SHARE EXCHANGE AGREEMENT
AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND SHARE EXCHANGE AND PLAN OF REORGANIZATION with
Allstate Shareholders (this "Agreement") is made and entered into as of July 29,
2006, by and among Shearson Financial Network, Inc. a Nevada corporation, (the
"Company" or "Shearson"); and Allstate Home Loans, Inc. a California corporation
("Allstate"), and Gregg Shanberg, the sole shareholder of Allstate (the
"Allstate Shareholder"), (Allstate, the Allstate Shareholder and the Company are
collectively referred to herein as the "Parties"), with reference to the
following facts:
RECITALS
A. WHEREAS, the Company is a publicly traded corporation engaged in
the business of mortgage banking, and Allstate is a shareholder of a privately
held corporation engaged in the business of mortgage banking with a total of 12
branches located in the United States.
B. WHEREAS, Allstate Shareholder owns 1,000 shares of common stock
of Allstate (the "Allstate Shares") which constitutes all of the issued and
outstanding shares of common stock of Allstate.
C. WHEREAS, the Company desires to purchase eighty five percent of
the Allstate Shares from the Allstate Shareholder and Allstate Shareholder
desires to sell, transfer and assign exchange eighty five percent of the
Allstate Shares for shares of common stock of Company;
D. WHEREAS, for United States federal income tax purposes, it is
intended that the transaction contemplated by this Agreement shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that this Agreement shall be, and is
hereby, adopted as a "plan of reorganization" for purposes of Section 368(a) of
the Code; and
E. WHEREAS, the Parties have determined it to be in their best
interest for Allstate to surrender and transfer 850 shares of its Common Stock
to the Company under the exemption made available pursuant to Section 4 of the
Securities Act of 1933, as amended (the "Securities Act");
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the Parties agree as follows:
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ARTICLE I
EXCHANGE OF THE SHARES AND CONSIDERATION
1.1 Shares Being Exchanged. Subject to the terms and conditions of this
Agreement, at the closing provided for in Section 2 hereof (the "Closing"), the
Company shall sell, assign, transfer and deliver to Allstate Shareholder two
million dollars ($2,000,000) worth of shares of the Company's common stock at a
price of $0.025 per share based on the closing price of the shares of the
Company on the date hereof, for a total of eighty million shares (80,000,000)
the shares of Company common stock sold, assigned and transferred to Allstate
hereunder are hereinafter referred to as the "Company Shares". The Company shall
make its best efforts to file a registration statement with the SEC within six
months from the date of this agreement.
1.2 Consideration. Subject to the terms and conditions of this Agreement
and in consideration of the sale, assignment, transfer and delivery of the
Company Shares to Allstate Shareholder, at the Closing Allstate Shareholder
shall sell, transfer, assign and deliver to the Company 850 shares of Allstate
common stock (the shares of Allstate's common stock issued, sold and delivered
to the Company hereunder are hereinafter referred to as the "Allstate Shares")
and shall also deliver to the Company duly executed stock powers for sale,
transfer and assignment of the Allstate Shares.
1.3 Promptly after its receipt from the Company of the Allstate shares,
Allstate hereby agrees to cancel the shares and issue new shares of like amount
in the name of the Company.
1.4 Additionally, Allstate shall include for the benefit of the Company
items as per attached (Exhibit A).
1.5 Allstate and the Company mutually agree that the existing working
capital presently on the books ( Exhibit B) shall remain as working capital.
1.6 Allstate currently hold a total of 33 state licenses to do business as
a mortgage broker and/or banker which shall become the property of the Company
upon the Company filing the proper notices with the respective authorities.
(Exhibit C).
1.7 Allstate and the Company mutually agree that any money being held by a
warehouse line shall be the property of Shearson and shall remain for the
benefit of Shearson paying off any contingent liabilities of the Company" we
should probably define "contingent liabilities. Although these funds may be used
in the normal course of business as working capital, after twelve months, should
there be funds left over after settling of all contingent liabilities derived
from EPD/Buybacks, then those remaining funds will be paid to Allstate
shareholders within 30 days. In the event there is a deficit amount available
from the warehouse lines such that the amounts owing from EPD/Buybacks is
greater than the funds available from the warehouse lines, then Shearson will
have the right to offset said amounts from the previous shareholders by reducing
the number of shares Allstate shareholders receive. The formula for said
reduction will be for each dollar of deficit amount owing, Allstate shareholders
shall return eighty (80) shares of Shearson stock.
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1.8 The Company shall assume 50% of the debt owed to the Allstate
Shareholder which shall be no greater than $1.25 million dollars and as
noted on Exhibit F attached. The Company, at its sole option, may
immediately convert said debt any time after the closing, to three
thousand (3,000) shares of Series A-1 Convertible Preferred Stock of the
Company with a value of $400.00 per share. Said shares shall have a
liquidation preference such that upon the investment funding by Barron
Partners (or another such investment company in an amount in excess of ten
million dollars) into the Company, holder may require the Company to
liquidate the Series A-1 Convertible Preferred Stock into $1.25 million
dollars in cash from the proceeds from said funding. In the event the
Company does not secure an investment by Barron Partners (or another such
investment company) within six months from the date of this agreement,
then the holders will have the right to convert the Series A-1 Convertible
Preferred Shares into common stock at the conversion price of $0.025 per
share for a total of 48 million shares. The Company will use its best
efforts to cause a registration statement to be filed pursuant to the
conversion of the shares into common stock.
ARTICLE II
CLOSING
2.1 Time and Place. Subject to the provisions of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Shearson Financial Network, Inc., 6330 S. Sandhill
Rd., Suite 6, Las Vegas, Nevada 89120, on July 29, 2006 (the "Closing Date") or
at such other place and on such other date as is mutually agreeable to the
Parties.
ARTICLE III
CLOSING DELIVERIES
3.1 Closing Deliveries. At the Closing, each of the Parties shall make the
Closing deliveries required of it pursuant to Article IX of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the written disclosure schedule attached
hereto as (Exhibit A) dated as of the date hereof prepared by the Company,
signed by the President and Chief Financial Officer of the Company and delivered
to Allstate and the Allstate Shareholder simultaneously with the execution
hereof (the "Company Disclosure Schedule"), the Company represents and warrants
to Allstate and the Allstate Shareholder that all of the statements contained in
this Article IV are true and correct as of the date of this Agreement (or, if
made as of a specified date, as of such date) and will be true, complete and
correct as of the Closing Date (or if made as of a specified date, as of such
date). Each exception set forth in the Disclosure Schedule and each other
response to this Agreement set forth in the Disclosure Schedule is identified by
reference to, or has been grouped under a heading referring to, a specific
individual section of this Agreement and relates only to such section except to
the extent that one portion of the Disclosure Schedule specifically refers to
another portion thereof, identifying such other portion by section reference or
similar specific cross-reference.
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4.1 Organization and Qualification.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the state of Nevada and has the requisite
corporate power and authority to carry on its business as it is now being
conducted. There is no pending or threatened proceeding for the dissolution or
liquidation of the Company.
(b) The Company (i) does not, directly or indirectly, own any
interest in any corporation, partnership, joint venture, limited liability
Company, or other Person and (ii) is not subject to any obligation or
requirement to provide funds to or to make any investment (in the form of a
loan, capital contribution or otherwise) in or to any Person. For purposes of
this Agreement, "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, government, entity or any group comprised of one or
more of the foregoing.
(c) The Company is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the nature of its business or the
properties owned or leased by it makes such qualification or licensing
necessary, except for any such jurisdiction where the failure to so qualify or
be licensed, individually and in the aggregate for all such jurisdictions, would
not reasonably be expected to have a Material Adverse Effect. For purposes of
this Agreement, "Material Adverse Effect" means an action, event or occurrence
if it has, or could reasonably be expected to have, a material adverse effect on
the capitalization, financial condition or results of operations of the person
or entity in question. Any item or event susceptible of measurement in monetary
terms which, when considered together with similar items or events, does not
exceed the amount of $25,000, shall not be considered a Material Adverse Effect.
(d) The Company has provided or will, promptly following the date of
this Agreement, provide to Allstate complete and accurate copies of the Articles
of Incorporation and Bylaws of the Company, as currently in effect, and minutes
and other records of the meetings and other proceedings of the Board of
Directors of the Company. The Company is not in violation of any provisions of
its Articles of Incorporation or Bylaws.
4.2 Capitalization.
(a) The authorized capital stock of the Company consists of
500,000,000 shares of Common Stock, $0.001 par value per share, of which
96,407,839 shares are issued and outstanding. All issued and outstanding shares
of Company Common Stock are validly issued and outstanding, fully paid and
nonassessable and free of preemptive rights. With respect to other shares of
Company Common Stock, (i) there are no shares of capital stock or other equity
securities of the Company outstanding and, (ii) there are no outstanding
options, warrants, subscription rights (including any preemptive rights), calls,
or commitments, or convertible notes or instruments of any character whatsoever
to which the Company is a party or is bound, requiring or which could require
the issuance, sale or transfer by the Company of any shares of capital stock of
the Company or any securities convertible into or exchangeable or exercisable
for, or rights to purchase or otherwise acquire, any shares of capital stock of
the Company. There are no stock appreciation, phantom stock or similar rights
relating to the Company.
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(b) All of the shares of Company Common Stock issued and outstanding
immediately prior to the Closing have been issued in compliance with applicable
federal and state securities laws in reliance on exemptions from registration or
qualification thereunder.
4.3 Authority. The Company has the requisite corporate power and authority
to enter into this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms.
4.4 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement and any instrument
required hereby to be executed and delivered by the Company at the Closing does
not, and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Articles of Incorporation or Bylaws of the Company; or (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or by which it or any of its properties is bound or
affected; or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default), or impair in
any material respect the Company's rights or materially alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of any note, bond,
mortgage, indenture, deed of trust, lease, permit, concession, franchise,
license, agreement or other instrument or obligation to which the Company is a
party or to which the properties or assets of the Company are subject, or (iv)
result in the creation of any security interest, lien, claim, pledge, agreement,
limitation on voting rights, charge or other encumbrance of any material nature
(collectively, "Liens") on any of the properties or assets of the Company
pursuant to any Company Agreement (as defined in Section 4.11 below).
(b) The execution and delivery of this Agreement and any instrument
required hereby to be executed and delivered by the Company at the Closing does
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court, administrative or regulatory agency or commission or other
governmental authority or instrumentality (whether domestic or foreign, a
"Governmental Entity").
(c) The consent of, or the delivery of notice to or filing with, any
party to a Company Agreement (as defined in Section 4.11 below) is not required
for the execution and delivery by the Company of this Agreement or the
consummation of the transactions contemplated by this Agreement.
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4.5 Compliance; Permits.
(a) The Company is not in conflict with, or in default or violation
of (and has not received any notices of violation. with respect to), any law,
rule, regulation, order, judgment or decree applicable to the Company or by
which it or any of its properties is bound or affected, and the Company has no
knowledge of any such conflict, default or violation thereunder, except in each
case for any such conflicts, defaults or violations that is not currently having
or would not have a Material Adverse Effect on the Company.
(b) The Company holds all permits, licenses, easements, variances,
exemptions, consents, certificates, authorizations, registrations, orders and
other approvals from Governmental Entities that are material to the operation of
the business of the Company as it is now being conducted (collectively, the
"Company Permits"). The Company Permits are in full force and effect, have not
been violated in any respect that is currently having or would have a Material
Adverse Effect on the Company, and no suspension, revocation or cancellation
thereof has been threatened and there is no action, proceeding or investigation
pending or, to the Company's knowledge, threatened regarding suspension,
revocation or cancellation of any Company Permits, except where the suspension,
revocation or cancellation of such Company Permits would not have a Material
Adverse Effect on the Company.
