DISTRIBUTION AND ACQUISITION AGREEMENT
This Agreement ("Agreement") is made effective as of February 21, 2007 by and
between U.S. Sustainable Energy Corporation, a Nevada Corporation ("USSE"),
having its principal office at 110 L.E. Barry Road, Natchez, MS 39120 and United
Ethanol Group, Inc., a Nevada Corporation, with its principal office located at
216 N Commercial Ave, Eagle Grove, IA 50533 ("ONYI").
RECITALS
WHEREAS, USSE is the owner of a unique process to break down biomass
feedstock (soy and/or corn) for manufacturing and producing liquid biofuel,
carbon ash and biogas (the "Process"); and
WHEREAS, ONYI desires to obtain exclusive use of fuels produced by USSE in
the Process in transportation ("Fuels")
WHEREAS, ONYI has the expertise and experience to utilize the Fuels in the
automotive and other transportation industry; and
WHEREAS, USSE has agreed to initially grant ONYI the exclusive right to
distribute the Fuels in the Territory in accordance with the terms of this
Agreement; and
WHEREAS, The respective Boards of Directors of USSE and ONYI deem it
advisable and in the best interests of their corporations and the respective
shareholders of their corporations that ONYI eventually acquire 100% of USSE, in
accordance with the terms and conditions of a reorganization transaction; and
WHEREAS, USSE and ONYI desire that upon execution of this Agreement USSE
and ONYI shall work together to reach completion of certain conditions
precedent, immediately subsequent to which USSE and ONYI shall complete a
merger, stock exchange or other reorganization transaction pursuant to which the
business of USSE shall become the business of ONYI. Such conditions precedent
shall include, without limitation, that USSE shall have prepared and delivered
to ONYI audited and unaudited financial statements which if filed at the time
received would be complete and compliant with Regulation S-X, Section 310,
sufficient for the combined entities to file any and all filings required by the
US Securities and Exchange Commission (the "USSE Financial Statements").
NOW, THEREFORE, in consideration of the promises and representations of the
parties hereto and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
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1. DEFINITIONS
Unless the context requires otherwise, whenever used in this Agreement the
following terms and expressions shall have the following meaning:
"AGREEMENT" means this agreement including the Exhibits, Addendums and
Schedules, as they may be amended from time to time.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on which
commercial banks in the city of Natchez, Mississippi are authorized by law to
close.
"CONFIDENTIAL INFORMATION" includes all information, whether written or oral,
in whatever form disclosed, concerning any technologies, products, developments,
business methods, business plans, marketing, investment, management, financial
and other business affairs in connection with all matters relating to or arising
out of this Agreement.
"TERRITORY" means worldwide
2. GRANT OF EXCLUSIVE DISTRIBUTION RIGHTS
2.1 USSE hereby grants to ONYI an exclusive right to distribute to customers
in the transportation industry in the Territory the Fuels produced by USSE by
the Process, as permitted by this Agreement subject to the terms and conditions
hereof. ONYI shall acquire the Fuels from USSE at pricing based upon market
conditions and as mutually agreed upon between the parties.
2.2 ONYI acknowledges that the Process and any other intellectual property
utilized by USSE are the sole and exclusive property of USSE, subject only to
the distribution rights hereby granted.
3. DUTIES OF ONYI IN CONNECTION WITH THIS AGREEMENT
3.1 ONYI shall be solely responsible for the organization, operation,
marketing and management of its business, and shall be responsible for the
development of its own ongoing method of business operation, including but not
limited to the following: selection and establishment of business sites; sales
techniques; marketing plan/system and advertising practices; employee selection,
hiring and training; personnel policies and practices; hours of operation; and
all other such ongoing concerns in the course of ONYI's routine business
operation and management.
3.2 The Parties acknowledge and agree that prior to completion of the
reorganization transaction set forth below, no partnership or joint venture is
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created by this Agreement and that ONYI may not, without prior approval, hold
itself out as an agent or representative of USSE, and may not incur any
liability or create any obligation whatsoever for USSE.
