SECURITIES PURCHASE AGREEMENT
by and among
KINGSGATE ACQUISITIONS, INC.
and
SKY E-COM CORPORATION
and
STOCKHOLDERS OF SKY E-COM CORPORATION
and
FOUNDING STOCKHOLDERS OF KINGSGATE ACQUISITIONS, INC.
AGREEMENT
AGREEMENT (this "Agreement") is dated as of August 15, 2000 by and between
Kingsgate Acquisitions, Inc., a Delaware corporation ("Kingsgate"), Sky E-Com,
Inc., a California corporation ("Sky E-Com") and the stockholders of Sky E-Com
whose names and security holdings are listed on Schedule A ("Sky E-Com
Stockholders").
WHEREAS, Kingsgate has just completed an offering (the "Kingsgate
Offering") of 1,000,000 units ("Units") pursuant to Rule 419 ("Rule 419") under
the Securities Act of 1933 (the "Securities Act"), each Unit consisting of one
share of its common stock ("Kingsgate Share") and five redeemable common stock
purchase warrants ("Kingsgate Warrants") exercisable at $1.00; and
WHEREAS, prior to the Kingsgate Offering, Kingsgate sold 2,000,000
Kingsgate Shares, pursuant to Regulation D to the Securities Act to its initial
stockholders (Kingsgate "Founding Stockholders") whose names and security
holdings are listed on Schedule B; and
WHEREAS, Sky E-Com is a private corporation which is involved in the
development, manufacturing and distribution of an information, shopping,
entertainment and Internet tablet for scheduled airlines, ferries, trains,
rental cars, offshore oil drilling platforms and similar venues; and
WHEREAS, Kingsgate has placed the proceeds of the Kingsgate Offering and
certificates representing the Kingsgate and Kingsgate Warrants in an escrow
account established pursuant to Rule 419 at Capital Suisse Management, Inc.,
Escrow Agent for Capital Suisse Securities, Inc.; and
WHEREAS, each registration statement ("Registration Statement") containing
business and financial information concerning Kingsgate is available on the
Electronic Data Gathering, Analysis and Retrieval System (known as "EDGAR")
maintained by the United States Securities and Exchange Commission
("Commission") on its World Wide Web site, www.sec.gov; and a printed copy of
its definitive prospectus contained in the last Registration Statement filed
with the Commission (the "Definitive Prospectus") as filed with the Commission
on Edgar is attached to this Agreement as Exhibit A; and
WHEREAS, pursuant to Rule 419 and the Definitive Prospectus, before
Kingsgate may consummate an acquisition, it must prepare and submit to the
Commission a post-effective amendment to its registration statement (the
"Post-Effective Amendment"), the Post-Effective Amendment must become effective;
the management of Kingsgate must submit the proposed acquisition to a vote of
subscribers to the Kingsgate Offering; and holders of at least 80% of the Units
must vote in favor of confirming the acquisition ("Reconfirmation Vote"); and
WHEREAS, stockholders of Sky E-Com ("Sky E-Com Stockholders") own 7,854,400
shares of its common stock ("Sky E-Com Shares") as of the date of this
Agreement; and no other classes of capital stock nor any securities convertible
into common stock are issued and outstanding; and
WHEREAS, Kingsgate desires to acquire all the capital stock of Sky E-Com
and Sky E-Com desires to sell to Kingsgate all of its capital stock subject to
the terms and conditions hereinafter set forth in this Agreement; and
NOW THEREFORE, in consideration of the premises and the covenants set forth
herein, the parties hereto (the "Parties" and, individually, a "Party") hereby
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SECURITIES - FACILITIES PROVIDED