4.6 Litigation. There is legal actions (a) pending or, threatened against
the Company, its assets, or (b) pending, threatened against an officer or
director of the Company said legal action has been disclosed in the Company
filings with the SEC.
4.7 Taxes. The Company has timely filed all tax returns and reports
required to be filed by it (after giving effect to any filing extension properly
granted by a governmental entity having authority to do so) ("Company Tax
Return"). Each such Company Tax Return is true, correct and complete in all
material respects. Company has paid, within the time and manner prescribed by
law, all material taxes that are due and payable. No Company Tax Return is the
subject of any investigation, audit or other proceeding by any federal, state or
local tax authority.
4.8 Labor Matters.
(a) The Company is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and laws, and is not engaged in any unfair
labor practices;
(b) There are no controversies pending or, to the knowledge of the
Company, threatened, between the Company and any of its respective employees,
consultants or independent contractors, which controversies have had or could
reasonably be expected to have a Material Adverse Effect on the Company;
(c) The Company is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company, nor does the Company know of any activities or proceedings of any labor
union to organize any such employees; and
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(d) The Company has no knowledge of any labor disputes, strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of, or consultants or independent contractors to, the Company.
4.9 Benefit Plans. The Company has not adopted and is not a party to any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other employee benefit plan, arrangement or understanding (whether or not
legally binding) providing benefits to any current or former employee, officer
or director of the Company or any person affiliated with the Company.
4.10 Financial Statements. Attached to the Company Disclosure Schedule are
(i) the audited balance sheet of the Company as of December 31, 2005 (the
"Audited Company Balance Sheet"), together with the related statements of income
and cash flows for each of the two fiscal years of the Company then ended and
for the cumulative period from the date of inception through December 31, 2005
(the "Audited Financial Statements"), all certified by Pollard/Kelley Audit
Services whose audit reports thereon are included therewith. The Audited
Financial Statements (including, in each case, any related notes thereto) (i)
were prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the period involved, (ii) are
complete and correct, and (iii) fairly presents the financial position of the
Company as of the date thereof and the results of its operations and cash flows
and stockholder equity for the period indicated. Except as noted in the opinions
contained in the Audited Financial Statements, such Audited Financial Statements
and opinions were rendered without qualification or exception and were not
subject to any contingency.
4.11 Contracts and Commitments.
(a) Except for the contracts, commitments, leases, licenses and
agreements listed on Section 4.11 of the Company Disclosure Schedule (the
"Company Agreements"), the Company is not party to or subject to:
(i) any agreement (or group of related agreements) which
requires future expenditures by the Company in excess of $25,000 or
is otherwise material to the Company's business;
(ii) any material contract or agreement for the purchase or
sale of any commodity, product, material, supplies, equipment or
other personal property, other than purchase or sale orders entered
into in the ordinary course of business consistent with past
practices;
(iii) any employment, consulting or independent contractor
agreements;
(iv) any distributor, sales representative, sales agent,
commission or similar agreement, whether or not in writing;
(v) any material license agreement (whether as licensor or
licensee) or royalty agreement;
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(vi) any agreement with any current or former stockholder,
officer or director of the Company, or any "affiliate" or
"associate" of such persons (as such terms are defined in the rules
and regulations promulgated under the Securities Act), including
without limitation any agreement or other arrangement providing for
the furnishing of services by, rental of real or personal property
from, or otherwise requiring payments to, any such person;
(vii) any agreement or other commitment with any person or
entity containing covenants limiting the freedom of the Company or
any of the Company's affiliates, employees, directors, officers,
consultants or agents to compete in any line of business or with any
person or entity or in any geographical location or to use or
disclose any information in their possession;
(viii) any loan agreement, indenture, note, bond, debenture,
guarantee or any other document or agreement evidencing a
capitalized lease obligation or indebtedness to any person or any
agreement of guaranty, indemnification or other similar commitment
with respect to the obligations or liabilities of any other Person;
(ix) any agreement for the disposition of Company assets other
than in the ordinary course of business consistent with past
practices;
(x) any agreement for the acquisition of the business or
shares of another party;
(xi) any contract or agreement concerning a partnership or
joint venture with one or more Person;
(xii) any lease of real property;
(xiii) any agreement which contains a fixed penalty or
liquidated damages clause for late performance or other default by
the Company to the extent that such late performance or default
would have a Material Adverse Effect on the Company; or
(xiv) any other agreement or contract (or group of related
agreements or contracts) to the extent not otherwise disclosed in
the Company Disclosure Schedule, the performance of which involves
consideration paid by the Company in excess of $100,000.00 in any
one year period.
(b) Correct and complete copies of all Company Agreements, including
all amendments thereto, have been delivered to Allstate and the Allstate
Shareholder. The Company has not breached, is not in default under, and has not
received written notice of any breach of or default under, any agreement
required to be disclosed in Section 4.11 of the Company Disclosure Schedule
(each, a "Material Contract"). To the Company's knowledge, no other party to any
Material Contract has breached or is in default of any of its obligations
thereunder to the extent that such breach or default would have a Material
Adverse Effect on the Company. Each Material Contract is in full force and
effect, except in any such case for breaches, defaults or failures to be in full
force and effect that do not currently have or would not have a Material Adverse
Effect on the Company. Each Material Contract is a legal, valid and binding
obligation of the Company and each of the other parties thereto, enforceable in
accordance with its terms, except that the enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity.
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(c) The consent of, or the delivery of notice to or filing with, any
party to a Material Contract is not required for the execution and delivery by
the Company of this Agreement or the consummation of the transactions
contemplated under the Agreement.
4.12 Absence of Certain Changes and Events. Since the date of the Audited
Company Balance Sheet, the Company has conducted its business in the ordinary
course consistent with past practice and, since such date, there has not
occurred:
(a) any event, damage, destruction or loss, whether covered by
insurance or not, which has had or reasonably is expected to have a Material
Adverse Effect on the Company or its assets;
(b) any entry by the Company into a commitment or transaction
material to the Company, which is not in the ordinary course of business
consistent with past practice;
(c) any change by the Company in accounting principles, methods or
practices, except insofar as may have been required by a change in GAAP;
(d) any declaration, payment or setting aside for payment of any
dividends or distributions in respect to shares of Company Common Stock, or any
redemption, purchase or other acquisition of any shares of Company Common Stock;
(e) any cancellation of any debts or waiver or release of any right
or claim of the Company individually or in the aggregate material to the
Company, whether or not in the ordinary course of business;
(f) any revaluations by the Company of any of its assets or
liabilities, including without limitation, writing-off notes or accounts
receivable;
(g) any material increase in the rate or terms of compensation
payable or to become payable by the Company to any of its personnel or
consultants; any bonus, incentive compensation, service award or other benefit
granted, made or accrued, contingently or otherwise, for or to the credit of any
Company personnel; employee welfare, pension, retirement, profit-sharing or
similar payment or arrangement made or agreed to by the Company for any Company
personnel except for contributions in accordance with prior practice made to,
and payments made to employees under, plans and arrangements existing on the
date of the Audited Company Balance Sheet;
(h) any adoption of a plan of liquidation or resolutions providing
for the liquidation, dissolution, merger, consolidation or other reorganization
of the Company, other than in connection with the transactions contemplated
hereby;
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(i) any purchase, acquisition or sale by the Company of any assets,
other than in the ordinary course of business;
(j) any amendment, cancellation or termination of any Material
Contract, including, without limitation, license or sublicense, or other
instrument to which the Company is a party or to which the Company or any of the
assets of the Company is bound;
(k) any failure to pay when due any material obligation of the
Company;
(l) any failure to operate the business of the Company in the
ordinary course with an effort to preserve the business intact, to keep
available to the Company the services of its personnel, and to preserve for the
Company the goodwill of its customers and others having business relations with
the Company except for such failures that would not have a Material Adverse
Effect on the Company;
(m) any commitment to borrow money entered into by the Company, or
any loans made or agreed to be made by the Company, involving more than $100,000
individually or $500,000 in the aggregate (other than credit provided by
suppliers or manufacturers in the ordinary course of the Company's business
consistent with past practices);
(n) any liabilities incurred by the Company involving $10,000 or
more individually and $25,000 or more in the aggregate, other than liabilities
incurred in the ordinary course of business consistent with past practices;
(o) any payment, discharge or satisfaction of any material
liabilities of the Company or any material capital expenditure of the Company,
other than (i) the payment, discharge or satisfaction in the ordinary course of
business consistent with prior practice of liabilities reflected or reserved
against in the Audited Financial Statements or incurred in the ordinary course
of business consistent with prior practice since the date of the Audited Company
Balance Sheet, and (ii) any capital expenditures involving $10,000 or less
individually and $25,000 or less in the aggregate;
(p) any amendment of the Company's Articles of Incorporation or
Company Bylaws; or
(q) any agreement by the Company to do any of the things described
in the preceding clauses (a) through (p) of this Section 4.12, other than as
expressly contemplated or provided for in this Agreement.
4.13 Properties, Assets, Encumbrances; No Undisclosed Liabilities.
(a) The Company has good, valid and marketable title to, a valid
leasehold interest in, or valid license rights to, all the properties and assets
which it purports to own, lease or license (real, personal and mixed, tangible
and intangible), including, without, limitation, all the properties and assets
reflected in the Company Balance Sheet (except for personal property sold since
the date of the Company Balance Sheet in the ordinary course of business
consistent with past practice), except as would not have a Material Adverse
Effect on the Company, and such properties and assets are all of the assets
(whether tangible or intangible) that are used or required for use in the
operation of its business as currently or proposed to be conducted. All
properties and assets reflected in the Company Balance Sheet are free and clear
of all Liens, except for Liens reflected on the Company Balance Sheet and Liens
for current taxes not yet due and other Liens that do not, individually or in
the aggregate, materially detract from the value or impair the use of the
property or assets subject thereto. Section 4.13 of the Company Disclosure
Schedule contains a complete and accurate list of all leases pursuant to which
the Company leases from others material amounts of real or personal property.
Each such lease is in good standing, valid and effective in accordance with its
terms, and there is not under any such lease, any existing material default or
event of default (or event which with the giving of notice or lapse of time, or
both, would constitute a material default).
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(b) There are no liabilities of the Company, other than (i)
liabilities disclosed or provided for in the Company Balance Sheet, or (ii)
liabilities incurred in the ordinary course of business since the date of the
Company Balance Sheet and which, if existing, would not have a Material Adverse
Effect on the Company. There is no probable or reasonably possible loss
contingency (within the meaning of Statement of Financial Accounting Standards
No. 5) known to the Company, which is not reflected in the Financial Statements
(including the notes thereto).
4.14 Environmental Matters.
(a) The Company is in compliance in all-material respects with all
applicable Environmental Laws (as defined below). The Company has not received
any communication from a Governmental Entity, citizens group, employee or other
person that alleges that the Company is not in full compliance with all
applicable Environmental Laws.
(b) There is no Environmental Claim (as defined below) pending
against the Company or, to the Company's knowledge, threatened against any
person whose liability for any Environmental Claim the Company has or may have
retained or assumed either contractually or by operation of law.
(c) "Environmental Claim" means any claim, action, cause of action,
investigation or notice by any person alleging potential liability arising out
of, based on or resulting from (i) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned by the Company, or (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
(d) "Environmental Laws" means all federal, state, local and foreign
laws and regulations relating to pollution or protection or preservation of
human health or the environment including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata and natural
resources, and including, without limitation, all laws and regulations relating
to emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, containment (whether above ground or
underground), disposal, transport or handling of Materials of Environmental
Concern, or the preservation of the environment or mitigation of adverse effects
thereon and all laws and regulations with regard to recordkeeping, notification,
disclosure and reporting requirements respecting Materials of Environmental
Concern.
