EXHIBIT 2.1
STOCK EXCHANGE AGREEMENT
between
Xerion EcoSolutions Group, Inc.
and
Town House Land Limited
and
its Shareholders
THE SHARES OF XERION ECOSOLUTIONS GROUP INC. TO BE ISSUED UNDER THIS AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION PURUSANT TO REGULATION S
UNDER THE ACT. UNTIL ONE YEAR AFTER THE DATE OF PURCHASE, NO AMOUNT OF THE
SHARES MAY BE OFFERED, SOLD, OR TRANSFERRED TO ANY U.S. PERSON AND NO HEDGING
TRANSACTIONS REGARDING THE SHARES SHALL BE MADE EXCEPT IN COMPLIANCE WITH THE
ACT. OFFERS, SALES OR TRANSFERS IN THE U.S. OR TO A U.S. PERSON (AS DEFINTED IN
REGULATION S PROMULATED UNDER THE ACT) OR FOR THE ACCOUNT AND BENEFIT OF A U.S.
PERSON ARE NOT PERMITTED, EXCEPT AS PROVIDED IN SAID REGULATION S, UNLESS THE
SHARES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION UNDER
THE ACT IS APPLICABLE.
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (hereinafter referred to as this
"Agreement"), is entered into as of this 19th day of October, 2005, by and among
Xerion EcoSolutions Group Inc., a Colorado corporation ("Xerion"); Town House
Land Limited ("Town House"), a limited liability company organized in the Hong
Kong Special Administrative Region in The People's Republic of China ("China" or
"PRC") and all of the equity registered capital stock owners of Town House ( the
"Shareholders"), upon the following premises:
PREMISES
A. Xerion is a public company which has been in existence since 1985.
B. Town House owns 97% of the issued and outstanding shares of
registered capital of Town House Land (Wuhan) Limited ("Wuhan Town House"), a
limited liability company organized in the City of Wuhan, Hubei Province, in the
PRC in 1995, which in turns directly owns 100% of Town House Land (Miami)
Corporation, a Florida corporation, and Town House Land (USA), Inc., a
California Corporation (the "Subsidiaries").
C. The Shareholders own 100% of the issued and outstanding capital
stock of Town House and have agreed to sell to Xerion and Xerion has agreed to
purchase all of the issued and outstanding capital stock of Town House (the
"Town House Stock") from the Shareholders in exchange for shares representing
approximately 98.75% of the subsequently issued and outstanding fully diluted
shares of common stock of Xerion after the stock exchange, pursuant to the terms
and conditions set forth in this Agreement (the "Exchange").
D. Town House, together with its Subsidiaries, will become a subsidiary
of Xerion after the closing of the Exchange.
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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, it is hereby agreed as follows:
ARTICLE I
PLAN OF EXCHANGE
1.1 The Exchange. At the Closing (as defined in Section 1.3 below), the
Shareholders of Town House hereby agree to assign, transfer, and deliver to
Xerion, free and clear of all liens, pledges, encumbrances, charges,
restrictions, or known claims of any kind, nature, or description, the
certificates evidencing the Town House Stock duly endorsed for transfer to
Xerion or accompanied by stock powers executed in blank by the Shareholders, and
Xerion agrees to acquire such shares on such date by issuing and delivering in
exchange therefore solely shares of Xerion common stock, in the amount of
224,480,317 shares of its restricted common voting stock, par value $0.001 (the
"Xerion Stock") to be issued to the Shareholders of Town House and their
designees as listed on Schedule 1 in full satisfaction of any right or interest
which the Shareholders held in the Town House Stock. As a result of the exchange
of the Town House Stock in exchange for the Xerion Stock, Town House will become
a wholly owned subsidiary of Xerion and the Shareholders of Town House and their
designees will own 98.75% of the then issued and outstanding shares of the
common stock of Xerion.
1.2 Dilution. For all relevant purposes of this Agreement, the 224,480,317
shares of Xerion Stock to be issued and delivered pursuant to this Agreement
will be subject to dilution if the capital structure of Xerion is modified.
However, if the capital structure of Xerion is modified between the date of
execution of this Agreement and the Closing, then the total amount of Xerion
Stock to be issued shall be adjusted to the extent that the Shareholder's and
their designees' percentage of ownership in Xerion shall still reflect the exact
percentage of ownership as described in Schedule 1 attached hereto. In the
instance of a change of the capital structure of Xerion between the date of
execution of this Agreement and the Closing, the number of shares of Xerion
Stock to be issued shall be appropriately adjusted to take into account any
stock split, stock dividend, reverse stock split, recapitalization, or similar
change in the Xerion common stock, par value $0.001, which occurred between the
date of the execution of this Agreement and the Closing.
1.3 Closing. The closing ("Closing") of the transactions contemplated by
this Agreement shall be at 10:00 AM British Columbia time on the fifth business
day (a day on which banks are open in the Province of British Columbia)
following the date on which the Consolidated US Balance Sheet (as that term is
defined in Section 5.1) is delivered to Xerion, via registered overnight courier
or facsimile, or on a date and at such time and place as the parties may agree,
but no later than October 31, 2005 ("Closing Date").
1.4 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
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all certificates, opinions, financial statements, 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 if agreed
to by the parties.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF TOWN HOUSE
As an inducement to, and to obtain the reliance of, Xerion, Town House
represents and warrants as follows:
2.1 Organization. Town House is a company duly organized, validly
existing, and in good standing under the laws of the Hong Kong Special
Administrative Region in The People's Republic of China ("PRC"). Town House Land
(Wuhan)Limited ("Wuhan Town House") is a limited liability company duly
organized, validly existing, and in good standing under the laws of Hubei
Province in the PRC that is 97% owned by Town House. Wuhan Town House directly
owns 100% of Town House (Miami) Corporation, a Florida corporation, and Town
House Land (USA) Inc., a California corporation. Each of Town House and its
subsidiaries have the power and are duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on their
respective businesses in all material respects as it is now being conducted,
including qualification to do business as a foreign entity in the jurisdictions
in which the character and location of the assets owned by them or the nature of
the business transacted by them requires qualification. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof will not,
violate any provision of any of Town House's and or its Subsidiaries' charters,
articles of formation, bylaws or other organizational documents. Town House has
taken all action required by law, its articles of formation, its bylaws, or
otherwise to authorize the execution and delivery of this Agreement. Town House
has full power, authority, and legal right and has taken all action required by
law, its Articles of Formation, bylaws, and otherwise to consummate the
transactions herein contemplated.
2.2 Capitalization. The authorized capitalization of Town House consists
of 500,000 shares, of which 500,000 shares are currently issued and outstanding.
All issued and outstanding shares are legally issued, fully paid, and
non-assessable and not issued in violation of the preemptive or other rights of
any person. Town House has not granted to any person any options, warrants, or
rights to purchase any of its shares of its registered capital or issued any
securities convertible into shares of its registered capital.
2.3 Subsidiaries and Predecessor Corporations. Town House owns 97% of the
registered capital of Wuhan Town House which in turns owns 100% of Town House
Land (Miami) Corporation and Town House Land (USA), Inc. None of Town House nor
its Subsidiaries owns, beneficially or of record, any shares of any other
corporation, partnership, company, limited company, or other business entity.
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(a) Town House will deliver to Xerion its consolidated audited balance
sheets as of December 31, 2004 and the related audited statements of
operations, stockholders' equity and cash flows for the years ended
December 31, 2004 and 2003, together with notes to such statements
and the opinions of both Murrell, Hall, McIntosh & Company, PLLP and
Henny Wee & Co., independent certified public accountants, with
respect thereto, and the Unaudited Balance Sheet of Town House as of
June 30, 2005, and the related statements of operations, condensed
consolidated stockholders' equity, and consolidated cash flow for
the six (6) months ended June 30, 2005, together with the notes
thereto. All of these Consolidated Financial Statements are included
in the Town House Schedules. The unaudited consolidated US balance
sheet, as of June 30, 2005, shall herein be defined as the
"Unaudited Balance Sheet" and is included in the Town House
Schedules. Total members' equity showing on the Unaudited Balance
Sheet is $10,785,430 ("Members Equity").
