EXCHANGE AGREEMENT
Between
OTISH MOUNTAIN DIAMOND COMPANY
and
OTISH MOUNTAIN DIAMOND CORP.
Dated November 30, 2003
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement") is
entered into as of this 30th day of November, 2003, by and between OTISH
MOUNTAIN DIAMOND COMPANY, a Nevada corporation (hereinafter referred to as the
"Company"), OTISH MOUNTAIN DIAMOND CORP., a Nevada corporation (hereinafter
referred to as "Otish"), and the persons executing this Agreement listed on the
signature page hereto (referred to collectively as "Otish Shareholders") who own
one hundred percent (100%) of the outstanding shares of Otish, upon the
following premises:
Premises.
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WHEREAS, the Otish Shareholders own one hundred percent (100%) of the
issued and outstanding shares of the capital stock of Otish;
WHEREAS, the Company is a publicly held corporation whose common stock is
quoted on the OTC Bulletin Board under the symbol "OMDC";
WHEREAS, Otish is a privately held corporation organized under the laws of
Nevada;
WHEREAS, the Company desires to acquire 100% of the issued and outstanding
shares of Common Stock of Otish in exchange for unissued shares of its Common
Stock (the "Common Stock") (the "Exchange Offer"), so that Otish will become a
wholly owned subsidiary of the Company; and
WHEREAS, Otish Shareholders desire to exchange all of their shares of
capital stock of Otish solely in exchange for the shares of authorized but
unissued Common Stock, $.001 par value, of the Company.
Agreement
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NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF OTISH
AND THE OTISH SHAREHOLDERS
As an inducement to and to obtain the reliance of the Company, except as
set forth on the Otish Schedules (as hereinafter defined), Otish and the Otish
Shareholders represent and warrant as follows:
Section 1.01 Organization. Otish is a corporation duly organized,
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validly existing, and in good standing under the laws of Nevada and has the
corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states or countries in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification, except where failure to be so qualified
would not have a material adverse effect on its business. Included in the Otish
Schedules are complete and correct copies of the Articles of Incorporation and
Bylaws of Otish as in effect on the date hereof. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
hereby will not, violate any provision of Otish's Articles of Incorporation or
Bylaws. Otish has taken all actions required by law, its Articles of
Incorporation, or otherwise to authorize the execution and delivery of this
Agreement. Otish has full power, authority, and legal right and has taken all
action required by law, its Articles of Incorporation, and otherwise to
consummate the transactions herein contemplated.
Section 1.02 Capitalization. The authorized capitalization of Otish
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consists of 310,000,000 shares of which 300,000,000 are common stock with par
value of $.001 per share, and 10,000,000 shares are preferred stock with par
value of $.001 per share. There are currently 15,000,000 shares of common
stock, and no shares of preferred stock, issued and outstanding. All issued and
outstanding shares are legally issued, fully paid, and non-assessable and not
issued in violation of the preemptive or other rights of any person.
Section 1.03 Subsidiaries and Predecessor Corporations. Otish does not
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have any predecessor corporation(s) or subsidiary(ies), and does not own,
beneficially or of record, any shares of any other corporation, unless otherwise
disclosed to the Company in writing.
Section 1.04 Other Information.
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(a) Otish has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties), except for taxes accrued but not yet due and payable.
(b) Otish has filed all state, federal or local income and/or franchise
tax returns required to be filed by it from inception to the date hereof. Each
of such income tax returns reflects the taxes due for the period covered
thereby, except for amounts which, in the aggregate, are immaterial.
(c) The books and records of Otish are in all material respects
complete and correct and have been maintained in accordance with good business
and accounting practices.
(d) Otish has no material liabilities, direct or indirect, matured or
unmatured, contingent or otherwise in excess of Twenty-Five Thousand Dollars
($25,000), except as disclosed in writing to the Company on Schedule 1.04.
Section 1.05 Information. The information concerning Otish set forth
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in this Agreement and in the Otish Schedules is complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, not misleading. In addition,
Otish has fully disclosed in writing to the Company (through this Agreement or
the Otish Schedules) all information relating to matters involving Otish or its
assets or its present or past operations or activities which (i) indicated or
may indicate, in the aggregate, the existence of a greater than Twenty-Five
Thousand Dollars ($25,000) liability or diminution in value, (ii) have led or
may lead to a competitive disadvantage on the part of Otish, or (iii) either
alone or in aggregation with other information covered by this Section,
otherwise have led or may lead to a material adverse effect on the transactions
contemplated herein or on Otish, its assets, or its operations or activities as
presently conducted or as contemplated to be conducted after the Closing Date,
including, but not limited to, information relating to governmental, employee,
environmental, litigation and securities matters and transactions with
affiliates.
Section 1.06 Options or Warrants. There are no existing options,
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warrants, calls, or commitments of Otish of any character relating to the
authorized and unissued Otish common stock, except options, warrants, calls or
commitments, if any, to which Otish is not a party and by which it is not bound.
Section 1.07 Absence of Certain Changes or Events. Except as set forth
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in this Agreement or the Otish Schedules, since June 30, 2003:
(a) there has not been (i) any material adverse change in the proposed
business, operations, properties, assets, or condition of Otish or (ii) any
damage, destruction, or loss to Otish (whether or not covered by insurance)
materially and adversely affecting the business or financial condition of Otish;
(b) Otish has not (i) amended its Articles of Incorporation or Bylaws;
(ii) declared or made, or agreed to declare or make, any payment of dividends or
distributions of any assets of any kind whatsoever to stockholders or purchased
or redeemed, or agreed to purchase or redeem, any of its capital stock; (iii)
waived any rights of value which in the aggregate are outside of the ordinary
course of business or material considering the business of Otish; (iv) made any
material change in its method of management, operation or accounting; (v)
entered into any other material transaction other than sales in the ordinary
course of its business; (vi) made any accrual or arrangement for payment of
bonuses or special compensation of any kind or any severance or termination pay
to any present or former officer or employee; (vii) increased the rate of
compensation payable or to become payable by it to any of its officers or
directors or any of its salaried employees whose monthly compensation exceeds
Ten Thousand Dollars ($10,000); or (viii) made any increase in any profit
sharing, bonus, deferred compensation, insurance, pension, retirement, or other
employee benefit plan, payment, or arrangement made to, for, or with its
officers, directors, or employees;
(c) Otish has not (i) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability (absolute
or contingent) in excess of $25,000 except as disclosed herein and except
liabilities incurred in the ordinary course of business; (ii) paid or agreed to
pay any material obligations or liability (absolute or contingent) other than
current liabilities, and current liabilities incurred in the ordinary course of
business and professional and other fees and expenses in connection with the
preparation of this Agreement and the consummation of the transactions
contemplated hereby; (iii) sold or transferred, or agreed to sell or transfer,
any of its assets, properties, or rights (except assets, properties, or rights
not used or useful in its business which, in the aggregate have a value of less
than Twenty-Five Thousand Dollars [$25,000]), or canceled, or agreed to cancel,
any debts or claims (except debts or claims which in the aggregate are of a
value of less than Twenty-Five Thousand Dollars [$25,000]); or (iv) made or
permitted any amendment or termination of any contract, agreement, or license to
which it is a party if such amendment or termination is material, considering
the business of Otish; and
(d) To the best knowledge of Otish, Otish has not become subject to
any law or regulation which materially and adversely affects, or in the future
may adversely affect, the business, operations, properties, assets, or condition
of Otish.
