Exhibit 2.1
EXCHANGE AGREEMENT
BETWEEN
CAVALCADE OF SPORTS MEDIA, INC.
and
PACIFICAP ENTERTAINMENT HOLDINGS, INC.
DATED: SEPTEMBER 18, 2003
TABLE OF CONTENTS
ARTICLE I REPRESENTATIONS, COVENANTS, AND WARRANTIES OF PACIFICAP
ENTERTAINMENT
1.01 Organization 4
1.02 Capitalization 5
1.03 Subsidiaries and Predecessor Corporations 5
1.04 Financial Statements 5
1.05 Information 6
1.06 Options and Warrants 6
1.07 Absence of Certain Changes or Events 6
1.08 Title and Related Matters 7
1.09 Litigation and Proceedings 8
1.10 Contracts 8
1.11 Material Contract Defaults 8
1.12 No Conflict With Other Instruments 9
1.13 Governmental Authorizations 9
1.14 Compliance With Laws and Regulations 9
1.15 Approval of Agreement 9
1.16 Material Transactions or Affiliations 10
1.17 Valid Obligation 11
ARTICLE II REPRESENTATIONS, COVENANTS, AND WARRANTIES OF WEB VIEWS
2.01 Organization 11
2.02 Capitalization 11
2.03 Subsidiaries and Predecessor Corporations 12
2.04 Financial Statements 12
2.05 Information 13
2.06 Options and Warrants 13
2.07 Absence of Certain Changes or Events 13
2.08 Title and Related Matters 13
2.09 Litigation and Proceedings 14
2.10 Contracts 15
2.11 Material Contract Defaults 15
2.12 No Conflict With Other Instruments 15
2.13 Governmental Authorizations 16
2.14 Compliance With Laws and Regulations 16
2.15 Approval of Agreement 16
2.16 Continuity of Business Enterprises 16
2.17 Material Transactions or Affiliations 16
2.18 Princeton Ventures Schedules 16
2.19 Valid Obligation 16
2.20 Liabilities 17
2.21 Quotation on the OTC Bulletin Board 18
2.22 Approval of the Exchange by the Company's Shareholders 19
2.23 Director Approval 19
ARTICLE III PLAN OF EXCHANGE
3.01 The Exchange 19
3.02 Tradability of Shares 19
3.03 Anti-Dilution 19
3.04 Closing 20
3.05 Closing Events 20
3.06 Termination 20
ARTICLE IV SPECIAL COVENANTS
4.01 Access to Properties and Records 22
4.02 Delivery of Books and Records 24
4.03 Third Party Consents and Certificates 24
4.04 Consent of Cascade Mountain Shareholders 24
4.05 Designation of Directors and Officers 24
4.06 Exclusive Dealing Rights 24
4.07 Actions Prior to Closing 24
4.08 Indemnification 25
4.09 Limitation of Subsequent Corporate Actions 25
4.10 Indemnification of Subsequent Corporate Actions 26
4.11 Name Change 26
4.12 Audited Financial Statements 26
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF WEB VIEWS
5.01 Accuracy of Representations and Performance of Covenants 26
5.02 Officer's Certificates 26
5.03 No Material Adverse Change 27
5.04 Approval by Web Views Shareholders 27
5.05 No Governmental Prohibitions 27
5.06 Consents 27
5.07 Other Items 27
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF PACIFICAP AND THE
CASCADE MOUNTAIN SHAREHOLDERS
6.01 Accuracy of Representations and Performance of Covenants 27
6.02 Officer's Certificate 28
6.03 No Material Adverse Change 28
6.04 No Governmental Prohibition 28
6.05 Consents 28
6.06 Other Items 28
ARTICLE VII MISCELLANEOUS
7.01 No Bankruptcy and No Criminal Convictions 29
7.02 Brokers 29
7.03 Governing Law 29
7.04 Notices 30
7.05 Attorney's Fees 30
7.06 Confidentiality 30
7.07 Public Announcements and Filings 31
7.08 Schedules; Knowledge 31
7.09 Third Party Beneficiaries 31
7.10 Expenses 31
7.11 Entire Agreement 31
7.12 Survival; Termination 31
7.13 Counterparts 31
7.14 Amendment or Waiver 31
7.15 Best Efforts 32
7.16 Faxed Copies 32
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement") is entered
into as of this 18 day of September 2003 by and between CAVALCADE OF SPORTS
MEDIA, INC., a Nevada corporation (hereinafter referred to as the "Company") and
PACIFICAP ENTERTAINMENT HOLDINGS, INC., a California corporation (hereinafter
referred to as "Pacificap"), upon the following premises:
PREMISES
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WHEREAS, the Company is a publicly held corporation organized under the laws of
the State of Nevada;
WHEREAS, Pacificap is a privately held corporation organized under the laws of
the State of California;
WHEREAS, management of the constituent corporations have determined that it is
in the best interest of the parties that the Company acquire 100% of the issued
and outstanding securities of Pacificap in exchange for the issuance of certain
shares of the Company (the "Exchange") and Pacificap agrees to use its best
efforts to cause its shareholders (the " Pacificap Shareholders") to exchange
their securities of Pacificap on the terms described herein; and
WHEREAS, the Company and Pacificap desire to set forth the terms of the
Exchange, which is intended to constitute a tax-free reorganization pursuant to
the provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986.