(b) All such financial statements of Town House have been prepared in
accordance with generally accepted accounting principles in Hong
Kong and the United States. The balance sheets of Town House present
fairly as of their dates the consolidated financial condition of
Town House. Town House did not have, as of the dates of such
consolidated balance sheets, except as and to the extent reflected
or reserved against therein, any liabilities or obligations
(absolute or contingent) which should be reflected in the
consolidated balance sheets or the notes thereto, prepared in
accordance with generally accepted accounting principles in Hong
Kong and in the United States, and all assets reflected therein will
be properly reported and present fairly the value of the assets of
Town House in accordance with such generally accepted accounting
principles. The statements of income, condensed stockholders'
equity, and cash flows will reflect fairly the information required
to be set forth therein by generally accepted accounting principles
in Hong Kong.
(c) Each of Town House and its Subsidiaries has filed all local income
tax returns required to be filed by them from inception to the date
hereof and all taxes have been paid. Each of Town House and its
Subsidiaries have filed all national, province, and local income tax
returns required to be filed by them from inception to the date
hereof and all taxes have been paid. None of such income tax returns
have been examined or audited in the PRC.
(d) None of Town House or its Subsidiaries owe any unpaid national,
province, county, local, or other taxes (including any deficiencies,
interest, or penalties), except for taxes accrued but not yet due
and payable for which Town House and its Subsidiaries may be liable
in their own right or as a transferee of the assets of, or as a
successor to, any other corporation or entity. Furthermore, except
as accruing in the normal course of business, none of Town House or
its Subsidiaries owes any accrued and unpaid taxes to the date of
this Agreement.
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(e) The books and records, financial and otherwise, of each of Town
House and its Subsidiaries are in all material respects complete and
correct and have been maintained in accordance with good business
and accounting practices.
(f) Each of Town House and its Subsidiaries has good and marketable
title to their assets and, except as set forth in the Town House
Schedules or the Unaudited Balance Sheet or the notes thereto, has
no material contingent liabilities, direct or indirect, matured or
not matured.
2.4 Information. The information concerning Town House and its
Subsidiaries set forth in this Agreement and in the Town House Schedules is
complete and accurate in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact required to make
the statements made, in light of the circumstances under which they were made,
not misleading.
2.5 Options or Warrants. There are no existing options, warrants, calls,
or commitments of any character relating to the authorized and unissued stock or
registered capital of Town House.
2.6 Absence of Certain Changes or Events. Except as set forth in this
Agreement or the Town House Schedules, from the date of the Consolidated US
Balance Sheet to the Closing:
(a) except in the normal course of business, there will not be (i) any
material adverse change in the business, operations, properties,
Member's Equity, assets, or condition of Town House and its
Subsidiaries, individually or taken as a whole; or (ii) any damage,
destruction, or loss to any of Town House and its Subsidiaries
(whether or not covered by insurance) materially and adversely
affecting the business, operations, properties, assets, or condition
of Town House and its Subsidiaries, individually or taken as a
whole;
(b) None of Town House or its Subsidiaries will have (i) amended their
charter or organizational documents; (ii) declared or made, or
agreed to declare or make, any payment of dividends or distributions
of any assets of any kind whatsoever to stockholders or purchased or
redeemed, or agreed to purchase or redeem, any of its capital stock;
(iii) waived any rights of value which in the aggregate are
extraordinary or material considering the business of Town House and
its Subsidiaries; (iv) made any material change in its method of
management, operation, or accounting (other than as contemplated in
Section 5.1 for the Consolidated US Balance Sheet); (v) entered into
any other material transaction which is not in the ordinary course
of business; (vi) made any accrual or arrangement for payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by
it to any of its officers or directors or any of its employees whose
monthly compensation exceeds $20,000; or (viii) made any increase in
any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit
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plan, payment, or arrangement made to, for, or with its officers,
directors, or employees; and
(c) None of Town House or its Subsidiaries will have (i) borrowed or
agreed to borrow any funds or incurred, or become subject to, any
material obligation or liability (absolute or contingent) except
borrowings in the ordinary course of business or borrowings
involving one or a series of related borrowings exceeding
$10,000,000 in the aggregate; (ii) paid any material obligation or
liability not otherwise in the ordinary course of business (absolute
or contingent) other than current liabilities reflected in or shown
on the Unaudited Balance Sheet, and current liabilities incurred
since that date in the ordinary course of business; (iii) sold or
transferred, or agreed to sell or transfer, any of its assets,
properties, or rights not otherwise in the ordinary course of
business (except assets, properties, or rights not used or useful in
its business which, in the aggregate have a value of less than
$500,000), or canceled, or agreed to cancel, any debts or claims
(except debts or claims which in the aggregate are of a value of
less than $1,000,000); (iv) made or permitted any amendment or
termination of any contract, agreement, or license to which any of
them is a party, except for any such contracts, or amendments or
terminations, in the ordinary course of business or any such
contracts or amendments or terminations that provide for aggregate
consideration over the terms of the contract in excess of
$5,000,000; or (v) issued, delivered, or agreed to issue or deliver
any stock, bonds or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock).
For purposes of this Agreement the terms "Material Adverse Change" and "Material
Adverse Effect" mean an adverse change or effect that a reasonable person would
attach importance to in evaluating the party to which it relates, the party's
business or financial condition, or the transactions herein contemplated.
2.7 Title and Related Matters. Town House has good and marketable title to
all of its properties, inventory, interests in properties, and assets, real and
personal, which will be reflected in the Unaudited Balance Sheet free and clear
of all liens, pledges, charges, or encumbrances except as disclosed therein. At
Closing, Town House and its Subsidiaries will have good and marketable title to
all of its properties, inventory, interests in properties, and assets, real and
personal, reflected in the Consolidated US Balance Sheet (as that term is
defined in Section 5.1) or acquired after that date (except properties,
interests in properties, and assets sold or otherwise disposed of since such
date in the ordinary course of business), free and clear of all liens, pledges,
charges, or encumbrances except:
(a) as such assets may be affected by laws of the Hong Kong Special
Administrative Region and The People's Republic of China;
(b) statutory liens or claims not yet delinquent; and
(c) 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
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or affected thereby or otherwise materially impair present business
operations on such properties;
Except as set forth in the Town House Schedules, each of Town House and its
Subsidiaries own, free and clear of any liens, claims, encumbrances, royalty
interests, or other restrictions or limitations of any nature whatsoever, any
and all properties it is currently constructing and all procedures, techniques,
marketing plans, business plans, methods of management, or other information
utilized in connection with its or their business. Except as set forth in the
Town House Schedules, no third party has any right to, and none of Town House or
its Subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any product, technology, data, trade
secrets, know-how, proprietary techniques, trademarks, service marks, trade
names, or copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling, or finding, would have a materially adverse affect
on the business, operations, financial condition, income, or business prospects
of Town House or its Subsidiaries or any material portion of its or their
properties, assets, or rights, individually or taken as a whole.
2.8 Litigation and Proceedings. Except as set forth in the Town House
Schedules, there are no actions, suits, proceedings, or investigations pending
or, to the knowledge of either Town House or the Shareholders after reasonable
investigation, threatened by or against any of Town House and its Subsidiaries,
or affecting any of Town House or its Subsidiaries or their respective
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
Neither Town House nor the Shareholders have any knowledge of any default on the
part of any of Town House and its Subsidiaries with respect to any judgment,
order, writ, injunction, decree, award, rule, or regulation of any court,
arbitrator, or governmental agency or instrumentality or of any circumstances
which, after reasonable investigation, would result in the discovery of such a
default.