Section 1.08 Title and Related Matters. No third party has any right
--------------------------
to, and Otish has not received any notice of infringement of or conflict with
asserted rights of others with respect to, any product, technology, data, trade
secrets, know-how, proprietary techniques, trademarks, service marks, trade
names, or copyrights which, individually or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would have a materially adverse
effect on the proposed business, operations, financial condition, income, or
business prospects of Otish or any material portion of its properties, assets,
or rights.
Section 1.09 Litigation and Proceedings. There are no actions, suits,
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or proceedings pending or, to the knowledge of Otish after reasonable
investigation, threatened by or against Otish or affecting Otish or its
properties, at law or in equity, before any court or other governmental agency
or instrumentality, domestic or foreign, or before any arbitrator of any kind.
Otish does not have any knowledge of any material default on its part with
respect to any judgment, order, injunction, decree, award, rule, or regulation
of any court, arbitrator, or governmental agency or instrumentality or of any
circumstances which, after reasonable investigation, would result in the
discovery of such a default.
Section 1.10 Contracts.
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(a) There are no material contracts, agreements, franchises, license
agreements, debt instruments or other commitments to which Otish is a party or
by which it or any of its assets, products, technology, or properties are bound
other than those incurred in the ordinary course of business (as used in this
Agreement, a "material" contract, agreement, franchise, license agreement, debt
instrument or commitment is one which (i) will remain in effect for more than
six (6) months after the date of this Agreement and (ii) involves aggregate
obligations of at least Twenty-Five Thousand Dollars ($25,000) unless otherwise
disclosed pursuant to this Agreement;
(b) All contracts, agreements, franchises, license agreements, and
other commitments, if any, to which Otish is a party and which are material to
the operations of Otish taken as a whole are valid and enforceable by Otish in
all respects, except as limited by bankruptcy and insolvency laws and by other
laws affecting the rights of creditors generally;
(c) Otish is not a party to or bound by, and the properties of Otish
are not subject to, any contract, agreement, other commitment or instrument; any
charter or other corporate restriction; or any judgment, order, writ,
injunction, decree, or award which materially and adversely affects, the
business operations, properties, assets, or condition of Otish; and
(d) Except as included or described in the Otish Schedules, Otish is
not a party to any oral or written (i) contract for the employment of any
officer or employee which is not terminable on thirty (30) days, or less notice;
(ii) profit sharing, bonus, deferred compensation, stock option, severance pay,
pension benefit or retirement plan; (iii) agreement, contract, or indenture
relating to the borrowing of money; (iv) guaranty of any obligation, other than
one on which Otish is a primary obligor, for the borrowing of money or
otherwise, excluding endorsements made for collection and other guaranties of
obligations which, in the aggregate do not exceed more than one (1) year or
providing for payments in excess of Twenty-Five Thousand Dollars ($25,000) in
the aggregate; (v) collective bargaining agreement; or (vi) agreement with any
present or former officer or director of Otish.
Section 1.11 Material Contract Defaults. Otish is not in default in
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any material respect under the terms of any outstanding material contract,
agreement, lease, or other commitment which is material to the business,
operations, properties, assets or condition of Otish and there is no event of
default in any material respect under any such contract, agreement, lease, or
other commitment in respect of which Otish has not taken adequate steps to
prevent such a default from occurring.
Section 1.12 No Conflict With Other Instruments. The execution of this
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Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
an event of default under, or terminate, accelerate or modify the terms of any
material indenture, mortgage, deed of trust, or other material contract,
agreement, or instrument to which Otish is a party or to which any of its
properties or operations are subject.
Section 1.13 Governmental Authorizations. Except as set forth in the
----------------------------
Otish Schedules, Otish has all licenses, franchises, permits, and other
governmental authorizations that are legally required to enable it to conduct
its business in all material respects as conducted on the date hereof. Except
for compliance with federal and state securities and corporation laws, as
hereinafter provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental body
is required in connection with the execution and delivery by Otish of this
Agreement and the consummation by Otish of the transactions contemplated hereby.
Section 1.14 Compliance With Laws and Regulations. Except as set forth
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in the Otish Schedules, to the best of its knowledge Otish has complied with all
applicable statutes and regulations of any federal, state, or other governmental
entity or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets, or
condition of Otish or except to the extent that noncompliance would not result
in the occurrence of any material liability for Otish.
Section 1.15 Approval of Agreement. The Board of Directors of Otish
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has authorized the execution and delivery of this Agreement by Otish and has
approved this Agreement and the transactions contemplated hereby, and will
recommend to the Otish Shareholders that the Exchange Offer be accepted by them.
Section 1.16 Material Transactions or Affiliations. Set forth in the
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Otish Schedules is a description, if applicable, of every contract, agreement,
or arrangement between Otish and any predecessor and any person who was at the
time of such contract, agreement, or arrangement an officer, director, or person
owning of record, or known by Otish to own beneficially, five percent (5%) or
more of the issued and outstanding common stock of Otish and which is to be
performed in whole or in part after the date hereof or which was entered into
not more than three (3) years prior to the date hereof. Except as disclosed in
the Otish Schedules or otherwise disclosed herein, no officer, director, or five
percent (5%) shareholder of Otish has, or has had since inception of Otish, any
known interest, direct or indirect, in any transaction with Otish which was
material to the business of Otish. There are no commitments by Otish, whether
written or oral, to lend any funds, or to borrow any money from, or enter into
any other transaction with, any such affiliated person.
Section 1.17 Otish Schedules. Otish will deliver to the Company the
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following schedules, if such schedules are applicable to the business of Otish,
which are collectively referred to as the " Otish Schedules" and which consist
of separate schedules dated as of the date of execution of this Agreement, all
certified by the chief executive officer of Otish as complete, true, and correct
as of the date of this Agreement in all material respects:
(a) a schedule containing complete and correct copies of the Articles of
Incorporation in effect as of the date of this Agreement;
(b) a schedule containing complete and correct copies of the Bylaws of
Otish in effect as of the date of this Agreement;
(c) a schedule containing any Corporate Resolutions of the Shareholders of
Otish;
(d) a schedule containing Minutes of meetings of the Board of Directors of
Otish;
(e) a schedule containing a list indicating the name and address of each
shareholder of Otish together with the number of shares owned by him, her or it;
and
(f) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed by Otish.
Otish shall cause the Otish Schedules and the instruments and data
delivered to the Company hereunder to be promptly updated after the date hereof
up to and including the Closing Date.
It is understood and agreed that not all of the schedules referred to above
have been completed or are available to be furnished by Otish. Otish shall have
until November 17, 2003 to provide such schedules. If Otish cannot or fails to
do so, or if the Company acting reasonably finds any such schedules or updates
provided after the date hereof to be unacceptable according to the criteria set
forth herein, the Company may terminate this Agreement by giving written notice
to Otish within five (5) days after the schedules or updates were due to be
produced or were provided. For purposes of the foregoing, the Company may
consider a disclosure in the Otish Schedules to be "unacceptable" only if that
item would have a material adverse impact on the financial condition of Otish,
taken as a whole.
Section 1.18 Valid Obligation. This Agreement and all agreements and
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other documents executed by Otish in connection herewith constitute the valid
and binding obligation of Otish, enforceable in accordance with its or their
terms, except as may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought. The Exchange of the Otish shares by the Otish Shareholders is being
completed simultaneously with a Stock Purchase Agreement.