3.3 At all times ONYI shall conduct its business in accordance with all
material applicable federal, state and local laws, regulations and ordinances.
ONYI shall not, either during or after the Term of this Agreement, do anything,
or aid or assist any other party to do anything, which would materially infringe
on, harm, impair, or contest the rights granted herein to ONYI with respect to
the ONYI Rights.
3.4 No later than five days after the execution of this Agreement, ONYI
agrees to take all action necessary to provide for the addition of seats on its
board of directors so that the number of directors shall be three in total.
During the Term, USSE shall have the right, but not the obligation, to appoint
up to two persons of its choice to ONYI's board of directors. ONYI shall
appoint John Rivera as its Chief Executive Officer.
4. TERM OF DISTRIBUTION RIGHTS
4.1 Unless terminated in accordance with the terms of this Agreement, this
Agreement shall be effective as of the date of execution of this Agreement and
shall remain in effect until the earlier of (i) December 31, 2012 or (ii)
Closing on the Reorganization (defined below) (in either case, the "Term").
5. PRICE AND PAYMENT FOR DISTRIBUTION RIGHTS
5.1 ONYI shall tender to USSE a total distribution fee which shall be only
for the exclusive distribution rights granted hereunder (the "Fee") of
900,000,000 shares of ONYI's common stock (the "ONYI Shares"). The ONYI Shares
represent approximately ninety percent (90%) of ONYI's total issued and
outstanding common stock on a fully diluted basis. USSE acknowledges that as of
the date of this Agreement, ONYI has a total of 120,000,000 shares of common
stock authorized of which 66,088,103 are issued and outstanding. Immediately
upon execution of this Agreement, ONYI shall issue and deliver a total of
20,000,000 shares of common stock to USSE. ONYI shall also immediately take
whatever corporate action or actions are required to increase its authorized
common stock to 2,000,000,000 shares. Immediately upon the effectiveness of the
increase in authorized shares, ONYI shall issue and deliver to USSE an
additional 880,000,000 shares. Any and all Common Stock shall constitute
"restricted securities" as such term is defined in Securities and Exchange
Commission Rule 144 and shall bear a restrictive transfer legend on each
certificate issued in connection with this Agreement, and shall not be subject
to any securities registration rights except as more fully set forth below.
ONYI shall at its sole cost and expense include such shares in the first
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registration statement pertaining to ONYI's securities filed by the ONYI with
the United States Securities and Exchange Commission. The Common Stock shall be
issued to USSE by ONYI within thirty (30) days following the effective date of
this Agreement.
6. REORGANIZATION TRANSACTION
6.1 Upon satisfaction of the conditions set forth below, ONYI and USSE shall
ni good faith endeavor to complete a stock purchase, merger or other
reorganization transaction pursuant to which ONYI shall acquire 100% of the
issued and outstanding common stock of USSE in consideration for the ONYI Stock
(the "Reorganization Date"). These conditions include the following:
(i) Completion and delivery to the reasonable satisfaction of ONYI of
the USSE Financial Statements (the "Audit Requirement");
(ii) USSE shall have installed and have active four reactors in its
facility for the production of biofuels.
(iii) Completion and effectiveness of any Registration Statement on
Form S-4 or other appropriate form as required by the rules and regulations of
the United States Securities and Exchange Commission (as more fully discussed
below); and
(iv) The representations and warranties of USSE and ONYI contained in
this Agreement remaining accurate in all material aspects.
6.2 On the Reorganization Date, ONYI and USSE shall enter into a plan of
reorganization of pursuant to the provisions of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986.
6.3 Upon completion of the closing of the Reorganization Transaction on the
Reorganization Date, ONYI shall have a total of no more than 1,000,000,000
shares of common stock issued and outstanding.
6.4 As part of the consideration payable and transferred in connection with
the Reorganization Transaction, USSE shall deliver to ONYI a total of
100,000,000 shares of Sustainable Power Corp., a Nevada corporation.