2.9 Contracts.
(a) Included in the Town House Schedules are copies of the most
significant contracts, agreements, franchises, license agreements,
or other commitments to which any of Town House and its Subsidiaries
is a party or by which any of them or their respective assets,
products, technology, or properties are bound, that have been
reasonably requested by Xerion;
(b) All contracts, agreements, franchises, license agreements, and other
commitments to which any of Town House and its Subsidiaries are
parties or by which their respective properties are bound and which
are material to the operations of them individually or taken as a
whole are valid and enforceable in all respects by the one or more
of Town House and its Subsidiaries that is a party thereto, except
as limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally; and
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(c) Except as described in the Town House Schedules, none of Town House
or its Subsidiaries is a party to or bound by, and none of the
properties of any of Town House and its Subsidiaries is subject to,
any contract, agreement, other commitment or instrument; any charter
or other corporate restriction; or any judgment, order, writ,
injunction, decree, or award which materially and adversely affects,
or in the future may (as far as Town House or the Shareholders can
now foresee) materially and adversely affect, the business,
operations, properties, assets, or condition of any of Town House
and its Subsidiaries, individually or taken as a whole.
2.10 Material Contract Defaults. None of Town House or its Subsidiaries is
in default in any material respect under the terms of any outstanding contract,
agreement, lease, or other commitment which is material to its or their
business, operations, properties, assets, or condition of Town House and its
Subsidiaries and there is no event that has occurred which presently or with the
passage of time, could result in a material default in any material respect
under any such contract, agreement, lease, or other commitment in respect of
which any of Town House and its Subsidiaries have not taken adequate steps to
prevent such a default from occurring.
2.11 No Conflict with Other Instruments. The execution of this Agreement
and the consummation of the transactions contemplated by this Agreement will not
result in the breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust, or other
material contract, agreement, or instrument to which any of Town House or its
Subsidiaries is a party or to which any of their respective properties or
operations are subject.
2.12 Compliance with Laws and Regulations. Each of Town House and its
Subsidiaries have complied with all applicable statutes and regulations of any
national, province, county, city, local or other governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets, or condition of
any of Town House and its Subsidiaries or except to the extent that
noncompliance would not result in the incurrence of any material liability for
any of Town House or its Subsidiaries.
2.13 Approval of Agreement. The board of directors of Town House has
authorized the execution and delivery of this Agreement by Town House, and has
or will have approved the transactions contemplated hereby.
2.14 Foreign Person and Activity Regulations.
(a) None of Town House, its Subsidiaries, the Shareholders, or any other
person who otherwise controls any of Town House or the Subsidiaries
is or shall be (i) listed on the Specially Designated Nationals and
Blocked Persons List maintained by the Office of Foreign Assets
Control ("OFAC"), Department of the Treasury, and/or on any other
similar list maintained by OFAC pursuant to any authorizing statute,
Executive Order or regulation (collectively, "OFAC Laws and
Regulations"), (ii) a "Designated National" as defined in the Cuban
Assets
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Control Regulations, 31 C.F.R. Part 515, or (iii) a person
designated under Paragraph 1 (b), (c) or (d) of Executive Order No.
13224 (September 23, 2001), any related enabling legislation or any
other similar Executive Orders (collectively, the "Executive
Orders"); and each of Town House and the Subsidiaries and the
Shareholders are in compliance with all OFAC Laws and Regulations,
Executive Orders and related government guidance;
(b) None of Town House, the Subsidiaries, the Shareholders, or any other
person who otherwise controls any of Town House and the Subsidiaries
(i) is under investigation by any governmental authority for, or has
been charged with, or convicted of, money laundering (under either
18 U.S.C. Paragraph 1956 or 1957), or drug trafficking,
terrorist-related activities or other money laundering predicate
crimes or a violation of the Bank Secrecy Act laws (31 U.S.C.
Paragraphs 5311, et seq.), (ii) has been assessed civil penalties
under these or related laws (collectively, "Anti-Money Laundering
Laws"), or (iii) has had any of its funds seized or forfeited in an
action under Anti-Money Laundering Laws; and
(c) None of Town House, the Subsidiaries, the Shareholders, or any other
person who is or was affiliated or associated as an officer,
employee, agent, consultant, or in any other capacity with any of
Town House and the Subsidiaries has, during the five-year period
ended August 31, 2005, and from that date to the Closing engaged in
any act or practice that could reasonably be construed as a
violation of any of the provisions of the Foreign Corrupt Practices
Act, 15 U.S.C. 78dd-1 et seq. or any rule or regulation pertaining
thereto.
2.15 Town House Schedules. Town House has delivered to Xerion or will
deliver, as soon as practicable but in no event less than 5 days prior to the
Closing, the following schedules, which are collectively referred to as the
"Town House Schedules" and which consist of separate schedules, all of which are
complete, true, and correct in all material respects.
(a) a schedule containing complete and correct copies of the
organizational documents, as amended, of each Town House and its
Subsidiaries in effect as of the date of the Closing of this
Agreement;
(b) a schedule containing the financial statements of Town House and its
Subsidiaries identified in paragraph 2.3(a) and 5.1;
(c) a schedule, if requested by Xerion, containing true and correct
copies of the most significant contracts, agreements, or other
instruments to which any of Town House and its Subsidiaries is a
party or by which any of them or their properties is bound,
specifically including all contracts, agreements, or arrangements
referred to in Section 2.10;
(d) a schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or
condition of Town House or
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its Subsidiaries since the date of the Consolidated US Financial
Statements, required to be provided pursuant to section 2.6 hereof;
and
(e) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the Town
House Schedules by sections 2.1 through 2.16.
Each of the Town House Schedules shall be produced through delivery of a hard
paper copy of the original and an electronic Microsoft Word or HTML formatted
copy of the original, and if the original is in a language other than English,
shall be produced through delivery of a hard paper copy of the original and an
electronic Microsoft Word or HTML formatted copy of the original foreign
language version and an English translation, certified by the translator as a
complete and accurate translation from the original. Town House and the
Shareholders shall cause the Town House Schedules and the instruments and data
delivered to Xerion hereunder to be updated after the date hereof up to and
including the Closing Date.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE SHAREHOLDERS OF TOWN HOUSE
As an inducement to, and to obtain reliance of Xerion, the Shareholders
further represent and warrant as follows:
3.1 Ownership of Town House Shares. The Town House Shareholders hereby
represent and warrant with respect to themselves that they are the legal and
beneficial owners of all of the issued and outstanding shares of Town House's
registered capital and ordinary shares free and clear of any claims, charges,
equities, liens, security interests, and encumbrances whatsoever, and that such
Shareholders have full right, power, and authority to transfer, assign, convey,
and deliver their Town House shares; and delivery of such shares at the Closing
will convey to Xerion good and marketable title to such shares free and clear of
any claims, charges, equities, liens, security interests, and encumbrances
whatsoever.
3.2 Exemption From Registration. The Shareholders represent that the
Xerion Stock is being acquired without a view to, or for, resale in connection
with any public distribution of the Shares or any interest therein without
registration or other compliance under the Securities Act of 1933, as amended
(the "1933 Act") and that the Shareholders have no direct or indirect
participation in any such undertaking or in the underwriting of such an
undertaking. The Shareholders acknowledge that the Xerion Stock to be acquired
pursuant to this Agreement have not been registered with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933 and are being
issued pursuant to Regulation S, as the Closing will occur outside of the United
States. The Shareholders agree and acknowledge that the Xerion Stock will be
"restricted securities" within the meaning of Rule 144 adopted under the 1933
Act, and Xerion will issue stop transfer instructions to its registrar and
transfer agent prohibiting the transfer of the Xerion Stock of Xerion delivered
under this Agreement. The Shareholders acknowledge that the Xerion Stock must be
held and may not be sold, transferred, or otherwise
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disposed of for value unless they are subsequently registered under the 1933 Act
or an exemption from such registration is available. The certificates
representing the Xerion Stock will bear a legend restricting their transfer,
except in compliance with applicable federal and state securities statutes: as
follows:
THE SHARES OF XERION ECOSOLUTIONS GROUP INC. TO BE ISSUED UNDER THIS AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION PURUSANT TO REGULATION S
UNDER THE ACT. UNTIL ONE YEAR AFTER THE DATE OF PURCHASE, NO AMOUNT OF THE
SHARES MAY BE OFFERED, SOLD, OR TRANSFERRED TO ANY U.S. PERSON AND THAT NO
HEDGING TRANSACTIONS REGARDING THE SHARES SHALL BE MADE EXCEPT IN COMPLIANCE
WITH THE ACT. OFFERS, SALES OR TRANSFERS IN THE U.S. OR TO A U.S. PERSON (AS
DEFINTED IN REGULATION S PROMULATED UNDER THE ACT) OR FOR THE ACCOUNT AND
BENEFIT OF A U.S. PERSON ARE NOT PERMITTED, EXCEPT AS PROVIDED IN SAID
REGULATION S, UNLESS THE SHARES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION
FROM SUCH REGISTRATION UNSDER THE ACT IS APPLICABLE.
