7.3.2 FAILURE TO ASSUME DEFENSE. In the event that the Indemnifying
Party, by the 30th day after receipt of notice of any such claim (or, if
earlier, by the tenth day preceding the day on which an answer or other pleading
must be served in order to prevent judgment by default in favor of the person
asserting such claim), does not elect to defend against such claim, the
Indemnified Party will (upon further notice to the Indemnifying Party) have the
right to undertake the defense, compromise or settlement of such claim on behalf
of and for the account and risk of the Indemnifying Party, subject to the right
of the Indemnifying Party to assume the defense of such claim at any time prior
to settlement, compromise or final determination thereof;
7.3.3 CLAIM ADVERSE TO INDEMNIFYING PARTY. Notwithstanding anything to
the contrary in this SECTION 7.3, if there is a reasonable probability that a
claim may materially and adversely affect the Indemnifying Party other than as a
result of money damages or other money payments, the Indemnifying Party shall
have the right, at its own cost and expense, to compromise or settle such claim,
but the Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the entry of any
judgment that does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party a release from all
liability in respect of such claim;
7.3.4 COOPERATION. In connection with any such indemnification, the
Indemnified Party will cooperate in all reasonable requests of the Indemnifying
Party; and
16
7.4 REMEDIES EXCLUSIVE. Except as provided in SECTION 10.10, the
remedies provided in this SECTION 7 shall be the exclusive remedy for monetary
damages (whether at law or in equity).
8. TERMINATION. This Agreement may be terminated at any time on or prior to the
Closing Date:
8.1 INJUNCTION. By either Seller or Buyer if any court of competent
jurisdiction in the United States or other applicable jurisdiction shall have
issued an order (other than a temporary restraining order), decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Transactions and such order, decree, ruling or other action shall have become
final and non-appealable.
8.2 MUTUAL AGREEMENT. By mutual agreement of Seller and Buyer.
8.3 TERMINATION DATE. By either Seller or Buyer if the Closing shall
not have occurred on or before December 31, 2000, (provided that the right to
terminate this Agreement pursuant to this SECTION 8.3 shall not be available to
a party who has materially breached any representation, warranty or covenant of
this Agreement, which in the case of Seller, includes a material breach of any
covenant by Target or the subsidiaries).
8.4 MATERIAL BREACH. By Seller or Buyer upon a material breach of any
representation, warranty or covenant of this Agreement (which in the case of
Seller, includes a material breach of any covenant by Target or the
Subsidiaries) by the other party that remains uncured for a period of thirty
(30) days after receipt of written notice of such breach from the nonbreaching
party.
8.5 EFFECTS OF TERMINATION. If this Agreement is terminated pursuant to
SECTIONS 8.1, 8.2., 8.3, or 8.4, all obligations of the parties hereunder
(except for SECTIONS 8.5, 9.1, 9.2, 10.2, 10.8, 10.9 and 10.10) shall terminate
without liability of any party to any other party. Nothing contained in this
SECTION 8.5 shall relieve any party of liability for any breach of this
Agreement that occurred prior to the date of termination of this Agreement.
9. OTHER COVENANTS.
9.1 CONFIDENTIALITY OBLIGATIONS. Each party that receives confidential
and/or proprietary information (the "RECEIVING PARTY") relating to this
Agreement or the consummation of the Transactions (the "INFORMATION") shall
maintain the confidential nature of the other party disclosing such Information
(the "DISCLOSING PARTY"), and not disclose to any third party without prior
written consent of the Disclosing Party; (a) any Information learned about the
Disclosing Party or its affiliates in the course of the Transactions, (b) the
terms of this Agreement or the Transactions, unless and to the extent necessary
to carry out the Transactions. At the termination of this Agreement, the
Receiving Party agrees to return to the Disclosing Party any and all materials
containing
17
any such Information. These restrictions on use and obligations of
confidentiality will not apply to any Information that: (i) is or becomes
generally available to the public other than as a result of a disclosure by the
Disclosing Party; (ii) was within the Receiving Party's possession prior to its
being furnished to the Receiving Party by or on behalf of the Disclosing Party
pursuant to this Agreement or for the consummation of the Transactions, provided
that the source of such information was not known by the Receiving Party to be
bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Disclosing Party or any other
party with respect to such information; (iii) becomes available to the Receiving
Party on a nonconfidential basis from a source other than the Disclosing Party,
provided that such source is not bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to the
Disclosing Party or any other party with respect to such information; or (iv)
the Receiving Party has received a written opinion of outside counsel that such
disclosure must be made by the Receiving Party in order for the Receiving Party
not to commit a violation of law.