Section 1.19 Acquisition of the Shares by theOtish Shareholders. The
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Otish Shareholders are acquiring the Shares for their own account without the
participation of any other person and with the intent of holding the Shares for
investment and without the intent of participating, directly or indirectly, in a
distribution of the Shares, or any portion thereof, and not with a view to, or
for resale in connection with, any distribution of the Shares, or any portion
thereof. The Otish Shareholders have read, understand and consulted with their
legal counsel regarding the limitations and requirements of Section 5 of the
1933 Act. The Otish Shareholders will offer, sell, pledge, convey or otherwise
transfer the Shares, or any portion thereof, only if: (i) pursuant to an
effective registration statement under the 1933 Act and any and all applicable
state securities or Blue Sky laws or in a transaction which is otherwise in
compliance with the 1933 Act and such laws; or (ii) pursuant to a valid
exemption from registration.
Section 1.20 Exemption from Registration. The Exchange and the
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transactions contemplated thereby, meet an exemption from registration pursuant
to Rule 506 of Regulation D promulgated under the 1933 Act.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE COMPANY
As an inducement to, and to obtain the reliance of Otish and the Otish
Shareholders, except as set forth in the Company Schedules (as hereinafter
defined), the Company represents and warrants as follows:
Section 2.01 Organization. The Company is a corporation duly
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organized, validly existing, and in good standing under the laws of the State of
Nevada, and has the corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances, and
orders of public authorities to own all of its properties and assets, to carry
on its business in all material respects as it is now being conducted, and
except where failure to be so qualified would not have a material adverse effect
on its business, there is no jurisdiction in which it is not qualified in which
the character and location of the assets owned by it or the nature of the
business transacted by it requires qualification. Included in the Company
Schedules are complete and correct copies of the Articles of Incorporation and
Bylaws of the Company as in effect on the date hereof. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby will not, violate any provision of the Company's Articles of
Incorporation or Bylaws. The Company has taken all action required by law, its
Articles of Incorporation, its Bylaws, or otherwise to authorize the execution
and delivery of this Agreement, and the Company has full power, authority, and
legal right and has taken all action required by law, its Articles of
Incorporation, Bylaws, or otherwise to consummate the transactions herein
contemplated.
Section 2.02 Capitalization. The Company is authorized to issue
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600,000,000 shares, consisting of 500,000,000 shares of Common Stock, par value
$.001 per share, of which approximately 107,750 shares will be issued and
outstanding on the closing date prior to the issuance of the shares to the Otish
Shareholders as set forth in Section 3.01(ii), as defined herein, and
100,000,000 shares of preferred stock with a par value of $.001 per share of
which 1,000,000 shares of Series A Preferred Stock will be issued and
outstanding on the closing date. All issued and outstanding shares are legally
issued, fully paid, and non-assessable and not issued in violation of the
preemptive or other rights of any person.
Section 2.03 Subsidiaries and Predecessor Corporations. The Company does
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not have any predecessor corporation(s) or subsidiaries, and does not own,
beneficially or of record, any shares of any other corporation.
Section 2.04 Financial Statements.
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(a) Included in the Company Schedules are (i) the audited balance
sheets of the Company and the related statements of operations and cash flows as
of and for the twelve (12) months ended December 31, 2002 and (ii) the unaudited
balance sheets of the Company and the related statements of operations and cash
flows for the six (6) months ended June 30, 2003.
(b) All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved. The Company balance sheets present fairly as of their
respective dates the financial condition of the Company. As of the date of such
balance sheets, except as and to the extent reflected or reserved against
therein, the Company had no liabilities or obligations (absolute or contingent)
which should be reflected in the balance sheets or the notes thereto prepared in
accordance with generally accepted accounting principles, and all assets
reflected therein are properly reported and present fairly the value of the
assets of the Company, in accordance with generally accepted accounting
principles. The statements of operations, stockholders' equity and cash flows
reflect fairly the information required to be set forth therein by generally
accepted accounting principles.
(c) The Company has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any deficiencies,
interest or penalties), except for taxes accrued but not yet due and payable.
(d) The books and records, financial and otherwise, of the Company are
in all material aspects complete and correct and have been maintained in
accordance with good business and accounting practices.
(e) All of the Company's assets are reflected on its financial
statements, and, except as set forth in the Company Schedules or the financial
statements of the Company or the notes thereto, the Company has no material
liabilities, direct or indirect, matured or unmatured, contingent or otherwise.
Section 2.05 Information. The information concerning the Company set
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forth in this Agreement and the Company Schedules is complete and accurate in
all material respects and does not contain any untrue statements of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading. In
addition, the Company has fully disclosed in writing to Otish (through this
Agreement or the Company Schedules) all information relating to matters
involving the Company or its assets or its present or past operations or
activities which (i) indicated or may indicate, in the aggregate, the existence
of a greater than One Thousand Dollars ($1,000) liability or diminution in
value, (ii) have led or may lead to a competitive disadvantage on the part of
the Company or (iii) either alone or in aggregation with other information
covered by this Section, otherwise have led or may lead to a material adverse
effect on the transactions contemplated herein or on the Company, its assets, or
its operations or activities as presently conducted or as contemplated to be
conducted after the Closing Date, including, but not limited to, information
relating to governmental, employee, environmental, litigation and securities
matters and transactions with affiliates.
Section 2.06 Options or Warrants. There are no existing options,
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warrants, calls, or commitments of any character relating to the authorized and
unissued stock of the Company.
Section 2.07 Absence of Certain Changes or Events. Except as disclosed
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in Schedule 2.07, or permitted in writing by Otish, since the date of the most
recent Company balance sheet:
(a) there has not been (i) any material adverse change in the business,
operations, properties, assets or condition of the Company or (ii) any damage,
destruction or loss to the Company (whether or not covered by insurance)
materially and adversely affecting the business, operations, properties, assets
or condition of the Company;
(b) The Company has not and will not (i) amend its Articles of
Incorporation or Bylaws except to complete the performance of the Company as set
forth herein; (ii) declare or make, or agree to declare or make any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchase or redeem, or agree to purchase or redeem, any of its capital stock;
(iii) waive any rights of value which in the aggregate are outside of the
ordinary course of business or material considering the business of the Company;
(iv) make any material change in its method of management, operation, or
accounting; (v) enter into any transaction or agreement other than in the
ordinary course of business; (vi) make any accrual or arrangement for or payment
of bonuses or special compensation of any kind or any severance or termination
pay to any present or former officer or employee; (vii) increase the rate of
compensation payable or to become payable by it to any of its officers or
directors or any of its salaried employees whose monthly compensation exceed One
Thousand Dollars ($1,000); or (viii) make any increase in any profit sharing,
bonus, deferred compensation, insurance, pension, retirement, or other employee
benefit plan, payment, or arrangement, made to, for or with its officers,
directors, or employees;
(c) The Company has not (i) granted or agreed to grant any options or
warrants; (ii) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid or agreed to
pay any material obligations or liabilities (absolute or contingent) other than
current liabilities reflected in or shown on the most recent the Company balance
sheet and current liabilities incurred since that date in the ordinary course of
business and professional and other fees and expenses in connection with the
preparation of this Agreement and the consummation of the transaction
contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer,
any of its assets, properties, or rights (except assets, properties, or rights
not used or useful in its business which, in the aggregate have a value of less
than One Thousand Dollars [$1,000]), or canceled, or agreed to cancel, any debts
or claims (except debts or claims which in the aggregate are of a value less
than One Thousand Dollars [$1,000]); and (v) made or permitted any amendment or
termination of any contract, agreement, or license to which it is a party if
such amendment or termination is material, considering the business of the
Company; and
(d) The Company has not become subject to any law or regulation which
materially and adversely affects, or in the future, may adversely affect, the
business, operations, properties, assets or condition of the Company.