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(e) "Materials of Environmental Concern" means all pollutants,
containments, toxic or hazardous substances, materials and wastes, petroleum and
petroleum products, asbestos and asbestos-containing materials, polychlorinated
biphenyls, radon or lead-based paints and materials.
4.15 Intellectual Property.
(a) "Intellectual Property" is defined as all intellectual property
in which Company has any right, title, or interest (including a licensed right
other than rights to licensed software that is generally commercially available)
or which has been, is being, or is expected to be used, exploited, or
commercialized by Company in the conduct of its business, including but not
limited to all "Patents" (hereinafter defined), all "Marks" (hereinafter
defined), all "Copyrights" (hereinafter defined), and all "Confidential
Information" (hereinafter defined).
(1) "Patents" is defined to include all concepts, ideas,
designs, formulas, inventions (whether patentable or not), techniques, all U.S.
and foreign patent applications, and all U.S. and foreign patents.
(2) "Marks" is defined to include all words, names, logos,
symbols, trade names, source indicating indicia, trade dress, trademarks, marks,
U.S. and foreign applications to register marks, and U.S. and foreign
registrations.
(3) "Copyrights" is defined to include all copyrights, U.S.
and foreign, whether registered or not, all copyright applications, all
copyright registrations, including but not limited to the copyrights in
Company's business documents and files, customer documents and files, software,
product designs and packaging, advertising, promotional material, and software
products (whether developed or in development).
(4) "Confidential Information" is defined to include, but not
limited to, confidential information, financial information, business trade
secrets, marketing information, financial and technical trade secrets,
techniques, processes, and know-how.
(b) Section 4.15(b) of the Company Disclosure Schedule contains a
complete and accurate list and description of (i) Intellectual Property which is
material to the business of the Company; (ii) all patent applications, issued
patents, trademark applications, trademark registrations, copyright
applications, and copyright registrations, (iii) all licenses of Intellectual
Property to the Company (other than licensed software that is generally
commercially available) which are material to the business of Company; and (iv)
all licenses and other agreements, written or not, from the Company to any third
party granting any rights or interests in the Intellectual Property.
(c) Except as set forth in Section 4.15(c) of the Company Disclosure
Schedule:
(1) Company is the sole owner, free and clear of any Lien or
encumbrance, and without the payment of any monies or royalty except with
respect to off-the-shelf software, of the Intellectual Property;
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(2) Company has taken, and will continue to take, all actions
which are necessary or advisable to acquire and protect the Intellectual
Property, consistent with prudent commercial practices;
(3) Company's rights in the Intellectual Property are valid
and enforceable;
(4) Company has received no demand, claim, notice or inquiry
from any person in respect of the Intellectual Property which challenges,
threatens to challenge or inquires as to whether there is any basis to
challenge, the validity of, the rights of the Company in, or the right of the
Company to use, any such Intellectual Property, and the Company knows of no
basis for any such challenge;
(5) Company is not in violation or infringement of, and has
not violated or infringed, any proprietary rights of any other person;
(6) no person has or is infringing, misappropriating, or
making unauthorized use of any Intellectual Property;
(7) except on an arm's-length basis for value and other
commercially reasonable terms, the Company has not licensed, consented or
acquiesced to the taking or use of any Intellectual Property by any person;
(8) all Marks and Copyrights which are material to the
business of the Company were either (a) authored by regular employees of Company
within the scope of their employment and Company was thus the original author
pursuant to the work made for hire doctrine, or (b) authored by independent
contractors subject to enforceable non-disclosure and assignment agreements;
(9) the execution and consummation of this Agreement will not
adversely impair or impact the value of or the Company's future enjoyment and
exploitation of the Intellectual Property;
(10) all current or former Company personnel, including
partners, directors, officers, employees, agents, consultants and contractors,
who have contributed to or participated in the conception, creation, or
development of any Intellectual Property have executed effective and proper
agreements containing non-disclosure and assignment provisions for the benefit
of Company. True and complete copies of these agreements have been delivered to
Allstate. After giving effect to the transactions contemplated herein, no
current or former personnel of Company will possess any right, title or interest
in the Intellectual Property; and
(11) Company is not in breach or violation of any agreement
relating to any Intellectual Property which would materially impair Company's
rights, title, or interest in the Intellectual Property or agreement.
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4.16 Insurance. Section 4.16 of the Company Disclosure Schedule contains a
true, accurate and complete list of all policies or binders of fire, liability,
title, workers' compensation and other forms of insurance (showing as to each
policy or binder the carrier, policy number, coverage limits, expiration dates,
annual premiums and a general description of the type of coverage provided)
maintained by the Company on the business, assets or personnel of the Company.
All of such policies are sufficient for compliance with all requirements of all
contracts to which the Company is a party and all state, federal, local or
foreign laws, rules and regulations applicable to the Company. The Company has
paid all premiums due on such insurance policies and is in compliance with and
not in default under any of such policies or binders. The Company has not failed
to give any notice or to present any claim under any such policy or binder in a
due and timely fashion when the effect of such default or such failure would be
to render a material claim uninsured. The Company has not received any notice
from any insurer advising of reduced coverage or increased premiums on existing
policies or binders. There are no outstanding unpaid claims under any such
policies or binders. Such policies and binders are in full force and effect, and
the Company has delivered true and correct copies of such policies and binders
to Shareholder.
4.17 Equipment. All of the tangible personal property of the Company that
is material, either individually or in the aggregate, to the operation of the
Company's business is in good working order, operating condition and state of
repair, ordinary wear and tear excepted.
4.18 Interested Party Transactions. No stockholder, officer or director of
the Company, or any person with whom any such stockholder, officer or director
has any direct or indirect relation by blood, marriage or adoption, or any
entity in which any such person owns any beneficial interest (other than a
publicly-held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by all of such persons), has any interest in (i) to
the Company's knowledge, any contract, arrangement or understanding with, or
relating to, the business or operations of the Company that could reasonably be
expected to result in a liability or obligation of the Company, (ii) any loan,
arrangement, understanding, agreement or contract for or relating to
indebtedness with the Company, (iii) any material property (real, personal or
mixed), tangible or intangible, used or currently intended to be used in the
business or operations of the Company, (iv) to the Company's knowledge, any
business or entity that competes with the Company, or (v) to the Company's
knowledge, any other transaction that would be required to be reported as a
Certain Relationship or Related Transaction, pursuant to Item 404, or any other
provisions of, Regulation S-B promulgated by the SEC, if the Company filed such
reports.
4.19 Change of Control Agreements. The Company has no plans, programs or
agreements to which it is a party, or to which it is subject, pursuant to which
payments (or acceleration of benefits) may be required upon, or may become
payable directly or indirectly as a result of, any change of control of the
Company.
4.20 Books and Records. The books of account, minute books (including,
without limitation, all actions of the shareholders of the Company, the board of
directors of the Company and all committees of the board of directors of the
Company) stock record books and other records of the Company are complete and
correct in all material respects and have been maintained in accordance with
sound business practices, including an adequate system of internal controls,
except for such failures with respect thereto as do not have a Material Adverse
Effect on the Company.
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4.21 Brokers. Except as described in Section 4.21 of the Company
Disclosure Schedule, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
4.22 Disclosure. The representations and warranties of the Company herein,
or in any document, exhibit, statement, certificate or schedule furnished by or
on behalf of the Company as required by this Agreement, do not contain and will
not contain any untrue statement of a material fact and do not omit and will not
omit to state any material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. There are no material facts or circumstances relating to the Company
which have not been disclosed herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ALLSTATE AND THE ALLSTATE SHARHOLDER
Except as set forth in the disclosure schedule attached hereto as Exhibit
B (the "Allstate Disclosure Schedule"), Allstate, by virtue of signing this
Agreement, represents and warrants to the Company that the statements contained
in this Article V are true, correct and complete as of the date of this
Agreement (or, if made as of a specified date, as of such date) and will be
true, correct and complete as of the Closing Date (or, if made as of a specified
date, as of such date).
5.1 Organization and Qualification.
(a) Allstate is a corporation duly organized, validly existing and
in good standing under the laws of the state of California and has the requisite
corporate power and authority to carry on its business as it is now being
conducted. There is no pending or threatened proceeding for the dissolution or
liquidation of Allstate.
(b) Allstate (i) does not, directly or indirectly, own any interest
in any corporation, partnership, joint venture, limited liability company, or
other Person and (ii) is not subject to any obligation or requirement to provide
funds to or to make any investment (in the form of a loan, capital contribution
or otherwise) in or to any Person. For purposes of this Agreement, "Person"
shall mean any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, institution,
government, entity or any group comprised of one or more of the foregoing.
(c) Allstate is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
properties owned or leased by it makes such qualification or licensing
necessary, except for any such jurisdiction where the failure to so qualify or
be licensed, individually and in the aggregate for all such jurisdictions, would
not reasonably be expected to have a Material Adverse Effect. For purposes of
this Agreement, "Material Adverse Effect" means an action, event or occurrence
if it has, or could reasonably be expected to have, a material adverse effect on
the capitalization, financial condition or results of operations of the person
or entity in question. Any item or event susceptible of measurement in monetary
terms which, when considered together with similar items or events, does not
exceed the amount of $25,000, shall not be considered a Material Adverse Effect.
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(d) Allstate has provided or will, promptly following the date of
this Agreement, provide to the Company complete and accurate copies of the
Articles of Incorporation and Bylaws of Allstate, as currently in effect, and
minutes and other records of the meetings and other proceedings of the Board of
Directors Allstate. Allstate is not in violation of any provisions of its
Articles of Incorporation or Bylaws.
5.2 Compliance; Permits.
(a) Allstate is not in conflict with, or in default or violation of
(and has not received any notices of violation. with respect to), any law, rule,
regulation, order, judgment or decree applicable to Allstate or by which it or
any of its properties is bound or affected, and Allstate has no knowledge of any
such conflict, default or violation thereunder, except in each case for any such
conflicts, defaults or violations that is not currently having or would not have
a Material Adverse Effect on Allstate.
(b) Allstate holds all permits, licenses, easements, variances,
exemptions, consents, certificates, authorizations, registrations, orders and
other approvals from Governmental Entities that are material to the operation of
the business of Allstate as it is now being conducted (collectively, the
"Allstate Permits"). Allstate Permits are in full force and effect, have not
been violated in any respect that is currently having or would have a Material
Adverse Effect on Allstate, and no suspension, revocation or cancellation
thereof has been threatened and there is no action, proceeding or investigation
pending or, to Allstate's knowledge, threatened regarding suspension, revocation
or cancellation of any Allstate Permits, except where the suspension, revocation
or cancellation of such Allstate Permits would not have a Material Adverse
Effect on Allstate.
5.3 Litigation. There are legal actions (a) pending or, threatened against
Allstate, Allstate Home Loans, Inc and its assets. (Schedule E) Said litigation
shall be the responsibility, obligation, and liability of Allstate and not that
of the Company.
5.4 Taxes. Allstate has timely filed all tax returns and reports required
to be filed by it (after giving effect to any filing extension properly granted
by a governmental entity having authority to do so) ("Allstate Tax Return").
Each such Allstate Tax Return is true, correct and complete in all material
respects. Company has paid, within the time and manner prescribed by law, all
material taxes that are due and payable. No Allstate Tax Return is the subject
of any investigation, audit or other proceeding by any federal, state or local
tax authority.