In the event that the Receiving Party is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process) to
disclose any Information, the Receiving Party shall provide the Disclosing Party
with prompt written notice of any such request or requirement so that the
Disclosing Party may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this SECTION 9.1. If, in the absence of
a protective order or other remedy or the receipt of a waiver by the Disclosing
Party, the Receiving Party is nonetheless, in the written opinion of counsel,
legally compelled to disclose such Information to any tribunal or else stand
liable for contempt or suffer other censure or penalty, the Receiving Party may,
without liability hereunder, disclose to such tribunal only that portion of such
Information that such counsel advises the Receiving Party is legally required to
be disclosed, provided that the Receiving Party exercise its best efforts to
preserve the confidentiality of such Information, including, without limitation,
by cooperating with the Disclosing Party to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be accorded
such Information by such tribunal.
9.2 ANNOUNCEMENTS. Neither Seller, Target or any of the Subsidiaries,
on the one hand, nor Buyer, on the other hand, shall make, or cause to be made,
any news releases or other public announcements pertaining to the Transactions
without first consulting the other party and attempting to formulate a mutually
satisfactory arrangement for such disclosure, and in any case will only make an
announcement thereafter without the consent of the other only to the extent
required by applicable law.
9.3 BEST EFFORTS. Each party hereto agrees, both before and after the
Closing, to (i) use its best efforts to consummate the Transactions as soon as
reasonably practicable after the date of this Agreement and (ii) execute any and
all further documents and writings and perform such other actions that may be or
become necessary or expedient to effectuate and carry out the Transactions
(which shall not include any obligation to make payments).
18
10. MISCELLANEOUS.
10.1 EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, none of the parties hereto shall have any obligation
to pay any of the fees and expenses of any other party incident to the
negotiation, preparation and execution of this Agreement or the consummation of
the Transactions, including the fees and expenses of counsel, accountants,
investment bankers and other experts.
10.2 WAIVERS. Seller or Buyer may, by written notice to the other
party: (a) extend the time for the performance of any of the obligations or
other actions of the other party under this Agreement; (b) waive any
inaccuracies in the representations or warranties of the other party contained
in this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the conditions or covenants of the other contained
in this Agreement; or (d) waive performance of any of the obligations of the
other under this Agreement. With regard to any power, remedy or right provided
herein or otherwise available to any party hereunder, (i) no waiver or extension
of time will be effective unless expressly contained in a writing signed by the
waiving party, and (ii) no alteration, modification or impairment will be
implied by reason of any previous waiver, extension of time, delay or omission
in exercise.
10.3 AMENDMENTS, SUPPLEMENTS. This Agreement may be amended or
supplemented at any time by the mutual written consent of Buyer and Seller.
10.4 ENTIRE AGREEMENT. This Agreement, its exhibits and schedules, and
the documents executed on the Closing Date in connection herewith, constitute
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
No representation, warranty, promise, inducement or statement of intention has
been made by either party that is not embodied in this Agreement or such other
documents, and neither party shall be bound by, or be liable for, any alleged
representation, warranty, promise, inducement or statement of intention not
embodied herein or therein.
10.5 BINDING EFFECT, BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
10.6 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by a party without the prior written
consent of the other parties of this Agreement.
10.7 NOTICES. All notices under this Agreement will be in writing and
will be delivered by personal service or telegram, telecopy or certified mail
(if such service is not available, then by first class mail), postage prepaid,
to such address as may be designated
19
from time to time by the relevant party, and that will initially be as set forth
below. Any notice sent by certified mail will be deemed to have been given seven
(7) days after the date on which it is mailed. All other notices will be deemed
given when received. No objection may be made to the manner of delivery of any
notice actually received in writing by an authorized agent of a party. Notices
will be addressed as follows or to such other address as the party to whom the
same is directed will have specified in conformity with the foregoing:
(a) If to Buyer: International Realty Group, Inc.