Each of the Shareholders represent to Xerion that:
a. he/she is a citizen and resident of The People's Republic of China,
and is NOT a U.S. person within the meaning of Rule 902(A) of
Regulation S;
b. he/she and his/her assigns of the Shares agree that the Shares of
Xerion acquired hereby shall not be voluntarily sold, transferred or
otherwise disposed of in the United States or to any U.S. person for
a minimum period of one year from the closing date of this
transaction, except by registration of such Shares under the Act and
any applicable state securities laws.
c. he/she understands that any disposition of the Shares in violation
of this Agreement shall be null and void. No transfer of the Shares
shall be made by Xerion or Xerion's registrar and transfer agent
upon Xerion's transfer books or records unless there has been
compliance with the terms of this Agreement, including the above
provisions. Xerion will issue stop transfer instructions to its
registrar and transfer agent to the effect that the Shares of Xerion
may not be transferred for a period of one year after the closing
date and may be transferred thereafter only except as provided
herein. He/she agrees to indemnify and hold Xerion harmless from and
against damages that may result from or arise out of any
dispositions thereof in violation of this Agreement.
c. In connection with the transaction which is the subject of this
Agreement, he/she acknowledges that offers respecting the sale of
the Shares directed by Xerion were received outside of the United
States and that he/she has not and is not engaged in or directed any
unsolicited offers to buy the Shares of Xerion in the United States
or to any U.S. Person.
3.3 Shell Company. Shareholders acknowledge that Xerion may be a shell
company as defined in Securities Act Release 33-8587. Shareholders will be
responsible for assuring that Xerion will comply with the terms and conditions
of Securities Act Release 33-8587, including, but not limited to filing the
required information with the Securities and Exchange Commission in a timely
manner.
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3.4 Investor Status. Each Shareholder is an "accredited investor" as
defined in Rule 501(a) of Regulation D under the 1933 Act.
ARTICLE IV
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF XERION
As an inducement to, and to obtain the reliance of Town House and the
Shareholders, Xerion represents and warrants as follows:
4.1 Organization. Xerion is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Colorado, and has
the corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, and there is no
jurisdiction in which it is not qualified in which the character and location of
the assets owned by it or the nature of the business transacted by it requires
qualification. Included in the Xerion Schedules (as hereinafter defined) are
complete and correct copies of the articles of incorporation and bylaws of
Xerion, and all amendments thereto, as in effect on the date hereof. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, violate any provision of Xerion's
articles of incorporation or bylaws. Xerion has taken all action required by
law, its articles of incorporation, its bylaws, or otherwise to authorize the
execution and delivery of this Agreement, and Xerion has full power, authority,
and legal right to consummate the transactions herein contemplated.
4.2 Capitalization. Xerion's authorized capitalization consists of
300,000,000 shares of common stock, par value $0.001, of which 2,841,523 shares
(prior to the stock exchange and the proposed Reverse Split) are issued and
outstanding; and 50,000,000 shares of preferred stock, no par value, of which no
shares are outstanding. All issued and outstanding shares are legally issued,
fully paid, and non-assessable and not issued in violation of the pre-emptive or
other rights of any person.
4.3 Subsidiaries. Xerion does not have any subsidiaries and does not own,
beneficially or of record, any shares of any other corporation or business
entity.
4.4 Financial Statements.
(a) Included in the Xerion Schedules, as available from the EDGAR
database available on the SEC website at www.sec.gov/edgar.shtml
("EDGAR") will be the audited balance sheets of Xerion as of
December 31, 2004 and 2003, and the audited statements of
operations, stockholders' equity, and cash flows for the two fiscal
years ended December 31, 2004 together with the notes to such
statements and the opinion of Manning Elliot, Chartered Accountants
in Vancouver, Canada, an independent registered public accounting
firm, with respect thereto; and the unaudited balance sheet of
Xerion as of June 30, 2005 (the "most recent Xerion balance sheet"),
and the related unaudited statements of operations, stockholders'
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equity, and cash flow for the six-month period ended June 30, 2005,
together with the notes to such statements.
(b) All such financial statements have been prepared in accordance with
generally accepted accounting principles in the United States
consistently applied throughout the periods involved. The Xerion
balance sheets present fairly as of their respective dates the
financial condition of Xerion. Xerion did not have as of the date of
any such Xerion balance sheet, except as and to the extent reflected
or reserved against therein, any liabilities or obligations
(absolute or contingent) which should be reflected in a balance
sheet or the notes thereto prepared in accordance with generally
accepted accounting principles, and all assets reflected therein are
properly reported and present fairly the value of the assets of
Xerion, in accordance with generally accepted accounting principles.
The statements of operations, stockholders' equity, and cash flow
reflect fairly the information required to be set forth therein by
generally accepted accounting principles.
(c) Xerion has no liabilities with respect to the payment of any
federal, state, county, local, or other taxes (including any
deficiencies, interest, or penalties), except for taxes accrued but
not yet due and payable.
(d) Xerion has filed all federal, state, province, or local income tax
returns required to be filed by it for the years ended December 31,
2004, 2003, and 2002 and included in the Xerion Schedules are true
and correct copies of said federal income tax returns of Xerion
filed. None of such federal income tax returns have been examined by
the Internal Revenue Service. Each of such income tax returns
reflects the taxes due for the period covered thereby, except for
amounts which, in the aggregate, are immaterial.
(e) The books and records, financial and otherwise, of Xerion are in all
material respects complete and correct and have been maintained in
accordance with good business and accounting practices to which the
corporate auditors have found no disclosable fault.
(f) Xerion has good and marketable title to its assets and, except as
set forth in the Xerion Schedules or the Financial Statements of
Xerion or the notes thereto, has no material contingent liabilities,
direct or indirect, matured or unmatured.
(g) As of the Closing date, Xerion will have no material assets and
shall not have any material liabilities, direct or contingent,
except as specifically permitted by this Agreement.
4.5 Information. The information concerning Xerion set forth in this
Agreement and the Xerion Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
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4.6 Options or Warrants. Except as set forth in the Xerion Schedules,
there are no existing options, warrants, calls, convertible notes, derivative
securities or commitments of any character relating to the authorized and
unissued stock of Xerion, except options, warrants, calls, convertible notes,
derivative securities or commitments, if any, to which Xerion is not a party and
by which it is not bound.
4.7 Absence of Certain Changes or Events. Except as described herein or in
the Xerion Schedules, since the date of the most recent Xerion balance sheet:
(a) there has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of Xerion (whether or
not covered by insurance) materially and adversely affecting the
business, operations, properties, assets, or financial condition of
Xerion;
(b) Xerion has not (i) recently amended its articles of incorporation or
bylaws or restructured the company's stock; (ii) declared or made,
or agreed to declare or make any payment of dividends or
distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of
its capital stock; (iii) waived any rights of value which in the
aggregate are extraordinary or material considering the business of
Xerion; (iv) made any material change in its method of management,
operation, or accounting; (v) entered into any other material
transactions; (vi) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by
it to any of its officers or directors or any of its employees whose
monthly compensation exceeds $1,000; or (viii) made any increase in
any profit sharing, bonus, deferred compensation, insurance,
pension, retirement, or other employee benefit plan, payment, or
arrangement, made to, for, or with its officers, directors, or
employees;
(c) Xerion has not (i) granted or agreed to grant any options, warrants,
or other rights for its stocks, bonds, or other corporate securities
calling for the issuance thereof; (ii) borrowed or agreed to borrow
any funds or incurred, or become subject to, any material obligation
or liability (absolute or contingent) except liabilities incurred in
the ordinary course of business; (iii) paid or agreed to pay any
material obligation or liability (absolute or contingent) other than
current liabilities reflected in or shown on the most recent Xerion
balance sheet and current liabilities incurred since that date in
the ordinary course of business and professional and other fees and
expenses incurred in connection with the preparation of this
Agreement and the consummation of the transactions contemplated
hereby; (iv) sold or transferred, or agreed to sell or transfer, any
of its assets, property, or rights (except assets, property, or
rights not used or useful in its business which, in the aggregate
have a value of less than $1,000), or canceled, or agreed to cancel,
any debts or claims (except debts or claims which in the aggregate
are of a value of less than $1,000); (v) made or permitted any
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amendment or termination of any contract, agreement, or license to
which it is a party if such amendment or termination is material,
considering the business of Xerion; or (vi) issued, delivered, or
agreed to issue or deliver any stock, bonds, or other corporate
securities including debentures (whether authorized and unissued or
held as treasury stock), except in connection with this Agreement;
and (d) to the best knowledge of Xerion, it has not become subject
to any law or regulation which materially and adversely affects, or
in the future may adversely affect, the business, operations,
properties, assets, or condition of Xerion.