7. REGISTRATION OF SHARES
7.1 Immediately upon completion of the Audit Requirement, ONYI shall
prepare, and, as soon as practicable, file with the SEC the Registration
Statement on Form S-4 covering the resale of all of the ONYI Shares. In the
event that Form S-4 is unavailable for such a registration, ONYI shall use such
other form as is available for such a registration on another appropriate form
reasonably acceptable to USSE. ONYI shall use its best efforts to have the
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Registration Statement declared effective by the SEC as soon as practicable.
7.2. At such time as ONYI is obligated to file a Registration Statement with
the SEC pursuant hereto, ONYI will use its best efforts to effect the
registration of the ONYI Shares in accordance with the intended method of
disposition thereof and, pursuant thereto, the Company shall have the following
obligations:
(i). ONYI shall keep each Registration Statement effective pursuant to Rule
415 at all times until the date as of which the Shareholders may sell all of the
ONYI Shares covered by such Registration Statement without restriction pursuant
to Rule 144(k) (or any successor thereto) promulgated under the 1933 Act. ONYI
shall ensure that each Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading.
7.3. ONYI shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement by reason of the Company filing a report on
Form 10-Q, Form 10-K or any analogous report under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), ONYI shall have incorporated such report
by reference into such Registration Statement, if applicable, or shall file such
amendments or supplements with the SEC on the same day on which the 1934 Act
report is filed which created the requirement for ONYI to amend or supplement
such Registration Statement.
7.4. ONYI shall use its best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale by
shareholders of the ONYI Shares covered by a Registration Statement under such
other securities or "blue sky" laws of all applicable jurisdictions in the
United States, (ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof, (iii)
take such other actions as may be necessary to maintain such registrations and
qualifications in effect, and (iv) take all other actions reasonably necessary
or advisable to qualify the ONYI Shares for sale in such jurisdictions;
provided, however, that ONYI shall not be required in connection therewith or as
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a condition thereto to (x) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify, (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction.
7.5. ONYI shall use its best efforts to cause all of the ONYI Shares covered
by a Registration Statement to be listed or quoted on each securities exchange
or securities association on which securities of the same class or series issued
by ONYI are then listed, if any, if the listing of such ONYI Shares is then
permitted under the rules of such exchange or association. The Company shall
pay all fees and expenses in connection with satisfying this obligation.
7.6. All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant hereto, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for ONYI shall be paid by ONYI.
8. CONFIDENTIALITY
8.1 Neither USSE or ONYI shall use or divulge or communicate to any person
(other than those whose province it is to know the same or as permitted or
contemplated by this Agreement or with the written approval of the other party
or as may be required by law):
(i) any Confidential Information; or
(ii) any of the terms of this Agreement
8.2 USSE and ONYI shall prevent the unauthorized publication or disclosure
of any such information, materials or documents and ensure that any person to
whom the information, materials or documents are disclosed is aware that the
same is confidential and is covered by a similar duty to maintain
confidentiality. USSE and ONYI shall each employ its best efforts to ensure
that its directors, shareholders, employees, consultants, agents or advisors are
aware of and comply with the confidentiality and non-disclosure provisions
contained in this Section.
9. LEGAL RELATIONSHIP
9.1 Until such time as the reorganization is completed on the
Reorganization Date, nothing herein shall contain any facts as to suggest that
USSE and ONYI are engaging in a joint venture or partnership. Neither party
shall have any authority to bind the other to any legal obligation. ONYI shall
only contract with Customers on its own behalf.
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10. REPRESENTATIONS AND WARRANTIES OF USSE
USSE represents and warrants to ONYI as follows:
10.1 USSE shall not, during the Term of this Agreement, do anything, or aid
or assist any other party to do anything which would infringe on, harm, impair,
or contest the distribution rights granted herein except in the event of a
breach of this Agreement by ONYI.