AGREEMENT
---------
NOW THEREFORE, on the stated premises and for and in consideration of the mutual
covenants and agreements hereinafter set forth and the mutual benefits to the
parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF PACIFICAP
As an inducement to, and to obtain the reliance of the Company, except as set
forth on the Pacificap Schedules (as hereinafter defined), Pacificap represents
and warrants as follows:
Section 1.01 Organization. Pacificap is a corporation duly organized, validly
existing, and in good standing under the laws of the State of California 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 (PACIFICAP
MAY NOT HAVE FILED ALL LICENSES IN ALL JURISDICTIONS) 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 Pacificap
Schedules are complete and correct copies of the articles of incorporation, and
bylaws of Pacificap 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 provisions of Pacificap's Articles of
Incorporation. Pacificap has taken all actions required by law, its articles of
incorporation, or otherwise to authorize the execution and delivery of this
Agreement. Pacificap 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 Pacificap consists
of 21,000,000 shares, consisting of 20,000,000 shares of common stock, no par
value per share, of which 18,000,000 shares are currently issued and
outstanding, and 1,000,000 shares of preferred stock, no par value per share of
which no shares are currently issued and outstanding. All issued and outstanding
shares are legally issued, fully paid, and non-assessable and not issued in
violation of the preemptive or other rights of any person.
Section 1.03 Subsidiaries and Predecessor Corporations. Pacificap does not have
any predecessor corporation(s) or subsidiaries, and does not own, beneficially
or of record, any shares of any other corporation, except as disclosed in
Schedule 1.03. For purposes hereinafter, the term "Pacificap" also includes
those subsidiaries, if any, set forth on Schedule 1.03.
Section 1.04 Financial Statements.
(a) An Amended Letter Agreement dated May 22, 2003 reflects that Pacificap has a
prior liability of $50,000 to FinanceArt, LLC which has been paid, and that as
of this date, Pacificap 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) Pacificap 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, financial and otherwise, of Pacificap are in all
material respects complete and correct and have been maintained in accordance
with good business and accounting practices. If only bank records exist, they
must be submitted to Cavalcade's counsel no less than five days prior to
closing.
(d) Except as set forth in the Pacificap Schedules or the financial statements
of Pacificap or the notes thereto, Pacificap has no material liabilities, direct
or indirect, matured or unmatured, contingent or otherwise.
Section 1.05 Information. The information concerning Pacificap set forth in this
Agreement and in the Pacificap Schedules are complete and accurate in all
material respects and do not contain any untrue statements of a material fact or
omit to state material facts required to make the statements made, in light of
the circumstances under which they were made, not misleading. In addition,
Pacificap has fully disclosed in writing to the Company (through this Agreement
or the Pacificap Schedules) all information relating to matters involving
Pacificap 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
$25,000 liability or diminution in value, (ii) have led or may lead to a
competitive disadvantage on the part of Pacificap 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 Pacificap, 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. (We cannot delete this. This paragraph has required language in a
pre-merger reorganization document. It demonstrates to the shareholders that the
company conducted its due diligence)
Section 1.06 Options or Warrants. There are no existing options, warrants,
calls, or commitments of Pacificap of any character relating to the authorized
and unissued Pacificap common stock, except options, warrants, calls or
commitments, if any, to which Pacificap is not a party and by which it is not
bound.