4.8 Title and Related Matters. Xerion has good and marketable title to all
of its properties, interest in properties, and assets, real and personal, which
are reflected in the Xerion balance sheet or acquired after that date (except
properties, interest in properties, and assets sold or otherwise disposed of
since such date in the ordinary course of business), free and clear of all
liens, pledges, charges, or encumbrances except
(a) statutory liens or claims not yet delinquent;
(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; and
(c) as described in the Xerion Schedules.
4.9 Litigation and Proceedings. There are no actions, suits, proceedings,
or investigations pending or, to the knowledge of Xerion after reasonable
investigation, threatened by or against Xerion, or affecting Xerion, at law or
in equity, before any court or other governmental agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind. Xerion has no
knowledge of any default on the part of Xerion with respect to any judgment,
order, writ, injunction, decree, award, rule, or regulation of any court,
arbitrator, or governmental agency or instrumentality or of any circumstances
which, after reasonable investigation, would result in the discovery of such a
default.
4.10 Contracts. Xerion is not a party to any material contract, agreement,
or other commitment, except as specifically disclosed in its schedules to this
Agreement.
4.11 No Conflict With Other Instruments. The consummation of the
transactions contemplated by this Agreement will not result in the breach of any
term or provision of, or constitute a default under, any indenture, mortgage,
deed of trust, or other material agreement or instrument to which Xerion is a
party or to which it or any of its assets or operations are subject.
4.12 Governmental Authorizations. Xerion has all licenses, franchises,
permits, and other government authorizations, that are legally required to
enable it to conduct its business operations in all material respects as
conducted on the date hereof. Except for compliance with federal and state
securities or corporation laws, as hereinafter provided, no authorization,
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approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by Xerion of this Agreement and the consummation by
Xerion of the transactions contemplated hereby.
4.13 Compliance With Laws and Regulations. To the best of its knowledge,
Xerion has complied with all applicable statutes and regulations of any federal,
state, or other applicable governmental entity or agency thereof, except to the
extent that noncompliance would not materially and adversely affect the
business, operations, properties, assets, or conditions of Xerion or except to
the extent that noncompliance would not result in the incurrence of any material
liability. This compliance includes, but is not limited to, the filing of all
reports to date with the U.S. Securities and Exchange Commission and state
securities authorities.
4.14 Insurance. Xerion owns no insurable properties and carries no
casualty or liability insurance.
4.15 Approval of Agreement. The board of directors of Xerion has
authorized the execution and delivery of this Agreement by Xerion and has
approved this Agreement and the transactions contemplated hereby.
4.16 Continuity of Business Enterprises. Xerion has no commitment or
present intention to liquidate Xerion or sell or otherwise dispose of a material
portion of its business or assets following the consummation of the transactions
contemplated hereby.
4.17 Material Transactions of Affiliations. Except as disclosed herein and
in the Xerion Schedules, there exists no material contract, agreement, or
arrangement between Xerion and any person who was at the time of such contract,
agreement, or arrangement an officer, director, or person owning of record or
known by Xerion to own beneficially, 10% or more of the issued and outstanding
common stock of Xerion and which is to be performed in whole or in part after
the date hereof or was entered into not more than three years prior to the date
hereof. Neither any officer, director, nor 10% shareholders of Xerion has, or
has had during the last preceding full fiscal year, any known interest in any
material transaction with Xerion which was material to the business of Xerion.
Xerion has no commitment, whether written or oral, to lend any funds to, borrow
any money from, or enter into any other material transaction with any such
affiliated person.
4.18 Employment Matters . Xerion has no employees other than its executive
officers.
4.19 Xerion Schedules. Xerion has delivered to Town House, or will deliver
as soon as practicable at its request, the following schedules, which are
collectively referred to as the "Xerion Schedules," and which consist of
separate schedules, all of which are complete, true, and correct in all material
respects.:
(a) a schedule containing complete and accurate copies of the articles
of incorporation and bylaws, as amended, of Xerion as in effect as
of the date of this Agreement and as are available online at the
Colorado Secretary of State website;
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(b) a schedule containing all filings made by Xerion with the "SEC"
since January 1, 2002 as available on EDGAR and all those since
January 1, 2002 which have not appeared on EDGAR.
(c) a schedule containing a copy of the federal income tax returns of
Xerion identified in paragraph 4.4(d);
(d) a schedule setting forth the description of any material adverse
change in the business, operations, property, assets, or condition
of Xerion since the date of the most recent Xerion balance sheet,
required to be provided pursuant to section 4.7 hereof; and
(e) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the Xerion
Schedules by sections 4.1 through 4.17.
4.20. Updated Schedules. Xerion shall cause the Xerion Schedules and the
instruments and data delivered to Town House hereunder to be updated after the
date hereof up to and including the Closing Date.
4.21 Cancellation of Debts to Affiliates. Xerion shall cause all debts and
any other obligations to directors, officers and any other affiliates of Xerion
to be cancelled and terminated on or before the Closing Date.
ARTICLE V
SPECIAL COVENANTS
5.1 Town House Consolidated US Financial Statements. At least five days
prior to Closing, Town House shall deliver to Xerion the consolidated US
financial statements ("Consolidated US Financial Statements"), which shall
consist of the consolidated audited balance sheets of Town House and the
Subsidiaries at December 31, 2004 and 2003 and June 30, 2005. The unaudited
consolidated balance sheet at June 30, 2005 is referred to herein as the
"Unaudited Balance Sheet". The related audited consolidated statements of
operations, stockholders' equity and cash flows for the periods ended December
31, 2004 and 2003 and June 30, 2005 (consolidating Town House and the
Subsidiaries), together with notes to such statements and the opinion of
Murrell, Hall, McIntosh & Company, P.L.C., independent certified public
accountants, with respect thereto shall be included in the Town House Schedules.
All of the Consolidated US Financial Statements will be in United States Dollars
and be prepared in accordance with generally accepted accounting principles in
the United States (consistently applied during each of the periods) and the
requirements of Regulation S-X adopted by the SEC. The Consolidated US Financial
Statements will be part of the Town House Schedules. Each of Town House and the
Shareholders represents and warrants that the Consolidated US Balance Sheet
presents fairly the consolidated financial condition of Town House and its
Subsidiaries. Town House and its Subsidiaries will not have, as of the date of
the Consolidated US Balance Sheet, except as and to the extent reflected or
reserved against therein, any liabilities or
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obligations (absolute or contingent) that should be reflected in the
Consolidated US Balance Sheet or the notes thereto. All assets reflected in the
Consolidated US Balance Sheet will be properly reported and present fairly the
value of the assets of Town House and its Subsidiaries. Consolidated statements
of income, stockholders' equity, and cash flows presented in the Consolidated US
Financial Statements will reflect fairly the information required to be set
forth therein. Town House and Shareholders represent and warrant that the
Members' Equity to be reported in the Consolidated US Balance Sheet shall not
show a material adverse change from that reported on the Unaudited Balance
Sheet. Town House and Shareholders further represent and warrant that the
Members' Equity to be reported in the Town House 3rd quarter ending September
30, 2005 shall not show a material adverse change greater than one million
dollars from the Member's Equity reported on the Consolidated US Balance Sheet.