1.01 Purchase and Sale.
(a) Subject to the terms and conditions of this Agreement, Kingsgate, Sky
E-Com, the Sky E-Com Stockholders and the Kingsgate Founding
Stockholders will accomplish the following transactions:
(i) the Kingsgate Founding Stockholders will transfer proportionally
to the Sky E-Com Stockholders 1,500,000 of the 2,000,000
Kingsgate Shares owned by them;
(ii) Kingsgate will issue, from its authorized but unissued shares of
common stock, 7,854,400 Kingsgate Shares to be distributed
proportionally to the Sky E-Com Stockholders;
(iii) Sky E-Com Stockholders will transfer all their Sky E-Com Shares
to Kingsgate;
(iv) Kingsgate will file the Post-Effective Amendment containing,
inter alia, a description of the business of Sky E-Com, risk
factors, audited financial statements of Kingsgate and Sky E-Com
and consolidated pro-forma financial statements of Kingsgate and
Sky E-Com;
(v) as soon as practicable after the effective date of the
Post-Effective Amendment, the present management of Kingsgate
will dispatch a copy of the Definitive Prospectus contained in
the Post-Effective Amendment, a copy of this Agreement and a
notice soliciting a vote in favor or against the acquisition of
Sky E-Com and informing holders of Units that the vote of at
least the holders of 80% of the Units will be required to
confirm the acquisition of Sky E-Com by Kingsgate;
(vi) Upon the execution of this Agreement, the present management of
Kingsgate will call a meeting of the board of directors and at
such meeting nominate and elect Mark Wheeler and Steven Lefler
to the board of directors, such appointment to take place as of
the Reconfirmation Vote. Kingsgate will also accept a letter of
resignation from the board of directors of Kingsgate from Leslie
McGuffin, such resignation to take place as of the
Reconfirmation Vote;
(vii) The present management of Kingsgate, in conjunction with the
present management of Sky E-Com, will use its best efforts to
secure a listing of the Kingsgate Shares and Kingsgate Warrants
on the Over-the-Counter Bulletin Board commencing the date of
the Reconfirmation Vote or as soon as practicable thereafter.
1.03 Exemption from Registration. Certificates representing the Kingsgate
Shares issued to Sky E-Com Stockholders shall bear a restrictive legend
setting forth that the Kingsgate Shares were issued in a transaction
exempt from registration under the Securities Act of 1933, as amended
(the "Securities Act") and may not be transferred unless pursuant to an
effective registration statement filed with the SEC or an exemption
therefrom.
1.04 Registration Statement. Kingsgate will file the Post-Effective Amendment
as soon as practical after the date of this Agreement.
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ARTICLE 2
CLOSING
2.01 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Sky E-Com
or at another place mutually agreed upon by the Parties. The "Closing"
shall mean the deliveries to be made by the Parties at the Closing in
accordance with this Agreement. The Closing will occur as soon as
practicable after the reconfirmation of the acquisition by the Kingsgate
Unit holders pursuant to Rule 419.
2.02 Deliveries by Sky E-Com. At the Closing, Sky E-Com shall deliver to
Kingsgate Share certificates purchased by Kingsgate pursuant to
paragraph 1.01(a). If not previously delivered, Sky E-Com shall also
deliver to Kingsgate at the Closing all documents the delivery of which
are contemplated by this Agreement.
2.03 Deliveries by Kingsgate. At the Closing, Kingsgate shall deliver
certificates representing 7,854,400 of its authorized by unissued
Kingsgate Shares and 1,500,000 Kingsgate Shares owned by the founding
stockholders of Kingsgate. The certificates shall be legended by
restrict transfer in the absence of an effective registration statement
filed with the Commission an exemption from such registration.
2.04 Further Assurances. Prior, at or after the Closing, each Party shall
prepare, execute, and deliver, such further instruments of conveyance,
sale, assignment, or transfer, and shall take or cause to be taken such
other or further action, as any Party shall reasonably request of any
other Party at any time or from time to time in order to consummate, in
any other manner, the terms and provisions of this Agreement, including
opinions of counsel for each Party relating to the representations and
warranties set forth in this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SKY E-COM
In this Agreement, any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means any
material event, change, condition or effect related to the financial condition,
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such entity or group of entities. In this
Agreement, any reference to a "Material Adverse Effect" with respect to any
entity or group of entities means any event, change or effect that is materially
adverse to the financial condition, properties, assets, liabilities, business,
operations or results of operations of such entity.
In this Agreement, any reference to a Party's "knowledge" means such
Party's actual knowledge after reasonable inquiry of officers, directors and
other employees of such Party reasonably believed to have knowledge of such
matters.
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Sky E-Com represents and warrants to Kingsgate as follows:
3.01 Organization, Standing and Power. Sky E-Com is a corporation duly
organized, validly existing and in good standing under the laws of
California. Sky E-Com has the corporate power to own its properties and
to carry on its business as now being conducted and as proposed to be
conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on Sky E-Com. At or
prior to the Closing, Sky E-Com will deliver a true and correct copy of
its certificate of incorporation, a certificate of good standing and
by-laws or other charter documents, as applicable, to Kingsgate. Sky
E-Com is not in violation of any of the provisions of its certificate
of incorporation or bylaws or equivalent organizational documents. Sky
E-Com has no direct or indirect majority-owned subsidiaries.