5.5 Labor Matters.
(a) Allstate is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and laws, and is not engaged in any unfair
labor practices;
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(b) There are no controversies pending or, to the knowledge of
Allstate, threatened, between Allstate and any of its respective employees,
consultants or independent contractors, which controversies have had or could
reasonably be expected to have a Material Adverse Effect on Allstate;
(c) Allstate is not a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by Allstate, nor
does Allstate know of any activities or proceedings of any labor union to
organize any such employees; and
(d) Allstate has no knowledge of any labor disputes, strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of, or consultants or independent contractors to, Allstate.
5.6 Benefit Plans. Allstate has not adopted and is not a party to any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other employee benefit plan, arrangement or understanding (whether or not
legally binding) providing benefits to any current or former employee, officer
or director of Allstate or any person affiliated with Allstate.
5.7 Financial Statements. Attached to Allstate Disclosure Schedule are (i)
the audited balance sheet of Allstate as of December 31, 2005 (the "Audited
Allstate Balance Sheet"), together with the related statements of income and
cash flows for each of the two fiscal years of Allstate then ended and for the
cumulative period from the date of inception through December 31, 2005 (the
"Audited Financial Statements"), all certified by Lorin & Zweig whose audit
reports thereon are included therewith. The Audited Financial Statements
(including, in each case, any related notes thereto) (i) were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the period involved, (ii) are complete and correct,
and (iii) fairly presents the financial position of Allstate as of the date
thereof and the results of its operations and cash flows and stockholder equity
for the period indicated. Except as noted in the opinions contained in the
Audited Financial Statements, such Audited Financial Statements and opinions
were rendered without qualification or exception and were not subject to any
contingency.
5.8 Contracts and Commitments.
(a) Except for the contracts, commitments, leases, licenses and
agreements listed on Allstate Disclosure Schedule (the "Allstate Agreements"),
Allstate is not party to or subject to:
(i) any agreement (or group of related agreements) which
requires future expenditures by the Company in excess of $25,000 or
is otherwise material to the Company's business;
(ii) any material contract or agreement for the purchase or
sale of any commodity, product, material, supplies, equipment or
other personal property, other than purchase or sale orders entered
into in the ordinary course of business consistent with past
practices;
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(iii) any employment, consulting or independent contractor
agreements;
(iv) any distributor, sales representative, sales agent,
commission or similar agreement, whether or not in writing;
(v) any material license agreement (whether as licensor or
licensee) or royalty agreement;
(vi) any agreement with any current or former stockholder,
officer or director of Allstate, or any "affiliate" or "associate"
of such persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the
furnishing of services by, rental of real or personal property from,
or otherwise requiring payments to, any such person;
(vii) any agreement or other commitment with any person or
entity containing covenants limiting the freedom of Allstate or any
of the Allstate's affiliates, employees, directors, officers,
consultants or agents to compete in any line of business or with any
person or entity or in any geographical location or to use or
disclose any information in their possession;
(viii) any loan agreement, indenture, note, bond, debenture,
guarantee or any other document or agreement evidencing a
capitalized lease obligation or indebtedness to any person or any
agreement of guaranty, indemnification or other similar commitment
with respect to the obligations or liabilities of any other Person;
(ix) any agreement for the disposition of Company assets other
than in the ordinary course of business consistent with past
practices;
(x) any agreement for the acquisition of the business or
shares of another party;
(xi) any contract or agreement concerning a partnership or
joint venture with one or more Person;
(xii) any lease of real property;
(xiii) any agreement which contains a fixed penalty or
liquidated damages clause for late performance or other default by
Allstate to the extent that such late performance or default would
have a Material Adverse Effect on Allstate; or
(xiv) any other agreement or contract (or group of related
agreements or contracts) to the extent not otherwise disclosed in
the Allstate Disclosure Schedule, the performance of which involves
consideration paid by Allstate in excess of $100,000.00 in any one
year period.
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(b) Correct and complete copies of all Allstate Agreements,
including all amendments thereto, have been delivered to the Company. Allstate
has not breached, is not in default under, and has not received written notice
of any breach of or default under, any agreement required to be disclosed in the
Allstate Disclosure Schedule (each, a "Material Contract"). To Allstate's
knowledge, no other party to any Material Contract has breached or is in default
of any of its obligations thereunder to the extent that such breach or default
would have a Material Adverse Effect on Allstate. Each Material Contract is in
full force and effect, except in any such case for breaches, defaults or
failures to be in full force and effect that do not currently have or would not
have a Material Adverse Effect on Allstate. Each Material Contract is a legal,
valid and binding obligation of Allstate and each of the other parties thereto,
enforceable in accordance with its terms, except that the enforcement thereof
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity.
(c) The consent of, or the delivery of notice to or filing with, any
party to a Material Contract is not required for the execution and delivery by
Allstate of this Agreement or the consummation of the transactions contemplated
under the Agreement.
5.9 Absence of Certain Changes and Events. Since the date of the Audited
Allstate Balance Sheet, the Company has conducted its business in the ordinary
course consistent with past practice and, since such date, there has not
occurred:
(a) any event, damage, destruction or loss, whether covered by
insurance or not, which has had or reasonably is expected to have a Material
Adverse Effect on Allstate or its assets;
(b) any entry by Allstate into a commitment or transaction material
to the Company, which is not in the ordinary course of business consistent with
past practice;
(c) any change by Allstate in accounting principles, methods or
practices, except insofar as may have been required by a change in GAAP;
(d) any declaration, payment or setting aside for payment of any
dividends or distributions in respect to shares of Allstate Common Stock, or any
redemption, purchase or other acquisition of any shares of Allstate Common
Stock;
(e) any cancellation of any debts or waiver or release of any right
or claim of Allstate individually or in the aggregate material to Allstate,
whether or not in the ordinary course of business;
(f) any revaluations by Allstate of any of its assets or
liabilities, including without limitation, writing-off notes or accounts
receivable;
(g) any material increase in the rate or terms of compensation
payable or to become payable by Allstate to any of its personnel or consultants;
any bonus, incentive compensation, service award or other benefit granted, made
or accrued, contingently or otherwise, for or to the credit of any Allstate
personnel; employee welfare, pension, retirement, profit-sharing or similar
payment or arrangement made or agreed to by Allstate for any Company personnel
except for contributions in accordance with prior practice made to, and payments
made to employees under, plans and arrangements existing on the date of the
Audited Allstate Balance Sheet;
19
(h) any adoption of a plan of liquidation or resolutions providing
for the liquidation, dissolution, merger, consolidation or other reorganization
of Allstate, other than in connection with the transactions contemplated hereby;
(i) any purchase, acquisition or sale by Allstate of any assets,
other than in the ordinary course of business;
(j) any amendment, cancellation or termination of any Material
Contract, including, without limitation, license or sublicense, or other
instrument to which Allstate is a party or to which Allstate or any of the
assets of Allstate is bound;
(k) any failure to pay when due any material obligation of Allstate;
(l) any failure to operate the business of Allstate in the ordinary
course with an effort to preserve the business intact, to keep available to
Allstate the services of its personnel, and to preserve for Allstate the
goodwill of its customers and others having business relations with Allstate
except for such failures that would not have a Material Adverse Effect on
Allstate;
(m) any commitment to borrow money entered into by Allstate, or any
loans made or agreed to be made by Allstate, involving more than $100,000
individually or $500,000 in the aggregate (other than credit provided by
suppliers or manufacturers in the ordinary course of the Allstate's business
consistent with past practices);
(n) any liabilities incurred by Allstate involving $10,000 or more
individually and $25,000 or more in the aggregate, other than liabilities
incurred in the ordinary course of business consistent with past practices;
(o) any payment, discharge or satisfaction of any material
liabilities of Allstate or any material capital expenditure of Allstate, other
than (i) the payment, discharge or satisfaction in the ordinary course of
business consistent with prior practice of liabilities reflected or reserved
against in the Audited Financial Statements or incurred in the ordinary course
of business consistent with prior practice since the date of the Audited
Allstate Balance Sheet, and (ii) any capital expenditures involving $10,000 or
less individually and $25,000 or less in the aggregate;
(p) any amendment of Allstate's Articles of Incorporation or
Allstate Bylaws; or
(q) any agreement by Allstate to do any of the things described in
the preceding clauses (a) through (p) of this Section, other than as expressly
contemplated or provided for in this Agreement.
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5.10 Properties, Assets, Encumbrances; No Undisclosed Liabilities.
(a) Allstate has good, valid and marketable title to, a valid
leasehold interest in, or valid license rights to, all the properties and assets
which it purports to own, lease or license (real, personal and mixed, tangible
and intangible), including, without, limitation, all the properties and assets
reflected in Allstate Balance Sheet (except for personal property sold since the
date of Allstate Balance Sheet in the ordinary course of business consistent
with past practice), except as would not have a Material Adverse Effect on
Allstate, and such properties and assets are all of the assets (whether tangible
or intangible) that are used or required for use in the operation of its
business as currently or proposed to be conducted. All properties and assets
reflected in the Allstate Balance Sheet are free and clear of all Liens, except
for Liens reflected on the Company Balance Sheet and Liens for current taxes not
yet due and other Liens that do not, individually or in the aggregate,
materially detract from the value or impair the use of the property or assets
subject thereto. Allstate Disclosure Schedule contains a complete and accurate
list of all leases pursuant to which Allstate leases from others material
amounts of real or personal property. Each such lease is in good standing, valid
and effective in accordance with its terms, and there is not under any such
lease, any existing material default or event of default (or event which with
the giving of notice or lapse of time, or both, would constitute a material
default).
(b) There are no liabilities of Allstate, other than (i) liabilities
disclosed or provided for in Allstate Balance Sheet, or (ii) liabilities
incurred in the ordinary course of business since the date of the Allstate
Balance Sheet and which, if existing, would not have a Material Adverse Effect
on Allstate. There is no probable or reasonably possible loss contingency
(within the meaning of Statement of Financial Accounting Standards No. 5) known
to Allstate, which is not reflected in the Financial Statements (including the
notes thereto).
5.11 Environmental Matters.
(a) Allstate is in compliance in all-material respects with all
applicable Environmental Laws (as defined below). Allstate has not received any
communication from a Governmental Entity, citizens group, employee or other
person that alleges that Allstate is not in full compliance with all applicable
Environmental Laws.
(b) There is no Environmental Claim (as defined below) pending
against Allstate or, to Allstate's knowledge, threatened against any person
whose liability for any Environmental Claim Allstate has or may have retained or
assumed either contractually or by operation of law.
(c) "Environmental Claim" means any claim, action, cause of action,
investigation or notice by any person alleging potential liability arising out
of, based on or resulting from (i) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned by Allstate, or (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
21
(d) "Environmental Laws" means all federal, state, local and foreign
laws and regulations relating to pollution or protection or preservation of
human health or the environment including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata and natural
resources, and including, without limitation, all laws and regulations relating
to emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, containment (whether above ground or
underground), disposal, transport or handling of Materials of Environmental
Concern, or the preservation of the environment or mitigation of adverse effects
thereon and all laws and regulations with regard to recordkeeping, notification,
disclosure and reporting requirements respecting Materials of Environmental
Concern.
(e) "Materials of Environmental Concern" means all pollutants,
containments, toxic or hazardous substances, materials and wastes, petroleum and
petroleum products, asbestos and asbestos-containing materials, polychlorinated
biphenyls, radon or lead-based paints and materials.
5.12 Intellectual Property.
(a) "Intellectual Property" is defined as all intellectual property
in which Allstate has any right, title, or interest (including a licensed right
other than rights to licensed software that is generally commercially available)
or which has been, is being, or is expected to be used, exploited, or
commercialized by Allstate in the conduct of its business, including but not
limited to all "Patents" (hereinafter defined), all "Marks" (hereinafter
defined), all "Copyrights" (hereinafter defined), and all "Confidential
Information" (hereinafter defined).