10.2 USSE acknowledges the shares of common stock to be issued by ONYI and
delivered to USSE pursuant hereto will not initially be registered under the
Securities Act of 1933, as amended, or any states' securities laws. The shares
are issued under applicable exemptions from the securities registration
requirements of such statutes. The exemptions being claimed include, but are
not necessarily limited to, those available under Section 4(2) of the Securities
Act; and, the reliance by the ONYI upon the exemptions from the securities
registration requirements of the federal and state securities laws is predicated
in part on the representations, understandings and covenants set forth in this
Agreement.
10.3 USSE is a Company duly organized and validly existing under the laws of
the State of Nevada. USSE has full power and authority to conduct its business
as presently being conducted.
10.4 Except as set forth in Schedule 10.4, the execution, delivery and
performance of this Agreement by USSE, and the consummation of the transactions
contemplated hereby, will not with or without the giving of notice of the lapse
of time or both,
(i) violate any material provision of law, statute, rule or regulation to
which USSE is subject,
(ii) violate any judgment, order, writ or decree to which USSE is a party or
by which it is or may be bound; or
(iii) to the knowledge of USSE, result in any material breach of or
conflict with any term, covenant, condition or provision of, or result in the
modification or termination of, or constitute a default under or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the assets or business of USSE, under the corporate charter or
by-laws or any other agreement, understanding or instrument to which USSE is a
party or by which it is or may be bound or affected.
10.5 Except as set forth in Schedule 10.5, all necessary corporate action
has been taken by USSE to authorize the execution, delivery and performance of
this Agreement. This Agreement has been duly and validly authorized, executed
and delivered by USSE and constitutes the valid and binding obligation of USSE
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enforceable against it in accordance with its terms, except as enforceability is
limited by (1) any applicable bankruptcy, insolvency, reorganization, moratorium
or similar law affecting creditors' rights generally or (2) general principles
of equity, whether considered in a proceeding in equity or at law.
10.6 Except as set forth in Schedule 10.6, all necessary consents and
approval required for completion of the transactions contemplated by this
Agreement have been obtained or will be obtained. Except as set forth in
Schedule 10.6, no consent of any court, governmental agency or other public
authority is required as a condition to the enforceability of this Agreement.
10.7 USSE has conducted its business in compliance with all material
federal, state and local laws, regulations and ordinances.
10.8 No employee, director, officer or stockholder (or any current or former
family member thereof) of USSE, either individually or in any other capacity,
has a claim of any kind against the Process or the Intellectual Property, and
USSE has no obligation with respect to such person or entity, except the right
to current salary or wages, accrued vacation pay, and reimbursable expenses
arising in the ordinary course of business.
11. REPRESENTATIONS AND WARRANTIES OF ONYI
ONYI represents and warrants to USSE as follows:
11.1 ONYI is a Company duly organized, validly existing and in good
standing under the laws of the State of Nevada and is qualified or licensed as a
foreign corporation in any other jurisdiction where said licensing is required.
ONYI has the full power and authority to conduct the business in which it is
engaged and will be engaged upon completion of the transaction contemplated
herein. Except as set forth in ONYI's filings with the Securities and Exchange
Commission, ONYI does not have any subsidiary or equity interest in any entity.
Accurate, current and complete copies of the Articles of Incorporation Company
and Bylaws of ONYI will be provided to Transferor prior to Closing.
11.2 The authorized capital stock of ONYI consists of 120,000,000
shares of Common Stock, of which 66,088,103 are issued and outstanding
(excluding any shares of Common Stock to be issued pursuant to this Agreement).
