EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
by and between
ARIZONA DIVERSIFIED EQUITY, LLC
a Nevada limited liability company
and
DEAN G. CANNON
and
ROSE MARIE CANNON
May 21, 2003
TABLE OF CONTENTS
ARTICLE I REPRESENTATIONS, COVENANTS AND WARRANTIES
OF SELLERS
PAGE
Section 1.1 Title to Express Shares..............................................................1
Section 1.2 Authority; Binding Obligation; No Default............................................2
Section 1.3 Compliance with Other Instruments, etc...............................................2
Section 1.4 Consents.............................................................................2
Section 1.5 Accuracy of Information Furnished....................................................2
ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES OF ADE
Section 2.1 Organization.........................................................................3
Section 2.2 Authority; Binding Obligation; No Default............................................3
Section 2.3 Compliance with Other Instruments, etc...............................................3
Section 2.4 Consents.............................................................................3
Section 2.5 Accuracy of Information Furnished....................................................4
Section 2.6 Securities Warranties................................................................4
ARTICLE III CLOSING
Section 3.1 Purchase of Express Shares...........................................................5
Section 3.2 Closing..............................................................................6
Section 3.3 Closing Events.......................................................................6
Section 3.4 Termination..........................................................................6
ARTICLE IV SPECIAL COVENANTS
Section 4.1 Special Covenants and Representations
Regarding the Express Shares......................................................7
Section 4.2 Third Party Consents.................................................................7
Section 4.3 General Release......................................................................8
Section 4.4 Indemnification of Certain Indemnified Parties.......................................9
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF ADE
Section 5.1 Accuracy of Representations and Compliance with Covenants...........................13
Section 5.2 No Restraints on Transaction........................................................13
Section 5.3 Consents............................................................................13
Section 5.4 Delivery of Certain Documents and Items.............................................13
Section 5.5 Certain Actions of the Company......................................................14
i
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
Section 6.1 Accuracy of Representations and Compliance with Covenants...........................15
Section 6.2 No Restraints on Transaction........................................................15
Section 6.3 Consents............................................................................15
Section 6.4 Delivery of Certain Documents and Items.............................................15
ARTICLE VII MISCELLANEOUS
Section 7.1 Brokers and Finders.................................................................15
Section 7.2 Choice of Law.......................................................................16
Section 7.3 Notices.............................................................................16
Section 7.4 Attorneys' Fees.....................................................................17
Section 7.5 Confidentiality.....................................................................17
Section 7.6 Schedules; Knowledge................................................................17
Section 7.7 Third Party Beneficiaries...........................................................17
Section 7.8 Entire Agreement....................................................................17
Section 7.9 Survival; Termination...............................................................17
Section 7.10 Counterparts; Facsimile Signatures..................................................17
Section 7.11 Amendment or Waiver.................................................................17
Section 7.12 Incorporation of Recitals...........................................................18
Section 7.13 Expenses............................................................................18
Section 7.14 Headings; Context...................................................................18
Section 7.15 Benefit.............................................................................18
Section 7.16 Severability........................................................................18
Section 7.17 Failure of Conditions; Termination..................................................18
Section 7.18 No Strict Construction..............................................................18
Section 7.19 Execution Knowing and Voluntary.....................................................18
Section 7.20 Definitions.........................................................................19
ii
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), is entered into as of
May 21, 2003, by and between Arizona Diversified Equity, LLC, a Nevada limited
liability company ("ADE"), on the one hand, and Dean G. Cannon and Rose Marie
Cannon, each an individual (collectively, the "Sellers").
PREMISES
WHEREAS, this Agreement provides for the transfer and delivery by
Sellers to ADE of the number of shares (the "Express Shares") of the common
stock of Cannon Express, Inc., a Delaware corporation (the "Company"), par value
$0.01 per share (the "Company Common Stock"), set forth in Section 3.1 of this
Agreement, which constitute all of the shares of Company Common Stock
beneficially owned by each of the Sellers, in exchange for the consideration
payable by ADE to Sellers, set forth in Section 3.1 of this Agreement, on the
terms and conditions set forth in this Agreement; and
WHEREAS, the parties intend and believe that it is in their best
interests to enter into this Agreement and the other agreements contemplated
herein.
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived here from, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties hereby agree as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF SELLERS
As an inducement to, and to obtain the reliance of ADE, each of the
Sellers represents and warrants to ADE, as follows:
Section 1.1 TITLE TO EXPRESS SHARES. Each of the Sellers is the owner,
beneficially and of record, of all the Express Shares transferred hereby, free
and clear of all liens and Encumbrances. Each of the Sellers has full power to
transfer the Express Shares hereby to ADE without obtaining the consent or
approval of any other Person. Upon transfer and delivery to ADE of the
certificates for the Express Shares described in Article III of this Agreement,
ADE shall receive good and marketable title to the Express Shares, all of the
Express Shares shall be received by ADE as validly issued, fully paid and
nonassessable, free and clear of all Encumbrances (other than any restrictions
generally imposed by federal, corporate or territorial securities laws or as
otherwise provided for in this Agreement). The Express Shares being transferred
hereby constitute all of the shares of Company Common Stock beneficially owned
by each of the Sellers.
1
Section 1.2 AUTHORITY; BINDING OBLIGATION; NO DEFAULT. Each of the
Sellers has the full power, authority and legal right, and, subject to approval
by the Board of Directors of the Company of the transactions contemplated by
this Agreement, has taken all actions required by law or otherwise to execute
and deliver this Agreement and consummate the transactions herein contemplated.