3.02 Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree against either Sky E-Com which has or could
reasonably be expected to have the effect of prohibiting or materially
impairing any current or future business practice, any acquisition of
property or the conduct of business as currently conducted or as
proposed to be conducted.
3.03 Governmental Authorization. Sky E-Com has obtained each federal, state,
county, local or foreign governmental consent, license, permit, grant,
or other authorization of a governmental entity (i) pursuant to which
it currently operates or holds any interest in any of its properties or
(ii) that is required for its operation, and all of such authorizations
are in full force and effect, except where the failure to obtain or
have any such authorizations could not reasonably be expected to have a
Material Adverse Effect.
3.04 Compliance With Laws. To its knowledge, Sky E-Com has complied with, is
not in violation of, and has not received any notices of violation with
respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the
ownership or operation of its business, except for such violations or
failures to comply as could not be reasonably expected to have a
Material Adverse Effect.
3.05 Authority. Sky E-Com has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been adopted by the Board of
Directors of Sky E-Com in resolutions which are in full force and
effect. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Sky E-Com.
This Agreement has been duly executed and delivered by Sky E-Com and
constitutes the valid and binding obligation of Sky E-Com enforceable
against Sky E-Com in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to creditors' rights
generally, and is subject to general principles of equity. The
execution and delivery of this Agreement by Sky E-Com does not, and the
consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or
loss of any material benefit under (i) any provision of the certificate
of incorporation or bylaws of Sky E-Com, or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Sky E-Com or any of its
properties or assets. No consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality
("Governmental Entity") is required by or with respect to Sky E-Com or
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i)
such consents, approvals, orders, authorizations, registrations,
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declarations and filings as may be required under applicable federal
and state securities laws, including but not limited to Rule 419 under
the Securities Act, and (ii) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made,
would not have a Material Adverse Effect on Sky E-Com and would not
prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
3.06 Financial Statements. Prior to the Closing, Sky E-Com will deliver to
Kingsgate audited financial statements for the period ended December
31, 1999 and unaudited financial statements for the period ended June
30, 2000 (the "Sky E-Com Financial Statements"). The Sky E-Com
Financial Statements will be complete and correct in all material
respects and will be prepared in accordance with generally accepted
accounting principles, applied on a consistent basis throughout the
periods indicated and with each other. The Sky E-Com Financial
Statements will accurately will set out and describe in all material
respects the financial condition and operating results as of the dates,
and for the periods, indicated therein, subject to normal year-end
adjustments. Sky E-Com will continue to maintain a standard system of
accounting established and administered in accordance with generally
accepted accounting principles.
3.07 Absence of Certain Changes. Subsequent to the date of the Sky E-Com
Financial Statements, except as otherwise disclosed in writing, Sky
E-Com will represent at the Closing that it has conducted its business
in the ordinary course consistent with past practice and there has not
occurred: (i) any change, event or condition that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect;
(ii) any acquisition, sale or transfer of any material asset other than
in the ordinary course of business and consistent with past practice;
(iii) any material change in accounting methods or practices (including
any change in depreciation or amortization policies or rates); (iv) any
declaration, setting aside, or payment of a dividend or other
distribution, or any direct or indirect redemption, purchase or other
acquisition of any shares of capital stock except as disclosed in
writing to Kingsgate; (v) any material contract entered into other than
in the ordinary course of business, and or any material amendment or
termination of, or default under, any material contract; (vi) any
undisclosed material amendment or change to the incorporation documents
or bylaws; (vii) any increase in or modification of the compensation or
benefits payable or to become payable to any directors or employees
other than in the ordinary course of business and consistent with past
practice or (viii) any negotiation or agreement to do any of the things
described in the preceding clauses (i) through (vii) (other than
negotiations with Kingsgate and its representatives regarding the
transactions contemplated by this Agreement or as otherwise disclosed
to Kingsgate).
3.08 Absence of Undisclosed Liabilities. Sky E-Com has no material
obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided
for in the Sky E-Com Financial Statements; (ii) those incurred in the
ordinary course of business and not required to be set forth in the Sky
E-Com Financial Statements under generally accepted accounting
principles; (iii) those incurred in the ordinary course of business
since the date of Sky E-Com Financial Statements and consistent with
past practice; and (iv) those incurred in connection with the execution
of this Agreement.