(1) "Patents" is defined to include all concepts, ideas,
designs, formulas, inventions (whether patentable or not), techniques, all U.S.
and foreign patent applications, and all U.S. and foreign patents.
(2) "Marks" is defined to include all words, names, logos,
symbols, trade names, source indicating indicia, trade dress, trademarks, marks,
U.S. and foreign applications to register marks, and U.S. and foreign
registrations.
(3) "Copyrights" is defined to include all copyrights, U.S.
and foreign, whether registered or not, all copyright applications, all
copyright registrations, including but not limited to the copyrights in
Allstate's business documents and files, customer documents and files, software,
product designs and packaging, advertising, promotional material, and software
products (whether developed or in development).
(4) "Confidential Information" is defined to include, but not
limited to, confidential information, financial information, business trade
secrets, marketing information, financial and technical trade secrets,
techniques, processes, and know-how.
(b) Allstate Disclosure Schedule contains a complete and accurate
list and description of (i) Intellectual Property which is material to the
business of Allstate; (ii) all patent applications, issued patents, trademark
applications, trademark registrations, copyright applications, and copyright
registrations, (iii) all licenses of Intellectual Property to Allstate (other
than licensed software that is generally commercially available) which are
material to the business of Allstate; and (iv) all licenses and other
agreements, written or not, from Allstate to any third party granting any rights
or interests in the Intellectual Property.
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(c) Except as set forth in Allstate Disclosure Schedule:
(1) Allstate is the sole owner, free and clear of any Lien or
encumbrance, and without the payment of any monies or royalty except with
respect to off-the-shelf software, of the Intellectual Property;
(2) Allstate has taken, and will continue to take, all actions
which are necessary or advisable to acquire and protect the Intellectual
Property, consistent with prudent commercial practices;
(3) Allstate's rights in the Intellectual Property are valid
and enforceable;
(4) Allstate has received no demand, claim, notice or inquiry
from any person in respect of the Intellectual Property which challenges,
threatens to challenge or inquires as to whether there is any basis to
challenge, the validity of, the rights of Allstate in, or the right of Allstate
to use, any such Intellectual Property, and Allstate knows of no basis for any
such challenge;
(5) Allstate is not in violation or infringement of, and has
not violated or infringed, any proprietary rights of any other person;
(6) no person has or is infringing, misappropriating, or
making unauthorized use of any Intellectual Property;
(7) except on an arm's-length basis for value and other
commercially reasonable terms, Allstate has not licensed, consented or
acquiesced to the taking or use of any Intellectual Property by any person;
(8) all Marks and Copyrights which are material to the
business of Allstate were either (a) authored by regular employees of Allstate
within the scope of their employment and Allstate was thus the original author
pursuant to the work made for hire doctrine, or (b) authored by independent
contractors subject to enforceable non-disclosure and assignment agreements;
(9) the execution and consummation of this Agreement will not
adversely impair or impact the value of or the Allstate's future enjoyment and
exploitation of the Intellectual Property;
(10) all current or former Allstate personnel, including
partners, directors, officers, employees, agents, consultants and contractors,
who have contributed to or participated in the conception, creation, or
development of any Intellectual Property have executed effective and proper
agreements containing non-disclosure and assignment provisions for the benefit
of Allstate. True and complete copies of these agreements have been delivered to
Allstate. After giving effect to the transactions contemplated herein, no
current or former personnel of Allstate will possess any right, title or
interest in the Intellectual Property; and
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(11) Allstate is not in breach or violation of any agreement
relating to any Intellectual Property which would materially impair Company's
rights, title, or interest in the Intellectual Property or agreement.
5.13 Insurance. Allstate Disclosure Schedule contains a true, accurate and
complete list of all policies or binders of fire, liability, title, workers'
compensation and other forms of insurance (showing as to each policy or binder
the carrier, policy number, coverage limits, expiration dates, annual premiums
and a general description of the type of coverage provided) maintained by
Allstate on the business, assets or personnel of Allstate. All of such policies
are sufficient for compliance with all requirements of all contracts to which
Allstate is a party and all state, federal, local or foreign laws, rules and
regulations applicable to Allstate. Allstate has paid all premiums due on such
insurance policies and is in compliance with and not in default under any of
such policies or binders. Allstate has not failed to give any notice or to
present any claim under any such policy or binder in a due and timely fashion
when the effect of such default or such failure would be to render a material
claim uninsured. Allstate has not received any notice from any insurer advising
of reduced coverage or increased premiums on existing policies or binders. There
are no outstanding unpaid claims under any such policies or binders. Such
policies and binders are in full force and effect, and Allstate has delivered
true and correct copies of such policies and binders to the Company.
5.14 Equipment. All of the tangible personal property of Allstate that is
material, either individually or in the aggregate, to the operation of
Allstate's business is in good working order, operating condition and state of
repair, ordinary wear and tear excepted.
5.15 Interested Party Transactions. No stockholder, officer or director of
Allstate, or any person with whom any such stockholder, officer or director has
any direct or indirect relation by blood, marriage or adoption, or any entity in
which any such person owns any beneficial interest (other than a publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by all of such persons), has any interest in (i) to Allstate's knowledge,
any contract, arrangement or understanding with, or relating to, the business or
operations of Allstate that could reasonably be expected to result in a
liability or obligation of Allstate, (ii) any loan, arrangement, understanding,
agreement or contract for or relating to indebtedness with Allstate, (iii) any
material property (real, personal or mixed), tangible or intangible, used or
currently intended to be used in the business or operations of Allstate, (iv) to
Allstate's knowledge, any business or entity that competes with Allstate, or (v)
to Allstate's knowledge, any other transaction that would be required to be
reported as a Certain Relationship or Related Transaction, pursuant to Item 404,
or any other provisions of, Regulation S-B promulgated by the SEC, if Allstate
filed such reports.
5.16 Change of Control Agreements. Allstate has no plans, programs or
agreements to which it is a party, or to which it is subject, pursuant to which
payments (or acceleration of benefits) may be required upon, or may become
payable directly or indirectly as a result of, any change of control of
Allstate.
5.17 Books and Records. The books of account, minute books (including,
without limitation, all actions of the shareholders of Allstate, the board of
directors of the Company and all committees of the board of directors of
Allstate) stock record books and other records of Allstate are complete and
correct in all material respects and have been maintained in accordance with
sound business practices, including an adequate system of internal controls,
except for such failures with respect thereto as do not have a Material Adverse
Effect on Allstate.
24
5.18 Brokers. Except as described in Allstate Disclosure Schedule, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Allstate.
5.19 Disclosure. The representations and warranties of Allstate herein, or
in any document, exhibit, statement, certificate or schedule furnished by or on
behalf of Allstate as required by this Agreement, do not contain and will not
contain any untrue statement of a material fact and do not omit and will not
omit to state any material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. There are no material facts or circumstances relating to Allstate
which have not been disclosed herein.
5.20 Ownership of Shares. Allstate Shareholder is the sole record and
beneficial owner of the Allstate Shares, which constitute all of the issued and
outstanding shares of the Allstate's Common Stock and the Allstate Shares are
not subject to any encumbrance, any rights of first refusal of any kind,
options, preemptive rights, voting arrangements or other rights of third parties
to acquire any of such shares. Allstate has good and valid title to, and has the
unrestricted (except for restrictions imposed generally under applicable federal
and state securities laws) right to transfer and sell such Allstate's shares of
Allstate Common Stock to Company in accordance with the terms of this Agreement.
5.21 Authority. Allstate and Allstate Shareholder each have the power and
authority to enter into and to perform their respective obligations under this
Agreement and each of the agreements, certificates and documents required to be
delivered by Allstate and Allstate Shareholder pursuant to the terms of this
Agreement. The execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary action on the part of Allstate. The Agreement constitutes the
legal, valid and binding obligation of Allstate and the Allstate Shareholder,
enforceable against Allstate in accordance with its terms, subject to the
effect, if any, of (a) applicable bankruptcy and other similar laws affecting
the rights of creditors generally and (b) rules of law and equity governing
specific performance, injunctive relief and other equitable remedies.
5.22 Conflicts. Neither the execution and delivery by Allstate and the
Allstate Shareholder of this Agreement nor the performance by Allstate of its
obligations hereunder will conflict with any contract, agreement or arrangement
(whether or not in writing) to which Allstate or Allstate Shareholder is a party
or any law, rule, regulation, order or injunction applicable to Allstate or the
Allstate Shareholder. There are no legal proceedings pending or, to the best
knowledge of Allstate and the Allstate Shareholder, threatened against Allstate
or the Allstate Shareholder that would prevent the consummation of the
transactions contemplated by this Agreement. No consent, notice or approval is
required of any person in connection with Allstate's and the Allstate
Shareholder's execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
25
5.23 Investment Representations.
(a) Disclosure of Information. Allstate Shareholder has had an
opportunity to ask questions and receive answers from Company's management
regarding the business, properties, prospects and financial condition of the
Company. Allstate Shareholder is aware of the risks of investing in the Company
and of holding securities in companies whose stock is traded on the OTC Bulletin
Board.
(b) Accredited Investor. Allstate Shareholder is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act. Allstate is experienced in evaluating and investing in
securities of companies in a similar stage of development to the Company and has
sufficient knowledge and experience in financial and business matters to assess
the relative merits and risks of an investment in the Company, and can bear the
economic risk of this investment.
(c) Purchase Entirely for Own Account. This Agreement is made with
the Company, Allstate Shareholder and Allstate in part in reliance upon Allstate
Shareholder's representation to the Company, which by Allstate Shareholders
execution of this Agreement Allstate Shareholder hereby confirms, that the
Company Shares to be acquired by Allstate Shareholder will be acquired for
investment for Allstate Shareholder's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof (other
than in accordance with applicable securities laws), and that Allstate
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing the same except to an entity which is owned or
controlled by Allstate Shareholder and which is an accredited investor. By
executing this Agreement, Allstate Shareholder further represents that it does
not presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to any of the Company Shares.
5.24 Restricted Securities. Allstate Shareholder understands that the
Company Shares have not been, and will not be, registered under the Securities
Act by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Allstate Shareholder's representations
as expressed herein. Allstate Shareholder understands that the Company Shares to
be received by Allstate Shareholder are "restricted securities" under applicable
U.S. federal and state securities laws and regulations, and that pursuant to
these laws, Allstate Shareholder must hold the Company Shares indefinitely
unless they are registered with the Securities and Exchange Commission and
qualified by state authorities or an exemption from such registration and
qualification requirements is available. Allstate Shareholder acknowledges that
the Company has no obligation to register or qualify the Company Shares for
resale. Allstate Shareholder further acknowledges that if an exemption from
registration or qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale, the
holding period for the Company Shares, and requirements relating to Company
which are outside of the Allstate Shareholder's control and which the Company is
under no obligation, and may not be able, to satisfy.
26
5.25 Legends. It is understood that the Company Shares, and any securities
issued in respect thereof or exchange therefore, may bear the following legend
or a legend of similar import and any legend required by the Blue Sky laws of
any state of the United States to the extent such laws are applicable to the
shares represented by the certificate so legended:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR OTHERWISE DISTRIBUTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT AND LAWS."