Each of the Sellers has duly taken all action necessary to authorize the
execution, delivery and performance of this Agreement and the other instruments
and agreements contemplated hereby. Such execution, delivery and performance
does not and will not (a) contravene, conflict with, or result in a violation
of, or give any Person the right to challenge any of the transactions
contemplated hereby or to exercise any remedy or obtain any relief under, any
law, rule, regulation, judgment, order, injunction, decree or ruling of any
court, tribunal, arbitrator or Governmental Authority to which any of the
Sellers, or any of the assets owned or used by any of the Sellers, may be
subject; (b) contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Person the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any license, permit or other
authorization that is held by any of the Sellers or that otherwise relates to
the business of, or any of the assets owned or used by, any of the Sellers; or
(c) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any contract, commitment, agreement, arrangement, plan or
understanding (each, a "Contract") to which any of the Sellers is a party. This
Agreement constitutes the legal, valid and binding obligation of each of the
Sellers, enforceable against each of the Sellers in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 1.3 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the
execution and delivery of this Agreement by any of the Sellers nor compliance by
any of the Sellers with the terms and conditions of this Agreement will: (a)
require any of the Sellers to obtain the consent of any Governmental Authority
or any other Person; (b) constitute a material default under any indenture,
mortgage or deed of trust to which any of the Sellers is a party or by which any
of the Sellers, or his or her properties may be subject; or (c) cause the
creation or imposition of any Encumbrance on any of the assets of any of the
Sellers.
Section 1.4 CONSENTS. No consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority or any
third party is required to be made or obtained by any of the Sellers in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
Section 1.5 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by any of the Sellers contained in this Agreement or in respect of the
exhibits, schedules or documents delivered to ADE by either of the Sellers and
expressly referred to herein, and no statement contained in any certificate
furnished or to be furnished by or on behalf of any of the Sellers pursuant
hereto, or in connection with the transactions contemplated hereby, contains, or
will contain as of the date such representation or warranty is made or such
certificate is or will be furnished, and as of the Closing Date, any untrue
statement of a material fact, or omits, or will omit to state as of the date
such representation or warranty is made or such certificate is or will be
2
furnished, any material fact which is necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading. True and correct copies of each agreement and other document
referred to in the schedules hereto have been furnished by each of the Sellers
to ADE.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF ADE
As an inducement to, and to obtain the reliance of the Sellers, ADE
represents and warrants to each of the Sellers, as follows:
Section 2.1 ORGANIZATION. ADE is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation.
Section 2.2 AUTHORITY; BINDING OBLIGATION; NO DEFAULT. ADE has the full
power, authority and legal right, and has taken all actions required by law, its
articles of organization, bylaws or otherwise to execute and deliver this
Agreement and consummate the transactions herein contemplated. ADE has duly
taken all action necessary to authorize the execution, delivery and performance
of this Agreement and the other instruments and agreements contemplated hereby.
Such execution, delivery and performance does not and will not (a) contravene,
conflict with, or result in a violation of, or give any Person the right to
challenge any of the transactions contemplated hereby or to exercise any remedy
or obtain any relief under, any law, rule, regulation, judgment, order,
injunction, decree or ruling of any court, tribunal, arbitrator or Governmental
Authority to which ADE, or any of its assets, may be subject; (b) contravene,
conflict with, or result in a violation of any of the terms or requirements of,
or give any Person the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any license, permit or other authorization that is held by ADE or that
otherwise relates to the business of, or any of the assets owned or used by,
ADE; or (c) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract to which ADE is a party. This Agreement
constitutes the legal, valid and binding obligation of ADE, enforceable against
ADE in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and similar laws relating
to or affecting creditors generally or by general equity principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
Section 2.3 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the
execution and delivery of this Agreement by ADE nor compliance by ADE with the
terms and conditions of this Agreement will: (a) require ADE to obtain the
consent of any Governmental Authority or any other Person; (b) constitute a
material default under any indenture, mortgage or deed of trust to which ADE is
a party or by which it, or any of its properties may be subject; or (c) cause
the creation or imposition of any Encumbrance on any of ADE's assets.
Section 2.4 CONSENTS. No consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Authority or any
third party is required to be made or obtained by ADE in connection with the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
3
Section 2.5 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by ADE contained in this Agreement or in respect of the exhibits,
schedules or documents delivered to Sellers by ADE and expressly referred to
herein, and no statement contained in any certificate furnished or to be
furnished by or on behalf of ADE pursuant hereto, or in connection with the
transactions contemplated hereby, contains, or will contain as of the date such
representation or warranty is made or such certificate is or will be furnished,
and as of the Closing Date, any untrue statement of a material fact, or omits,
or will omit to state as of the date such representation or warranty is made or
such certificate is or will be furnished, any material fact which is necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
Section 2.6 SECURITIES WARRANTIES. With respect to the Express Shares
to be transferred and delivered by Sellers to ADE pursuant to Section 3.1
hereof, ADE represents and warrants to each of the Sellers that:
(a) The Express Shares are being acquired for the account of ADE and
not with a view to sale in connection with any distribution of the Express
Shares;
(b) ADE is acquiring the Express Shares hereunder without having
received any form of general solicitation or general advertising;
(c) ADE has been provided with, or given reasonable access to, full and
fair disclosure of all material information concerning the Company;
(d) ADE has a preexisting personal or business relationship with the
Company or certain of its officers, directors or controlling Persons, or by
reason of its business or financial experience, ADE could reasonably be assumed
to have the capacity to represent its own interests in connection with this
Agreement;
(e) ADE understands and hereby acknowledges that the Express Shares
will be transferred pursuant only to those restrictions imposed by and
exemptions available pursuant to applicable federal and state laws and that the
certificates to be issued in respect of the Express Shares may bear a legend in
a form satisfactory to the Company;
(f) ADE agrees that the certificates to be transferred in respect of
the Express Shares will bear a legend in a form satisfactory to the Company
reflecting the status of the Express Shares as restricted securities under Rule
144(a)(3) promulgated under the Securities Act and acknowledges that the
transfer agent or registrar for the Company may be instructed to restrict the
transfer of the Express Shares in accordance with such legend and any other
restrictions provided in this Agreement;
(g) ADE hereby agrees that it will not sell, transfer, hypothecate,
pledge, assign or otherwise dispose of any of the Express Shares, except
pursuant to the terms of this Agreement and to a registration statement filed
4
under the provisions of the Securities Act, a favorable no-action or
interpretive Person received from the Commission or an opinion of counsel that
such sale, transfer, hypothecation, pledge, assignment or other disposition will
not violate the registration requirements of the Securities Act;
(h) ADE hereby acknowledges that: (i) the Express Shares referred to
herein are being acquired after adequate investigation of the business plan and
prospects of the Company; (ii) that ADE is not relying upon the accuracy of any
predictions as to the future prospects or developments of the Company or its
business and is well informed as to the business of the Company and has reviewed
its operations and financial statements; (iii) ADE has discussed the financial
condition and business operations of the Company with the officers, directors
and principal stockholders of the Company and has been afforded the opportunity
to ask questions with respect thereto; and (iv) there can be no assurance that
the Company will achieve its business objectives; and
(i) ADE has such experience in business and financial matters that it
is capable of evaluating the merits and risks of an investment in the
securities. ADE acknowledges that the securities are speculative and involve a
high degree of risk, including the potential loss of ADE's investment herein and
ADE has taken cognizance of and understands the risk factors related to the
purchase of the securities.
