EXHIBIT 10.1
Securities Purchase Agreement
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of December 28, 2005 (this
"Agreement"), by and among Duluth Venture Capital Partners, LLC, a Minnesota
limited liability company (the "Seller") and the persons listed on Schedule A to
this Agreement (each a "Purchaser" and collectively, the "Purchasers"). The
Seller and each Purchaser are referred to herein as a "Party" and collectively,
as the "Parties".
BACKGROUND
The Seller is the owner of a convertible note, dated December 13, 2005
(the "Note"), in the principal amount of $127,428, which is convertible into
600,000 shares (the "Seller Shares") of the common stock of Equicap, Inc., a
Nevada corporation (the "Company"). The Seller desires to convert the Note and
sell all of the Seller Shares to the Purchasers. The Seller Shares will
represent at the Closing approximately 60.60% of the issued and outstanding
capital stock of the Company calculated on a fully-diluted basis. The Purchasers
desire to purchase all of the Seller Shares by purchasing the number of Seller
Shares set forth opposite his or its name on Schedule A.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein contained, the Company, the Seller and the Purchasers
hereby agree as follows:
1. Purchase and Sale.
The Seller shall convert the Note into Seller Shares and sell, transfer,
convey and deliver unto the Purchasers the Seller Shares, and each Purchaser
shall acquire and purchase from the Seller the number of Seller Shares set forth
opposite each such Purchaser's name on Schedule A to this Agreement.
2. Purchase Price.
(a) General. The gross purchase price (the "Purchase Price") for the
Seller Shares, in the aggregate, is Four Hundred Ninety Two Thousand, Five
Hundred Dollars ($492,500) payable as specified in this Section 2 subject to the
other terms and conditions of this Agreement.
(b) Payment at Closing. At the Closing, each Purchaser shall pay to
the Seller the portion of the Purchase Price set forth opposite such Purchaser's
name on Schedule A.
(c) Adjustment for Outstanding Liabilities. In the event that the
Company shall have any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for taxes ("Liability"), as of the Closing, the portion of the
Purchase Price payable at the Closing shall be reduced on a dollar for dollar
basis by the amount of such Liability and if any such Liability remains after
the Closing, then upon the demand of the Purchasers, the Seller shall
immediately pay to the Purchasers the amount of any such Liability in cash.
3. The Closing.
(a) General. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place by exchange of documents among the
Parties by fax or courier, as appropriate, following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) not later than December
23, 2005 or such other date as the Purchasers and the Seller may mutually
determine (the "Closing Date").
(b) Delivery of Certificates in Escrow. As soon as possible after
the date hereof, the Seller is delivering certificates (the "Certificates")
evidencing the Seller Shares held by the Seller to Thelen Reid & Priest LLP,
with offices at 701 Eighth Street, NW, Washington, DC 20001 (the "Escrow
Agent"). The Escrow Agent shall hold the Certificates in escrow until the
Closing at which time the Escrow Agent shall deliver the Certificates to the
Purchasers immediately after delivery to the Seller of the total Purchase Price
at Closing.
(c) Deliveries at the Closing. At the Closing: (i) the Seller shall
deliver to the Purchasers the various certificates, instruments, and documents
referred to in Section 10(a) below; (ii) the Purchasers shall deliver to the
Seller the various certificates, instruments, and documents referred to in
Section 10(b) below; (iii) the Purchasers shall deliver to the Seller the
Purchase Price, by wire transfer to an account specified by the Seller to the
Purchasers in writing in advance of the Closing; and (iv) the Seller shall
deliver to the Purchasers the Certificates, endorsed in blank or accompanied by
duly executed assignment documents and including a Medallion Guarantee.