Section 1.07 Absence of Certain Changes or Events. Except as set forth in this
Agreement or the Pacificap Schedules, since July, 2003:
(a) there has not been (i) any material adverse change in the business,
operations, properties, assets, or condition of Pacificap or (ii) any damage,
destruction, or loss to Pacificap (whether or not covered by insurance)
materially and adversely affecting the business, operations, properties, assets,
or condition of Pacificap;
(b) Pacificap 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 Pacificap; (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
$1,000; or (viii) made any increase in any profit sharing, bonus, deferred
compensation, insurance, pension, retirement, or other employee benefit plan,
payment, or arrangement made to, for, or with its officers, directors, or
employees; (this paragraph cannot be deleted because it demonstrates to the
regulators that the company has done its due diligence. If none of the items
exist, so be it. We have made a good faith effort to ask the questions and make
the determination that these issues are not a problem, impediment, or
otherwise). If there are any material transactions, we must have them presented
before closing.
(c) Pacificap has not (i) borrowed or agreed to borrow any funds or incurred, or
become subject to, any material obligation or liability (absolute or contingent)
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 $5,000), or
canceled, or agreed to cancel, any debts or claims (except debts or claims which
in the aggregate are of a value of less than $1,000); 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 Pacificap; and
(d) To the best and actual knowledge of Pacificap, Pacificap 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 Pacificap.
Section 1.08 Title and Related Matters. Pacificap has good and marketable title
to all of its properties, inventory, interests in properties, and assets, real
and personal, or acquired after that date (except properties, inventory,
interests in properties, and assets sold or otherwise disposed of since such
date in the ordinary course of business) free and clear of all liens, pledges,
charges, or encumbrances except (a) 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. (c) To the best of the knowledge
of Pacificap Schedules, no third party has any right to, and Pacificap 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,
propriety 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
Pacificap or any material portion of its properties, assets, or rights.
Section 1.09 Litigation and Proceedings. Except as set forth in the Pacificap
Schedules, there are no actions, suits, proceedings, or investigations pending
or, to the actual knowledge of Pacificap, threatened by or against Pacificap or
affecting Pacificap 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. Pacificap 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.
(a) Except as included or described in the Pacificap Schedules, there are no
"material" contracts, agreements, franchises, license agreements, debt
instruments or other commitments to which Pacificap 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 or (ii) involves aggregate obligations of at
least fifty thousand ($50,000));
(b) All contracts, agreements, franchises, license agreements, and other
commitments to which Pacificap is a party or by which its properties are bound
and which are material to the operations of Pacificap taken as a whole are valid
and enforceable by Pacificap in all respects, except as limited by bankruptcy
and insolvency laws and by other laws affecting the rights of creditors
generally;
(c) Pacificap is not a party to or bound by, and the properties of Pacificap 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 Pacificap; and
(d) Except as included or described in the Pacificap Schedules, Pacificap is not
a party to any oral or written (i) contract for the employment of any officer or
employee which is not terminable on 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
Pacificap 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 $50,000 in the aggregate; (v) collective bargaining
agreement; or (vi) agreement with any present or former officer or director of
Pacificap.
Section 1.11 Material Contract Defaults. Pacificap is not in default in any
material 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 Pacificap and there is no event of default in any
material respect under any such contract, agreement, lease, or other commitment
in respect of which Pacificap has not taken adequate steps to prevent such a
default from occurring.
Section 1.12 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 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 Pacificap 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 Pacificap
Schedules, Pacificap 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 Pacificap of this
Agreement and the consummation by Pacificap of the transactions contemplated
hereby.
Section 1.14 Compliance With Laws and Regulations. Except as set forth in the
Pacificap Schedules, to the best of its knowledge Pacificap 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 Pacificap or except to the extent that noncompliance
would not result in the occurrence of any material liability for Pacificap.
Section 1.15 Approval of Agreement. The board of directors of Pacificap has
authorized the execution and delivery of this Agreement by Pacificap and has
approved this Agreement and the transactions contemplated hereby, and will
recommend to the Pacificap Shareholders that the Exchange be accepted by them.