Section 2.08 Title and Related Matters. The Company has good and
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marketable title to all of its properties, inventory, interest in properties,
and assets, real and personal, which are reflected in the most recent Company
balance sheet or acquired after that date (except properties, inventory,
interest in properties, and assets sold or otherwise disposed of since such date
in the ordinary course of business), free and clear of all liens, pledges,
charges, or encumbrances except (a) statutory liens or claims not yet
delinquent; (b) such imperfections of title and easements as do not and will not
materially detract from or interfere with the present or proposed use of the
properties subject thereto or affected thereby or otherwise materially impair
present business operations on such properties; and (c) as described in the
Company Schedules. Except as set forth in the Company Schedules, the Company
owns, free and clear of any liens, claims, encumbrances, royalty interests, or
other restrictions or limitations of any nature whatsoever, any and all products
it is currently manufacturing, including the underlying technology and data, and
all procedures, techniques, marketing plans, business plans, methods of
management, or other information utilized in connection with the Company's
business. Except as set forth in the Company Schedules, no third party has any
right to, and the Company has not received any notice of infringement of or
conflict with asserted rights of others with respect to any product, technology,
data, trade secrets, know-how, proprietary techniques, trademarks, service
marks, trade names, or copyrights which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a
materially adverse effect on the business, operations, financial condition,
income, or business prospects of the Company or any material portion of its
properties, assets, or rights.
Section 2.09 Litigation and Proceedings. There are no actions, suits,
--------------------------
proceedings or investigations pending or, to the knowledge of the Company after
reasonable investigation, threatened by or against the Company or affecting the
Company or its properties, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind. The Company has no knowledge of any default on its part
with respect to any judgment, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator, or governmental agency or instrumentality,
or any circumstance which after reasonable investigation would result in the
discovery of such default.
Section 2.10 Contracts.
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(a) The Company is not a party to, and its assets, products, technology
and properties are not bound by, any material contract, franchise, license
agreement, agreement, debt instrument or other commitments whether such
agreement is in writing or oral.
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which the Company is a party or by which its properties are
bound and which are material to the operations of the Company taken as a whole
are valid and enforceable by the Company in all respects, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally;
(c) The Company is not a party to or bound by, and the properties of
the Company are not subject to any contract, agreement, other commitment or
instrument; any charter or other corporate restriction; or any judgment, order,
writ, injunction, decree, or award which materially and adversely affects, the
business operations, properties, assets, or condition of the Company; and
(d) Except as included or described in the Company Schedules or
reflected in the most recent Company balance sheet, the Company is not a party
to any oral or written (i) contract for the employment of any officer or
employee which is not terminable on thirty (30) days, or less notice; (ii)
profit sharing, bonus, deferred compensation, stock option, severance pay,
pension benefit or retirement plan, (iii) agreement, contract, or indenture
relating to the borrowing of money, (iv) guaranty of any obligation, other than
one on which the Company is a primary obligor, for the borrowing of money or
otherwise, excluding endorsements made for collection and other guaranties of
obligations which, in the aggregate do not exceed more than one year or
providing for payments in excess of Twenty-Five Thousand Dollars ($25,000) in
the aggregate; (v) collective bargaining agreement; or (vi) agreement with any
present or former officer or director of the Company.
Section 2.11 Material Contract Defaults. The Company is not in default
--------------------------
in any respect under the terms of any outstanding contract, agreement, lease, or
other commitment which is material to the business, operations, properties,
assets or condition of the Company and there is no event of default in any
material respect under any such contract, agreement, lease, or other commitment
in respect of which the Company has not taken adequate steps to prevent such a
default from occurring.
Section 2.12 No Conflict With Other Instruments. The execution of this
----------------------------------
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
a default under, or terminate, accelerate or modify the terms of, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or to which any of its assets or operations are subject.
Section 2.13 Governmental Authorizations. The Company has all
----------------------------
licenses, franchises, permits, and other governmental authorizations, that are
legally required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with federal
and state securities or corporation laws, as hereinafter provided, no
authorization, approval, consent or order of, of registration, declaration or
filing with, any court or other governmental body is required in connection with
the execution and delivery by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby.
Section 2.14 Compliance With Laws and Regulations. To the best of its
------------------------------------
knowledge, the Company has complied with all applicable statutes and regulations
of any federal, state, or other applicable governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets or condition of
the Company or except to the extent that noncompliance would not result in the
occurrence of any material liability. This compliance includes, but is not
limited to, the filing of all reports, filings and schedules to date with
federal and state securities authorities.
Section 2.15 Approval of Agreement. The Board of Directors of the
-----------------------
Company has authorized the execution and delivery of this Agreement by the
Company and has approved this Agreement and the transactions contemplated
hereby.
Section 2.16 Material Transactions or Affiliations. Except as
----------------------------------------
disclosed herein and in the Company Schedules, there exists no contract,
agreement or arrangement between the Company and any predecessor and any person
who was at the time of such contract, agreement or arrangement an officer,
director, or person owning of record or known by the Company to own
beneficially, five percent (5%) or more of the issued and outstanding Common
Stock of the Company and which is to be performed in whole or in part after the
date hereof or was entered into not more than three years prior to the date
hereof. Neither any officer, director, nor five percent (5%) shareholder of the
Company has, or has had since inception of the Company, any known interest,
direct or indirect, in any such transaction with the Company which was material
to the business of the Company. The Company has no commitment, whether written
or oral, to lend any funds to, borrow any money from, or enter into any other
transaction with, any such affiliated person.
Section 2.17 The Company Schedules. Within ten (10) days following the
---------------------
Closing, the Company will deliver to Otish the following schedules, which are
collectively referred to as the "Company Schedules" and which consist of
separate schedules, which are dated the date of this Agreement, all certified by
the chief executive officer of the Company to be complete, true, and accurate in
all material respects as of the date of this Agreement:
(a) a schedule containing complete and accurate copies of the Articles
of Incorporation and Bylaws of the Company as in effect as of the date of this
Agreement;
(b) a schedule containing the financial statements of the Company
identified herein;
(c) a certified list from the Company's Transfer Agent setting forth
the name and address of each shareholder of the Company together with the number
of shares owned by him, her or it;
(d) a schedule containing a description of all real property owned by
the Company, together with a description of every mortgage, deed of trust,
pledge, lien, agreement, encumbrance, claim, or equity interest of any nature
whatsoever in such real property;
(e) copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which the
Company carries on or proposes to carry on its business (except those which, in
the aggregate, are immaterial to the present or proposed business of the
Company);
(f) a schedule listing the accounts receivable and notes and other
obligations receivable of the Company as of June 30, 2003, or thereafter other
than in the ordinary course of business of the Company, indicating the debtor
and amount, and classifying the accounts to show in reasonable detail the length
of time, if any, overdue, and stating the nature and amount of any refunds, set
offs, reimbursements, discounts, or other adjustments which are in the aggregate
material and due to or claimed by such debtor;
(g) a schedule listing the accounts payable and notes and other
obligations payable of the Company as of June 30, 2003, or that arose thereafter
other than in the ordinary course of the business of the Company, indicating the
creditor and amount, classifying the accounts to show in reasonable detail the
length of time, if any, overdue, and stating the nature and amount of any
refunds, set offs, reimbursements, discounts, or other adjustments, which in the
aggregate are material and due to or claimed by the Company respecting such
obligations;
(h) a schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or condition of
the Company since June 30, 2003; and
(i) a schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the Company Schedules
by Sections 2.01 through 2.18.