5.2 Access to Properties and Records. Xerion and Town House will each
afford to the officers and authorized representatives of the other full access
to the properties, books, and records of Xerion or Town House and its
Subsidiaries as the case may be, in order that each may have full opportunity to
make such reasonable investigation as it shall desire to make of the affairs of
the other, and each will furnish the other with such additional financial and
operating data and other information as to the business and properties of Xerion
or Town House and its Subsidiaries as the case may be, as the other shall from
time to time reasonably and with cause request.
5.3 Delivery of Books and Records. At the Closing, Xerion shall deliver to
Stephen A. Zrenda, Jr., Esq., legal counsel to Town House, the originals of the
corporate minute books, books of account, contracts, records, and all other
books or documents of Xerion now in the possession or control of Xerion or its
representatives and agents.
5.4 Xerion Board of Directors. At the Closing, Xerion shall deliver or
cause to be delivered the resignation of all members from the board of directors
of Xerion, together with a unanimous written consent of the Xerion board of
directors providing for: the appointment of persons designated by the
Shareholders for election to the board of directors to fill the vacancies left
by the resignations (the "New Board"), including one member of the Board of
Directors to be designated by Etech Capital Group, Inc.; and, all actions taken
subsequent to the Closing of this Agreement and prior to the effective date of
the resignations of the current directors as directors of Xerion, by the board
of directors, will require the approval and consent of the director elected to
the board to fill the vacancy left by the resignations. At the Closing each of
the resigning directors will deliver to Town House and Xerion their signed
resignations as directors of Xerion and a unanimous written consent of the
directors of Xerion appointing as directors to fill the vacancies left by their
resignations persons designated by the Shareholders and one person designated by
Etech Capital Group, all of which will be effective 10 days following the later
to occur of, the date a statement complying with the requirements of Rule 14f-1
adopted under the Securities Exchange Act of 1934 (the "Exchange Act")
disclosing the change in control of the Xerion board of directors is mailed to
all shareholders of record of Xerion, and said statement is filed with the SEC.
Xerion will take all action required to prepare, mail to shareholders, and file
the foregoing statement required by Rule 14f-1 of the Exchange Act no later than
20 days following the Closing Date. The New Board of Xerion will be responsible
for the filing of Xerion's third quarter 2005 10QSB. The New Board of Xerion
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agrees to promptly transfer shares of the Xerion Stock to all parties involved
in this Exchange according to the schedule 1. The New Board of Xerion shall also
agree to promptly register the shares of Etech Capital Group and its designated
holders through a Form SB-1 or Form SB-2 or other appropriate form under the
Securities Act of 1933. It is understood that Xerion may also register shares of
its common stock for sale in the same registration statement to further
capitalize Xerion.
5.5 Third Party Consents and Certificates. Xerion and Town House 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.
5.6 Actions Prior to Closing.
(a) From and after the date of this Agreement until the Closing Date and
except as set forth in the Xerion or Town House Schedules or as
permitted or contemplated by this Agreement, Xerion and Town House
and its Subsidiaries respectively, will each: (i) carry on its
business in substantially the same manner as it has heretofore; (ii)
maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary
wear and tear and damage due to casualty; (iii) maintain in full
force and effect insurance comparable in amount and in scope of
coverage to that now maintained by it; (iv) perform in all material
respects all of its obligation under material contracts, leases, and
instruments relating to or affecting its assets, properties, and
business; (v) use its best efforts to maintain and preserve its
business organization intact, to retain its key employees, and to
maintain its relationship with its material suppliers and customers;
and (vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws
and all rules, regulations, and orders imposed by federal or state
governmental authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither Xerion nor Town House and its Subsidiaries will: (i) make
any change in their organizational documents, articles of
incorporation or bylaws; (ii) take any action described in section
2.6 in the case of Town House and its Subsidiaries or in section
4.7, in the case of Xerion (all except as permitted therein or as
disclosed in the applicable party's schedules); or (iii) enter into
or amend any contract, agreement, or other instrument of any of the
types described in such party's schedules, except that a party may
enter into or amend any contract, agreement, or other instrument in
the ordinary course of business.
5.7 Sales Under Rules 144 or 145, If Applicable.
(a) Xerion will use its best efforts to at all times to comply with the
reporting requirements of the Exchange Act, including timely filing
of all periodic reports required under the provisions of the
Exchange Act and the rules and regulations promulgated thereunder.
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(b) Upon being informed in writing by any person holding restricted
stock of Xerion as of the date of this Agreement that such person
intends to sell any shares under Rule 144 or Rule 145 promulgated
under the Securities Act (including any rule adopted in substitution
or replacement thereof), Xerion will certify in writing to such
person that it has filed all of the reports required to be filed by
it under the Exchange Act to enable such person to sell such
person's restricted stock under Rule 144 or 145, as may be
applicable in the circumstances, or will inform such person in
writing that it has not filed any such report or reports.
(c) If any certificate representing any such restricted stock is
presented to Xerion's transfer agent for registration of transfer in
connection with any sale theretofore made under Rule 144 or 145,
provided such certificate is duly endorsed for transfer by the
appropriate person(s) or accompanied by a separate stock power duly
executed by the appropriate person(s) in each case with a medallion
guarantee with reasonable assurances that such endorsements are
genuine and effective, and is accompanied by an opinion of counsel
satisfactory to Xerion and its counsel, at the sole expense of the
transferee, that such transfer has complied with the requirements of
Rule 144 or 145, as the cases may be, Xerion will promptly instruct
its transfer agent to register such transfer and to issue one or
more new certificates representing such shares to the transferee
and, if appropriate under the provisions of Rule 144 or 145, as the
case may be, free of any stop transfer order or restrictive legend.
The provisions of this Section 5.7 shall survive the Closing and the
consummation of the transactions contemplated by this Agreement.
5.8 Indemnification.
(a) Each of Town House and the Shareholders hereby agree, jointly and
severally, to indemnify Xerion and each of the officers, agents and
directors of Xerion as of the date of execution of this Agreement
against any loss, liability, claim, damage, or expense (including,
but not limited to, any and all expense whatsoever reasonably
incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever), to
which it or they may become subject arising out of or based on any
inaccuracy appearing in or misrepresentation made under Article II,
Article III, or Section 5.1 of this Agreement. The indemnification
provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination
of this Agreement.
(b) Xerion hereby agrees to indemnify Town House and each of the
officers, agents and directors of Town House as of the date of
execution of this Agreement and the Shareholders against any loss,
liability, claim, damage, or expense (including, but not limited to,
any and all expense whatsoever reasonably incurred in investigating,
preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever), to which it or they may become
subject
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arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article IV of this Agreement. The
indemnification provided for in this paragraph shall survive the
Closing and consummation of the transactions contemplated hereby and
termination of this Agreement.
5.9 After the Closing of this Agreement and assumption of control of
Xerion by the New Board, the New Board and Shareholders shall initiate and
approve and effect a one-for-eight (1-for-8) Reverse Split of the outstanding
common stock of Xerion. In regard to this Reverse Split, Xerion will not issue
any fractional shares nor pay any cash for fractional shares, and any fractional
share(s) shall be rounded up to the next higher full share. In connection with
the Reverse Split, the New Board of Xerion will authorize special treatment
("Special Treatment") to certain stockholders ("Certain Stockholders") of Xerion
in order to preserve round lot holders (i.e., holders owning at least 100
shares) after the Reverse Split, as follows:
a) The Certain Stockholders are defined as holding, as of the Closing
date, 800 or fewer shares of common stock, but at least 100 shares
of common stock in Xerion.
b) Special Treatment is defined as follows: The Certain Stockholders
shall receive shares, newly issued or from treasury, from Xerion, at
no cost to these Certain Stockholders, equaling the amount of shares
necessary to bring their holding to 100 shares of common stock of
Xerion after the Reverse Split.
c) Persons holding less than 100 shares of common stock would not be
affected by the Reverse Split and shall continue to hold and own the
same number of shares as they possessed before the Reverse Split.
d) The Certain Stockholders shall be identified according to the
printed Shareholder List provided in the Xerion Schedules. Certain
Stockholders who are not listed on the Shareholder List due to their
not having their shares registered at time of Closing but which
evidence, within 180 days of Closing, to the board along with
written request from themselves or their broker for issuance of such
new shares that they qualify as a Certain Stockholder will be
afforded Special Treatment.
e) The new board, upon Closing, shall publicize the details of this
Special Treatment in a corporate news release and Form 8-K current
report.
f) Those Certain Stockholders appearing on the Shareholder List shall
automatically be mailed their new certificates within ninety days
subsequent to the execution of the Reverse Split.
g) Any other terms and conditions of Special Treatment to be afforded
to stockholders to preserve round lot stockholders, and determining
which
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stockholders may be eligible for such Special Treatment, will be determined
solely by the New Board.