4. Appointment of Purchaser Representative.
The Purchasers hereby irrevocably constitute and appoint, effective as of
the date hereof, Fountainhead Investments, Inc. (together with its permitted
successors, the "Purchaser Representative"), as their true and lawful agent and
attorney-in-fact to enter into any agreement in connection with the transactions
contemplated by this Agreement, to perform on behalf of the Purchasers any
obligations or undertakings thereunder, to exercise all or any of the powers,
authority and discretion conferred on it under any such agreement, to waive any
terms and conditions of any such agreement (other than the amount of the
Purchase Price), to give and receive notices on their behalf and to be their
exclusive representative with respect to any matter, suit, claim, action or
proceeding arising with respect to any transaction contemplated by any such
agreement; and the Purchaser Representative agrees to act as, and to undertake
the duties and responsibilities of, such agent and attorney-in-fact. This power
of attorney is coupled with an interest and irrevocable. The Purchaser
Representative shall not be liable for any action taken or not taken by him in
connection with his obligations under this Agreement as long as such actions are
taken or omitted in good faith and in the absence of willful misconduct or gross
negligence. If the Purchaser Representative shall be unable or unwilling to
serve in such capacity, his successor shall be named by those persons agreeing
to acquire more than fifty percent (50%) in interest of the Seller Shares
pursuant to this Agreement.
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5. Representations and Warranties of the Seller.
The Seller represents and warrants to the Purchasers that the statements
contained in this Section 5 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 5).
(a) The Seller has the power and authority to execute, deliver and
perform Seller's obligations under this Agreement and to sell, assign, transfer
and deliver to the Purchasers the Seller Shares as contemplated hereby. No
permit, consent, approval or authorization of, or declaration, filing or
registration with any governmental or regulatory authority or consent of any
third party is required in connection with the execution and delivery by Seller
of this Agreement and the consummation of the transactions contemplated hereby.
(b) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby or compliance with the
terms and conditions hereof by the Seller will violate or result in a breach of
any term or provision of any agreement to which Seller is bound or is a party,
or be in conflict with or constitute a default under, or cause the acceleration
of the maturity of any obligation of Seller under any existing agreement or
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller or any properties or assets of Seller.
(c) This Agreement has been duly and validly executed by Seller, and
constitutes the valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting creditors' rights generally or by
limitations, on the availability of equitable remedies.
(d) The Seller Shares are owned beneficially and of record by Seller
and are validly issued and outstanding, fully paid for and non-assessable with
no personal liability attaching to the ownership thereof. Seller owns the Seller
Shares free and clear of all liens, charges, security interests, encumbrances,
claims of others, options, warrants, purchase rights, contracts, commitments,
equities or other claims or demands of any kind (collectively, "Liens"), and
upon delivery of the Seller Shares to the Purchasers, the Purchasers will
acquire good, valid and marketable title thereto free and clear of all Liens.
The Seller is not a party to any option, warrant, purchase right, or other
contract or commitment that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of the Company (other than pursuant to
this Agreement). The Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
(e) The Company is a corporation in good standing duly incorporated
in the State of Nevada. The Company is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction where such qualification
is required. The Company has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on its business. The
Company has no subsidiaries and does not control any other subsidiaries,
directly or indirectly, or have any direct or indirect equity participation in
any other entity.
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(f) The Company's authorized capital stock, as of the date of this
Agreement and as of the Closing, consists of 500,000,000 shares of Common Stock,
$0.001 par value per share, of which 390,100 shares are issued and outstanding
and held by approximately 405 stockholders of which (i) 53,800 shares are
unrestricted and not held by affiliates, (ii) 36,300 shares are restricted but
subject to Rule 144 and not held by affiliates, and (iii) 300,000 shares are
restricted and held by the sole director and executive officer of the Company.
The Company has not reserved any shares of its Common Stock for issuance upon
the exercise of options, warrants or any other securities that are exercisable
or exchangeable for, or convertible into, Common Stock. All of the issued and
outstanding shares of Common Stock are validly issued, fully paid and
non-assessable and have been issued in compliance with applicable laws,
including, without limitation, applicable federal and state securities laws.