The Company shall cause the Company Schedules and the instruments and data
delivered to Otish hereunder to be promptly updated after the date hereof up to
and including the Closing Date.
If the Company cannot or fails to provide the schedules required by this
Section, or if Otish or the Otish Shareholders find any such schedules or
updates provided after the date hereof to be unacceptable, Otish or the Otish
Shareholders may terminate this Agreement by giving written notice to the
Company within five (5) days after the schedules or updates were due to be
produced or were provided. For purposes of the foregoing, the Otish may
consider a disclosure in the Company Schedules to be "unacceptable" only if that
item would have a material adverse impact on the financial condition of the
Company, taken as a whole.
Section 2.18 Valid Obligation. This Agreement and all agreements and
-----------------
other documents executed by the Company in connection herewith constitute the
valid and binding obligation of the Company, enforceable in accordance with its
or their terms, except as may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought.
Section 2.19 Liabilities. The Company acknowledges that it will
-----------
have no liabilities outstanding on the Closing Date (as defined in Section
3.02).
Section 2.20 Reporting Requirements of the Company. The Company is
----------------------------------------
subject to the reporting and filing requirements of the Securities Exchange Act
of 1934 ("the Exchange Act') including (1) the periodic reporting requirements
and (2) the Proxy Rules set forth thereunder. The Company and its officers,
directors, and beneficial owners are subject to the provisions of the Exchange
Act Section 16 relating to short-swing profit recapture, reports of beneficial
ownership and short sale prohibitions and the Company and its officers,
directors, and beneficial owners have timely complied in all respects with the
filing requirements of the Exchange Act.
Section 2.21 Quotation on the OTC Bulletin Board. The Company's Common
-----------------------------------
Stock is quoted on the OTC Bulletin Board under the symbol "OMDC" and the
Company will retain such quotation on the OTC Bulletin Board until the Closing
of the transactions contemplated herein.
Section 2.22 Approval of the Exchange by the Company's Shareholders. The
--------------------------------------------------------
transactions contemplated by this Agreement do not require the approval of the
Company's shareholders and the Company is not required to file a Schedule 14A or
14C with the Securities and Exchange Commission as a result of this Agreement.
Section 2.23 The Directors of the Company shall have approved the
Exchange Offer and the related transactions described herein.
Section 2.24 Approval of the Exchange Offer and related transactions by
the Company's Shareholders is not required by Nevada law or the Company's
Articles of Incorporation or Bylaws or any amendments thereto.
ARTICLE III
PLAN OF EXCHANGE
Section 3.01 The Exchange. (i) On the terms and subject to the
-------------
conditions set forth in this Agreement, on the Closing Date (as defined in
Section 3.02), each Otish Shareholder who shall elect to accept the Exchange
Offer described herein shall assign, transfer and deliver, free and clear of all
liens, pledges, encumbrances, charges, restrictions or known claims of any kind,
nature, or description, the number of shares of common stock of Otish set forth
herein, in the aggregate constituting 100% of the issued and outstanding shares
of common stock of Otish. After the acquisition of 100% of the outstanding
shares of Otish, Otish shall become a wholly owned subsidiary of the Company.
Section 3.01(ii) The Otish Shareholders will receive one (1) share
of the Company's common stock for every one (1) share of Otish common stock held
or an aggregate amount of 15,000,000 shares of the Company's Common Stock.
Following the execution of this Agreement, the Otish Shareholders shall own
15,000,000 shares out of 15,107,750 shares of common stock outstanding in the
Company, representing ninety-nine (99%) of the Company's then outstanding Common
Stock. There will also be 1,000,000 shares of Series A Preferred Stock issued
and outstanding under the same terms and conditions as before this Agreement.
Section 3.02 Closing. The closing ("Closing") of the transaction
-------
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date") but not later than October 31, 2003, subject
to the right of the Company or Otish to extend such Closing Date by up to an
additional ten (10) days. Such Closing shall take place at a mutually agreeable
time and place. At Closing, or immediately thereafter, the following will
occur:
a) The Otish Shareholders shall surrender the certificates evidencing a
minimum of 80% of the shares of Otish stock, duly endorsed with Medallion
Guaranteed stock powers so as to make the Company the sole owner thereof ;
b) The Company will issue and deliver 15,000,000 newly issued treasury shares
of the Company's Common Stock in the name of Shareholders in accordance
with this Agreement;
c) At Closing, the Director of the Company shall appoint Directors designated
by Otish to be appointed to the Board of Directors. Upon the appointment of
Otish's Designates, the Company will have three Directors;
d) At the Closing, the Company, Otish and each of the Otish Shareholders shall
execute, acknowledge, and deliver (or shall ensure to be executed,
acknowledged, and delivered) any and all certificates, opinions, financial
statements, schedules, agreements, resolutions, rulings or other
instruments required by this Agreement to be so delivered at or prior to
the Closing, together with such other items as may be reasonably requested
by the parties hereto and their respective legal counsel in order to
effectuate or evidence the transactions contemplated hereby. Among other
things, the Company shall provide an opinion of counsel acceptable to Otish
as to such matters as Otish may reasonably request, which shall include,
but not be limited to, a statement, to the effect that to such counsel's
best knowledge, after reasonable investigation, from inception until the
Closing Date, the Company has complied with all applicable statutes and
regulations of any federal, state, or other applicable governmental entity
or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties,
assets or condition of the Company or except to the extent that
noncompliance would not result in the occurrence of any material liability
(such compliance including, but not being limited to, the filing of all
reports to date with federal and state securities authorities).
Section 3.03 Name Change. Prior to the date first-above written,
------------
the Company changed its name from First Cypress, Inc. to Otish Mountain Diamond
Company. The Company timely complied with Nevada law in all respects including
amending its Articles of Incorporation to reflect the name change.
Section 3.04 Tradability of Shares. The shares of the Common Stock of
----------------------
the Company to be issued to the Otish Shareholders have not been registered
under the 1933 Act, nor registered under any state securities law, and are
"restricted securities" as that term is defined in Rule 144 under the 1933 Act.
The securities may not be offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the 1933 Act, or pursuant
to an exemption from registration under the 1933 Act. The shares to be issued to
the Otish Shareholders will bear the following restrictive legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY
NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED WITHOUT EITHER: i)
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, OR ii) SUBMISSION TO THE CORPORATION OF AN OPINION OF COUNSEL,
SATISFACTORY TO THE CORPORATION THAT SAID SHARES AND THE TRANSFER THEREOF ARE
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS."
Section 3.05 Anti-Dilution. The number of shares of the Company's
-------------
Common Stock issuable upon the Exchange Offer shall be appropriately adjusted to
take into account any other stock split, stock dividend, reverse stock split,
recapitalization, or similar change in the Company's Common Stock which may
occur (i) between the date of the execution of this Agreement and the Closing
Date.