ARTICLE VI
PRE-CLOSING COVENANTS
6.1 Operation of Company.
(a) Except as specifically provided in this Agreement, between the
date of this Agreement and the Closing Date, Company shall:
(i) maintain its books of account and records in the usual and
ordinary manner, and in conformity with its past practices;
(ii) pay accounts payable and other obligations when they
become due and payable in the ordinary course of business consistent
with past practices except to the extent disputed in good faith;
(iii) conduct its business in the ordinary course consistent
with past practices, or as required by this Agreement;
(iv) pay all taxes when due and file all Company Tax Returns
on or before the due date therefor except to the extent disputed in
good faith;
(v) make appropriate provisions in its books of account and
records for taxes relating to its operations during such period
(regardless of whether such taxes are required to be reflected in a
tax return having a due date on or prior to the Closing Date);
(vi) withhold all taxes required to be withheld and remitted
by or on behalf of Company in connection with amounts paid or owing
to any Company personnel or other person, and pay such taxes to the
proper governmental authority or set aside such taxes in accounts
for such purpose;
27
(vii) make all required filings on a timely basis with the SEC
or any other state, federal or local regulatory body, including,
without limitation, making all filings under the Exchange Act, on a
timely basis so as to maintain Company's status as a reporting
Company in good standing under the Exchange Act; and
(viii) comply with the listing requirements of, and take all
steps reasonably necessary to maintain Company's listing on, the OTC
Bulletin Board.
(b) Without the prior written consent of the Allstate and except as
contemplated by this Agreement, between the date of this Agreement and the
Closing Date (or termination of this Agreement), Company shall not:
(i) grant any increase in the compensation payable, or to
become payable, to any Company personnel or enter into any bonus,
insurance, pension, severance, change-in-control or other benefit
plan, payment, agreement or arrangement for or with any Company
personnel, except as consistent with past practices in the ordinary
course of business;
(ii) borrow or agree to borrow any funds, incur any
indebtedness or directly or indirectly guarantee or agree to
guarantee the obligations of others, or draw or borrow on any lines
of credit that may be available to Company;
(iii) except as contemplated by this Agreement, issue or
promise to issue any capital stock or any options, warrants or other
rights to subscribe for or purchase any capital stock or any
securities convertible into or exchangeable or exercisable for, or
rights to purchase or otherwise acquire, any shares of the capital
stock of Company;
(iv) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any
of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares
of its capital stock, or repurchase or otherwise acquire, directly
or indirectly, any shares of its capital stock;
(v) enter into any material contract or commitment, or amend
or otherwise modify or waive any of the terms of any of its material
contracts, other than in the ordinary course of business consistent
with past practice, or violate or terminate any such material
contracts;
(vi) transfer, assign or license to any person or entity any
rights to its intellectual property other than in the ordinary
course of business consistent with past practice;
28
(vii) enter into or amend any agreements pursuant to which any
other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of its products or
intellectual property;
(viii) adopt or amend any employee benefit or stock purchase
or option plan;
(ix) except as may be required or reasonably necessary in
order to complete the transactions contemplated by this Agreement,
agree to borrow any funds, incur any indebtedness or directly or
indirectly guarantee or agree to guarantee the obligations of
others, or draw or borrow on any lines of credit that may be
available to Company;
(x) place or allow to be placed a lien or encumbrance on any
of the assets of Company;
(xi) pay, discharge or satisfy in an amount in excess of
$5,000 in any one case or $30,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course
of business, other than the payment, discharge or satisfaction of
liabilities reflected or reserved against in Company's financial
statements;
(xii) make any capital expenditures, capital additions or
capital improvements except in the ordinary course of business and
consistent with past practice;
(xiii) materially reduce the amount of any material insurance
coverage provided by existing insurance policies;
(xiv) terminate or waive any right of substantial value;
(xv) commence a lawsuit other than (1) for the routine
collection of bills, (2) in such cases where it in good faith
determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business, provided
that it consults with Allstate prior to the filing of such a suit,
or (3) for a breach of this Agreement;
(xvi) sell, lease, license or otherwise dispose of or encumber
any of its properties or assets which are material, individually or
in the aggregate, to its business, except in the ordinary course of
business consistent with past practice;
(xvii) commit any act or omit to do any act which will cause a
breach of this Agreement or any other material agreement, contract,
lease or commitment to which Company is party;
(xviii) violate any law or governmental approval, including,
without limitation any federal or state securities laws;
29
(xix) make any loan, advance, distribution or payment of any
type or to any Person other than as contemplated by this Agreement;
(xx) amend its Articles of Incorporation or Bylaws;
(xxi) except as contemplated by this Agreement, consolidate
with, or agree to merge or consolidate with, or purchase
substantially all of the assets of, or otherwise acquire any
business or any Person or division thereof;
(xxii) make any tax election or settle or compromise any tax
liability other than in the ordinary course of business consistent
with past practices;
(xxiii) lease or purchase or agree to lease or purchase any
assets or properties;
(xxiv) take, or agree in writing or otherwise to take, any
action which would make any of its representations or warranties
contained in this Agreement untrue or incorrect in any material
respect or prevent it from performing or cause it not to perform its
covenants hereunder in any material respect; or
(xxv) take any action or series of actions that results in or
is likely to result in (i) the delisting of the Company Common Stock
from trading on the OTC Bulletin Board, or (ii) Company losing its
status as a reporting Company in good standing under the Exchange
Act.
6.2 Operation of Allstate.
(a) Except as specifically provided in this Agreement, between the
date of this Agreement and the Closing Date, Allstate shall:
(i) maintain its books of account and records in the usual and
ordinary manner, and in conformity with its past practices;
(ii) pay accounts payable and other obligations when they
become due and payable in the ordinary course of business consistent
with past practices except to the extent disputed in good faith;
(iii) conduct its business, if any, in the ordinary course
consistent with past practices, or as required by this Agreement;
(iv) pay all taxes when due and file all required Tax Returns
on or before the due date therefor except to the extent disputed in
good faith;
(v) make appropriate provisions in its books of account and
records for taxes relating to its operations during such period
(regardless of whether such taxes are required to be reflected in a
tax return having a due date on or prior to the Closing Date); and
30
(vi) withhold all taxes required to be withheld and remitted
by or on behalf of Allstate in connection with amounts paid or owing
to any Allstate personnel or other person, and pay such taxes to the
proper governmental authority or set aside such taxes in accounts
for such purpose.
(b) Without the prior written consent of Company, between the date
of this Agreement and the Closing Date (or termination of this Agreement), the
Allstate shall not:
(i) issue or promise to issue any capital stock or any
options, warrants or other rights to subscribe for or purchase any
capital stock or any securities convertible into or exchangeable or
exercisable for, or rights to purchase or otherwise acquire, any
shares of the capital stock of Allstate;
(ii) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any
of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares
of its capital stock, or repurchase or otherwise acquire, directly
or indirectly, any shares of its capital stock;
(iii) enter into any material contract or commitment, or amend
or otherwise modify or waive any of the terms of any of its material
contracts, other than in the ordinary course of business consistent
with past practice, or violate or terminate any such material
contracts;
(iv) transfer, assign or license to any person or entity any
rights to its intellectual property other than in the ordinary
course of business consistent with past practice;
(v) enter into or amend any agreements pursuant to which any
other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of its products or
intellectual property;
(vi) adopt or amend any employee benefit or stock purchase or
option plan;
(vii) except as may be required or reasonably necessary in
order to complete the transactions contemplated by this Agreement,
agree to borrow any funds, incur any indebtedness or directly or
indirectly guarantee or agree to guarantee the obligations of
others, or draw or borrow on any lines of credit that may be
available to Allstate;
(viii) place or allow to be placed a lien or encumbrance on
any of the assets of the Company;
(ix) pay, discharge or satisfy in an amount in excess of
$5,000 in any one case or $30,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course
of business, other than the payment, discharge or satisfaction of
liabilities reflected or reserved against in the Company's financial
statements;
31
(x) make any capital expenditures, capital additions or
capital improvements except in the ordinary course of business and
consistent with past practice;
(xi) materially reduce the amount of any material insurance
coverage provided by existing insurance policies;
(xii) terminate or waive any right of substantial value;
(xiii) commence a lawsuit other than (1) for the routine
collection of bills, (2) in such cases where it in good faith
determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business, provided
that it consults with Company prior to the filing of such a suit, or
(3) for a breach of this Agreement;
(xiv) sell, lease, license or otherwise dispose of or encumber
any of its properties or assets which are material, individually or
in the aggregate, to its business, except in the ordinary course of
business consistent with past practice;
(xv) commit any act or omit to do any act which will cause a
breach of this Agreement or any other material agreement, contract,
lease or commitment to which the Company is party;
(xvi) violate any law or governmental approval, including,
without limitation any federal or state securities laws;
(xvii) make any loan, advance, distribution or payment of any
type or to any Person other than as contemplated by this Agreement;
(xviii) amend its Articles of Incorporation or Bylaws;
(xix) except as contemplated by this Agreement, consolidate
with, or agree to merge or consolidate with, or purchase
substantially all of the assets of, or otherwise acquire any
business or any Person or division thereof;
(xx) make any tax election or settle or compromise any tax
liability other than in the ordinary course of business consistent
with past practices;
(xxi) lease or purchase or agree to lease or purchase any
assets or properties; or
(xxii) take, or agree in writing or otherwise to take, any
action which would make any of its representations or warranties
contained in this Agreement untrue or incorrect in any material
respect or prevent it from performing or cause it not to perform its
covenants hereunder in any material respect.
32
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Information.
(a) From the date hereof to the Closing Date, Company shall afford,
and shall cause its officers, directors, employees, representatives and agents
to afford, to Allstate and to the officers, employees and agents of Allstate
reasonable access during normal business hours to the Company's officers,
employees, agents, representatives, properties, books, records and contracts,
and shall furnish to Allstate all financial, operating and other data and
information as Allstate, through its agents, officers, employees or other
representatives, may reasonably request.
(b) From the date hereof to the Closing Date, Allstate shall afford,
and shall cause its officers, directors, employees, representatives and agents
to afford, to the Company and to the officers, employees and agents of the
Company reasonable access during normal business hours to Allstate's officers,
employees, agents, representatives, properties, books, records and contracts,
and shall furnish to the Company all financial, operating and other data and
information as the Company, through its agents, officers, employees or other
representatives, may reasonably request.
(c) No investigation pursuant to Section 8.1(a) shall affect any
representations or warranties of the Parties herein or the conditions to the
obligations of the Parties.
7.2 Expenses and Taxes. Each of the Parties shall pay their respective
costs incurred in connection with the preparation, negotiation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, including, without limitation, the fees of the attorneys, accountants
and advisors.
7.3 News Releases. Except as otherwise required by law or the rules of the
SEC or NASD, so long as this Agreement is in effect, Company will not permit any
of their respective affiliates or representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld or delayed.
Subject to the foregoing, the Company and Allstate will cooperate with each
other in the development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such releases and
announcements as far in advance as reasonably possible.
33
7.4 Additional Agreements. Subject to the terms and conditions of this
Agreement, each Party agrees to use all reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable law to consummate and make effective the
transactions contemplated by this Agreement. If at any time after the Closing
Date any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each such corporation shall
take all such necessary or desirable action.
7.5 Notification of Certain Matters.
(a) The Company shall give prompt notice to Allstate and Allstate
Shareholder of any material inaccuracy in any representation or warranty made by
it herein, or any material failure of the Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by the Company
under this Agreement; provided, however, that no such notification shall affect
the representations or warranties or covenants or agreements of the Company or
the conditions to the obligations of the Company hereunder.
(b) Allstate and Allstate Shareholder shall give prompt notice to
the Company of any material inaccuracy in any representation or warranty made by
it herein, or any material failure of Allstate or Allstate Shareholder to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations or warranties or covenants or
agreements of Allstate or the Allstate shareholder or the conditions to the
obligations of Allstate or the Allstate Shareholder hereunder.
(c) The Company and Allstate Shareholder and Allstate shall each
promptly advise the other orally and in writing of any change or event having,
or which, insofar as can reasonably be foreseen, in the future would have, a
Material Adverse Effect or any adverse effect on the right or ability of any
Party to enter into and complete the transactions contemplated hereby.