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3.09 Taxes. Sky E-Com and have timely filed all tax returns required to be
filed and has paid all taxes shown thereon to be due. The Sky E-Com
Financial Statements (i) fully accrue all actual and contingent
liabilities for taxes with respect to all periods through December 31,
1999 and neither Sky E-Com nor its subsidiary has or will incur any tax
liability in excess of the amount reflected on the Sky E-Com Financial
Statements with respect to such periods, and (ii) properly accrue in
accordance with generally accepted accounting principles all
liabilities for taxes payable after December 31, 1999 with respect to
all transactions and events occurring on or prior to such date. No
material tax liability since December 31, 1999 has been incurred by Sky
E-Com other than in the ordinary course of business and adequate
provision has been made in the Sky E-Com Financial Statements for all
taxes since that date in accordance with generally accepted accounting
principles.
3.10 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any
agency, court or tribunal, foreign or domestic, or, to the knowledge of
Sky E-Com, threatened against either Sky E-Com or any of its properties
or any of their respective officers or directors (in their capacities
as such) that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Sky E-Com or except as
has been previously disclosed to Kingsgate. There is no judgment,
decree or order against Sky E-Com or, to the knowledge of Sky E-Com,
any of its directors or officers (in their capacities as such), that
could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement, or that could reasonably
be expected to have a Material Adverse Effect on Sky E-Com.
3.11 Title to Property. Sky E-Com has and will have, as the case may be good
and marketable title to all of its properties, interests in properties
and assets, real and personal, as reflected in the Sky E-Com Financial
Statements or acquired after the Sky E-Com Financial Statements. The
property and equipment of that are used in the operations of its
business are in all material respects in good operating condition and
repair, ordinary wear and tear excepted.
3.12 Intellectual Property.
(a) Sky E-Com owns or is licensed or otherwise possesses legally
enforceable rights to use all trademarks, trade names, service
marks, copyrights, domain registrations and any applications
therefor, and tangible or intangible proprietary information or
material ("Intellectual Property") that are used in its business
as currently conducted, except to the extent that the failure to
have such rights has not had and would not reasonably be
expected to have a Material Adverse Effect.
(b) Sky E-Com has not been sued in any suit, action or proceeding
and has not brought any action, suit or proceeding for
infringement of Intellectual Property or breach of any license
or agreement involving Intellectual Property against any third
party. The conduct of its business does not infringe any
trademark, service mark, copyright, trade secret or other
proprietary right of any third party, where such infringement
would have a Material Adverse Effect.
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3.13 Interested Party Transactions. Sky E-Com is not indebted to any
director, officer, employee or agent (except for amounts due as normal
salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to Sky E-Com except as disclosed in the Sky
E-Com Financial Statements.
3.14 Insurance. Sky E-Com does not currently carry any insurance.
3.15 Brokers' and Finders' Fees. Sky E-Com has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement.
3.16 Minute Books. Sky E-Com will make available to Kingsgate a complete and
accurate summary of all meetings of directors and shareholders or
actions by written consent since the time of incorporation of Sky
E-Com, and reflect all transactions referred to in such minutes
accurately in all material respects.
3.17 Complete Copies of Materials. Sky E-Com has delivered or made
available, and will continue to deliver or make available until the
Closing true and complete copies of each agreement not in the ordinary
course of business to which Sky E-Com is a party.
3.18 Representations Complete. None of the representations or warranties
made by Sky E-Com, or documents furnished by Sky E-Com or pursuant to
this Agreement or any written statement furnished to Kingsgate pursuant
hereto or in connection with the transactions contemplated hereby, when
all such documents are read together in their entirety, contains or
will contain at the Closing any untrue statement of a material fact, or
omits or will omit at the Closing to state any material fact necessary
in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading; provided,
however, that for purposes of this representation, any document
attached hereto as a "Superseding Document" (even if not actually
physically attached hereto) that provides information inconsistent with
or in addition to any other written statement furnished to Kingsgate in
connection with the transaction contemplated hereby, shall be deemed to
supersede any other prior document or written statement furnished to
Kingsgate with respect to such inconsistent or additional information.
3.19 Compliance With Other Instruments. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any violation or default of any
provision of any instrument, judgment, order, writ, decree or contract
to which Sky E-Com is a party or by which it is bound, or require any
consent under or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a violation or default
under any such provision.
3.20 Capital Structure. 7,854,400 shares of Sky E-Com common stock are
issued and outstanding. Such shares are fully paid and nonassessable.