Av. Constituyentes 647
Mexico, D.F. C.D. 11810
ATTN: President
(b) If to Seller, Target
or the Subsidiaries: Qualton Group Corporation
Cerro DE Maika No. 355
Lomas de Chapultepec
Mexico, D.F. C.D. 11000
ATTN: President
10.8 GOVERNING LAW: JURISDICTION. This Agreement will be governed and
construed by and under the laws of the State of Delaware without regard to the
application of the principles of conflict of laws. The parties will submit all
disputes arising out of or related to this Agreement, or to the interpretation,
performance, breach or termination thereof, to binding arbitration pursuant to
the Expedited Procedures of the Commercial Arbitration Rules ("RULES") of the
American Arbitration Association ("AAA"). The arbitration will take place in San
Diego, California at the offices of the AAA. The language of the arbitration
will be English. The dispute will be resolved by a single arbitrator appointed
by the AAA in accordance with the list procedure described in Paragraph 13 of
the Rules. The parties expressly agree that prior to the selection of the
arbitrator, nothing in this Agreement will prevent the parties from applying to
a court that would otherwise have jurisdiction for provisional or interim
relief. After the arbitrator is selected, he will have sole jurisdiction to hear
such applications, except that the parties agree that any relief ordered by the
arbitrator may be immediately and specifically enforced by a court otherwise
having jurisdiction over the parties. All fees and costs will be allocated to
the parties to the arbitration as determined by the arbitrator, except that the
prevailing party shall be entitled to attorneys' fees and costs as provided in
Section 10.9. To the extent that state or federal law under which a party's
claim arises provides for the award of attorneys' fees to the prevailing party,
the arbitrator is empowered to award such fees. The parties submit to the
exclusive jurisdiction of the United States District Court for the Southern
District of California for the resolution of any dispute or enforcement of any
right arising out of or relating to this agreement to arbitrate, including
enforcement of this agreement to arbitrate, application for the provisional or
interim remedies provided for herein, and confirmation of any award rendered by
the arbitrator pursuant to this agreement to arbitrate and waive any objection
to the venue or personal jurisdiction of said courts. The decision of the
arbitrator shall be final and binding on the parties and enforceable in
accordance with the New York Convention on the Recognition and Enforcement of
Arbitral Awards (9 U.S.C s1 et. seq.).
20
10.9 ATTORNEYS' FEES. Should any litigation be commenced (including any
proceedings in a bankruptcy court) among the parties hereto or their
representatives concerning any provision of this Agreement or the rights and
duties of any person or entity hereunder, solely as among the parties hereto or
their successors, the party or parties prevailing in such proceeding will be
entitled to the reasonable attorneys' fees and expenses of counsel and court
costs incurred by reason of such litigation.
10.10 EQUITABLE REMEDIES. Seller, Target or the subsidiaries and Buyer
acknowledge that the remedy at law for any breach, or threatened breach, of any
of the provisions of SECTION 9.1 will be inadequate and, accordingly, each party
covenants and agrees that the other party will, in addition to any other rights
or remedies that it may have and regardless of whether such other rights or
remedies have been previously exercised, be entitled to such equitable and
injunctive relief as may be available from any appropriate court referred to in
SECTION 10.8. Notwithstanding the foregoing sentence, any monetary damages which
is all or a portion of any equitable relief granted hereunder shall be subject
to the limitations set forth in SECTIONS 7.3 and 7.4.
10.11 RULES OF CONSTRUCTION.
10.11.1 HEADINGS. The article and section headings in this
Agreement are inserted only as a matter of convenience, and in no way define,
limit, or extend or interpret the scope of this Agreement or of any particular
article or section.
10.11.2 TENSE AND CASE. Throughout this Agreement, as the
context may require, references to any word used in one tense or case shall
include all other appropriate tenses or cases.