ARTICLE III
CLOSING
Section 3.1 PURCHASE OF EXPRESS SHARES.
(a) Upon the terms and subject to the conditions contained herein, and
simultaneously at the Closing (defined in Section 3.2 below):
(i) the Sellers shall transfer and deliver an aggregate of
1,934,486 shares of Company Common Stock (the "Express Shares") to ADE; and
(ii) ADE shall deliver to the Sellers by check or wire
transfer good funds in the amount of $100,000. The payment of the amount by ADE
to the Sellers set forth in this Section 3.1(a)(ii) shall constitute payment in
full for the Express Shares.
(b) In addition to the obligations set forth in Section 3.1(a)(ii), as
additional consideration for the terms and conditions of this Agreement, but not
as additional purchase price attributable to the purchase of the Express Shares,
and subject to the terms and conditions of this Section 3.1(b), Dean G. Cannon
agrees to serve as a personal consultant to ADE with respect to the prospective
operations of the Company following the Closing. Dean G. Cannon shall only be
obligated to provide consulting services to ADE, from time, as reasonably
requested by ADE. Under the terms of this Section 3.1(b), ADE shall pay to the
Sellers, an amount up to and not to exceed the aggregate amount of $1,000,000.
ADE shall only be obligated to pay to Sellers, at any time and from time to time
following the Closing, an amount equal to 10% of the net profits before taxes of
the Company, as reflected on the consolidated financial statements of the
5
Company and its Subsidiaries, as audited by the Company's independent public
accountants, for each fiscal year following the Closing and commencing with the
fiscal year ending September 30, 2003, until such time that ADE shall have paid
to the Sellers the aggregate amount of $1,000,000, after which time the
obligations created under this Section 3.1(b) shall terminate. The amount of
such obligation shall be payable by ADE to Sellers within 90 days after the
publication of such audited consolidated financial statements. Notwithstanding
the foregoing, the operations of the Company to be included in such audited
consolidated financial statements shall exclude the operations of any Subsidiary
of the Company acquired by the Company after the Closing Date.
(c) Simultaneously with the execution and delivery of this Agreement,
each of the Sellers shall deliver to ADE certificates or other documents
evidencing ownership of the Express Shares to be transferred hereby, duly
endorsed in blank for transfer or accompanied by appropriate stock power duly
executed in blank, with medallion guaranteed signatures. ADE shall hold such
certificates without further action, until the Closing. Sellers shall remain the
beneficial and record owner of the tendered Express Shares and ADE shall not
become the beneficial and record owner of the Express Shares until the Closing.
Each of the Sellers hereby irrevocably constitutes and appoints ADE as attorney
to transfer the Express Shares tendered hereby (as evidenced by the tendered
stock certificates) on the books of the Company with full power of substitution
in the premises.
Section 3.2 CLOSING. Subject to the terms and conditions of this
Agreement, the closing ("Closing") of the transactions contemplated by this
Agreement shall occur on May 21, 2003, or such other date as the parties may
agree (the "Closing Date") at the offices of Luce, Forward, Hamilton & Scripps
LLP, 11755 Wilshire Boulevard, Suite 1600, Los Angeles, California 90025.
Notwithstanding anything to the contrary herein, in the event that the Closing
shall not occur on or Before May 31, 2003, this Agreement shall terminate and,
no obligation, right or liability shall arise hereunder, and each party shall
bear all of the expenses incurred by it in connection with the negotiation,
drafting and execution of this Agreement and the transactions herein
contemplated.
Section 3.3 CLOSING EVENTS. At the Closing, each of the respective
parties hereto shall execute, acknowledge and deliver (or shall cause to be
executed, acknowledged and delivered) any and all certificates, schedules,
agreements, resolutions, rulings, or other instruments required by this
Agreement to be so delivered at or prior to the Closing, together with such
other items as may be reasonably requested by the parties hereto and their
respective legal counsel in order to effectuate or evidence the transactions
contemplated hereby. However, in no event shall the Closing occur without the
satisfaction or waiver of the conditions set forth in Articles V and VI of this
Agreement.
Section 3.4 TERMINATION.
(a) This Agreement may be terminated by ADE or the Sellers at any time
prior to the Closing Date if:
6
(i) there shall be any actual or threatened action or
proceeding before any court or any Governmental Authority which shall seek to
restrain, prohibit or invalidate the transactions contemplated by this Agreement
and which, in the judgment of ADE or the Sellers, as the case may be, made in
good faith and based on the advice of their legal counsel, makes it inadvisable
to proceed with the transactions contemplated by this Agreement; or
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is required to consummate
such transactions or in the judgment of ADE or the Sellers, as the case may be,
made in good faith and based on the advice of counsel, there is substantial
likelihood that any such approval will not be obtained or will be obtained only
on a condition or conditions which would be unduly burdensome, making it
inadvisable to proceed with the merger and consolidation.