Section 3.06 Termination.
-----------
(a) This Agreement may be terminated by the Board of Directors of
either the Company or Otish or by the Otish Shareholders at any time prior to
the Closing Date if:
(i) there shall be any actual or threatened action or proceeding
before any court or any governmental body which shall seek to restrain,
prohibit, or invalidate the transactions contemplated by this Agreement and
which, in the judgment of such Board of Directors, made in good faith and
based upon the advice of its legal counsel, makes it inadvisable to proceed
with the Exchange;
(ii) any of the transactions contemplated hereby are disapproved by
any regulatory authority whose approval is required to consummate such
transactions (which does not include the Securities and Exchange
Commission) or in the judgment of such board of directors, made in good
faith and based on the advice of counsel, there is substantial likelihood
that any such approval will not be obtained or will be obtained only on a
condition or conditions which would be unduly burdensome, making it
inadvisable to proceed with the Exchange; or
(iii) if less than eighty percent (80%) of the Otish Shareholders
agree to the Exchange Offer.
In the event of termination pursuant to this paragraph, no obligation, right or
liability shall arise hereunder, and each party shall bear all of the expenses
incurred by it in connection with the negotiation, drafting, and execution of
this Agreement and the transactions herein contemplated.
(b) This Agreement may be terminated by the Board of Directors of the
Company at any time prior to the Closing Date if:
(i) the Board of Directors of the Company determines in good faith
that one or more of the Company's conditions to Closing has not occurred,
through no fault of the Company.
(ii) The Company takes the termination action specified in Section
1.17 as a result of Otish Schedules or updates thereto which the Company
finds unacceptable; or
(iii) Otish shall fail to comply in any material respect with any of
its covenants or agreements contained in this Agreement or if any of the
representations or warranties of Otish contained herein shall be inaccurate
in any material respect, where such noncompliance or inaccuracy has not
been cured within ten (10) days after written notice thereof.
If this Agreement is terminated pursuant to this paragraph, this Agreement shall
be of no further force or effect, and no obligation, right or liability shall
arise hereunder, except that Purchaser shall bear the costs in connection with
the negotiation, preparation, and execution of this Agreement and qualifying the
offer and sale of securities to be issued in the Exchange under the registration
requirements, or exemption from the registration requirements, of state and
federal securities laws.
(c) This Agreement may be terminated by the Board of Directors of Otish
or by the Otish Shareholders at any time prior to the Closing Date if:
(i) there shall have been any change after the date of the latest
balance sheet of the Company in the assets, properties, business or
financial condition of the Company which could have a material adverse
effect on the financial statements of the Company listed in Section 2.04(a)
and 2.04(b) taken as a whole, except any changes disclosed in the Company
Schedules;
(ii) the Board of Directors of Otish determines in good faith that one
or more of Otish's conditions to Closing has not occurred, through no fault
of Otish;
(iii) Otish takes the termination action specified in Section 2.17 as
a result of the Company Schedules or updates thereto which Otish finds
unacceptable;
(iv) on or before October 31, 2003, if Otish notifies the Company that
Otish's investigation pursuant to Section 4.01 below has uncovered
information which it finds unacceptable by the same criteria set forth
herein; or
(v) The Company shall fail to comply in any material respect with any
of its covenants or agreements contained in this Agreement or if any of the
representations or warranties of the Company contained herein shall be
inaccurate in any material respect, where such noncompliance or inaccuracy
has not been cured within ten (10) days after written notice thereof.
If this Agreement is terminated pursuant to this paragraph, this Agreement shall
be of no further force or effect, and no obligation, right or liability shall
arise hereunder.
No revenue ruling or opinion of counsel will be sought as to the tax-free
nature of the subject Exchange and such tax treatment is not a condition to
Closing herein.
ARTICLE IV
SPECIAL COVENANTS
Section 4.01 Access to Properties and Records. The Company and Otish
---------------------------------
Will each afford to the officers and authorized representatives of the other
full access to the properties, books and records of the Company or, as the case
may be, in order that each may have a full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other, and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of the Company or Otish, as
the case may be, as the other shall from time to time reasonably request. Any
such investigation and examination shall be conducted at reasonable times and
under reasonable circumstances, and each party hereto shall cooperate fully
therein. No investigation by a party hereto shall, however, diminish or waive in
any way any of the representations, warranties, covenants or agreements of the
other party under this Agreement. In order that each party may investigate as it
may wish the business affairs of the other, each party shall furnish the other
during such period with all such information and copies of such documents
concerning the affairs of it as the other party may reasonably request, and
cause its officer, employees, consultants, agents, accountants, and attorneys to
cooperate fully in connection with such review and examination, and to make full
disclosure to the other parties all material facts affecting its financial
condition, business operations, and the conduct of operations. Without limiting
the foregoing, as soon as practicable after the end of each fiscal quarter (and
in any event through the last fiscal quarter prior to the Closing Date), the
Company shall provide Otish with quarterly internally prepared and unaudited
financial statements for all periods up to the date of Closing.
Section 4.02 Delivery of Books and Records. At the Closing, Otish
---------------------------------
shall deliver to the Company copies of the corporate minute books, books of
account, contracts, records, and all other books or documents of Otish now in
the possession of Otish or its representatives.
Section 4.03 Third Party Consents and Certificates. The Company and
---------------------------------------
Otish agree to cooperate with each other in order to obtain any required third
party consents to this Agreement and the transactions herein contemplated.
Section 4.04 Consent ofOtish Shareholders. Otish shall use its best
------------------------------
efforts to obtain the consent of all Otish Shareholders to participate in the
Exchange.
Section 4.05 Exclusive Dealing Rights. Until 5:00 P.M. Eastern
--------------------------
Daylight Time on October 31, 2003.
(a) In recognition of the substantial time and effort which the Company
has spent and will continue to spend in investigating Otish and its business and
in addressing the matters related to the transactions contemplated herein, each
of which may preempt or delay other management activities, neither Otish, nor
any of its officers, employees, representatives or agents will directly or
indirectly solicit or initiate any discussions or negotiations with, or, except
where required by fiduciary obligations under applicable law as advised by
counsel, participate in any negotiations with or provide any information to or
otherwise cooperate in any other way with, or facilitate or encourage any effort
or attempt by, any corporation, partnership, person or other entity or group
(other than the Company and its directors, officers, employees, representatives
and agents) concerning any merger, sale of substantial assets, sale of shares of
capital stock, (including without limitation, any public or private offering of
the common stock of Otish) or similar transactions involving Otish (all such
transactions being referred to as " Otish Acquisition Transactions"). If Otish
receives any proposal with respect to an Otish Acquisition Transaction, it will
immediately communicate to the Company the fact that it has received such
proposal and the principal terms thereof.
(b) In recognition of the substantial time and effort which Otish has
spent and will continue to spend in investigating the Company and its business
and in addressing the matters related to the transactions contemplated herein,
each of which may preempt or delay other management activities, neither the
Company, nor any of its officers, employees, representatives, shareholders or
agents will directly or indirectly solicit or initiate any discussions or
negotiations with, or, except where required by fiduciary obligations under
applicable law as advised by counsel, participate in any negotiations with or
provide any information to or otherwise cooperate in any other way with, or
facilitate or encourage any effort or attempt by, any corporation, partnership,
person or other entity or group (other than Otish and its directors, officers,
employees, representatives and agents) concerning any merger, sale of
substantial assets, sale of shares of capital stock, (including without
limitation, any public or private offering of the Common Stock of the Company or
similar transactions involving the Company (all such transactions being referred
to as "Company Acquisition Transactions"). If the Company receives any proposal
with respect to a Company Acquisition Transaction, it will immediately
communicate to Otish the fact that it has received such proposal and the
principal terms thereof.