Immediately upon execution of this Agreement, ONYI shall take what corporate or
shareholder action is required to increase the authorized Common Stock of ONYI
to 2,000,000,0000 shares. Prior to Closing, ONYI shall not issue any additional
shares of common stock (other than the shares issuable herein). All the issued
and outstanding shares of capital stock of ONYI are duly authorized, validly
issued, fully paid and non-assessable. Upon the issuance of all of the ONYI
Shares pursuant to this Agreement, the ONYI Shares to be issued to USSE shall,
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on a fully diluted basis, constitute not less than 90% of all the issued and
outstanding Common Stock. Upon issuance of the ONYI Shares to USSE, legal and
beneficial ownership of the ONYI Shares shall be transferred to USSE free and
clear of all encumbrances, except those required by Rule 144 of the Securities
Act, and all of the ONYI Shares to be issued shall be duly authorized, validly
issued, fully paid and non-assessable. There are no outstanding bonds,
debentures, notes or other indebtedness or other securities of ONYI (or
convertible into, or exchangeable for, any such securities) There are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which ONYI is a party or
by which it is bound obligating ONYI to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity or
voting securities of ONYI or obligating ONYI to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. There are no outstanding contractual obligations,
commitments, understandings or arrangements of ONYI to repurchase, redeem or
otherwise acquire or make any payment in respect of any shares of capital stock
of ONYI.
11.3 The execution and delivery of this Agreement by ONYI and the
performance of all ONYI's obligations hereunder have been duly authorized and
approved by all requisite corporate action on the part of ONYI pursuant to
applicable law. ONYI has the power and authority to execute and deliver this
Agreement and to perform all its obligations hereunder. This Agreement and any
other documents, instruments and agreements executed by ONYI in connection
herewith constitute the valid and legally binding agreements of ONYI,
enforceable against ONYI in accordance with their terms, except that (i)
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
enforcement of the rights and remedies of creditors; and (ii) the availability
of equitable remedies may be limited by equitable principles.
11.4 Neither the execution, delivery nor performance of this Agreement
or any other documents, instruments or agreements executed by ONYI in connection
herewith, nor the consummation of the transactions contemplated hereby: (i)
constitutes a violation of or default under (either immediately, upon notice or
upon lapse of time) the Articles of Incorporation or Bylaws of ONYI, any
provision of any contract to which ONYI may be bound, any judgment or any law;
or (ii) will or could result in the creation or imposition of any encumbrance
upon, or give to any third person any interest in or right to, the ONYI Shares
or any other capital stock of ONYI; or (iii) will or could result in the loss or
adverse modification of, or the imposition of any fine or penalty with respect
to, any license, permit or franchise granted or issued to, or otherwise held by
or for the use of, ONYI; or (iv) violate any applicable law or order currently
in effect to which ONYI is subject.
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11.5 Schedule 11.5 sets forth the audited financial statements of ONYI,
including balance sheets, statements of operations, statements of changes in
shareholders' equity and statements of cash flows for the fiscal year ended
December 31, 2006. Schedule F sets forth the unaudited balance sheet as of
the date January 31, 2007. All of such financial statements are hereinafter
referred to as the "Financial Statements." The Financial Statements are true,
correct and complete, were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods indicated, and
accurately reflect ONYI's financial condition and the results of ONYI's
operations for the periods and as of the dates which they purport to cover. The
Financial Statements fully comply with the rules and requirements of the United
States Securities and Exchange Commission, including without limitation Item 301
of Regulation S-B promulgated under the Securities Exchange Act of 1934, as
amended, and may be utilized in any periodic report or other filing with the
United States Securities Exchange Commission. Management of ONYI has fully
complied with any and all Sarbanes-Oxley requirements in connection with these
financial statements. ONYI has provided to USSE documentation indicating the
forgiveness of indebtedness or satisfaction of any and all shareholder loans and
the forgiveness of any and all accrued salary for ONYI. There are no other
outstanding loans, accrued salaries or payables except for sums due ONYI's
transfer agent totaling approximately $1,000 and attorney fees totaling
approximately $8,500.