In the event of termination pursuant to this paragraph (a) of Section
3.4, no obligation, right or liability shall arise hereunder, and each party
shall bear all of the expenses incurred by it in connection with the
negotiation, drafting and execution of this Agreement and the transactions
herein contemplated.
(b) This Agreement may be terminated at any time prior to the Closing
Date by action of ADE, if any of the Sellers shall fail to comply in any
material respect with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of either of Sellers
contained herein shall be inaccurate in any material respect. If this Agreement
is terminated pursuant to this paragraph (b) of Section 3.4, this Agreement
shall be of no further force or effect, and no obligation, right or liability
shall arise hereunder.
(c) This Agreement may be terminated at any time prior to the Closing
Date by Sellers if ADE shall fail to comply in any material respect with any of
its covenants or agreements contained in this Agreement or if any of the
representations or warranties of ADE contained herein shall be inaccurate in any
material respect. If this Agreement is terminated pursuant to this paragraph (c)
of Section 3.4, this Agreement shall be of no further force or effect and no
obligation, right or liability shall arise hereunder.
ARTICLE IV
SPECIAL COVENANTS
Section 4.1 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE EXPRESS
SHARES. The consummation of this Agreement and the transactions herein
contemplated, including the transfer and delivery of the Express Shares to ADE,
as contemplated hereby, constitutes the offer and sale of securities under the
Securities Act, and applicable state statutes. Such transaction shall be
consummated in reliance on exemptions from the registration and prospectus
delivery requirements of such statutes, which depend, INTER ALIA, upon the
circumstances under which ADE acquires such securities.
Section 4.2 THIRD PARTY CONSENTS. ADE and Sellers agree to cooperate
with each other in order to obtain any required third party consents to this
Agreement and the transactions herein and therein contemplated.
7
Section 4.3 GENERAL RELEASE.
(a) In consideration of the terms and conditions of this Agreement, and
subject to the Closing, each of the Sellers, on their own behalf, and on behalf
of each of their spouses, agents, successors, assigns, heirs, legatees and
representatives, hereby fully and forever releases and discharges each of ADE
and the Company, and, each of their parents, subsidiaries, directors, officers,
stockholders, members, partners, attorneys, accountants, employees, agents,
successors, assigns, heirs, legatees, nominees and representatives (the
"Released Parties"), and each of them, of and from all manner of actions, causes
of action, claims, demands, costs, damages, liabilities, losses, obligations,
expenses and compensation of any nature whatsoever in law or in equity, known
and unknown, including, but not limited to, those asserted or which could have
been asserted against each other with respect to all claims, disputes and
differences between them, including, but not limited to, those asserted or which
could have been asserted in connection with the Express Shares, other than the
executory obligations of ADE to Sellers expressly created under Sections 3.1(b)
and 4.4 of this Agreement and the Other Indemnification Obligations, as such
term is defined in Section 4.4(d) (the "Released Claims").
(b) This Agreement and the General Release set forth in Section 4.3
hereof, are and shall be, releases of all claims, whether known or unknown. Each
of the Sellers acknowledges that he or she may hereafter discover facts in
addition to or different from those which he or she now believes to be true with
respect to the subject matter of the disputes and other matters herein released,
but agree that the releases herein given shall be and remain in effect as full
and complete general releases notwithstanding the discovery or existence of any
such additional or different facts, of which either Seller expressly assumes the
risk, except as expressly represented and warranted herein
(c) It is understood and agreed that this Agreement constitutes a
compromise of disputed claims, and that neither this Agreement nor any
consideration given hereunder, concurrently herewith, or pursuant hereto, is to
be advocated or construed as an admission of any liability on the part of any
party hereto.
(d) Each of the Sellers hereto acknowledges and represents that each
such Seller: (i) has fully and carefully read this Agreement prior to execution,
(ii) has been, or has had the opportunity to be, fully apprised by each such
Seller's attorneys of the legal effect and meaning of this document and all the
terms and conditions hereof, (iii) has had the opportunity to make whatever
investigation or inquiry deemed necessary or appropriate in connection with the
subject matter of this Agreement, (iv) has been afforded the opportunity to
negotiate as to any and all terms hereof, and (v) is executing this Agreement as
a free and voluntary act.
(e) This Agreement and the General Release set forth in this Section
4.3 hereof, is and shall be, a release of all claims, whether known or unknown,
and each of Sellers hereby releases all rights reserved to each of the Sellers
by ss.1542 of the Civil Code of the State of California, and all other similar
statutes of any jurisdiction that might apply hereto, which reads as follows:
8
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
In waiving the provisions of ss. 1542 of the Civil Code, each of the Sellers
acknowledges that each such Seller may hereafter discover facts in addition to
or different from those which such Seller now believes to be true with respect
to the subject matter of the disputes and other matters herein released, but
agrees that the release herein given shall be and remain in effect as a full and
complete general release notwithstanding the discovery or existence of any such
additional or different facts, of which each of the Sellers expressly assumes
the risk.
Section 4.4 INDEMNIFICATION OF CERTAIN INDEMNIFIED PARTIES.
(a) In the event and only in the event that the Company shall not have
in effect a directors' and officers' liability insurance policy or tail
coverage, for the members of the Board of Directors of the Company in office
immediately prior to the Closing and who shall have resigned from such offices
in accordance with Section 5.5(c) hereof, with coverage no less than that
provided by the Company, as of the date of this Agreement, for a period of at
least one year following the Closing, ADE will indemnify and hold Sellers and
such other members of the Board of Directors of the Company (the "Indemnified
Parties") harmless from any and all liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all court costs and
attorneys' fees (collectively, "Losses"), that any of the Indemnified Parties,
may suffer or incur solely as a result of or relating to the Closing of the
transactions contemplated by this Agreement.