5.10 The Shareholders and New Board of Xerion shall not approve a
reverse-split of Xerion's shares for a period of at least two years
subsequent to the Exchange, except for the Reverse Split provided for
herein and except in the instance that market conditions prevent Xerion
from achieving a per share price equaling the requisite per share price
for NASDAQ listing (as per paragraph 5.11) and institutional
investment, such as the purchase of Xerion stock for investment on the
open market by a mutual fund, estimated to be US$5.00 and US$8.00 per
share respectively, and Xerion is unable to meet the per share price
requirement necessary to obtain such listing and Institutional
Investment.
5.11 Upon Closing, the Shareholders agree to authorize and direct the New
Board of Xerion to apply all diligence and effort to prepare and apply for
listing ("Listing") on the NASDAQ Small Cap stock exchange, the American Stock
Exchange or other reputable and nationally listed North American stock exchange.
5.12 Reverse Stock Split. Promptly after the Closing, the assumption of
control of the New Board and the issuance of Xerion Stock, the Shareholders
shall approve a reverse stock split of one-for eight (1-for-8) (1 post-split
share equals 8 pre-split shares) of the then issued and outstanding shares of
the common stock of Xerion (referred to herein as the "Reverse Split"). The
resultant post-Reverse Split percentage of ownership of Xerion Stock will equal
approximately the structure expressed in schedule 2, with the only exceptions
being that of the possibility of the numbers being adjusted for fractional
shares.
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF XERION
The obligations of Xerion under this Agreement are subject to Xerion's
satisfaction at or prior to Closing of the following conditions:
6.1 Accuracy of Representations. The representations and warranties made
by Town House and the Shareholders 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 at and as of the Closing Date (except
for changes therein permitted by this Agreement), and Town House and the
Shareholders shall have performed or complied with all covenants and conditions
required by this Agreement to be performed or complied with by Town House and
the Shareholders prior to or at the Closing. Xerion shall be furnished with a
certificate, signed by a
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duly authorized officer of Town House and the Shareholders and dated the Closing
Date, to the foregoing effect.
6.2 Officer's Certificates. Xerion shall have been furnished with a
certificate dated the Closing Date and signed by a duly authorized officer of
Town House and the Shareholders to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of Town House or
the Shareholders threatened, which might result in an action to enjoin or
prevent the consummation of the transactions contemplated by this Agreement,
and, to the extent not disclosed in the Town House Schedules, by or against the
Shareholders or any of Town House and its Subsidiaries which might result in any
material adverse change in any of the assets, properties, business, or
operations of any of Town House and its Subsidiaries, individually or taken as a
whole.
6.3 No Material Adverse Change. Prior to the Closing Date, there shall not
have occurred any material adverse change in the financial condition, business,
or operations of any of Town House and its Subsidiaries, individually or taken
as a whole, nor shall any event have occurred which, with the lapse of time or
the giving of notice, may cause or create any material adverse change in the
financial condition, business, or operations of any of Town House and its
Subsidiaries.
6.4 Director Questionnaires. Xerion shall have received director
questionnaires completed and signed by each director to be designated and
elected as director of Xerion in form and substance reasonably satisfactory to
Xerion and its counsel which shall contain information for use by Xerion in
reporting the transaction contemplated hereby on Form 8-K and other documents to
be filed with the SEC.
6.5 Other Items.
(a) Xerion shall have received a Shareholders list of Town House
containing the name, address, and number of shares held by the Town
House Shareholders as of the date of Closing certified by an
executive officer of Town House as being true, complete, and
accurate.
(b) Xerion shall have received such further documents, certificates, or
instruments relating to the transactions contemplated hereby as
Xerion may reasonably request.
(c) Xerion shall have been furnished with the Consolidated US Financial
Statements not less than five days prior to the Closing.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF
TOWN HOUSE AND THE SHAREHOLDERS
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The obligations of Town House and the Shareholders under this Agreement
are subject to Town House's and the Shareholder's satisfaction at or prior to
Closing of the following conditions:
7.1 Accuracy of Representations. The representations and warranties made
by Xerion 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 Closing Date, and Xerion shall have performed and complied with all
covenants and conditions required by this Agreement to be performed or complied
with by Xerion prior to or at the Closing. Town House shall have been furnished
with a certificate, signed by a duly authorized executive officer of Xerion and
dated the Closing Date, to the foregoing effect.
7.2 Officer's Certificate. Town House shall have been furnished with a
certificate dated as of the Closing Date and signed by a duly authorized
executive officer of Xerion to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of Xerion
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
7.3 No Material Adverse Change. Prior to the Closing Date, there shall not
have occurred any material adverse change in the financial condition, business,
or operations of Xerion nor shall any event have occurred which, with the lapse
of time or the giving of notice, may cause or create any material adverse change
in the financial condition, business, or operations of Xerion.
7.4 Good Standing. Xerion shall have received a certificate of good
standing from the Secretary of State of the State of Colorado or other
appropriate office, dated as of a date within 10 days prior to the Closing Date
certifying that Xerion is in good standing as a corporation in the State of
Colorado.
(the remainder of this page intentionally left blank)
7.5 Other Items.
(a) Town House shall have received a shareholders' list of Xerion
("Shareholder List") from its transfer agent, current at least
within ten (10) days prior to Closing, containing the name and
number of shares held by each registered Xerion shareholder.
(b) Town House shall have received such further documents, certificates,
or instruments relating to the transactions contemplated hereby as
Town House may reasonably request.
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(the remainder of this page intentionally left blank)
ARTICLE VIII
TERMINATION
8.1 Termination.
(a) This Agreement may be terminated by the board of directors of either
Xerion or Town House at any time prior to the Closing Date if: (i)
there shall be any actual or threatened action or proceeding, that
is not frivolous, before any court or any governmental body which
shall seek to restrain, prohibit, or invalidate the transactions
contemplated by this Agreement and which, in the judgment of such
board of directors, made in good faith and based on the advice of
its legal counsel, makes it inadvisable to proceed with the exchange
contemplated by this Agreement; (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 such board of directors, 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 exchange; (iii) either party
identifies a serious material deficiency with the results of its
business, legal, and accounting due diligence regarding the other
conducted up to the Closing Date, or (iv) there shall have been any
material adverse change after the date of the latest balance sheet
of Xerion or financial condition of Xerion, which could have a
materially adverse affect on the value of the business of Xerion,
except any changes disclosed in the Xerion Schedules or allowed for
herein. In the event of termination pursuant to this paragraph (a)
of section 8.1, 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 by
action of the board of directors of Xerion if: (i) Town House 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 Town House contained herein shall
be inaccurate in any material respect; or (ii) there shall have been
a material adverse change between the previously delivered financial
statements and the yet to be delivered Consolidated US Balance Sheet
in the assets, properties, business, or financial condition of any
of Town House and its Subsidiaries, which could have a materially
adverse affect on the value of the business of any of Town House and
its Subsidiaries, individually and taken as a whole, except any
changes disclosed in the Town House Schedules. If this
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Agreement is terminated pursuant to this paragraph (b) of section
8.1, 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 by
action of the board of directors of Town House if Xerion 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 Xerion contained herein shall be
inaccurate in any material respect. If this Agreement is terminated
pursuant to this paragraph (c) of section 8.1, this Agreement shall
be of no further force or effect, and no obligation, right, or
liability shall arise hereunder, except that each party shall bear
its own costs incurred in connection with the negotiation,
preparation, and execution of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Brokers. Xerion, the Shareholders and Town House agree that there were
no finders or brokers, other than Etech Securities, Inc. involved in bringing
the parties together or who were instrumental in the negotiation, execution, or
consummation of this Agreement. Xerion, on one hand, and Town House and the
Shareholders on the other, agree to indemnify the other against any claim by any
third person for any commission, brokerage, or finders' fee arising from 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.