Section 1.16 Material Transactions or Affiliations. Set forth in the Pacificap
Schedules is a description of every contract, agreement, or arrangement between
Pacificap 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 Pacificap to own beneficially, 5% or more of the issued and
outstanding common stock of Pacificap and which is to be performed in whole or
in part after the date hereof or which was entered into not more than three
years prior to the date hereof. Except as disclosed in the Pacificap Schedules
or otherwise disclosed herein, no officer, director, or 5% shareholder of
Pacificap has, or has had since inception of Pacificap, any known interest,
direct or indirect, in any transaction with Pacificap which was material to the
business of Pacificap. There are no commitments by Pacificap, 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 Pacificap Schedules. Pacificap will deliver to the Company, prior
to the closing of this Agreement, the following schedules, which are
collectively referred to as the " Pacificap 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 Pacificap 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, and bylaws of Pacificap in effect as of the date of this
Agreement;
(b) a schedule stating that there are no liabilities;
(c) a Schedule 1.17(c) containing a list indicating the name and address of each
shareholder of Pacificap together with the number of shares owned by him, her or
it
(d) a schedule containing a description of any or all real property owned by
Pacificap, 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) if applicable, copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which
Pacificap carries on or proposes to carry on its business (except those which,
in the aggregate, are immaterial to the present or proposed business of
Pacificap);
(f) if applicable, a schedule setting forth a description of any material
adverse change in the business, operations, property, inventory, assets, or
condition of Pacificap since December 31, 2002, required to be provided pursuant
to section 1.07 hereof; and
(g) a schedule setting forth any other information, together with any required
copies of documents, required to be disclosed in the Pacificap Schedules by
Sections 1.01 through 1.17.
Pacificap shall cause the Pacificap 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 Pacificap. Pacificap shall
have until September 5, 2003 to provide such schedules. If Pacificap 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 below, the Company may terminate this Agreement by giving
written notice to Pacificap within five (5) days after the schedules or updates
were due to be produced or were. For purposes of the foregoing, the Company may
consider a disclosure in the Pacificap Schedules to be "unacceptable" only if
that item would have a material adverse impact on the financial condition of
Pacificap, taken as a whole.
Section 1.18 Valid Obligation. This Agreement and all agreements and other
documents executed by Pacificap in connection herewith constitute the valid and
binding obligation of Pacificap, 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.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE COMPANY
As an inducement to, and to obtain the reliance of Pacificap and the Pacificap
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 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 certificate 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's authorized capitalization consists of
300,000,000 shares of common stock, par value $.001 per share of which 1,000,630
shares will be issued and outstanding at the Closing prior to the issuance of
the shares to the Pacificap Shareholders as set forth in Section 3.01. 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 not
have any predecessor corporation(s) or subsidiaries, and does not own,
beneficially or of record, any shares of any other corporation, except as
disclosed in Schedule 2.03. For purposes hereinafter, the term "Company" also
includes those subsidiaries, if any, set forth on Schedule 2.03.
Section 2.04 Financial Statements.
(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 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
three months ended March 31, 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 (which dates shall be the most recent year end and/or the most
recent quarter ended) 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 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 fail 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 Pacificap (through this Agreement
or the Company Schedules) all information relating to matters involving the
Company or its assets and liabilities or its present or past operations or
activities which (i) indicated or may indicate, in the aggregate, the existence
of a greater than $5,000 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, warrants,
calls, or commitments of any character relating to the authorized and unissued
stock of the Company, other than those disclosed in the Company Schedules.
Section 2.07 Absence of Certain Changes or Events. Except as disclosed in
Exhibit 2.07, or permitted in writing by Pacificap, since the date of the most
recent Company balance sheet which shall be current, or within 120 days prior to
this transaction.
(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) Prior to closing, the Company has not and will not (i) amend its certificate
of incorporation or bylaws except to reflect the name change, affect a forward
stock split, and authorize the issuance of preferred stock; (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 $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) including
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 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 $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 $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) to the best knowledge of the Company, it has not become subject to any law
or regulation which materially and adversely affects, or in the future, may
adversely affect, the business, operations, properties, assets or condition of
the Company.
Section 2.08 Title and Related Matters. The Company has good and marketable
title to all of its properties, including intellectual property and rights to
distribute and re-distribute., 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 except as disclosed in Schedule 2.09. 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.
(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, except as disclosed in Schedule 2.10.
(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 for the quarter ended June 30, 2003, 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 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 $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
material 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 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. A Written
Unanimous Consent to Action is attached signed by the Directors of the Company.