10.11.3 SEVERABILITY. The validity, legality or enforceability
of the remainder of this Agreement will not be affected even if one or more of
the provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
10.11.4 AGREEMENT NEGOTIATED. The parties hereto are
sophisticated and have been represented by lawyers throughout this transaction
who have carefully negotiated the provisions hereof. As a consequence, the
parties waive any effect under the laws or rules under Delaware law relating to
the interpretation of contracts against the drafter of any particular clause.
10.12 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
21
IN WITNESS WHEREOF, this Stock Purchase Agreement has been duly
executed and delivered by the duly authorized officers of the parties hereto as
of the date first above written.
BUYER
International Realty Group, Inc.
----------------------------
By:
Its:
SELLER
Qualton Group Corporation
----------------------------
By:
Its:
TARGET
Qualton Hotels & Resorts Corporation
----------------------------
By:
Its:
SUBSIDIARIES
Hotelera Qualton, S.A. de C.V.
----------------------------
By:
Its:
Impulsora Turistica de Acapulco,
S.A. de C.V.
----------------------------
By:
Its:
22
Impulsora Turistica de Ixtapa, S.A.
de C.V.
----------------------------
By:
Its:
Acknowledged and agreed to by
Bernardo Dominguez Cereceres, in his
capacity as minority stockholder of
Hotelera Qualton, S.A. de C.V.,
Impulsora Turistica de Acapulco,
S.A. de C.V. and Impulsora Turistica
de Ixtapa, S.A. de C.V., as to
Sections 2.3.2 and 4.5 of this
Agreement:
----------------------------
By: Bernardo Dominguez Cereceres
23
EXHIBIT A
"AGREEMENT" shall have the meaning set forth in the preamble.
"BALANCE SHEET" shall mean the unaudited consolidated balance sheet of
Target as of June 30, 2000 (the "BALANCE SHEET DATE"), subject to adjustments
reflecting Intracompany Transactions that have not been reflected in such
balance sheet.
"BUSINESS" shall mean the business of Target and the Subsidiaries as
presently conducted.
"BUYER" shall have the meaning set forth in the preamble.
"BUYER STOCK" shall have the meaning set forth in SECTION 1.1.
"CHARGES" shall mean all federal, state, county city, municipal, local,
foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i)
Target's or any of the Subsidiaries' employees, payroll, income or gross
receipts, (ii) Target's or any of the Subsidiaries' ownership or use of any of
its assets or (iii) any other aspect of Target's or the Subsidiaries' Business.
"CLOSING" and "CLOSING DATE" shall have the meanings set forth in
SECTION 1.2.
"DISCLOSING PARTY" shall have the meaning set forth in SECTION 9.1.
"FINANCIAL STATEMENTS" shall mean the Balance Sheet and Statement of
Operations.
"HOTEL CONTRACTS" shall have the meaning set forth in SECTION 2.10.5.
"HOTELERA QUALTON" shall have the meaning set forth in the preamble.
"INDEMNIFIED PARTY" shall mean, with respect to any Loss, the party
seeking indemnity hereunder.
"INDEMNIFYING PARTY" shall mean, with respect to any Loss, the party
from whom indemnity is being sought hereunder.
"INTRACOMPANY TRANSACTIONS" shall mean transactions between Target and
Seller or its other subsidiaries that are allocable or attributable to Target,
including, without limitation, any services (such as administrative, data
processing, employee benefits, insurance, etc.) provided by Seller or such
subsidiaries to Target.
"ITA" shall have the meaning set forth in the preamble.
"ITI" shall have the meaning set forth in the preamble.
O-1
"KNOWLEDGE" shall mean the actual knowledge of a party as of the date
hereof, after reasonable inquiry conducted by such party.
"LAWS" shall have the meaning set forth in SECTION 2.5.
"LOSSES" shall mean any and all costs and expenses (including, without
limitation, reasonable attorneys' fees), damages, losses, net of any Tax
adjustments, settlements, reductions or other effects, that actually result from
the Loss and its payment by the Indemnifying Party.
"MANAGEMENT EMPLOYEES" shall mean employees of Target and the
Subsidiaries or employees of Buyer, as the case may be, with a title of at least
Vice President or the equivalent.
"RECEIVING PARTY" shall have the meaning set forth in SECTION 9.1.
"SECURITIES ACT" shall have the meaning set forth in SECTION 2.20.1.