There are no other outstanding securities of Sky E-Com and no
outstanding commitments to issue any securities.
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3.21 Authorized Shares of Common Stock and Warrants. The Sky E-Com Shares to
be transferred to Kingsgate under this Agreement will be free and clear
of any lien, pledge, security interest or other encumbrance and, upon
delivery of the securities at the Closing as provided for in this
Agreement, and assuming Kingsgate is acquiring the Sky E-com Shares in
good faith and without notice of any adverse claim, Kingsgate will
acquire good title thereto, free and clear of any lien, pledge,
security interest or encumbrance (other than restrictions on transfer
arising under applicable securities laws).
3.22 Disclosure. Sky E-Com has fully provided Kingsgate with all the
information in its possession that Kingsgate has requested in
determining whether to enter into this Agreement. Neither this
Agreement nor any document attached to this Agreement nor any
certificate delivered pursuant hereto that, in any such case, has been
or will be provided by or on behalf of Sky E-Com contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements made herein or therein not misleading
in light of the circumstances under which they were made.
3.23 Employee Matters. To its best knowledge, Sky E-Com is in compliance in
all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms
and conditions of employment, wages, hours and occupational safety and
health and employment practices, and is not engaged in any unfair labor
practice. To its best knowledge, there are no pending claims against
Sky E-Com under any workers compensation plan or policy or for long
term disability. There are no employee benefit plans or stock option
plans or other bonus compensation to employees.
3.24 Delivery of Documents. Sky E-Com has delivered or will deliver to
Kingsgate at or prior to the Closing all documents
required to be delivered under this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF KINGSGATE
Kingsgate represents and warrants to Sky E-Com as follows:
4.01 Organization, Standing and Power. Kingsgate is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware. Kingsgate has the corporate power to own its properties and
to carry on its business as now being conducted and as proposed to be
conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on Kingsgate.
4.02 Authority. Kingsgate has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Kingsgate.
This Agreement has been duly executed and delivered by Kingsgate and
constitutes the valid and binding obligation of Kingsgate enforceable
against Kingsgate in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to creditors' rights
8
generally, and is subject to general principles of equity. The
execution and delivery of this Agreement by Kingsgate does not, and the
consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or
loss of any material benefit under (i) any provision of the articles of
organization or bylaws of Kingsgate as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Kingsgate or
any of its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental
authority or instrumentality ("Governmental Entity") is required by or
with respect to Kingsgate or Kingsgate in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be
required under applicable state securities laws and the securities laws
of any foreign country, (ii) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made,
would not have a Material Adverse Effect on Kingsgate and would not
prevent, or materially alter or delay any of the transactions
contemplated by this Agreement and (iii) subject, as to the enforcement
of remedies, to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors' rights generally,
to general equitable principles and to limitations on the
enforceability of indemnification provisions as applied to certain
types of claims arising hereafter, if any, under the federal securities
laws.
4.03 Litigation. There is no action, suit, proceeding, or investigation
pending or, to its knowledge, currently threatened against Kingsgate
which questions the validity of this Agreement or the right of
Kingsgate to enter into this Agreement or to consummate the
transactions contemplated hereby.
4.04 Financial Statements. The financial statements of Kingsgate ("Kingsgate
Financial Statements") as filed with the Commission are complete and
correct in all material respects and were prepared in accordance with
generally accepted accounting principles, applied on a consistent basis
throughout the periods indicated and with each other. The Kingsgate
Financial Statements accurately set out and describe in all material
respects the financial condition and operating results as of the dates,
and for the periods, indicated therein, subject to normal year-end
adjustments.
4.05 Absence of Certain Changes. Since the date of the Kingsgate Financial
Statements, except as otherwise disclosed in writing, Kingsgate
represents that it has conducted its business in the ordinary course
consistent with past practice and that Kingsgate has been an inactive
company except for the issuance of shares of common stock to its
founding stockholders, filing Registration Statements with the
Commission and conducting the Kingsgate Offering.
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4.06 Absence of Undisclosed Liabilities. Kingsgate has no material
obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided
for in the Kingsgate Financial Statements; (ii) those incurred in the
ordinary course of business and not required to be set forth in the
Kingsgate Financial Statements under generally accepted accounting
principles; (iii) those incurred in the ordinary course of business
since the Kingsgate Financial Statements and consistent with past
practice; and (iv) those incurred in connection with the execution of
this Agreement.