Section 2.16 Continuity of Business Enterprises. The Company has no commitment
or present intention to liquidate Pacificap or sell or otherwise dispose of a
material portion of Pacificap's business or assets following the consummation of
the transactions contemplated hereby.
Section 2.17 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, 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 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. Other than for the
professional fees to be accrued in preparation of the recent transactions in
anticipation for this Exchange, 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 2.18 The Company Schedules. The Company has delivered to Pacificap 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 certificate 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 in
paragraph 2.04(a);
(c) a Schedule 2.18(c) containing a list indicating 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 and intellectual 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 December 31, 2002, and the quarters ended March
31, 2003 and June 20, 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 December 31, 2002 and the quarters ended March 31,
2003 and June 20, 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 December 31, 2002 required to be provided pursuant to section 2.07 hereof;
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 Pacificap 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 the Company. The Company
shall have until September 19, 2003 to provide such schedules, which will be
necessary for the short-form parent/subsidiary merger that Pacificap and the
Company intend to enter into within sixty days of this Exchange. If the Company
cannot or fails to do so, or if Pacificap acting reasonably finds any such
schedules or updates provided after the date hereof to be unacceptable according
to the criteria set forth below, Pacificap 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,
Pacificap may consider a disclosure in the Company Schedules to be
"unacceptable" only if that item would have a material adverse impact on the
financial statements listed in Section 2.04(b), taken as a whole.
Section 2.19 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 2.20 Liabilities. The Company acknowledges that it will have no
liabilities outstanding on the Closing Date.
Section 2.21 Quotation on the OTC Bulletin Board. The Company's common stock is
quoted on the OTC Bulletin Board and the Company will retain such quotation on
the OTC Bulletin Board.
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.
Section 2.23 Director Approval. The Directors of the Company shall have approved
the Exchange Offer and the transactions contemplated herein.
ARTICLE III
PLAN OF EXCHANGE
Section 3.01 The Exchange. On the terms and subject to the conditions set forth
in this Agreement, on the Closing Date (as defined in Section 3.03), each
Pacificap Shareholder who shall elect to accept the exchange offer described
herein (the "Accepting Shareholders"), 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 Pacificap set forth on Schedule 1.17(c) attached hereto, in the aggregate
constituting a minimum of 100% of the issued and outstanding shares of common
stock of Pacificap held by each of such shareholders; the objective of such
Exchange being the acquisition by the Company of 100% of the issued and
outstanding common stock of Pacificap. In exchange for the transfer of
18,000,000 shares of common stock by the Pacificap Shareholders, the Company
shall issue to the Pacificap Shareholders an aggregate of 18,000,000 shares of
common stock of the Company (the "Initial Shares"), on the basis of one share of
Company common stock for every share of Pacificap. At the Closing, each
Pacificap Shareholder shall, on surrender of his certificate or certificates
representing such Pacificap shares to the Company or its registrar or transfer
agent, be entitled to receive a certificate or certificates evidencing his
proportionate interest in the Initial Shares. Upon consummation of the
transaction contemplated herein, assuming participation by all of the Pacificap
Shareholders, all of the shares of capital stock of Pacificap shall be held by
the Company.
Section 3.02 Tradability of Shares. The shares of the Company's common stock to
be issued to the Pacificap 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 Pacificap 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." (you cannot issue free trading shares in a
tax free, stock for stock exchange)
Section 3.03 Anti-Dilution. Not withstanding the non-qualified stock
compensation plan that will be filed within 10 days of the Closing date, the
number of shares of the Company's common stock issuable upon exchange pursuant
to Section 3.01 shall be appropriately adjusted to take into account any other
stock split, stock dividend, reverse stock split, recapitalization, or similar
change in the Company common stock which may occur (i) between the date of the
execution of this Agreement and the Closing Date, as to the Initial Shares, and
(ii) between the date of the execution of this Agreement and the release date,
as to the Additional Shares.
Section 3.04 Closing. The closing ("Closing") of the transactions contemplated
by this Agreement shall be on a date and at such time as the parties may agree
("Closing Date") but not later than September 18, 2003, subject to the right of
the Company or Pacificap to extend such Closing Date by up to an additional
Thirty (30) days. Such Closing shall take place at a mutually agreeable time and
place.
Section 3.05 Closing Events. At the Closing, the Company, Pacificap and each of
the Pacificap Accepting 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
Pacificap as to such matters as Pacificap 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 3.06 Termination.