(b) Any party entitled to receive indemnification under this Section
4.4 (the "Indemnified Party") agrees to give prompt written notice (a "Claim
Notice") to the party or parties required to provide such indemnification (the
"Indemnifying Parties") upon the discovery of the occurrence of any
indemnifiable Loss or the assertion of any claim or the commencement of any
action or proceeding in respect of which such a Loss may reasonably be expected
to occur (such a claim, action or proceeding being referred to as a "Claim"),
but the Indemnified Party's failure to give such notice will not affect the
obligations of the Indemnifying Party under this Section 4.4 except to the
extent that the Indemnifying Party is prejudiced thereby.
(c) The Indemnifying Party may elect to assume and control the defense
of any Claim, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of expenses related thereto, if (i) the
Indemnifying Party acknowledges its obligation to indemnify the Indemnified
Party for any Losses resulting from such Claim and provides reasonable evidence
to the Indemnified Party of its financial ability to satisfy such obligation,
and (ii) the Claim does not seek to impose any material liability or obligation
on the Indemnified Party other than for money damages. If such conditions are
satisfied and the Indemnifying Party elects to assume and control the defense of
a Claim, then (A) the Indemnifying Party will not be liable for any settlement
of such Claim effected without its consent, which consent will not be
unreasonably withheld; (B) the Indemnifying Party may not settle such Claim
without the consent of the Indemnified Party (not to be unreasonably withheld)
9
unless such settlement includes a full and unconditional release of the
Indemnified Party; and (C) the Indemnified Party may employ separate counsel and
participate in the defense thereof, but the Indemnified Party will be
responsible for the fees and expenses of such counsel unless (I) the
Indemnifying Party has failed to assume the defense of such Claim or to employ
counsel with respect thereto or (II) a conflict of interest exists between the
interests of the Indemnified Party and the Indemnifying Party that requires
representation by separate counsel, in which case the fees and expenses of such
separate counsel will be paid by the Indemnifying Party. If such conditions are
not satisfied, the Indemnified Party may assume and control the defense of the
Claim at the expense of the Indemnifying Party; provided that the Indemnified
Party may not settle any such Claim without the consent of the Indemnifying
Party (not to be unreasonably withheld) unless such settlement includes a full
and unconditional release of the Indemnifying Party; and further provided that
the Indemnifying Party may participate in such defense (at the Indemnifying
Party's expense).
(d) Notwithstanding anything to the contrary herein, the provision for
indemnification contained in this Section 4.4 shall only be effective after and
to the extent that valid and enforceable Claims exceed amounts paid or payable
by the Company under the indemnification provisions of any Contract, the
certificate of incorporation or bylaws of the Company or applicable law or
otherwise, by any Person other than ADE or its Affiliates, or by any Person
under any policy of insurance for the benefit of the Indemnified Parties or any
of them (the "Other Indemnification Obligations"), it being understood by the
parties that the Indemnified Parties shall have exhausted all other means
available to them to recover from alternative sources in order to satisfy any
obligations created by any Losses before seeking indemnification from ADE
hereunder.
(e) Notwithstanding anything to the contrary herein, ADE shall have no
liability to the Indemnified Parties or any of them hereunder in the event that
any of the Losses shall result from or relate to in any respect to: (i) the
inaccuracy in or breach of any representation, warranty, covenant or agreement
of Sellers or any of them contained in this Agreement, (ii) any violation of
federal or state securities laws by Sellers or any of them, (iii) the
intentional conduct or gross negligence of Sellers or any of them, or (iv) or
the acts or omissions of Sellers or any of them prior to or following the
Closing.
(f) Notwithstanding anything to the contrary herein, ADE shall have no
liability to the Indemnified Parties or any of them hereunder in the event that
any of the following statements shall not be true both as of the date of this
Agreement and the Closing Date:
(i) The Company has filed all registration statements, proxy
statements, information statements, prospectuses, reports, schedules, forms and
other documents required to be filed by it with the Commission, since September
1, 2002, under the Securities Act or the Exchange Act (all of the foregoing
filed prior to the date hereof, and all exhibits included therein and financial
statements and schedules thereto and documents, other than exhibits to such
documents, incorporated by reference therein, being referred to herein as the
"Company SEC Documents"). No Subsidiary of the Company is required to file any
registration statement, proxy statement, information statement, prospectus,
report, schedule, form or other document with the Commission. All of the Company
SEC Documents, as of their respective dates of filing (or if amended or
10
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (A) complied in all material respects as to form with the
applicable requirements of the Securities Act or Exchange Act, as the case may
be, and (B) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(ii) The consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
(including the related notes thereto) of the Company and its Subsidiaries
included in the Company SEC Documents (collectively, the "Company Financial
Statements") complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, fairly presented the consolidated financial
position and the consolidated results of operations and the changes in
stockholders' equity and cash flows for the Company and its Subsidiaries as of
their respective dates and for the respective periods covered thereby and have
been prepared in accordance with GAAP consistently applied during the periods
involved, (except as otherwise noted therein, or, in the case of unaudited
interim financial statements, as may be permitted by the Commission).
(iii) Except as set forth in the Company Financial Statements
and the Company SEC Documents, neither the Company nor any of its Subsidiaries
had at the date of the most recent balance sheet included in the Company
Financial Statements (the "Recent Company Balance Sheet Date") or has incurred
since the Recent Company Balance Sheet Date, any material liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise), except
liabilities, obligations or contingencies which: (A) are accrued or reserved
against in the Company Financial Statements or that would not be required to be
disclosed on a consolidated balance sheet of the Company and its Subsidiaries or
the footnotes thereto prepared in conformity with GAAP, or (B) were incurred
after the Recent Company Balance Sheet Date in the ordinary course of business
of the Company and its Subsidiaries and consistent with past practice and which,
in any event, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on the Company.
(iv) Except as set forth in the Company SEC Documents, each of
the Company and its Subsidiaries has good and marketable title to and is the
sole and exclusive owner of all of the properties and assets, inventory,
interests in properties and assets, real and personal, which are reflected in
the most recent Company Financial Statements or acquired after the Recent
Company Balance Sheet Date (except properties, interests in properties and
assets sold or otherwise disposed of since such date in the ordinary course of
business), or in the case of leased properties and assets, valid leasehold
interests in (collectively, "Company Assets"), free and clear of all
Encumbrances, except: (A) statutory liens or claims not yet delinquent, and (B)
such imperfections of title and easements as do not and will not, materially
detract from or interfere with the present or proposed use of the properties
subject thereto or affected thereby or otherwise materially impair present
business operations on such properties.