4.07 Taxes. Kingsgate has, or will have prior to the Closing filed all tax
returns required to be filed and has paid all taxes shown thereon to be
due. The Kingsgate Financial Statements will (i) fully accrue all
actual and contingent liabilities for taxes with respect to all periods
through June 30, 2000, and Kingsgate has not or will not incur any tax
liability in excess of the amount reflected on the Kingsgate Financial
Statements with respect to such periods, and (ii) properly accrue in
accordance with generally accepted accounting principles all
liabilities for taxes payable after June 30, 2000 with respect to all
transactions and events occurring on or prior to such date. No material
tax liability since June 30, 2000 has been incurred by Kingsgate.
4.08 Governmental Authorization. Kingsgate has obtained each federal, state,
county, local or foreign governmental consent, license, permit, grant,
or other authorization of a Governmental Entity (i) pursuant to which
it currently operates or holds any interest in any of its properties or
(ii) that is required for its operation, and all of such authorizations
are in full force and effect, except where the failure to obtain or
have any such authorizations could not reasonably be expected to have a
Material Adverse Effect.
4.09 Title to Property. Kingsgate has good and marketable title to all of
its properties, interests in properties and assets, reflected in the
Kingsgate Financial Statements.
4.10 Interested Party Transactions. Kingsgate is not indebted to any
director, officer, employee or agent and no such person is indebted to
Kingsgate.
4.11 Insurance. Kingsgate does not currently carry any insurance.
4.12 Compliance With Laws. To its knowledge, Kingsgate has complied with, is
not in violation of, and has not received any notices of violation with
respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the
ownership or operation of its business, except for such violations or
failures to comply as could not be reasonably expected to have a
Material Adverse Effect.
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4.13 Authorization. This Agreement has been adopted by the Board of
Directors of Kingsgate in resolutions which are in full force and
effect. All acts and conditions required by law on the part of
Kingsgate to authorize the execution and delivery of this Agreement and
the transactions contemplated herein and the performance of all
obligations of Kingsgate hereunder have been duly performed and
obtained, and this Agreement constitutes a valid and legally binding
obligation of Kingsgate, enforceable in accordance with its terms,
subject, as to the enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting
creditors' rights generally, to general equitable principles and to
limitations on the enforceability of indemnification provisions as
applied to certain types of claims arising hereafter, if any, under the
federal securities laws.
4.14 Compliance With Other Instruments. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any violation or default of any
provision of any instrument, judgment, order, writ, decree or contract
to which Kingsgate is a party or by which it is bound, or require any
consent under or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a violation or default
under any such provision.
4.15 Authorized Shares of Common Stock and Warrants. The Kingsgate Shares to
be transferred to Sky E-Com under this Agreement will be free and clear
of any lien, pledge, security interest or other encumbrance and, upon
delivery of the securities at the Closing as provided for in this
Agreement, and assuming Sky E-Com is acquiring the shares in good faith
and without notice of any adverse claim, Sky E-Com Stockholders will
acquire good title thereto, free and clear of any lien, pledge,
security interest or encumbrance (other than restrictions on transfer
arising under applicable securities laws).
4.16 Minute Books. Kingsgate will make available to Sky E-Com a complete and
accurate summary of all meetings of directors and shareholders or
actions by written consent since the time of incorporation, and reflect
all transactions referred to in such minutes accurately in all material
respects.
4.17 Brokers' and Finders' Fees. Kingsgate has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement.
4.18 Representations Complete. None of the representations or warranties
made by Kingsgate, or documents furnished by Kingsgate or pursuant to
this Agreement or any written statement furnished to Kingsgate pursuant
hereto or in connection with the transactions contemplated hereby, when
all such documents are read together in their entirety, contains or
will contain at the Closing any untrue statement of a material fact, or
omits or will omit at the Closing to state any material fact necessary
in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading; provided,
however, that for purposes of this representation, any document
attached hereto as a "Superseding Document" (even if not actually
physically attached hereto) that provides information inconsistent with
or in addition to any other written statement furnished to Kingsgate in
connection with the transaction contemplated hereby, shall be deemed to
supersede any other prior document or written statement furnished to
Sky E-Com with respect to such inconsistent or additional information.
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4.19 Disclosure. Kingsgate has fully provided Sky E-Com with all the
information in its possession that Sky E-Com has requested in
determining whether to enter into this Agreement. Neither this
Agreement nor any document attached to this Agreement nor any
certificate delivered pursuant hereto that, in any such case, has been
or will be provided by or on behalf of Kingsgate contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements made herein or therein not misleading
in light of the circumstances under which they were made.