There are no outstanding options, warrants or other rights of any kind to
acquire any additional shares of capital stock of the Company or securities
exercisable or exchangeable for, or convertible into, capital stock of the
Company, nor is the Company committed to issue any such option, warrant, right
or security. There are no agreements relating to the voting, purchase or sale of
capital stock (i) between or among the Company and any of its stockholders, (ii)
between or among the Seller and any third party, or (iii) to the best knowledge
of the Seller between or among any of the Company's stockholders. The Company is
not a party to any agreement granting any stockholder of the Company the right
to cause the Company to register shares of the capital stock of the Company held
by such stockholder under the Securities Act. The stockholder list provided to
the Purchasers is a current shareholder list generated by its stock transfer
agent, and such list accurately reflects all of the issued and outstanding
shares of the Company's Common Stock.
(g) As of the date hereof the Company has total Liabilities of less
than $1,000, all of which Liabilities will be paid off at or prior to the
Closing and shall in no event become the Liability of the Purchasers or remain
the Liabilities of the Company following the Closing.
(h) There is no legal, administrative, investigatory, regulatory or
similar action, suit, claim or proceeding that is pending or, to the Seller's
knowledge, threatened against the Company.
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(i) During the period from January 1, 2000 through the date hereof,
the Company has filed or furnished (i) all reports, schedules, forms,
statements, prospectuses and other documents required to be filed with, or
furnished to, the Securities and Exchange Commission (the "SEC") by the Company
(all such documents, as amended or supplemented, are referred to collectively
as, the "Company SEC Documents") and (ii) all certifications and statements
required by (x) Rule 13a-14 or 15d-14 under the Exchange Act, or (y) 18 U.S.C.
ss.1350 (Section 906 of the Sarbanes-Oxley act of 2002) with respect to any
applicable Company SEC Document (collectively, the "SOX Certifications"). The
Company has made available to the Purchasers all SOX Certifications and comment
letters received by the Company from the staff of the SEC and all responses to
such comment letters by or on behalf of the Company. Through the date hereof,
the Company complied in all respects with its SEC filing obligations under the
Exchange Act and the Securities Act, as a reporting issuer under Section 12g of
the Exchange Act. Each of the audited financial statements and related schedules
and notes thereto and unaudited interim financial statements of the Company
(collectively, the "Company Financial Statements") contained in the Company SEC
Documents (or incorporated therein by reference) were prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis ("GAAP") (except in the case of interim unaudited financial
statements) except as noted therein, and fairly present in all respects the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations, cash
flows and changes in stockholders' equity for the periods then ended, subject
(in the case of interim unaudited financial statements) to normal year-end audit
adjustments (the effect of which will not, individually or in the aggregate, be
adverse) and, such financial statements complied as to form as of their
respective dates in all respects with applicable rules and regulations of the
SEC. The financial statements referred to herein reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. No financial
statements of any Person not already included in such financial statements are
required by GAAP to be included in the consolidated financial statements of the
Company. As of their respective dates, each the Company SEC Document was
prepared in accordance with and complied with the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and regulations
thereunder, and the Company SEC Documents (including all financial statements
included therein and all exhibits and schedules thereto and all documents
incorporated by reference therein) did not, as of the date of effectiveness in
the case of a registration statement, the date of mailing in the case of a proxy
or information statement and the date of filing in the case of other the Company
SEC Documents, contain any untrue statement of a fact or omit to state a fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Neither the Company nor, to the Company's knowledge, any of its officers has
received notice from the SEC or any other governmental authority questioning or
challenging the accuracy, completeness, content, form or manner of filing or
furnishing of the SOX Certifications. The Company is a reporting issuer pursuant
to Section 12g of the Exchange Act.
(j) The Company has properly filed all federal, state and local tax
returns and has paid all taxes, assessments and penalties due and payable. All
such tax returns were complete and correct in all respects as filed, and no
claims have been assessed with respect to such returns. There are no present,
pending, or threatened audit, investigations, assessments or disputes as to
taxes of any nature payable by the Company or any of its subsidiaries, nor any
tax liens whether existing or inchoate on any of the assets of the Company or
any of its subsidiaries, except for current year taxes not presently due and
payable. No IRS or foreign, state, county or local tax audit is currently in
progress. Neither the Company nor any of its subsidiaries has waived the
expiration of the statute of limitations with respect to any taxes. There are no
outstanding requests by the Company or any of its Subsidiaries for any extension
of time within which to file any tax return or to pay taxes shown to be due on
any tax return.