(v) Except as set forth in the Company SEC Documents filed
prior to the date of this Agreement, since the Recent Company Balance Sheet
Date, each of the Company and its Subsidiaries has conducted its business only
11
in the ordinary course and in a manner consistent with past practice and, since
the Recent Company Balance Sheet Date, other than in the ordinary course of
business, there has not occurred: (A) any change, event or condition that has
resulted in, or might be reasonably expected to result in, a Material Adverse
Effect to the Company; or (B) any change in any accounting methods or practices
by the Company or any reevaluation by the Company of the Company Assets.
(vi) The authorized capitalization of the Company consists of
10,000,000 shares of Company Common Stock, of which 3,205,276 shares (and 60,125
treasury shares) of Company Common Stock were issued and outstanding.
(vii) Except as set forth in the Company SEC Documents: (A)
There are no: (I) outstanding securities convertible into or exchangeable for
any capital stock of the Company or any of its Subsidiaries; (II) outstanding
options, warrants, calls or other rights, to purchase or subscribe to capital
stock of the Company or any of its Subsidiaries or securities convertible into
or exchangeable for capital stock of the Company or any of its Subsidiaries; or
(III) Contracts relating to the issuance, sale or transfer of any equity or
other security of the Company or any of its Subsidiaries, other than this
Agreement, and (B) neither the Company nor any of its Subsidiaries is a party to
any voting trust agreement or other Contract restricting or otherwise relating
to voting or dividend rights with respect to the Company Common Stock or the
capital stock of any of its Subsidiaries.
(viii) The Company and each of its Subsidiaries is: (A) a
corporation or other organization duly organized, validly existing and in good
standing under the laws of the jurisdiction of its respective incorporation or
organization and has the requisite power and authority to own, lease and operate
its properties and assets and to carry on its business in all material respects
as now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power and authority, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company, and (B) duly authorized, qualified, franchised and licensed in each
jurisdiction in which the nature or location of its business or the ownership or
leasing of its properties and assets or the character and location of the assets
owned or leased by it makes such authorization, qualification, franchising and
licensing necessary, except where the failure to be so authorized, qualified,
franchised or licensed, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the Company.
(ix) All of the outstanding shares of capital stock of each
Subsidiary of the Company were duly authorized and validly issued, and are fully
paid and nonassessable, and are owned, beneficially and of record, directly or
indirectly, by the Company, free and clear of all Encumbrances
PROVIDED, HOWEVER, in any event, that the indemnification obligations of ADE to
the Indemnified Parties pursuant to this Section 4.4 shall be limited to and in
no event shall exceed a maximum aggregate amount of $200,000 of Losses for all
of the Indemnified parties as a group.
12
(g) The indemnification rights of the Indemnified Parties hereunder
shall not be assignable or transferable to any Person and no Person shall have a
right of subrogation against ADE with respect to the indemnification rights of
the Indemnified Parties hereunder.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
OF ADE
The obligations of ADE under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.1 ACCURACY OF REPRESENTATIONS AND COMPLIANCE WITH COVENANTS.
The representations and warranties made by each of the Sellers in this Agreement
were true when made and shall be true at the Closing Date with the same force
and effect as if such representations and warranties were made as of the date of
this Agreement (except for changes therein permitted by this Agreement), and
each of the Sellers shall have performed or complied with all covenants and
conditions required by this Agreement to be performed or complied with by each
of the Sellers prior to or at the Closing.
Section 5.2 NO RESTRAINTS ON TRANSACTION. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect, nor shall any proceeding brought by any Governmental
Authority seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transactions contemplated by this Agreement, which
makes the consummation of such transactions illegal. In the event an injunction,
order or other restraint or prohibition shall have been issued or imposed, each
party agrees to use its commercially reasonable efforts to have such injunction,
order or other restraint or prohibition lifted.
Section 5.3 CONSENTS. Each of Sellers shall have timely obtained all
approvals, waivers and consents, if any, necessary for the consummation of or in
connection with the Closing and the transactions contemplated hereby and ADE
shall have been furnished with evidence satisfactory to it of the consent or
approval of those Persons whose consent or approval shall be required in
connection with the Closing or otherwise required to consummate the transactions
contemplated by this Agreement.
Section 5.4 DELIVERY OF CERTAIN DOCUMENTS AND ITEMS. At the Closing,
each of the Sellers shall have satisfied the following:
(a) Each of the Sellers shall have delivered certificates for the
Express Shares to ADE in accordance with Section 3.1 hereof;
(b) Each of the Sellers shall have delivered to ADE all of the exhibits
and schedules referenced in this Agreement to be delivered by the Sellers to
ADE; and
(c) Each of the Sellers shall have executed and delivered this
Agreement.
13
Section 5.5 CERTAIN ACTIONS OF THE COMPANY.
(a) At or before to the Closing, the Board of Directors of the Company
in office immediately prior to the Closing, shall have approved the transactions
contemplated by this Agreement to the effect that, following the Closing, the
restrictions on "business combinations" with "interested stockholders" set forth
in Section 203 of the Delaware General Corporation Law shall not be applicable
to ADE and its Affiliates.
(b) At or before to the Closing, the Company and CFOex, Inc. ("CFO")
shall have renegotiated the terms and conditions of all Contracts between the
Company and CFO and its Affiliates, as reflected in a Schedule 13D filed by CFO
with the Commission, and as such Contracts have been amended to the date of this
Agreement, to the satisfaction of ADE, in the sole and absolute discretion of
ADE.