(a) This Agreement may be terminated by the board of directors of either the
Company or Pacificap 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;
or
(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.
In the event of termination pursuant to this paragraph (a) of Section 3.05, 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 Or
Pacificap at any time prior to the Closing Date if:
(i) The Company takes the termination action specified in Section 1.17 as a
result of Pacificap Schedules or updates thereto which the Company finds
unacceptable; or
(ii) Pacificap 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 Pacificap contained herein shall be inaccurate
in any material respect, where such noncompliance or inaccuracy has not been
cured within forty-five (45) days after written notice thereof to Pacificap;
If this Agreement is terminated pursuant to this paragraph (b) of Section 3.05,
this Agreement shall be of no further force or effect, and no obligation, right
or liability shall arise hereunder, except that the Company and Pacificap shall
equally 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 Pacificap 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 Pacificap determines in good faith that one or
more of Pacificap's conditions to Closing has not occurred, through no fault of
Pacificap;
(iii) Pacificap takes the termination action specified in Section 2.18 as a
result of the Company Schedules or updates thereto which Pacificap finds
unacceptable;
(iv) on or before September 18, 2003, Pacificap notifies the Company that
Pacificap's investigation pursuant to Section 4.01 below has uncovered
information which it finds unacceptable by the same criteria set forth in
Section 2.18;
(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 (c) of Section 3.05,
this Agreement shall be of no further force or effect, and no obligation, right
or liability shall arise hereunder, except that the Company shall bear the costs
as well as the reasonable costs of the Company incurred in connection with the
negotiation, preparation and execution of this Agreement.
ARTICLE IV
SPECIAL COVENANTS
Section 4.01 Access to Properties and Records. The Company and Pacificap 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 Pacificap,
as the case may be, as the other shall from time to time reasonably request.
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 Pacificap with quarterly internally
prepared and unaudited financial statements
Section 4.02 Delivery of Books and Records. At the Closing, Pacificap shall
deliver to the Company copies of any and all existing corporate minute books,
books of account, contracts, records, and all other books or documents of
Pacificap now in the possession of Pacificap or its representatives.
Section 4.03 Third Party Consents and Certificates. The Company and Pacificap
agree to cooperate with each other in order to obtain any required third party
consents to this Agreement and the transactions herein contemplated. Pacificap
will transfer all banking commitments and projects.
Section 4.04 Consent of Pacificap Shareholders. Pacificap shall use its best
efforts to obtain the consent of all Pacificap Shareholders to participate in
the Exchange.
Section 4.05 Designation of Directors and Officers. On or before the Closing
Date, the Company's board of directors shall consist of a maximum of three
directors. Michael Riley shall serve as Chairman of the Board of Directors, Ed
Litwak shall serve as President, Robert Stulman shall serve as Secretary and
Donald Parson shall serve as Director. A Treasurer will be appointed within 60
days of the Closing.
Section 4.06 Exclusive Dealing Rights. Until 5:00 P.M. Eastern Standard TIME ON
SEPTEMBER 18, 2003.
(a) In recognition of the substantial time and effort which the Company has
spent and will continue to spend in investigating Pacificap 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 Pacificap,
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 Pacificap) or similar transactions involving Pacificap (all
such transactions being referred to as " Pacificap Acquisition Transactions").
(b) In recognition of the substantial time and effort which Pacificap 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 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 Pacificap 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 Pacificap the fact that it has
received such proposal and the principal terms thereof.
Section 4.07 Actions Prior to and Subsequent 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 Pacificap Schedules or as permitted or
contemplated by this Agreement and in (c) below, the Company and Pacificap
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 Pacificap will:
(i) make any changes in their articles or certificate of incorporation or
bylaws, except as otherwise provided in this Agreement;
(ii) take any action described in Section 1.07 in the case of Pacificap, 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.
(c) From and after the Closing Date, the Company and Pacificap respectively,
will each:
(i) Immediately subsequent to the closing, Pacificap will enter into a
three year Employment Agreement with Ed Litwak, who will serve as the Company's
President and will continue to serve on the Board of Directors. Included in that
Agreement will be an investment reimbursement to Mr. Litwak of $750,000, payable
over the three year period and contingent upon the Company reaching certain
profit margins.