(k) The Company maintains limited operations and does not employ any
employees and does not maintain any employee benefit or stock option plans.
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(l) Since December 31, 2004, there has not been any event or
condition of any character which has adversely affected, or may be expected to
adversely affect, the Company's business or prospects, including, but not
limited to any adverse change in the condition, assets, liabilities (existing or
contingent) or business of the Company from that shown in the financial
statements of the Company included in its annual report on Form 10-KSB filed for
the year ended December 31, 2004.
(m) The Company has complied in all material respects with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of all governmental
authorities, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against the
Company alleging any failure so to comply. To the knowledge of the Seller,
neither the Company, nor any officer, director, employee, consultant or agent of
the Company has made, directly or indirectly, any payment or promise to pay, or
gift or promise to give or authorized such a promise or gift, of any money or
anything of value, directly or indirectly, to any governmental official,
customer or supplier for the purpose of influencing any official act or decision
of such official, customer or supplier or inducing him, her or it to use his,
her or its influence to affect any act or decision of a governmental authority
or customer, under circumstances which could subject the Company or any
officers, directors, employees or consultants of the Company to administrative
or criminal penalties or sanctions.
(n) No representation or warranty by the Seller in this Agreement,
nor in any certificate, schedule or exhibit delivered or to be delivered
pursuant to this Agreement contains or will contain any untrue statement of
material fact, or omits or will omit to state a material fact necessary to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading.
6. Representations and Warranties of the Purchasers.
Each Purchaser represents and warrants to the Seller as follows:
(a) Each Purchaser has full power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. This Agreement
constitutes a valid and binding obligation of each Purchaser enforceable in
accordance with its terms, except as (i) the enforceability hereof may be
limited by bankruptcy, insolvency or similar laws affecting the enforceability
of creditor's rights generally and (ii) the availability of equitable remedies
may be limited by equitable principles of general applicability.
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, nor compliance by any
Purchaser with any of the provisions hereof will: violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien upon any of the properties or assets of
Purchaser under any of the terms, conditions or provisions of any material note,
bond, indenture, mortgage, deed or trust, license, lease, agreement or other
instrument or obligation to which he is a party or by which he or any of his
properties or assets may be bound or affected, except for such violations,
conflicts, breaches or defaults as do not have, in the aggregate, any material
adverse effect; or violate any material order, writ, injunction, decree,
statute, rule or regulation applicable to Purchaser or any of its properties or
assets, except for such violations which do not have, in the aggregate, any
material adverse effect.
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(c) Each Purchaser is acquiring the Seller Shares for his own
account for investment and not for the account of any other person and not with
a view to or for distribution, assignment or resale in connection with any
distribution within the meaning of the Securities Act. Each Purchaser agrees not
to sell or otherwise transfer the Seller Shares unless they are registered under
the Securities Act and any applicable state securities laws, or an exemption or
exemptions from such registration are available. Each Purchaser has knowledge
and experience in financial and business matters such that he is capable of
evaluating the merits and risks of acquiring the Seller Shares.
(d) No permit, consent, approval or authorization of, or
declaration, filing or registration with any governmental or regulatory
authority or the consent of any third party is required in connection with the
execution and delivery by Purchaser of this Agreement and the consummation of
the transactions contemplated hereby.
7. Brokers and Finders.
There are no finders and no parties shall be responsible for the payment
of any finders' fees other than as specifically set forth herein. Other than the
foregoing, neither the Seller nor the Company, nor any of their respective
directors, officers or agents on their behalf, have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or financial advisory services or other similar payment in
connection with this Agreement.
8. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its best efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 10 below).