Section 4.06 Actions Prior to Closing.
---------------------------
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the Company Schedules or Otish Schedules or as
permitted or contemplated by this Agreement, the Company (subject to paragraph
(b) below) and Otish respectively, will each:
(i) carry on its business in substantially the same manner as it has
heretofore;
(ii) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary wear and
tear and damage due to casualty;
(iii) maintain in full force and effect insurance comparable in amount
and in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligations under
material contracts, leases, and instruments relating to or affecting its
assets, properties, and business;
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws and all
rules, regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither the Company nor Otish will:
(i) make any changes in their Articles of Incorporation or Bylaws,
except as otherwise provided in this Agreement;
(ii) take any action described in Section 1.07 in the case of Otish,
or in Section 2.07, in the case of the Company (all except as permitted
therein or as disclosed in the applicable party's schedules);
(iii) enter into or amend any contract, agreement, or other instrument
of any of the types described in such party's schedules, except that a
party may enter into or amend any contract, agreement, or other instrument
in the ordinary course of business involving the sale of goods or services;
or
(iv) sell any assets or discontinue any operations (other than the
Divestiture), sell any shares of capital stock (other than as contemplated
in Section 4.06 hereof and the sale of securities underlying existing
warrants or options of the Company) or conduct any similar transactions
other than in the ordinary course of business.
Section 4.07 Indemnification.
---------------
(a) The Company hereby agrees to indemnify Otish and each of the officers,
agents, and directors of Otish and each of the Otish Shareholders as of the date
of execution of this Agreement against any loss, liability, claim, damage, or
expense (including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever), to which it or
they may become subject arising out of or based on any inaccuracy appearing in
or misrepresentation made by the Company under this Agreement. The
indemnification provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of this
Agreement.
Section 4.08 Limitation of Subsequent Corporate Actions.
----------------------------------------------
It is expressly understood and agreed that the Company, the shareholders of
Otish, and their affiliates will take all steps necessary to ensure that:
(1) The Company will not enact a reverse split of its Common Stock for a
period of twelve (12) months after execution of this Agreement;
(2) The assets of Otish, if any, shall remain in the Company as part of
its business operations;
(3) The Company will not switch transfer agents for a period of twelve
(12) months following the date of execution of this Agreement.
Notwithstanding items (1), (2), and (3) and the Company may waive such
conditions stated above with a written waiver. Other than (1), (2), and (3) of
this Section, there are no restrictions upon the Company to inhibit, prevent,
limit or restrict the Company from issuing additional securities of any class,
preference or type after the date of the Closing.
Section 4.09 Indemnification of Subsequent Corporate Actions.
---------------------------------------------------
(1) No officer, director, controlling shareholder, agent or representative
of the Company, or any other person currently affiliated with the
Company, has offered or agreed to assist in the promotion, market
making, development, enhancement, or support of the Company's
business, capital raising, or securities market.
(2) Otish hereby represents and warrants that it will indemnify and hold
harmless any officer, director, controlling shareholder, agent or
representative of the Company, or any other person affiliated with the
Company, from any decisions, activities, or conduct of the Company
contemporaneous with, or subsequent to this Agreement.
Section 4.10 Audited Financial Statements. The Company shall file
------------------------------
audited financial statements of Otish as required by the Securities and Exchange
Commission within seventy-five (75) days from the date of Closing.
Section 4.11 Blue Sky Manual Exemption. The Company shall file with
----------------------------
Standard & Poors or Moody's within one hundred twenty (120) days from the date
of Closing.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.01 Accuracy of Representations and Performance of Covenants.
--------------------------------------------------------
The representations and warranties made by Otish in this Agreement were true
when made and shall be true at the Closing Date with the same force and effect
as if such representations and warranties were made at and as of the Closing
Date (except for changes therein permitted by this Agreement). Otish shall have
performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by Otish prior to or at the Closing.
The Company shall be furnished with a certificate, signed by a duly authorized
executive officer of Otish and dated the Closing Date, to the foregoing effect.
Section 5.02 Officer's Certificate. The Company shall have been
----------------------
furnished with a certificate dated the Closing Date and signed by a duly
authorized officer of Otish to the effect that no litigation, proceeding,
investigation, or inquiry is pending, or to the best knowledge of Otish
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement, or, to the
extent not disclosed in the Otish Schedules, by or against Otish, which might
result in any material adverse change in any of the assets, properties,
business, or operations of Otish.
Section 5.03 No Material Adverse Change. Prior to the Closing Date,
----------------------------
there shall not have occurred any material change in the financial condition,
business, or operations of Otish nor shall any event have occurred which, with
the lapse of time or the giving of notice, is determined to be unacceptable
using the criteria set forth in Section 1.17.
Section 5.04 Approval by Otish Shareholders. The Exchange shall have
----------------- ------------
been approved, and shares delivered in accordance with Section 3.01, by the
holders of not less than one hundred percent (100%) of the outstanding common
stock of Otish.
Section 5.05 No Governmental Prohibition. No order, statute, rule,
-----------------------------
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 5.06 Consents. All consents, approvals, waivers or amendments
--------
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of the Company and Otish after the Closing Date on the basis as
presently operated shall have been obtained.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF OTISH
AND THE OTISH SHAREHOLDERS
The obligations of Otish and the Otish Shareholders under this Agreement
are subject to the satisfaction, at or before the Closing Date, of the following
conditions:
Section 6.01 Accuracy of Representations and Performance of Covenants.
--------------------------------------------------------
The representations and warranties made by the Company in this Agreement were
true when made and shall be true as of the Closing Date (except for changes
therein permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Additionally, the Company shall have performed and complied with all covenants
and conditions required by this Agreement to be performed or complied with by
the Company and shall have satisfied all conditions set forth herein prior to or
at the Closing. Otish shall have been furnished with certificates, signed by
duly authorized executive officers of the Company and dated the Closing Date, to
the foregoing effect.
Section 6.02 Officer's Certificate. Otish shall have been furnished
----------------------
with certificates dated the Closing Date and signed by the duly authorized
executive officer of the Company, to the effect that no litigation, proceeding,
investigation or inquiry is pending, or to the best knowledge of the Company
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the Company Schedules, by or against the Company, which
might result in any material adverse change in any of the assets, properties or
operations of the Company.
Section 6.03 No Material Adverse Change. Prior to the Closing Date,
----------------------------
there shall not have occurred any change in the financial condition, business or
operations of the Company nor shall any event have occurred which, with the
lapse of time or the giving of notice, is determined to be unacceptable using
the criteria set forth in Section 2.17.
Section 6.04 No Governmental Prohibition. No order, statute, rule,
-----------------------------
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 6.05 Consents. All consents, approvals, waivers or amendments
--------
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of the Company and Otish after the Closing Date on the basis as
presently operated shall have been obtained.