9.2 Governing Law. This Agreement shall be governed by, enforced, and
construed under and in accordance with the laws of the United States of America
and, with respect to matters of state law, with the laws of Colorado. Any
dispute arising under or in any way related to this Agreement will be submitted
to binding arbitration before a single arbitrator by the American Arbitration
Association in accordance with the Association's commercial rules then in
effect. The arbitration will be conducted in Los Angeles, California. The
decision of the arbitrator will set forth in reasonable detail the basis for the
decision and will be binding on the parties. The arbitration award may be
confirmed by any court of competent jurisdiction.
9.3 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if personally delivered or if sent by
courier or registered mail, both with copy by facsimile, addressed as follows:
If to Xerion: Xerion EcoSolutions Group Inc.
Suite 905, 102-4639 Main Street
Whistler, BC Canada VON 1B4
Telephone: 604-902-0718
Fax: 604-905-0931
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If to Town House or Shareholders:
Stephen A. Zrenda, Jr., Esq.
Stephen A. Zrenda, Jr., P.C.
100 N. Broadway Avenue, Suite 2440
Oklahoma City, OK 73102-8608
Telephone: 405.235.2111
Fax: 915.975.8003
Email: zrendaesq@aol.com
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 by courier or fax.
9.4 Attorney's 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 parties shall be responsible for their own costs.
9.5 Confidentiality. The parties will keep and use all nonpublic
information ("Confidential Information") in confidence solely for the purpose
set forth in this Agreement and will not disclose any part of Confidential
Information to any person, firm, corporation, or other entity. Confidential
Information includes, but is not limited to; all data and information obtained
with respect to another party or any subsidiaries thereof from any
representative, officer, director, or employee or other entity or from any books
or records or from personal inspection, or such other party. Other than provided
for herein, the parties shall not use Confidential Information or disclose the
same to others, except (i) to the extent such data or information is published
or is or becomes a matter of public knowledge other than by breach of this
Agreement, or is required by law to be published; and (ii) to the extent that
such data or information must be used or disclosed in order to consummate the
transactions contemplated by this Agreement.
9.6 Expenses of Stock Exchange. Except as otherwise provided for in
Section 8.1, Xerion and Town House agree that they will each bear their own
costs and expenses in negotiating and closing the transactions contemplated by
this Agreement, including but not limited to, attorneys' fees, accounting fees,
due diligence expenses, travel, printing, copying, mail, telephone and other
related expenses.
9.7 Third Party Beneficiaries. This contract is solely between Xerion, the
Shareholders and Town House and, except as specifically provided, no director,
officer, stockholder, employee, agent, independent contractor, or any other
person or entity shall be deemed to be a third party beneficiary of this
Agreement.
9.8 Entire Agreement. This Agreement represents the entire agreement
(including the exhibits or schedules hereto) between the parties relating to the
subject matter hereof, including 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.
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9.9 Survival. The representations, warranties, and covenants of the
respective parties shall survive the Closing Date and the consummation of the
transactions herein contemplated.
9.10 Counterparts. 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.
9.11 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 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, unless so delivered in writing. 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 parties whose signatures appear on this
Agreement..
9.12 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. All
monetary amounts stated in this Agreement are, unless specifically stated
otherwise, denominated in United States Dollars. The parties acknowledge and
agree with respect to their respective schedules that (i) the schedules may
include certain items and information solely for informational purposes for the
convenience of the parties hereto, (ii) each attachment referenced in a schedule
shall be deemed incorporated into and a part of such schedule.
9.14 Headings. The headings in this document are for reference only and
are not intended to be used to interpret the document. Further documentation, if
any, required to give force and effect to the spirit and intent of this
Agreement will be executed promptly.
9.15 Time and Transmission. Time shall of the essence in this Agreement.
The parties agree that executed copies of this Agreement transmitted and
received via facsimile shall be accepted as binding documents evidencing the
intention of the parties to be bound by the terms of this Agreement. The parties
agree to also send complete original copies by courier.
9.16 Validity. Should any part of this Agreement be declared or held
invalid for any reason, such validity shall not affect the validity of the
remainder which shall continue in full force and effect and be construed as if
this Agreement had been executed without the invalid portion and it is hereby
declared that the intention of
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the parties hereto that this Agreement should have been executed without
reference to any portion of which may be for any reason hereinafter declared or
held invalid.
9.17 Full Understanding. This Agreement contains the full and complete
agreement of the parties and supersedes all prior agreements, arrangements or
understandings, whether written or oral, relating thereto. This Agreement may
not be amended, modified or supplemented, and no provision or requirement hereof
may be waived, except by written instrument signed by the party to be charged.
There are no representations or warranties, expressed or implied, statutory or
otherwise, other than as expressly set forth or referred to herein.
[Signatures on Following Page.]
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IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly authorized,
as of the date first above-written and each page has been initialed by the
parties.
31
XERION ECOSOLUTIONS GROUP INC.
By:_____________________________________
Ben Traub
Chief Executive Officer and President
TOWN HOUSE LAND LIMITED
By:_____________________________________
Fang, Zhong
Chief Executive Officer and President
TOWN HOUSE LAND LIMITED'S SHAREHOLDERS:
________________________________________
Fang, Zhong
________________________________________
Hu Min
________________________________________
Fang, Wei-Jun
________________________________________
Fang, Hui's legal representative
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Schedule 1
to
STOCK EXCHANGE AGREEMENT
Dated October 17, 2005
The Xerion Stock of Xerion EcoSolutions Group Inc. to be issued under
section 1.1 and section 1.2 of the Stock Exchange Agreement shall be issued to
the following persons with a restrictive legend consistent with the Securities
Act of 1933, as amended:
Common Stock of Xerion
EcoSolutions Group Inc.
to be issued to the stockholders
of Town House Land
Limited and their designees Number of Shares Percentage
- --------------------------- ---------------- ----------
1. Fang, Zhong 181,439,200 79.816%
2. Hu, Min 6,201,340 2.728%
3. Fang, Wei-Jun 6,201,340 2.728%
4. Fang Hui's legal representative 6,201,340 2.728%
5. Belmont Capital Group Limited 8,751,891 3.85%
6. Hung Wan 991,123 0.436%
7. Stephen A. Zrenda, Jr. 1,623,078 0.714%
8. Etech Capital Group 9,092,974 4.0%
9. Liang, Rang Yi 3,978,132 1.75%
---------------- ----------
224,480,317 98.75%
---------------- ----------
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Schedule 2
to
STOCK EXCHANGE AGREEMENT
Dated October 17, 2005
Immediately subsequent to Closing, the Common Stock of Xerion EcoSolutions
Group Inc. will be Reverse Split at a one-for-eight ratio , as per section 5.12
of Article V of the Stock Exchange Agreement. All Xerion Stock issued shall bear
a restrictive legend consistent with the Securities Act of 1933, as amended. The
post Reverse Split shareholder structure for all parties receiving Xerion Stock
under the Stock Exchange Agreement will be as follows:
Common Stock of Xerion
EcoSolutions Group Inc.
to be issued to the stockholders
of Town House Land
Limited and their designees Number of Shares Percentage
- --------------------------- ---------------- ----------
1. Fang, Zhong 22,679,900 79.816%
2. Hu, Min 775,167 2.728%
3. Fang, Wei-Jun 775,167 2.728%
4. Fang Hui's legal representative 775,167 2.728%
5. Belmont Capital Group Limited 1,093,986 3.85%
6. Hung Wan 123,890 0.436%
7. Stephen A. Zrenda, Jr. 202,885 0.714%
8. Etech Capital Group 1,136,609 4.0%
9. Liang, Rang Yi 497,267 1.75%
---------------- ----------
28,060,040 98.75%
---------------- ----------
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