4.20 Capital Structure. The capitalization of Kingsgate consists of
45,000,000 shares of common stock, par value $.001 each, of which
3,000,000 shares of common stock are issued and outstanding as of the
date of closing and 5,000,000 shares of "blank check" preferred stock,
$.001 par value each of which none are issued. In addition, Kingsgate
has issued 5,000,000 common stock purchase warrants exercisable at
$1.00. There are no other outstanding securities of Kingsgate and no
outstanding commitments to issue any securities.
4.21 Employee Matters. Kingsgate has no employees.
4.22 Delivery of Documents. Kingsgate has delivered or will deliver to Sky
E-Com at or prior to the Closing all documents required to be delivered
under this Agreement.
ARTICLE 5
LEGEND REMOVAL, TRANSFER, CERTAIN SALES, ADDITIONAL SHARES
5.01 Removal of Legend. The restrictive legend shall be removed and
Kingsgate shall issue, or shall cause to be issued, a certificate
without such legend to the holder of any security upon which it is
stamped, and a certificate for a security shall be originally issued
without the legend, if, (a) the resale of such security is registered
under the Securities Act, and (b) such holder provides Kingsgate with
an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions and reasonably
satisfactory to Kingsgate and its counsel (the reasonable cost of which
shall be borne by Kingsgate if neither an effective registration
statement under the Securities Act or Rule 144 is available in
connection with such sale) to the effect that a public sale or transfer
of such security may be made without registration under the Securities
Act pursuant to an exemption from such registration requirements.
5.02 Transfer Agent Instructions. Kingsgate shall instruct its transfer
agent to issue certificates, registered in the name of Kingsgate or its
transferees, for the Kingsgate Shares in such amounts specified from
time to time by Kingsgate or its transferees to exercise of the
Warrants.
ARTICLE 6
ELECTION OF DIRECTORS
6.01 Prior to the Closing, Kingsgate will take all corporate and other
action necessary to establish the size of its Board of Directors at
three members, to accept the resignation of Leslie McGuffin, effective
upon the Closing and to elect, effective upon the Closing, Mark Wheeler
and Steven Lefler to be directors.
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ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The obligations of Kingsgate on the one hand, and Sky E-Com, on the other
hand, to the following conditions on or prior to the Closing:
7.01 Consents and Approvals. The Parties shall have obtained all consents
and approvals of third parties and governmental authorities, if any,
required to consummate the transactions contemplated by this Agreement,
including but not limited to the effectiveness of the Post-Effective
Registration Statement and the Reconfirmation Vote.
7.02 Representations, Warranties and Agreements. All representations and
warranties made herein by Kingsgate and Sky E-Com, shall be true,
accurate and correct in all respects as of the date made and as of the
Closing. Kingsgate and Sky E-Com, shall have performed all obligations
and agreements undertaken by each of them herein to be performed at or
prior to the Closing.
7.03 Certificate. Kingsgate shall have received from Sky E-Com and Sky E-Com
shall have received from Kingsgate, a certificate, dated as of the
Closing and executed by the President or Chief Executive Office and
Secretary of Sky E-Com and Kingsgate, respectively to the effect that
the conditions set forth in Article 3 or Article 4 respectively shall
have been satisfied.
7.04 No Material Adverse Changes. There shall not have occurred any material
adverse change in the financial condition, properties, assets
(including intangible assets), liabilities, business, operations or
results of operations of Sky E-Com.
7.05 No Actions. Consummation of the transactions contemplated by this
Agreement shall not violate any order, decree or judgment of any court
or governmental body having jurisdiction.
7.06 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents
and instruments incident to such transactions shall be in form and
substance reasonably satisfactory to counsel for each of the Parties,
and each such Party (or its counsel) shall have received all such
counterpart originals or certified or other copies of such documents as
it may reasonably request.
7.07 Accuracy of Documents and Information. The copies of all material
instruments, agreements, other documents and written information
delivered to any Party by any other Party or its representatives shall
be complete and correct in all material respects as of the Closing.
7.08 Execution of Agreements. The Parties will have executed the
Registration Rights Agreement and Voting Agreement in the form attached
hereto as Exhibit 2.02.