Section 6.06 Other Items. Otish shall have received further opinions,
-----------
documents, certificates, or instruments relating to the transactions
contemplated hereby as Otish may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.01 No Bankruptcy and No Criminal Convictions. None of the Parties
-----------------------------------------
to the Agreement, nor their officers, directors or affiliates, promoters,
beneficial shareholders or control persons, nor any predecessor thereof have
been subject to the following:
(a) Any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer within the past
five (5) years;
(b) Any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(c) Being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; and
(d) Being found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission (the "SEC") or the Commodity
Futures Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended, or vacated.
Section 7.02 Brokers. No broker's or finder's fee will be paid in
-------
connection with the transaction contemplated by this Agreement other than fees
payable to persons registered as broker-dealers pursuant to Section 15 of the
Securities Exchange Act of 1934. The Company and Otish agree that, except as
set forth herein and on Schedule 7.02 attached hereto, there were no brokers or
finders involved in bringing the parties together or who were instrumental in
the negotiation, execution or consummation of this Agreement. The Company and
Otish each agree to indemnify the other against any claim by any third person
other than those described above for any commission, brokerage, or finder's fee
arising from the transactions contemplated hereby based on any alleged agreement
or understanding between the indemnifying party and such third person, whether
express or implied from the actions of the indemnifying party.
Section 7.03 Governing Law and Arbitration. This Agreement shall be
-------------------------------
governed by, enforced, and construed under and in accordance with the laws of
the United States of America and, with respect to the matters of state law, with
the laws of the State of Nevada without giving effect to principles of conflicts
of law thereunder. All controversies, disputes or claims arising out of or
relating to this Agreement shall be resolved by binding arbitration. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. All arbitrators shall possess
such experience in, and knowledge of, the subject area of the controversy or
claim so as to qualify as an "expert" with respect to such subject matter. The
governing law for the purposes of any arbitration arising hereunder shall be in
Nevada. The prevailing party shall be entitled to receive its reasonable
attorney's fees and all costs relating to the arbitration. Any award rendered
by arbitration shall be final and binding on the parties, and judgment thereon
may be entered in any court of competent jurisdiction.
Section 7.04 Notices. Any notice or other communications required or
-------
permitted hereunder shall be in writing and shall be sufficiently given if
personally delivered to it or sent by telecopy, overnight courier or registered
mail or certified mail, postage prepaid, addressed as follows:
If to the Company, to: Otish Mountain Diamond Company
349 West Georgia Street, Suite 3362
Vancouver, B.C., Canada V6B 3Y3
If to Otish, to: Otish Mountain Diamond Corp.
One Penn Plaza, Suite 3600
250 West 34th Street
New York, NY 10119
USA
With copies to: David M. Loev, Attorney at Law
2777 Allen Parkway
Suite 1000
Houston, Texas 77019
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given (i) upon receipt, if personally delivered, (ii) on
the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if
transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3)
days after mailing, if sent by registered or certified mail.
Section 7.05 Attorney's Fees. In the event that either party
----------------
institutes any action or suit to enforce this Agreement or to secure relief from
any default hereunder or breach hereof, the prevailing party shall be reimbursed
by the losing party for all costs, including reasonable attorney's fees,
incurred in connection therewith and in enforcing or collecting any judgment
rendered therein.
Section 7.06 Confidentiality. Each party hereto agrees with the other
---------------
that, unless and until the transactions contemplated by this Agreement have been
consummated, it and its representatives will hold in strict confidence all data
and information obtained with respect to another party or any subsidiary thereof
from any representative, officer, director or employee, or from any books or
records or from personal inspection, of such other party, and shall not use such
data or information or disclose the same to others, except (i) to the extent
such data or information is published, is a matter of public knowledge, or is
required by law to be published; or (ii) to the extent that such data or
information must be used or disclosed in order to consummate the transactions
contemplated by this Agreement. In the event of the termination of this
Agreement, each party shall return to the other party all documents and other
materials obtained by it or on its behalf and shall destroy all copies, digests,
work papers, abstracts or other materials relating thereto, and each party will
continue to comply with the confidentiality provisions set forth herein.
Section 7.07 Public Announcements and Filings. Unless required by
-----------------------------------
applicable law or regulatory authority, none of the parties will issue any
report, statement or press release to the general public, to the trade, to the
general trade or trade press, or to any third party (other than its advisors and
representatives in connection with the transactions contemplated hereby) or file
any document, relating to this Agreement and the transactions contemplated
hereby, except as may be mutually agreed by the parties. Copies of any such
filings, public announcements or disclosures, including any announcements or
disclosures mandated by law or regulatory authorities, shall be delivered to
each party at least one (1) business day prior to the release thereof.
Section 7.08 Schedules; Knowledge. Each party is presumed to have full
--------------------
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 7.09 Third Party Beneficiaries. This contract is strictly
---------------------------
between the Company and Otish and the Otish Shareholders, and, except as
specifically provided, no director, officer, stockholder (other than the Otish
Shareholders), employee, agent, independent contractor or any other person or
entity shall be deemed to be a third party beneficiary of this Agreement.
Section 7.10 Expenses. The Company and Otish each hereto agree to pay
---------
its own costs and expenses incurred in negotiating this Agreement including
legal, accounting and professional fees, incurred in connection with the
Exchange or any of the other transactions contemplated hereby, and those costs
and expenses incurred in consummating the transactions described herein.
Section 7.11 Entire Agreement. This Agreement represents the entire
-----------------
agreement between the parties relating to the subject matter thereof and
supersedes all prior agreements, understandings and negotiations, written or
oral, with respect to such subject matter.
Section 7.12 Survival; Termination. The representations, warranties,
----------------------
and covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for a period of two (2)
years.
Section 7.13 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 7.14 Amendment or Waiver. Every right and remedy provided
---------------------
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may by amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance may be extended by a writing
signed by the party or parties for whose benefit the provision is intended.
Section 7.15 Best Efforts. Subject to the terms and conditions herein
------------
provided, each party shall use its best efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by it under this
Agreement so that the transactions contemplated hereby shall be consummated as
soon as practicable. Each party also agrees that it shall use its best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective this Agreement and the transactions contemplated
herein.
Section 7.16 Faxed Copies. For purposes of this Agreement, a
-------------
faxed signature will constitute an original signature.
Section 7.17 Severability. The invalidity or unenforceability of
------------
any term, phrase, clause, paragraph, restriction, covenant, agreement or other
provision of this Agreement shall in no way affect the validity or enforcement
of any other provision or any part thereof.
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement
to be executed by their respective officers, hereunto duly authorized, as of the
date first-above written.
OTISH MOUNTAIN DIAMOND COMPANY
BY: /s/ Philipp Buschmann
---------------------------------------------
Philipp Buschmann, Chief Executive Officer
OTISH MOUNTAIN DIAMOND CORP.
BY: /s/ Massimiliano Pozzoni
---------------------------------------------
Massimiliano Pozzoni, Chief Executive
Officer
OTISH SHAREHOLDERS:
Massimiliano Pozzoni
/s/ Massimiliano Pozzoni, Individually
Number of Shares: 5,500,000
Menace Capital
By: /s/ Dennis Higgs
Its: President
Number of Shares 250,000
Miranda Gold Corp.
By: /s/ Dennis Higgs
Its: President
Number of Shares: 2,500,000
Ben Carter
/s/ Ben Carter, Individually
Number of Shares: 200,000
Jim Chapman
/s/ Jim Chapman, Individually
Number of Shares: 200,000