(b) Notices and Consents. The Seller will cause the Company to give
any notices to third parties, and will cause the Company to use its best efforts
to obtain any third party consents, that the Purchaser Representative may
reasonably request. Each of the Parties will (and the Seller will cause the
Company to) give any notices to, make any filings with, and use its best efforts
to obtain any authorizations, consents, and approvals of governmental
authorities necessary in order to consummate the transactions contemplated
hereby. The parties acknowledge that SEC Rule 14f-1 requires that an information
statement containing certain specified disclosures be filed with the Securities
and Exchange Commission and mailed to the Company's stockholders at least 10
days before any person designated by the Purchasers can become a director of the
Company. The Purchasers and the Seller agree to cooperate fully with the Company
in the preparation and timely filing of such information as soon as practicable
following the Closing and with respect to the preparation and filing of a Form
8-K under the Exchange Act, regarding the change of control of the Company, when
such change of control occurs, and to provide all information therefor
respectively needed from them in a timely manner, so as not to cause undue delay
in the filing of the information statement or the Form 8-K or any amendment
thereto. Otherwise, the Seller is not aware of any third party consent nor other
filing or notice to third parties that is necessary in respect of this
Agreement.
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(c) Operation of Business. The Seller will not cause or permit the
Company to engage in any practice, take any action, or enter into any
transaction except for ministerial matters necessary to maintain the Company in
good standing and to arrange for the filing of all necessary reports required
under the Securities Exchange Act to make the Company a reporting company.
Without limiting the generality of the foregoing, the Seller will not cause or
permit the Company to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or otherwise
acquire any of its capital stock except as otherwise expressly specified herein,
(ii) issue, sell, or otherwise dispose of any of its capital stock, or grant any
options, warrants, preemptive or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital stock, (iii) make any
capital expenditures, loans, or incur any other obligations or liabilities, (iv)
enter into any agreements involving expenditures individually, or in the
aggregate, of more than $1,000 (other than agreements for professional services
which will be paid in full at or prior to the Closing), (v) enter into any
agreement or incur any other commitment or (vi) otherwise engage in any
practice, take any action, or enter into any transaction that is inconsistent
with the transactions contemplated hereby.
(d) Preservation of Business. The Seller will cause the Company to
keep its business and properties substantially intact until the Closing.
(e) Notice of Developments. The Seller will give prompt written
notice to the Purchaser Representative of any material adverse development
causing a breach of any of the representations and warranties in Section 5
above. No disclosure by any Party pursuant to this Section, however, shall be
deemed to amend or supplement the disclosures contained in the Schedules hereto
or to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(f) Exclusivity. The Seller shall not, directly or indirectly, (i)
solicit, initiate, or encourage the submission of any proposal or offer from any
person relating to the acquisition of the Seller Shares or any capital stock or
other voting securities, or any assets (including any acquisition structured as
a merger, consolidation, or share exchange) of the Company or (ii) participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any person to do or seek any of the foregoing. The Seller
will vote the shares of the Company's Common Stock held by it in favor of any
such acquisition structured as a merger, consolidation, or share exchange. The
Seller shall notify the Purchaser immediately if any person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
9. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
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(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party may
reasonably request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 11 below). The Seller acknowledges and agree that from and after the
Closing the Purchasers will be entitled to possession of all documents, books,
records (including tax records), agreements, and financial data of any sort
relating to the Company.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, the other Party will cooperate with
him or it and his or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 11 below).
10. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Purchaser.