(ii) Within 60 days of the Closing Date, the new entity shall fulfill the
objectives outlined in the Letter of Intent of June 21, 2003. Section 4.08
Indemnification.
(a) Pacificap hereby agrees to indemnify the Company and each of the officers,
agents and directors of the Company 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 misrepresentations
made under Article I of this Agreement. The indemnification provided for in this
paragraph shall survive the Closing and consummation of the transactions
contemplated hereby and termination of this Agreement.
(b) The Company hereby agrees to indemnify Pacificap and each of the officers,
agents, and directors of Pacificap and each of the Pacificap 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 under Article II of this Agreement. The
indemnification provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of this
Agreement.
Section 4.09 Indemnification of Subsequent Corporate Actions.
(a) 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) Pacificap 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 Name Change. After the Closing, the Company shall amend its
certificate of incorporation to effect a name change to be determined by the
parties.
Section 4.11 Audited Financial Statements. The Company shall file audited
financial statements of Pacificap as required by the Securities and Exchange
Commission within 75 days from the Closing. Pacificap shall supply the Company's
present management with a copy of its audited financial statements within 70
days from the Closing. The Company has audited financial statements available,
and they are available on the SEC website and on edgar online. Pacificap must
pay for, and produce, audited financials prior to closing.
Section 4.12 The reorganized entity intends to raise $1,000,000 in a Regulation
D, Rule 506 Offering to accredited and up to 35 non-accredited investors to
further its new business plan, which Offering shall commence within 90 days of
the closing of this Exchange.
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 Pacificap 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). Pacificap shall
have performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by Pacificap prior to or at the
Closing. The Company shall be furnished with a certificate, signed by a duly
authorized executive officer of Pacificap 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
Pacificap to the effect that no litigation, proceeding, investigation, or
inquiry is pending, or to the best knowledge of Pacificap 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 Pacificap Schedules, by or against Pacificap, which might result in any
material adverse change in any of the assets, properties, business, or
operations of Pacificap. In addition, the Officer will certify that there are no
liabilities of Pacificap.
Section 5.03 No Material Adverse Change. Prior to the Closing Date, there shall
not have occurred any change in the financial condition, business, or operations
of Pacificap 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 1.06.
Section 5.04 Approval by Pacificap Shareholders. The Exchange shall have been
approved, and shares delivered in accordance with the relevant subsections of
Sections 3, by the holders of not less than one hundred percent (100%) of the
outstanding common stock of Pacificap. Pacificap believes that the transaction
is exempt from registration pursuant to Section 4(2) of the Securities Act as
transactions by an issuer not involving a public offering as the recipients had
sufficient knowledge and experience in financial and business matters that they
were able to evaluate the merits and risks of an investment in the Company, they
had access to the type of information normally provided in a prospectus, and
since the transaction is non-recurring.
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 Pacificap after the Closing Date on the basis as
presently operated shall have been obtained.
Section 5.07 Other Items.
(a) The Company shall have received a list of Pacificap's shareholders
containing the name, address, and number of shares held by each Pacificap
shareholder as of the date of Closing, certified by an executive officer of
Pacificap as being true, complete and accurate; and
(b) The Company shall have received such further opinions, documents,
certificates or instruments relating to the transactions contemplated hereby as
the Company may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PACIFICAP
AND THE PACIFICAP SHAREHOLDERS
The obligations of Pacificap and the Pacificap 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 the conditions described below prior to or
at the Closing:
(a) Immediately prior to the Closing, the Company shall have no more than an
aggregate of 1,000,630 shares of common stock issued and outstanding, excluding
any shares issuable pursuant to the Exchange.
(b) The directors of the Company shall have approved the Exchange and the
related transactions described herein. Pacificap 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. Pacificap 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 2.18.
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 Pacificap after the Closing Date on the basis as
presently operated shall have been obtained.
Section 6.06 Other Items. Pacificap shall have received further opinions,
documents, certificates, or instruments relating to the transactions
contemplated hereby as Pacificap 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, promoter or control
person, nor any predecessor, thereof have been subject to the following:
(1) Any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer within the past five years;
(2) Any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) 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
(4) 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. The Company and Pacificap agree that, except as set out 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 Pacificap 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. WHAT ABOUT LEN?