"SELLER" shall have the meaning set forth in the preamble.
"STATEMENT OF OPERATIONS" shall mean the unaudited statement of
operations of Target and the Subsidiaries for the six (6) month period ended
June 30, 2000, as adjusted to reflect Intracompany Transactions.
"SUBSIDIARIES" shall have the meaning set forth in the preamble.
"TARGET" shall have the meaning set forth in the preamble.
"TARGET STOCK" shall have the meaning set forth in Paragraph A of the
Recitals.
"TAX" or "TAXES" shall mean any and all taxes, charges, fees or levies,
payable to any federal, state, local or foreign taxing authority or agency,
including, without limitation, (i) income, franchise, profits, gross receipts,
minimum, alternative minimum, estimated, AD VALOREM, value added, sales, use,
service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers compensation,
unemployment compensation, utility, severance, excise, stamp, windfall profits,
transfer and capital gains taxes, (ii) custom duties, imposts, charges, levies
or other similar assessments of any kind, and (iii) interest, penalties and
additions to tax imposed with respect thereto.
"TAX RETURN" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TRANSACTIONS" shall mean the transactions contemplated by this
Agreement.
O-2
INTERNATIONAL REALTY GROUP, INC.
AV. CONSTITUYENTES 647
Mexico, D.F. 11810
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Bernardo Dominguez
Cereceres, Pablo Macedo Pizarro and Jaime Serra, and each of them, his or her
true and lawful agents and proxies with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Stockholders of International
Realty Group, Inc. to be held at the U.S. Grant Hotel, 326 Broadway, San Diego,
CA 92101-4800, on October 17, 2000, at 10:00 a.m., local time, and at any
adjournments thereof, and to vote as designated.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED:
- - "FOR" ALL DIRECTOR NOMINEES TO THE BOARD OF DIRECTORS;
- - "FOR" THE RATIFICATION AND APPROVAL OF THE COMPANY'S ACQUISITION OF QUALTON
HOTELS & RESORTS CORPORATION AND THE ISSUANCE OF MORE THAN 20% OF THE
COMPANY'S COMMON STOCK IN CONNECTION WITH THE ACQUISITION;
- - "FOR" THE AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE
THE COMPANY'S NAME TO "QUALTON, INC."; AND
- - "FOR" THE RATIFICATION OF INDEPENDENT AUDITORS AND AS THE PROXY HOLDER MAY
DETERMINE IN HIS DISCRETION WITH REGARD TO ANY OTHER MATTER PROPERLY
BROUGHT BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
YOUR VOTE IS IMPORTANT! PLEASE VOTE.
(Continued on reverse side)
BACK OF CARD
- --------------------------------------------------------------------------------
1. ELECTION OF DIRECTOR NOMINEES
FOR all nominees listed below.
__________
FOR all nominees listed below except as marked to the contrary.
__________
WITHHOLD AUTHORITY to vote for all nominees listed below.
__________
Withhold Authority
For Specific Nominee
--------------------
Nominees: 1. Bernardo Dominguez Cereceres ___________
-------- 2. Pablo Macedo Pizarro ___________
3. Jaime Serra ___________
4. Jorge Lopez Nunez ___________
2. RATIFICATION AND APPROVAL OF THE COMPANY'S ACQUISITION OF QUALTON HOTELS &
RESORTS CORPORATION AND THE ISSUANCE OF MORE THAN 20% OF THE COMPANY'S
COMMON STOCK IN CONNECTION WITH THE ACQUISITION
Vote For ____ Vote Against ____ Abstain ____
3. AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE
COMPANY `S NAME TO "QUALTON, INC."
Vote For ____ Vote Against ____ Abstain ____
4. RATIFICATION OF THE SELECTION OF STARK TINTER & ASSOCIATES, LLC, AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
2000
Vote For ____ Vote Against ____ Abstain ____
and to vote on such other business as may properly come before the meeting
Dated:____________________________________________________, 2000.
-----------------------------------------------------------------
Signature of Stockholder(s)
-----------------------------------------------------------------
Signature of Stockholder(s)
Please sign exactly as name appears hereon. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name
by authorized person.
THANK YOU FOR VOTING.