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ARTICLE 8
INDEMNIFICATION
8.01 Indemnification. Each Party will indemnify and hold harmless the other
Party and its respective officers, directors, agents and employees, and
each person, if any, who controls or may control a Party within the
meaning of the Securities Act from and against any and all losses,
costs, damages, liabilities and expenses arising from claims, demands,
actions, causes of action, including, without limitation, reasonable
legal fees, except for the net of any recoveries under existing
insurance policies, tax benefits received by any Party or its
affiliates as a result of such damages, indemnities from third parties
or in the case of third party claims, by any amount actually recovered
by a Party or its affiliates pursuant to counterclaims made by any of
them directly relating to the facts giving rise to such third party
claims arising out of any misrepresentation or breach of or default in
connection with any of the representations, warranties, covenants and
agreements given or made by Sky E-Com or Kingsgate in this Agreement,
or any exhibit or schedule to this Agreement. Each Party and its
affiliates shall act in good faith and in a commercially reasonable
manner to mitigate any damages they may suffer.
ARTICLE 9
MISCELLANEOUS
9.01 Notices. Any notice given hereunder shall be in writing and shall be
deemed effective upon the earlier of personal delivery (including
personal delivery by facsimile) or the third day after mailing by
certified or registered mail, postage prepaid, as follows:
(a) If to Kingsgate:
Barney Magnusson
950 11th Street
West Vancouver, British Columbia
V7T 2M3
Canada
(b) If to Sky E-Com:
Mark Wheeler
17300 17th Street
Suite J-117
Tustin, California 92680
or to such other address as any Party may have furnished in writing to the other
Party in the manner provided above.
9.02 Entire Agreement; Modifications; Waiver. This Agreement and the
documents and instruments and other agreements specifically referred to
herein constitute the final, exclusive and complete understanding of
the Parties with respect to the subject matter hereof and supersedes
any and all prior agreements, understandings and discussions with
respect thereto. No variation or modification of this Agreement and no
waiver of any provision or condition hereof, or granting of any consent
contemplated hereby, shall be valid unless in writing and signed by the
Party against whom enforcement of any such variation, modification,
waiver or consent is sought. The rights and remedies available to each
Party pursuant to this Agreement and all exhibits hereunder shall be
cumulative.
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9.03 Captions. The captions in this Agreement are for convenience only and
shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
9.04 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an
original copy hereof, but all of which together shall constitute one
agreement.
9.05 Publicity. Except for disclosure required by any law to which either
Party is subject, the timing and content of any announcements, press
releases and public statements to be made concerning the transactions
pursuant to this Agreement shall be determined solely by Kingsgate, in
consultation with Sky E-Com.
9.06 Successors and Assigns. No Party may, without the prior express written
consent of each other Party, assign this Agreement in whole or in part.
This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the Parties.
9.07 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of California without
regard to its principles of conflicts of laws.
9.08 Further Assurances. At the request of any of the Parties, and without
further consideration, the other Parties will execute such documents
and instruments and to do such further acts as may be necessary or
desirable to effectuate the transactions contemplated hereby, required
by law, statute, rule or regulation.
9.09 Confidentiality and Nondisclosure Agreements. All information which
shall have been furnished or disclosed by one Party to the other
pursuant to this Agreement, including without limitation, business,
financial and customer development plans, forecasts, strategies and
information, shall be held in confidence pursuant hereto and shall not
be disclosed to any person other than their respective employees,
directors, legal counsel, accountants or financial advisors, with a
need to have access to such information, and shall not make any use
whatsoever of such information except to evaluate such information
internally. The confidentiality provisions set forth herein shall
survive until two years from the date hereof, unless the Party desiring
to disclose the information can document that (i) such information is
(through no improper action or inaction by such Party or any affiliate,
agent, consultant or employee) generally available to the public, or
(ii) was in its possession or known by it prior to receipt from the
other Party, or (iii) was rightfully disclosed to it by a third party,
or (iv) was independently developed by employees of such Party who have
had no access to such information.
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9.10 Severability. The invalidity or unenforceability of any one or more
phrases, sentences, clauses or provisions of this Agreement shall not
affect the validity or enforceability of the remaining portions of this
Agreement or any part thereof.
IN WITNESS WHEREOF, each Party has executed this Agreement as of the
date first above written.
KINGSGATE ACQUISITION, INC. SKY E-COM, INC.
By: /s/Barney Magnusson By: Mark Wheeler
--------------------- --------------------
Barney Magnusson, Mark Wheeler,
President President
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