(please explain your question)
Section 7.03 Governing Law. This Agreement shall be governed by, enforced, and
construed under and in accordance with the laws of the United States of America
and, with respect to the matters of state law, with the laws of the State of
Nevada without giving effect to principles of conflicts of law thereunder. Each
of the parties (a) irrevocably consents and agrees that any legal or equitable
action or proceedings arising under or in connection with this Agreement shall
be brought exclusively in the federal courts of the United States, (b) by
execution and delivery of this Agreement, irrevocably submits to and accepts,
with respect to any such action or proceeding, generally and unconditionally,
the jurisdiction of the aforesaid court, and irrevocably waives any and all
rights such party may now or hereafter have to object to such 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: Cavalcade of Sports Media, Inc.
12868 Via Latina
Del Mar, California 92014
If to Pacificap, to: Pacificap Entertainment Holdings, Inc.
Attn: Michael Riley
address
With copies to : Andrea Cataneo, Attorney at Law
81 Meadowbrook Road
Randolph, NJ 07869
K. David Pirnazar
_________________
_________________
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, with the specific exclusion of the
announcement made on August 13, 2003. 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 Pacificap, and, except as specifically provided, no director,
officer, stockholder (other than the Pacificap 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. Subject to Sections 3.05 and 7.05 above, whether or not
the Exchange is consummated, the Company will bear the expenses, including
legal, accounting and professional fees, incurred in connection with the
Exchange or any of the other transactions contemplated hereby.
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 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.
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.
CAVALCADE OF SPORTS MEDIA, INC.
BY: /s/ Ed Litwak
------------------------
Ed Litwak
President and Chief Executive Officer
PACIFICAP ENTERTAINMENT HOLDINGS, INC.
BY: /s/ Mike Riley
------------------------
Michael Riley
President
The undersigned Pacificap Shareholders hereby agree to participate in the
Exchange on the terms set forth above. Subject to Section 7.12 above, each of
the undersigned hereby represents and affirms that he has read each of the
representations and warranties of Pacificap set out hereof and that, to the best
of his knowledge, all of such representations and warranties are true and
correct. PLEASE RETURN ORIGINAL STOCK CERTIFICATE ALONG WITH THIS EXCHANGE
AGREEMENT.
NAME OF SHAREHOLDER NUMBER OF SHARES
- --------------------- ------------------
1. Michael Riley 1,500,000 shares
/s/ Mike Riley 9/23/03
_____________________ ___________
Signature Date
2. S-1 Investments 1,000,000 shares
/s/ George Lawson 9/23/03
_____________________ ___________
Signature Date
3. Conor Riley 1,000,000 shares
/s/ Conor Riley 9/23/03
_____________________ ___________
Signature Date
NAME OF SHAREHOLDER NUMBER OF SHARES
- --------------------- ------------------
4. Kaitlin Riley 1,000,000 shares
/s/ Kaitlin Riley 9/23/03
_____________________ ___________
Signature Date
5. Bransfield Holdings 1,000,000 shares
/s/ Steve Schwartz 9/23/03
_____________________ ___________
Signature Date
6. C.H.I. 1,000,000 shares
/s/ Pat O'Conner 9/23/03
_____________________ ___________
Signature Date
7. G.W. Management 1,000,000 shares
/s/ Paul Lewis 9/23/03
_____________________ ___________
Signature Date
8. Capital Resource Group 1,000,000 shares
/s/ Allan Smith 9/23/03
_____________________ ___________
Signature Date
9. J. Capital Partners 1,000,000 shares
/s/ Jason Price 9/23/03
_____________________ ___________
Signature Date
10. A. Jackson Trust Company 1,000,000 shares
/s/ Andrew Jackson 9/23/03
_____________________ ___________
Signature Date
NAME OF SHAREHOLDER NUMBER OF SHARES
- --------------------- ------------------
11. Clinton Hall, LLC 3,000,000 shares
/s/ Clinton Hall 9/23/03
_____________________ ___________
Signature Date
12. Marlon Muller 1,000,000 shares
/s/ Marlon Muller 9/23/03
_____________________ ___________
Signature Date
13. Rancho, LLC 1,000,000 shares
/s/ Robert Simon 9/23/03
_____________________ ___________
Signature Date
14. SOFI, LLC 1,000,000 shares
/s/ Sy Shane 9/23/03
_____________________ ___________
Signature Date
15. KIVA, LLC 1,000,000 shares
/s/ Karl Anton 9/23/03
_____________________ ___________
Signature Date