7.6 Confidentiality.
(a) Each Party shall hold, and shall cause its officers, employees,
agents and representatives, including, without limitation, attorneys,
accountants, consultants and financial advisors who obtain such information to
hold, in confidence, and not use for any purpose other than evaluating the
transactions contemplated by this Agreement, any confidential information of
another Party obtained through the investigations permitted hereunder, which for
the purposes hereof shall not include any information which (i) is or becomes
generally available to the public other than as a result of disclosure by a
Party or one of its affiliates in violation of its obligations under this
subsection, (ii) becomes available to a Party on a nonconfidential basis from a
source, other than the Party which alleges the information is confidential or
its affiliates, which has represented that such source is entitled to disclose
it, or (iii) was known to a Party on a nonconfidential basis prior to its
disclosure to such Party hereunder. If this Agreement is terminated, at the
request of a Party, the other Party shall deliver, and cause its officers,
employees, agents, and representatives, including, without limitation,
attorneys, accountants, consultants and financial advisors who obtain
confidential information of the requesting Party pursuant to investigations
permitted hereunder, to deliver to the requesting Party all such confidential
information that is written (including copies or extracts thereof).
34
(b) If a Party or a Person to whom a Party transmits confidential
information of another Party is requested or becomes legally compelled (by oral
questions, interrogatories, requests for information or documents, subpoena,
criminal or civil investigative demand or similar process) to disclose any of
such confidential information, such Party or other Person will provide the other
Party with prompt written notice so that such Party may seek a protective order
or other appropriate remedy or waive compliance with Section 8.6(a). If such
protective order or other remedy is not obtained, or if the applicable Party
waives compliance with Section 8.6(a), the Party or Person subject to the
request will furnish only that portion of such confidential information which is
legally required and will exercise reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such confidential
information.
7.7 Consents and Filings. The Parties shall, promptly after execution of
this Agreement, make all required filings and submissions with respect to the
transactions contemplated by this Agreement. Each Party will take all reasonable
actions to obtain any other consent, authorization, order or approval of, or any
exemption by, any Person required to be obtained or made in connection with the
transactions contemplated by this Agreement. Each Party will cooperate with and
promptly furnish information to the other Party in connection with obtaining
such consents or making any such filings and will promptly furnish to the other
Party a copy of all filings made with a governmental authority.
7.8 Company SEC Filings. Between the date hereof and the Closing Date,
Allstate shall cooperate with the Company in connection with the preparation and
filing of, and provide to the Company for inclusion or incorporation by
reference in, any reports or filings to be filed by Company with the Commission
(the "Company Filings"). Without limiting the foregoing, Allstate shall take all
commercially reasonable actions requested by Company to enable Company to
include or incorporate by reference in the Company Filings any Financial
Statement of Company, including, without limitation, any auditors' report
thereon. Allstate agrees that (i) at least three (3) business days prior to
filing, Allstate shall furnish the Company copies of all proposed Company
Filings relating to, disclosing or describing the transactions contemplated by
this Agreement, and (ii) it shall not make any Company Filing described in the
immediately preceding clause (i) without the prior consent of Allstate, which
shall not be unreasonably withheld, conditioned or delayed.
7.9 Tax-Free Reorganization. The Parties intend that the transaction will
qualify as a reorganization within the meaning of Section 368(a) of the Code.
The Company and Allstate shall each use its reasonable best efforts to cause the
transactions to so qualify. Neither the Company nor Allstate shall knowingly
take any action, or knowingly fail to take any action that would be reasonably
likely to jeopardize the qualification of the transaction as a reorganization
within the meaning of Section 368(a) of the Code. The Company and Allstate
acknowledge, however, that no Party hereto has made any representation or
warranty to the other with respect to the treatment of such transaction or the
effect thereof under the applicable tax laws, regulations or interpretations;
and that no attorney's opinion or private revenue ruling has been obtained with
respect to the effects thereof under the Code.
35
ARTICLE VIII
CLOSING DELIVERIES AND CONDITIONS TO CLOSING
8.1 Documents to be Delivered by Company. At the Closing, Company shall
deliver to Allstate the following:
(a) A certificate of the Secretary of Company dated the Closing Date
as to (i) the corporate actions taken by Company and its board of directors to
authorize the transactions contemplated hereby, and (ii) the incumbency and
signatures of the officers of Company executing this Agreement and the other
agreements, instruments and other documents executed by or on behalf of Company
pursuant to this Agreement or otherwise in connection with the transactions
contemplated hereby;
(b) A certificate, executed by an officer of Company, certifying
that all representations, warranties and covenants herein are true and correct
as of the Closing Date. The delivery of such certificate shall constitute a
representation and warranty of Company as to the statements set forth therein;
(c) A copy of the resolutions adopted by the Board of Directors of
Company (i) authorizing the execution and delivery of this Agreement and the
performance by Company of its obligations hereunder, (ii) electing the person
designated by the Company as a director of Company effective as of the Closing
Date, (iii) electing the persons designated by the Company as directors of
Company effective ten (10) days after the filing with the SEC of an Information
Statement pursuant to Section 14(f) of the Exchange Act (the "Section 14(f)
Information Statement") and distribution thereof to the Company shareholders,
and (iv) electing the persons designated by the Company as officers of Company
effective as of the Closing Date, certified by its Secretary;
(d) A certificate of good standing of Company from the Secretary of
State of Delaware dated as of the most recent practicable date;
(e) A current report on Form 8-K disclosing the completion of the
transactions contemplated by this Agreement which has been approved by all
Parties and Company's auditors and is ready for filing with the SEC;
(f) Such other customary certificates or documents as may be
reasonably required by Allstate or the Allstate Shareholder.
8.2 Documents to be Delivered by Allstate and Allstate Shareholder. At the
Closing, Allstate shall deliver to the Company the following:
(a) A certificate of the Secretary and President of Allstate, dated
the Closing Date, in form and substance reasonably satisfactory to the Company
as to (i) the corporate actions taken by Allstate and its board of directors to
authorize the transactions contemplated hereby, and (ii) the incumbency and
signatures of the officers of Allstate executing this Agreement and the other
agreements, instruments and other documents executed by or on behalf of Allstate
pursuant to this Agreement or otherwise in connection with the transactions
contemplated hereby;
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(b) A certificate, executed by the President and Chief Financial
Officer of the Allstate, in such detail as the Company shall reasonably request,
certifying that all representations, warranties and covenants herein are true
and correct as of the Closing Date. The delivery of such certificate shall
constitute a representation and warranty of Allstate as to the statements set
forth therein;
(c) A copy of the resolutions adopted by the Board of Directors of
Allstate authorizing the execution and delivery of this Agreement and the
performance by Allstate of its obligations hereunder, certified by the Secretary
and President of Allstate; and
(d) A certificate of good standing of Allstate from the Secretary of
State of California dated as of the most recent practicable date;
(e) Such other customary certificates or documents as may be
reasonably required by the Company.
8.3 Documents to be Delivered by each Party. At the Closing, the Company
shall deliver to Allstate Stockholder a stock certificate representing the
Company Shares, together with such letters of transmittal, stock powers and
other documents as are necessary to effect the transfer thereof to Allstate.
Allstate Stockholder shall deliver to the Company a stock certificate
representing the Allstate Shares, together with such letters of transmittal,
stock powers duly endorsed and other documents as are necessary to effect the
transfer thereof to the Company.
8.4 Conditions to Obligations of Each Party. Each Party's obligations to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver at or prior to the Closing, of each of the following
conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order issued by any governmental authority or other material
legal restraint or prohibition issued or promulgated by a governmental authority
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect or shall be threatened, and there shall not be any law or
regulation enacted or deemed applicable to the transactions contemplated by this
Agreement that makes consummation of such transactions illegal.
8.5 Conditions to Obligations of the Company. The obligation of the
Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction or waiver, at or prior to the Closing, of each of
the following conditions:
(a) Each of the representations and warranties of the Allstate and
the Allstate Shareholder set forth in this Agreement (i) that are not qualified
by materiality must have been true and correct in all material respects as of
the Closing Date, and (ii) that are qualified by materiality must have been true
and correct as of the Closing Date; except, in each case, for inaccuracies that
would not individually or in the aggregate have a Material Adverse Effect on
either party.
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(b) All of the obligations, covenants and agreements with which
Allstate and the Allstate Shareholder are required to comply or that the Company
is required to perform under this Agreement at or prior to the Closing shall
have been complied with and performed in all material respects.
(c) The documents required to be delivered by the Allstate and the
Allstate Shareholder pursuant to this Agreement shall have been delivered
simultaneously with the Closing.
8.6 Conditions to Obligations of Allstate. The obligation of Allstate to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver, at or prior to the Closing, of each of the following
conditions:
(a) Each of the representations and warranties of Company set forth
in this Agreement (i) that are not qualified by materiality must have been true
and correct in all material respects as of the Closing Date, and (ii) that are
qualified by materiality must have been true and correct as of the Closing Date;
except, in each case, for inaccuracies that would not individually or in the
aggregate have a Material Adverse Effect on either Party.
(b) All of the obligations, covenants and agreements with which
Company is required to comply or that Company is required to perform under this
Agreement at or prior to the Closing shall have been complied with and performed
in all material respects.
(c) The documents required to be delivered by Company pursuant to
this Agreement shall have been delivered simultaneously with the Closing.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual written consent of the Parties at any time prior to
the Closing;
(b) by the Company in the event of a material breach by Allstate or
the Allstate Shareholder of any provision of this Agreement for which written
notice has been given to the Allstate and which breach has not been cured prior
to the earlier of (i) the Termination Date or (ii) thirty (30) days following
notice of such breach; provided, however that the right to terminate this
Agreement under this Section shall not be available to Company if Company has
materially breached any provision of this Agreement and such breach remains
uncured;
(c) by Allstate in the event of a material breach by Company of any
provision of this Agreement which breach has not been cured prior to the
Termination Date; provided, however, that the right to terminate this Agreement
under this Section shall not be available to the Allstate if Allstate has
materially breached any provision of this Agreement and such breach remains
uncured;
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(d) by Allstate if the Closing shall not have occurred by July 29,
2006 (the "Termination Date"); provided, however, the right to terminate this
Agreement under this Section shall not be available to any Party whose failure
to fulfill any obligation hereunder has been the cause of, or results in, the
failure of the Closing to have occurred on or before the Termination Date;
9.2 Effect of Termination. Except for the provisions of Sections____ and
the provisions of Article X hereof, each of which shall survive any termination
of this Agreement, in the event of termination of this Agreement pursuant to
this Agreement, this Agreement shall forthwith become void and of no further
force and effect and the Parties shall be released from any and all obligations
hereunder; provided, however, that termination of this Agreement shall not
relieve any Party from liability for the breach of any of its obligations
hereunder.
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations and Warranties. All representations and
warranties of the Company, Allstate Shareholder and Allstate contained herein or
in any document, certificate or other instrument required to be delivered
hereunder in connection with the transactions contemplated hereby shall survive
the Closing for the period ending on the date that is (12) months after the
Closing Date. No claim for indemnification for breach of a representation or
warranty may be commenced after the period of survival of such representation or
warranty, provided, however, that claims made within the applicable time period
shall survive to the extent of such claim until such claim is finally determined
and, if applicable, paid.
10.2 Indemnification.
(a) Company agrees to indemnify, defend and hold harmless Allstate
and Allstate Shareholder from and against any and all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs and
expenses, including interest, penalties and reasonable attorneys' fees and
expenses (collectively "Damages") asserted against, resulting to, imposed upon
or incurred by Allstate, directly or indirectly, by reason of or resulting from
(i) any breach by the Company of this Agreement, or (ii) any inaccuracy in or
breach of any of the representations, warranties, covenants or agreements made
by the Company in this Agreement.