The obligation of the Purchasers to consummate the transactions to be
performed by the Purchasers in connection with the Closing are subject to
satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 5
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Seller shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
(iii) the Company shall have procured all of the third party
consents required in order to effect the Closing;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Purchasers to own
the Seller Shares and to control the Company, or (D) affect adversely the right
of the Company to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
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(v) the Seller shall have delivered to the Purchasers a
certificate to the effect that (A) each of the conditions specified above in
Section 10(a)(i)-(iv) is satisfied in all respects, and (B) as of the Closing,
the Company has no Liabilities;
(vi) The Seller shall have converted the Note into the Seller
Shares and the Seller shall have caused the Company to file a current report on
Form 8-K disclosing the issuance of the Seller Shares and the Seller shall have
filed any reports or schedules required to be filed by the Seller under
applicable federal securities laws;
(vii) The Purchasers shall have received an opinion of counsel
to the Seller providing that (A) all of the Seller Shares and all other
outstanding shares were validly issued, are fully paid and non-assessable and
were issued in compliance with all laws, including, without limitation,
applicable federal and state securities laws, (B) all outstanding shares of the
Company's common stock (other than control shares held by affiliates of the
Company) may be transferred freely pursuant to Rule 144(k), and (C) no consents
or notices are required to be given under any applicable laws in connection with
the transactions contemplated by this Agreement;
(viii) the Purchasers shall have received the resignation of
the Company's sole director and executive officer, which resignation shall be
effective as of the Closing with respect to all of the executive offices held,
and shall be effective as of the 10th day following the filing with the
Securities and Exchange Commission and mailing to stockholders of the
information statement that complies with the requirements of Rule 14f-1. Such
information statement will be filed by the Company as soon as practicable
following the Closing. The Purchasers shall have appointed Purchasers' designees
as officers of the Company. The designee of the Purchasers who may be lawfully
appointed to the Board of Directors of the Company as of the Closing shall have
been appointed.
(ix) there shall not have been any occurrence, event,
incident, action, failure to act, or transaction since December 31, 2004 which
has had or is reasonably likely to cause a material adverse effect on the
business, assets, properties, financial condition, results of operations or
prospects of the Company;
(x) the Purchasers shall have completed their business,
accounting and legal due diligence review of the Company, and the results
thereof shall be consistent with the reports filed by the Company with the
Securities and Exchange Commission, which reports have already been reviewed by
the Purchasers;
(xi) the Purchasers shall have received such pay-off letters
and releases relating to Liabilities as they shall have requested and such
pay-off letters shall be in form and substance satisfactory to the Purchasers;
(xii) the Purchasers shall have conducted UCC, judgment lien
and tax lien searches with respect to the Company, the results of which indicate
no liens on the assets of the Company;
(xiii) the Seller shall have delivered to the Company copies
of the Company's Certificate of Incorporation and bylaws, both as amended to the
Closing Date, certified by the Secretary of the Company, resolutions adopted by
the Board of Directors of the Company appointing the Purchasers designee as
director and officer of the Company and authorizing such other action as the
Purchaser's may reasonably require and the Seller shall have delivered to the
Purchasers the Company's original minute book and corporate seal and all other
original corporate documents and agreements;
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(xiv) the Seller shall deliver to the Purchasers confirmation
that the Company is in Good Standing in Nevada.
(xv) the Company shall have maintained at and immediately
after the Closing its status as a company whose Common Stock is quoted on the
OTC Bulletin Board; and
(xvi) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to the
Purchasers.
(xvii) at the Closing, there shall be no more than 990,100
shares of the Company's Common Stock issued and outstanding.
The Purchasers may waive any condition specified in this Section 10(a) at
or prior to the Closing in writing executed by the Purchasers.
(b) Conditions to Obligation of the Seller.
The obligations of the Seller to consummate the transactions to be
performed by it in connection with the Closing are subject to satisfaction of
the following conditions:
(i) the representations and warranties set forth in Section 6
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Purchasers shall have performed and complied with all
of their covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(iv) the Purchasers shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in Section
10(b)(i)-(iii) is satisfied in all respects;
(v) all actions to be taken by the Purchasers in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to the Seller.
11
The Seller may waive any condition specified in this Section 10(b) at or
prior to the Closing in writing executed by the Seller.
11. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties shall survive the Closing
hereunder (even if a Party knew or had reason to know of any misrepresentation
or breach of warranty by another Party at the time of Closing) and continue in
full force and effect for a period of twenty four months thereafter.
(b) Indemnification Provisions for Benefit of the Purchasers.
(i) In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean the Seller has breached) any
of its representations, warranties, and covenants contained herein, and, if
there is an applicable survival period pursuant to Section 11(a) above, provided
that the Purchasers make a written claim for indemnification against the Seller
within such survival period, then the Seller shall indemnify the Purchasers from
and against the entirety of any Adverse Consequences the Purchasers may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Purchasers may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach). For purposes of this Agreement,
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, taxes, Liens, losses, lost value,
expenses, and fees, including court costs and attorneys' fees and expenses.