(c) At the Closing, the Board of Directors of the Company in office
immediately prior to the Closing, shall have resigned from each of their
respective offices and the Persons designated by ADE (the "ADE Board Designees")
shall have been appointed, to become effective in connection with and following
the Closing, to fill the vacancies on the Board of Directors of the Company
created by the resignations of such resigning members of the Board of Directors
to the effect that, following the Closing, such replacement members of the Board
of Directors shall be deemed to be "Continuing Directors" for purposes of
Article SEVENTH of the Certificate of Incorporation of the Company.
(d) At or before the Closing, the Company shall not have experienced a
Material Adverse Effect to the Company since the Recent Company Balance Sheet
Date and shall not have entered into any Contracts with any other Person
concerning any sale of substantially all of the assets or stock (including any
option or other right to purchase all or substantially all of the assets or
stock) of either of the Company or any of its Subsidiaries, or any merger,
reorganization, consolidation, exchange or similar transaction involving the
Company or any of its Subsidiaries, or the creation of any other right or
interest in favor of any other Person that would conflict with the transactions
described herein.
(e) At the Closing, ADE shall have received a certificate, dated as of
the Closing Date, executed by the Chief Executive Officer of the Company,
substantially in the form of EXHIBIT 5.5(E) hereto.
(f) At or before the Closing, the Company shall have obtained a binding
commitment for the issuance of a directors and officers liability insurance
policy providing coverage to the ADE Board Designees in an amount, for a period
and at a premium price to the satisfaction of ADE, in the sole and absolute
discretion of ADE.
14
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligations of the Sellers under this Agreement are
subject to the satisfaction, at or before the Closing Date, of the following
conditions:
Section 6.1 ACCURACY OF REPRESENTATIONS AND COMPLIANCE WITH COVENANTS.
The representations and warranties made by ADE in this Agreement were true when
made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the date of this
Agreement, and ADE shall have performed and complied with all covenants and
conditions required by this Agreement to be performed or complied with by ADE
prior to or at the Closing.
Section 6.2 NO RESTRAINTS ON TRANSACTION. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect, nor shall any proceeding brought by any Governmental
Authority seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transactions contemplated by this Agreement, which
makes the consummation of such transactions illegal. In the event an injunction,
order or other restraint or prohibition shall have been issued or imposed, each
party agrees to use its commercially reasonable efforts to have such injunction,
order or other restraint or prohibition lifted.
Section 6.3 CONSENTS. ADE shall have timely obtained all approvals,
waivers and consents, if any, necessary for the consummation of or in connection
with the Closing and the transactions contemplated hereby and Sellers shall have
been furnished with evidence satisfactory to it of the consent or approval of
those Persons whose consent or approval shall be required in connection with the
Closing or otherwise required to consummate the transactions contemplated by
this Agreement.
Section 6.4 DELIVERY OF CERTAIN DOCUMENTS AND ITEMS. At the Closing,
ADE shall have satisfied the following:
(a) ADE shall have delivered payment of $100,000 for the Express Shares
to the Sellers in accordance with Section 3.1 hereof; and
(b) ADE shall have executed and delivered this Agreement.
ARTICLE VII
MISCELLANEOUS
Section 7.1 BROKERS AND FINDERS. Neither ADE nor the Sellers, nor any
of their respective officers, directors, agents or employees has employed any
investment banker, broker or finder, or incurred any liability on behalf of ADE
or the Sellers, as the case may be, for any brokerage fees, commissions or
finders' fees, in connection with the transactions contemplated by this
Agreement. The parties each agree to indemnify the other against any other claim
15
by any third Person for any commission, brokerage or finder's fee or other
payment with respect to this Agreement or the transactions contemplated hereby
based on any alleged agreement or understanding between the indemnifying party
and such third Person, whether express or implied from the actions of the
indemnifying party.
Section 7.2 CHOICE OF LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the substantive laws of the State
of California, without giving effect to any conflicts of law rule or principle
that might require the application of the laws of another jurisdiction. Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the
state or federal courts of the State of California and to venue in the courts of
the county of Los Angeles, California in any such action, suit or proceeding,
and agrees that any such action, suit or proceeding shall be brought only in
such court (and waives any objection based on FORUM NON CONVENIENS or any other
objection to venue therein); PROVIDED, HOWEVER, that such consent to
jurisdiction is solely for the purpose referred to in this Section 7.2 and shall
not be deemed to be a general submission to the jurisdiction of said courts or
in the State of California other than for such purpose.
Section 7.3 NOTICES. All notices that are required or may be given
pursuant to this Agreement must be in writing and delivered personally, by a
recognized courier service, by a recognized overnight delivery service, by
telecopy or by registered or certified mail, postage prepaid, to the parties at
the following addresses (or to the attention of such other Person or such other
address as any party may provide to the other parties by notice in accordance
with this Section 7.3):
If to ADE, to: Arizona Diversified Equity, LLC
765 The Camelback Esplanade
2525 East Camelback Road
Phoenix, Arizona 85016
Attn: John W. Pacheco, President
Telephone no. (602) 381-6660
Facsimile no. (602) 381-6661
With copies to: Luce, Forward, Hamilton & Scripps LLP
11755 Wilshire Boulevard, Suite 1600
Los Angeles, California 90025
Attn: Jeffrey P. Berg, Esq.
Telephone no. (310) 481-5200
Facsimile no. (310) (310) 481-5206
If to Sellers, to Dean G. Cannon
Rose Marie Cannon
1457 Robinson Street
Springdale, Arkansas 72765
Telephone no. (479) 283-3249
Telephone no. (479) 750-3249
16
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed or telegraphed.
Section 7.4 ATTORNEYS' FEES. In the event that any party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the non-prevailing party or parties shall reimburse
the prevailing party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein (including any appeal therefrom).
Section 7.5 CONFIDENTIALITY. Each party hereto agrees with the
other parties that, until the Closing Date, they and their representatives will
hold in strict confidence all data and information obtained with respect to
another party or any subsidiary thereof from any representative, officer,
director or employee, or from any books or records or from personal inspection,
of such other party, and shall not use such data or information or disclose the
same to others, except: (a) to the extent such data is a matter of public
knowledge or is required by law to be published; and (b) to the extent that such
data or information must be used or disclosed in order to consummate the
transactions contemplated by this Agreement.