(b) Allstate and the Allstate Shareholder each agree to indemnify,
defend and hold harmless Company from and against any and all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including interest, penalties and reasonable attorneys' fees and
expenses (collectively "Damages") asserted against, resulting to, imposed upon
or incurred by the Company , directly or indirectly, by reason of or resulting
from (i) any breach by Allstate or Allstate Shareholder of this Agreement, or
(ii) any inaccuracy in or breach of any of the representations, warranties,
covenants or agreements made by Allstate or Allstate Shareholder in this
Agreement.
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10.3 Claims. Whenever any claim shall arise for indemnification hereunder
(a "Claim"), the party entitled to indemnification (the "Indemnified Party")
shall promptly give written notice to the party obligated to provide indemnity
(the "Indemnifying Party") of the nature and extent of such Claim and the
Damages incurred by it. If the Damages are liquidated in amount, the notice
shall so state, and such amount shall be deemed the amount of such Claim of the
Indemnified Party against the Indemnifying Party. If the amount is not
liquidated, the notice shall so state and, in such event, such Claim shall be
deemed asserted against the Indemnifying Party but no payment or satisfaction
shall be made on account thereof until the amount of such claim is liquidated.
If the Indemnifying Party shall not, within thirty (30) days after
the giving of such notice by the Indemnified Party, notify the Indemnified Party
in accordance herewith that the Indemnifying Party disputes the right of the
Indemnified Party to indemnity in respect of such Claim, then any such Claim
shall be paid or satisfied as follows: (i) if said Claim is liquidated, then
payment of such Claim to the Indemnified Party shall be made by the Indemnifying
Party at the end of such period; or (ii) if the amount of such Claim is
unliquidated at the time notice is originally given to the Indemnifying Party,
the Indemnified Party shall give a second notice to the Indemnifying Party when
the liquidated amount of such Claim is known and, unless the Indemnifying Party
shall object in writing to such amount (as opposed to the Claim itself, as to
which the right to dispute had expired) within twenty (20) days after the giving
of said second notice, payment of such Claim to the Indemnified Party shall be
made by the Indemnifying Party.
If the Indemnifying Party shall not have made payment to the
Indemnified Party of any Claim when said payment is due, then the Indemnified
Party shall have the right to take any and all actions required to collect from
the Indemnifying Party the amount of such Claim.
Any portion of the amount of Damages asserted by the Indemnified
Party in connection with a Claim shall, if not objected to by the Indemnifying
Party in accordance with the procedures established herein, be considered to be
subject to satisfaction without further objection, as may be appropriate.
If the Indemnifying Party shall notify the Indemnified Party that he
disputes any Claim or the amount thereof (which notice shall only be given if
the Indemnifying Party has a good faith belief that the Indemnified Party is not
entitled to indemnity or the full amount of indemnity as claimed) then the
parties hereto shall endeavor to settle and compromise such Claim, or may agree
to submit the same to arbitration, and, if unable to agree on any settlement or
compromise or on submission to arbitration, such claim shall be settled by
appropriate litigation, and any liability and the amount of the Damages
established by reason of such settlement, compromise, arbitration or litigation,
or incurred as a result thereof, shall be paid and satisfied as provided herein.
10.4 Conditions of Indemnification with Respect to Third Party Claims. The
Indemnified Party shall promptly give notice to the Indemnifying Party of any
claim of a third party which may reasonably be expected to result in a Claim by
the Indemnified Party. The Indemnifying Party shall have the right to
participate in and, with respect to a third party Claim as to which he is
"wholly at risk," direct the defense, compromise or settlement of such claim
with counsel selected by him, provided the Indemnifying Party gives written
notice to the Indemnified Party of his election to do so within thirty (30) days
after receipt of notice in accordance with the preceding sentence. For the
purposes of this Section, the Indemnifying Party shall be deemed to be "wholly
at risk" except as to (i) Claims as to which the Indemnified Party may have any
direct monetary risk for which it is not fully indemnified by the terms hereof
or (ii) Claims as to which the Indemnified Party in its reasonable judgment has
any risk or liability for which compensation by monetary damages would not be
adequate. If the Indemnifying Party fails to so notify the Indemnified Party of
his election to defend any such third party claim, the Indemnified Party will
(upon further notice to the Indemnifying Party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the account
and expense of the Indemnifying Party, subject to the right of the Indemnifying
Party to assume the defense of such claim at any time prior to settlement,
compromise or final determination thereof.
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If the proceeding involves matters as to which the Indemnifying
Party is not "wholly at risk," then the defense, compromise or settlement of the
Claim shall be the responsibility of the Indemnified Party, but such defense,
compromise and settlement by the Indemnified Party shall be for the expense and
account of the Indemnifying Party. Counsel for the Indemnifying Party shall
consult and cooperate at all times with counsel for the Indemnified Party in
defending against any such third party claim.
The Indemnifying Party shall not under any circumstances, without
the written consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party a release from all liability in respect of such claim.
10.5 Limitations. Notwithstanding any of the provisions of this Article:
(a) None of the Parties to this Agreement nor any of their
affiliates shall be entitled to indemnification under this Article until the
aggregate amount of all Claims exceeds $25,000.00 at which time all Claims shall
be subject to indemnification;
(b) In no event will any indemnifying party be liable for
consequential damages under this Article.
ARTICLE XI
GENERAL PROVISIONS
11.1 Amendment. This Agreement may not be amended except by an instrument
in writing signed by each of the Parties.
11.2 Waiver. At any time prior to the Closing Date, any Party may (a)
extend the time for the performance of any of the obligations or other acts of
any other Party hereto or (b) waive compliance with any of the agreements of any
other Party or with any conditions to its own obligations. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of the Party making the waiver or granting the extension by a duly
authorized officer. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
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11.3 Assignment and Binding Effect. Neither this Agreement nor any of the
rights or obligations hereunder may be assigned by Company without the prior
written consent of Allstate or assigned by Allstate or the Allstate Shareholder
without the prior written consent of Company. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, transferees and assigns, and no other Person shall
have any right, benefit or obligation hereunder.
11.4 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of State of Nevada, without regard to the
conflict of law provisions thereof.
11.5 Entire Agreement. This Agreement constitutes the entire agreement
between the Parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties with respect to the subject matter hereof.
11.6 Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.7 Construction and Titles. The titles, captions or headings of the
Articles and Sections herein are for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. This Agreement has been negotiated between the parties hereto, and
the language hereof shall not be construed for or against any party. A reference
herein to any section shall be deemed to include a reference to every subsection
thereof. All pronouns contained herein, and any variations thereof, shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as to
the identity of the parties hereto may require.
11.8 Arbitration. Any dispute arising out of this Agreement, or its
performance or breach, shall be resolved by binding arbitration in Las Vegas,
Nevada under the Commercial Arbitration Rules (the "AAA Rules") of the American
Arbitration Association (the "AAA"). This arbitration provision is expressly
made pursuant to and shall be governed by the Federal Arbitration Act, 9 U. S.
C. Sections 1-14 as well as the AAA Rules. The Parties agree that pursuant to
Section 9 of the Federal Arbitration Act, a judgment of a United States District
Court of competent jurisdiction shall be entered upon the award made pursuant to
the arbitration. A single arbitrator, who shall have the authority to allocate
the costs of any arbitration initiated under this paragraph, shall be selected
according to the AAA Rules within ten (10) days of the submission to the AAA of
the response to the statement of claim or the date on which any such response is
due, whichever is earlier. The arbitrator shall be required to furnish to the
parties to the arbitration a preliminary statement of the arbitrator's decision
that includes the legal rationale for the arbitrator's conclusion and the
calculations pertinent to any damage award being made by the arbitrator. The
arbitrator shall then furnish each of the parties to the arbitration the
opportunity to comment upon and/or contest the arbitrator's preliminary
statement of decision either, in the discretion of the arbitrator, through
briefs or at a hearing. The arbitrator shall render a final decision following
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any such briefing or hearing. The arbitrator shall conduct the arbitration in
accordance with the Federal Rules of Evidence and the AAA Rules. The arbitrator
shall decide the amount and extent of the pre-hearing discovery which is
appropriate. The arbitrator shall have the power to enter any award of monetary
and/or injunctive relief (including the power to issue permanent injunctive
relief and also the power to reconsider any prior request for immediate
injunctive relief by any Party and any order as to immediate injunctive relief
previously granted or denied by a court in response to a request therefor by any
Party), including the power to render an award as provided in Rule 43 of the AAA
Rules. The arbitrator shall have the power to award the prevailing party its
costs and reasonable attorney's fees; provided, however, that the arbitrator
shall not award attorneys' fees to a prevailing party if the prevailing party
received a settlement offer unless the arbitrator's award to the prevailing
party is greater than such settlement offer without taking into account
attorneys' fees in the case of the settlement offer or the arbitrator's award.
In addition to the above courts, the arbitration award may be enforced in any
court having jurisdiction over the Parties and the subject matter of the
arbitration.
11.9 Attorneys' Fees. Should any Party institute any action or proceeding
to enforce any provision of this Agreement, including, without limitation, an
action or proceeding for declaratory relief, damages by reason of an alleged
breach of any provision of this Agreement, equitable relief or otherwise in
connection with this Agreement, or any provision hereof, the prevailing Party
shall be entitled to recover from the losing Party or Parties reasonable
attorneys' fees and costs for services rendered to the prevailing Party in such
action or proceeding.
11.10 Multiple Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
11.11 Notices. Unless applicable law requires a different method of giving
notice, any and all notices, demands or other communications required or desired
to be given hereunder by any Party shall be in writing. Assuming that the
contents of a notice meet the requirements of the specific Section of this
Agreement which mandates the giving of that notice, a notice shall be validly
given or made to another Party if served either personally or if deposited in
the United States mail, certified or registered, postage prepaid, or if
transmitted by telegraph, telecopy or other electronic written transmission
device or if sent by overnight courier service, and if addressed to the
applicable Party as set forth below. If such notice, demand or other
communication is served personally, service shall be conclusively deemed given
at the time of such personal service. If such notice, demand or other
communication is given by mail, service shall be conclusively deemed given
seventy-two (72) hours after the deposit thereof in the United States mail. If
such notice, demand or other communication is given by overnight courier, or
electronic transmission, service shall be conclusively deemed given at the time
of confirmation of delivery. The addresses for the Parties are as follows:
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If to Allstate Shareholders: Gregg Shanberg
27 Trumpet Vine
Irvine, CA 92603
If to Company: Michael A. Barron, CEO
6330 S. Sandhill Rd., Suite 6
Las Vegas, Nevada 89120
Any Party may change such Party's address for the purpose of receiving
notices, demands and other communications as herein provided, by a written
notice given in the aforesaid manner to the other Parties.
11.12 Incorporation by Reference. All Exhibits and Schedules attached
hereto or to be delivered in connection herewith are incorporated herein by this
reference.
[SIGNATURES CONTINUED ON NEXT PAGE]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the date first written above.
ALLSTATE HOME LOANS INC.
By:________________________________ ________________________________
Gregg Shanberg Gregg Shanberg
SHEARSON FINANCIAL NETWORK, INC.
By:________________________________
President
By:________________________________
Secretary
EXHIBIT A
Company Disclosure Schedule
EXHIBIT B
Allstate "Books" Disclosure Schedule
EXHIBIT C
Schedule of Licenses
EXHIBIT D
Warehouse Lines
EXHIBIT E
Allstate Litigation
EXHIBIT F
Allstate Debt Holders