(ii) The Seller shall indemnify the Purchasers from and
against the entirety of any Adverse Consequences the Purchasers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
Liability of the Company (whether or not accrued or otherwise disclosed) (x) for
any taxes of the Company with respect to any tax year or portion thereof ending
on or before the Closing Date (or for any Tax year beginning before and ending
after the Closing Date to the extent allocable to the portion of such period
beginning before and ending on the Closing Date) and (y) for the unpaid taxes of
any Person (other than the Company) under Section 1.1502-6 of the Regulations
adopted under the Code (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(iii) The Seller shall indemnify the Purchasers from and
against the entirety of any Liabilities arising out of the ownership of the
Shares or operation of the Company prior to the Closing.
(iv) The Seller shall indemnify the Purchasers from and
against the entirety of any Adverse Consequences the Purchasers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
indebtedness or other Liabilities of the Company existing as of the Closing
Date.
12
(c) Indemnification Provisions for Benefit of the Seller. In the
event the Purchasers breach (or in the event any third party alleges facts that,
if true, would mean the Purchasers has breached) any of its representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to Section 11(a) above, provided that the Seller makes
a written claim for indemnification against the Purchasers within such survival
period, then the Purchasers shall indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller may suffer through and after the
date of the claim for indemnification (including any Adverse Consequences the
Seller may suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 11, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within 10 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 11(d)(ii) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).
13
(iv) In the event any of the conditions in Section 11(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses), and (C) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 11.
(v) Other Indemnification Provisions. The Seller hereby
indemnifies the Purchasers against any and all claims that may be filed by a
current or former officer, director or employee of the Seller by reason of the
fact that such person was a director, officer, employee, or agent of the Company
or was serving the Company at the request of the Seller or the Company as a
partner, trustee, director, officer, employee, or agent of another entity,
whether such claim is for accrued salary, compensation, indemnification,
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement, or otherwise) with respect to any action,
suit, proceeding, complaint, claim, or demand brought against the Company
(whether such action, suit, proceeding, complaint, claim, or demand is pursuant
to an agreement, applicable law, or otherwise).
12. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(b) the Purchasers and the Seller may terminate this Agreement by
mutual written agreement at any time prior to the Closing;
(c) the Purchasers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if (A) the Seller has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect and the Purchasers have notified the Seller of
the breach, and the breach has continued without cure for a period of 2 days
after the notice of breach; and (B) if the Closing shall not have occurred on or
before January 31, 2006 by reason of the failure of any condition precedent
under Section 10(a) hereof (unless the failure results primarily from the
Purchasers themselves breaching any representation, warranty, or covenant
contained in this Agreement) ; and
(d) the Seller may terminate this Agreement by giving written notice
to the Purchasers at any time prior to the Closing (A) in the event the
Purchasers has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Seller has notified the
Purchasers of the breach, and the breach has continued without cure for a period
of 2 days after the notice of breach; or (B) if the Closing shall not have
occurred on or before January 31, 2006, by reason of the failure of any
condition precedent under Section 10(b) hereof (unless the failure results
primarily from the Seller itself breaching any representation, warranty, or
covenant contained in this Agreement).
14
(e) Effect of Termination. If this Agreement terminates pursuant to
this Section 12, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party, except for any
Liability of a Party that is then in breach.
13. Miscellaneous.
(a) Facsimile Execution and Delivery. Facsimile execution and
delivery of this Agreement is legal, valid and binding execution and delivery
for all purposes.