11.6 Except as specifically set forth in Schedule 11.6 hereto, since
the date of the Financial Statements, ONYI has not:
(i). suffered the damage or destruction of any of its properties or
assets (whether or not covered by insurance) which is materially adverse to the
business or financial condition of ONYI, or made any disposition of any of its
material properties or assets other than in the ordinary course of business;
(ii) made any change or amendment in its certificate of incorporation
or by-laws, or other governing instruments;
(iii) other than the ONYI Shares issuable hereunder, issued or sold any
Equity Securities or other securities, acquired, directly or indirectly, by
redemption or otherwise, any such Equity Securities, reclassified, split-up or
otherwise changed any such Equity Security, or granted or entered into any
options, warrants, calls or commitments of any kind with respect thereto;
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(iv) organized any new Subsidiary or acquired any Equity Securities of
any Person or any equity or ownership interest in any business;
(v) borrowed any funds or incurred, or assumed or become subject to,
whether directly or by way of guarantee or otherwise, any obligation or
liability with respect to any such indebtedness for borrowed money;
(vi) paid, discharged or satisfied any material claim, liability or
obligation (absolute, accrued, contingent or otherwise), other than in the
ordinary course of business;
(vii) prepaid any material obligation having a maturity of more than 90
days from the date such obligation was issued or incurred;
(viii) cancelled any material debts or waived any material claims or
rights, except in the ordinary course of business;
(ix) disposed of or permitted to lapse any rights to the use of any
material patent or registered trademark or copyright or other intellectual
property owned or used by it;
(x) granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any employee benefit plan);
(xi) purchased or entered into any contract or commitment to purchase
any material quantity of raw materials or supplies, or sold or entered into any
contract or commitment to sell any material quantity of property or assets;
(xii) made any capital expenditures or additions to property, plant or
equipment or acquired any other property or assets;
(xiii) written off or been required to write off any notes or accounts
receivable;
(xiv) written down or been required to write down any inventory;
(xv) entered into any collective bargaining or union contract or
agreement; or
(xvi) incurred any liability.
11.7 ONYI is not a party to any,
(i) contract or agreement involving any liability on the part of ONYI.
(ii) Lease of personal property;
(iii) Employee bonus, stock option or stock purchase, performance unit,
profit-sharing, pension, savings, retirement, health, deferred or incentive
compensation, insurance or other material employee benefit plan (as defined in
Section 2(3) of ERISA) or program for any of the employees, former employees or
retired employees of ONYI
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(iv) Commitment, contract or agreement that is currently expected by
the management of ONYI to result in any material loss upon completion or
performance thereof;
(v) Contract, agreement or commitment with any officer, employee,
agent, consultant, advisor, salesman, sales representative, value added
reseller, distributor or dealer; or
(vi) Employment agreement or other similar agreement.
11.8 John Rivera and Taylor F. Moffitt are the only directors, and John
Rivera, Taylor F. Moffitt and Christopher M. McGovern are the only officers of
ONYI.
11.9 ONYI is not a party to: (i) any profit sharing, pension,
retirement, deferred compensation, bonus, stock option, stock purchase,
retainer, consulting, health, welfare or incentive plan or agreement or other
employee benefit plan, whether legally binding or not; or (ii) any plan
providing for "fringe benefits" to its employees, including, but not limited to,
vacation, disability, sick leave, hospitalization and life insurance and other
insurance plans, or related benefits. No person or party (including, but not
limited to, governmental agencies of any kind) has any claim or basis for any
action or proceeding against ONYI arising out of any statute, ordinance or
regulation relating to discrimination in employment or to employment practices
or occupational safety and health standards.
11.10 ONYI has not generated any hazardous wastes or engaged in
activities which are or could be interpreted to be potential violations of laws
or judicial decrees in any manner regulating the generation or disposal of
hazardous waste. There are no on-site or off-site locations where ONYI has
stored, disposed or arranged for the disposal of chemicals, pollutants,
contaminants, wastes, or toxic substances. There are no underground storage
tanks located on property owned or leased by ONYI.