Section 7.6 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 7.7 THIRD PARTY BENEFICIARIES. This Agreement is solely among
ADE and the Sellers and as otherwise as specifically provided no other director,
officer, or other stockholder, employee, agent, independent contractor or any
other Person shall be deemed to be a third party beneficiary of this Agreement.
Section 7.8 ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof. This
Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations or warranties, written or oral,
except as set forth herein.
Section 7.9 SURVIVAL; TERMINATION. The representations, warranties and
covenants of the respective parties shall survive the consummation of the
transactions herein contemplated until the executory provisions of this
Agreement shall be completed.
Section 7.10 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original and
all of which taken together shall be but a single instrument. The parties
hereto, and their respective successors and assigns, are hereby authorized to
rely upon the signature of each Person on this Agreement, which are delivered by
facsimile, as constituting a duly authorized, irrevocable, actual, current
delivery of this Agreement with original ink signatures of each such Person.
Section 7.11 AMENDMENT OR WAIVER. Every right and remedy provided
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
17
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended. This Agreement may not be amended or modified, except by a written
agreement signed by all parties hereto.
Section 7.12 INCORPORATION OF RECITALS. All of the recitals hereof are
incorporated by this reference and are made a part hereof as though set forth at
length herein.
Section 7.13 EXPENSES. Each of the parties to this Agreement shall bear
all of its own expenses incurred by it in connection with the negotiation of
this Agreement and in the consummation of the transactions provided for herein
and the preparation therefor.
Section 7.14 HEADINGS; CONTEXT. The headings of the sections and
paragraphs contained in this Agreement are for convenience of reference only and
do not form a part hereof and in no way modify, interpret or construe the
meaning of this Agreement.
Section 7.15 BENEFIT. This Agreement shall be binding upon and shall
inure only to the benefit of the parties hereto, and their permitted assigns
hereunder. This Agreement shall not be assigned by any party without the prior
written consent of the other party.
Section 7.16 SEVERABILITY. In the event that any particular provision
or provisions of this Agreement or the other agreements contained herein shall
for any reason hereafter be determined to be unenforceable, or in violation of
any law, governmental order or regulation, such unenforceability or violation
shall not affect the remaining provisions of such agreements, which shall
continue in full force and effect and be binding upon the respective parties
hereto.
Section 7.17 FAILURE OF CONDITIONS; TERMINATION. In the event any of
the conditions specified in this Agreement shall not be fulfilled on or before
the Closing Date, the parties, or any one of them, have the right either to
proceed or, upon prompt written notice to the other, to terminate and rescind
this Agreement without liability to any other party. The election to proceed
shall not affect the right of such electing party reasonably to require the
other party to continue to use its efforts to fulfill the unmet conditions.
Section 7.18 NO STRICT CONSTRUCTION. The language of this Agreement
shall be construed as a whole, according to its fair meaning and intendment, and
not strictly for or against either party hereto, regardless of who drafted or
was principally responsible for drafting the Agreement or terms or conditions
hereof.
Section 7.19 EXECUTION KNOWING AND VOLUNTARY. In executing this
Agreement, the parties severally acknowledge and represent that each: (a) has
fully and carefully read and considered this Agreement; (b) has been or has had
the opportunity to be fully apprised of its attorneys of the legal effect and
meaning of this document and all terms and conditions hereof; (c) has been
afforded the opportunity to negotiate as to any and all terms hereof; and (d) is
executing this Agreement voluntarily, free from any influence, coercion or
duress of any kind.
18
Section 7.20 DEFINITIONS.
As used in this Agreement:
"AFFILIATE" has the meaning ascribed to such term, as defined in Rule
405 promulgated by the Commission under the Securities Act.
"BENEFICIAL OWNERSHIP" or "BENEFICIALLY OWN" shall have the meaning
under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder.
"BOARD OF DIRECTORS" means the Board of Directors of any specified
Person and any committee thereof.
"CLOSING" has the meaning set forth in Section 3.2 of this Agreement.
"CLOSING DATE" has the meaning set forth in Section 3.2 of this
Agreement.
"COMMISSION" means the United States Securities and Exchange
Commission.
"ENCUMBRANCE" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, security interest, lien (statutory
or other) or preference, equity, option, charge, limitation on voting rights,
right to receive dividends, dissenters' or appraisal rights, priority or other
security or similar agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" means any supranational, national, state,
municipal, local or foreign government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority.
"KNOWN" or "KNOWLEDGE" means, with respect to any party, the knowledge
of such party's or any of its Subsidiaries executive officers or its Board of
Directors, after reasonable inquiry.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person any event,
change, circumstance or effect that is materially adverse to: (i) the business,
properties, assets, financial condition or results of operations of such Person
and its Subsidiaries taken as a whole, other than any event, change,
circumstance or effect relating: (x) to the economy or financial markets in
general, or (y) in general to the industries in which such Person operates and
not specifically relating to (or having the effect of specifically relating to
19
or having a materially disproportionate effect (relative to most other industry
participants) on such Person, or (ii) the ability of such Person to consummate
the transactions contemplated by this Agreement.
"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARY" when used with respect to any party means any corporation
or other organization, whether incorporated or incorporated, at least a majority
of the securities or other interests of which having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and entered into as of the date first above written at Los Angeles,
California.
("ADE")
Arizona Diversified Equity, LLC
a Nevada limited liability company
By: Nevada Diversified Equity, LLC
a Nevada limited liability company
Its Managing Member
By: American Building Management Corporation
a Nevada corporation
Its Managing Member
/s/ John W. Pacheco
-------------------------------
By: John W. Pacheco, President
("Sellers")
By: /s/ Dean G. Cannon
-------------------------------------
Dean G. Cannon
By: /s/ Rose Marie Cannon
-------------------------------------
Rose Marie Cannon
21