(b) Press Releases and Public Announcements. Neither the Seller nor
the Purchasers shall (and the Seller shall cause the Company not to) issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Purchasers; provided,
however, that the Parties acknowledge that the Company may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the Seller will use their best efforts to advise the other Parties prior to
making the disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Purchasers and the Seller; provided, however, that the
Purchasers may (i) assign any or all of its rights and interests hereunder to
one or more of its Affiliates, and (ii) designate one or more of its Affiliates
to perform its obligations hereunder, but no such assignment shall operate to
release Purchasers or a successor from any obligation hereunder unless and only
to the extent that Seller agrees in writing.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
15
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient at their
addresses as specified on the signature page hereto, and, in the case of the
Purchasers, to the Purchaser Repreentative.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Purchasers and the Seller or their respective representatives. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties and the Company will bear his or
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Seller agrees that the Company has not borne or will not bear any of the
Seller's costs and expenses (including any of his legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
16
(m) 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 or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. The Parties intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant. Nothing
in the disclosure Schedules attached hereto shall be deemed adequate to disclose
an exception to a representation or warranty made herein, however, unless the
disclosure Schedules identifies the exception with particularity and describes
the relevant facts in detail. Without limiting the generality of the foregoing,
the mere listing (or inclusion of a copy) of a document or other item in the
disclosure Schedules or supplied in connection with the Purchasers' due
diligence review, shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself).
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 13(p) below), in addition to any other remedy to which they may
be entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in New York County, New York,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Any Party may make service on any other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 13(h)
above. Nothing in this Section 13(p), however, shall affect the right of any
Party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or at equity. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or at equity.
[signature pages follow]
17
[Seller Signature Page]
IN WITNESS WHEREOF, the undersigned Seller has duly executed this
Agreement the date first above written.
DULUTH VENTURE CAPITAL PARTNERS, LLC
By /s/ William Wilkinson
-----------------------------------
Name: William Wilkinson
Title:Managing Member
Address: 60 South Sixth Street
Suite 3000
Minneapolis Minnesota 55042
18
[Purchaser Signature Page]
IN WITNESS WHEREOF, each of the undersigned Purchasers has duly executed
this Agreement the date first above written.
LA PERGOLA INVESTMENTS LTD.
By: /s/ David Cantor
----------------------------------
Name: David Cantor
Title:Principal
19
[Purchaser Signature Page]
IN WITNESS WHEREOF, each of the undersigned Purchasers has duly executed
this Agreement the date first above written.
FOUNTAINHEAD INVESTMENTS, INC.
By: /s/ Peter Zachariou
----------------------------------
Name: Peter Zachariou
Title:Principal
20
[Purchaser Signature Page]
IN WITNESS WHEREOF, each of the undersigned Purchasers has duly executed
this Agreement the date first above written.
GAHA VENTURES, LLC
By: /s/ Jodi Kirsch
----------------------------------
Name: Jodi Kirsch
Title:Principal
21
[Purchaser Signature Page]
IN WITNESS WHEREOF, each of the undersigned Purchasers has duly executed
this Agreement the date first above written.
G4, LLC
By:
----------------------------------
Name:
Title:
22
[Signature Page for Purchaser Representative]
IN WITNESS WHEREOF, the undersigned Purchaser Representative has duly
executed this Agreement with respect to the obligations set forth in Section 4
of this Agreement only as of the date first above written.
PURCHASER REPRESENTATIVE
FOUNTAINHEAD INVESTMENTS, INC.
By:
----------------------------------
Name: Peter Zachariou
Title: Principal
23
SCHEDULE A
PURCHASERS
- ----------------------------------------- ------------------------------------- --------------------------------------
Name and Address Number of Seller Shares Being
of Purchaser Amount Paid Acquired
- ----------------------------------------- ------------------------------------- --------------------------------------
La Pergola Investments Ltd. $137,900 174,333
Portman House
Hue Street
St Helier, Jersey
- ----------------------------------------- ------------------------------------- --------------------------------------
Fountainhead Investments, Inc. $177,300 222,334
8618 West 3rd Street, Los Angeles, CA
90048
- ----------------------------------------- ------------------------------------- --------------------------------------
Gaha Ventures, LLC $88,650 114,333
25 Elm Street
Woodbury NY 11797
- ----------------------------------------- ------------------------------------- --------------------------------------
G4, LLC $88,650 108,000
57 Rofay Drive
East Northport, NY 11731
- ----------------------------------------- ------------------------------------- --------------------------------------