11.11 ONYI's books and records are and have been properly prepared and
maintained in form and substance adequate for preparing audited financial
statements in accordance with generally accepted accounting principles, and
fairly and accurately reflect all of ONYI's assets, obligations and accruals,
and all transactions (normally reflected in books and records in accordance with
generally accepted accounting principles) to which ONYI is or was a party or by
which ONYI or any of its assets are or were affected.
11.12 All tax returns and all taxes due, owing and payable by ONYI
have been filed and fully paid. No claim for any tax due from or assessed
against ONYI is being contested by ONYI. None of ONYI's tax returns or reports
has been audited by the Internal Revenue Service or any state or local tax
authority, and ONYI has not received any notice of deficiency or other
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adjustment from the Internal Revenue Service or any state or local tax
authority. There are no agreements, waivers or other arrangements providing an
extension of time with respect to the assessment of any tax against ONYI, nor
are there any tax proceedings now pending or threatened against ONYI. ONYI is
not aware of any facts that exists or has existed, nor has any event occurred,
which would constitute grounds for the assessment of any further tax against
ONYI.
11.13 ONYI is not a party to, the subject of, or threatened with any
litigation nor, to the best of ONYI's knowledge, is there any basis for any
litigation. ONYI is not contemplating the institution of any litigation.
11.14 No claim of breach of contract, tort, product liability or other
claim, contingent or otherwise, has been asserted or threatened against ONYI
nor, to the best of ONYI's knowledge, is capable of being asserted by any
employee, creditor, claimant or other person against ONYI. No state of facts
exists or has existed, nor has any event occurred, which could give rise to the
assertion of any such claim by any person.
11.15 The execution, delivery and performance by ONYI of this Agreement
and the consummation by ONYI of the transactions contemplated hereby do not
require any consent that has not been received prior to the date hereof.
11.16 There are no outstanding judgments against ONYI. There are no
health or safety problems involving or affecting ONYI. There are no open
workers compensation claims against ONYI, or any other obligation, fact or
circumstance which would give rise to any right of indemnification on the part
of any current or former shareholder, director, officer, employee or agent of
ONYI, or any heir or personal representative thereof, against ONYI or any
successor to the businesses of ONYI.
11.17 ONYI as well as its officers and directors have filed any and all
required forms and reports with the Securities and Exchange Commission (the
"Commission"). All of the filings made with the Commission are complete and
accurate, and do not omit any information required to make the statements and
information provided, non-misleading, accurate and meaningful. None of the
reports filed with the Commission contain any untrue statement of a material
fact or omit any material fact. ONYI has not received any inquiries or trading
suspensions from the SEC or the NASD. ONYI's common stock is trading on the
over-the-counter bulletin board under the symbol "ONYI.OB".
11.18 All the representations and warranties made by ONYI herein or in
any Schedule, and all of the statements, documents or other information
pertaining to the transaction contemplated herein made or given by ONYI, its
agents or representatives, are complete and accurate, and do not omit any
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information required to make the statements and information provided, in light
of the transaction contemplated herein, non-misleading, accurate and meaningful.
11.19 The operations of ONYI have been conducted in accordance with all
applicable laws and regulations of all Governmental Bodies having jurisdiction
over them, except for violations thereof which are not likely to have a material
adverse effect on the business or financial condition of ONYI. ONYI has not
received any notification of any asserted present or past failure by it to
comply with any such applicable laws or regulations. ONYI has all material
licenses, permits, orders or approvals from the Governmental Bodies required for
the conduct of its business, and is not in material violation of any such
licenses, permits, orders and approvals. All such licenses, permits, orders and
approvals are in full force and effect, and no suspension or cancellation of any
thereof has been threatened.
11.20 No broker, finder or investment advisor acted directly or
indirectly as such for ONYI in connection with this Agreement or the other
transaction documents relating to the transactions contemplated hereby, and no
broker, finder, investment advisor or other Person is entitled to any fee or
other commission, or other remuneration, in respect thereof based in any way on
any action, agreement, arrangement or understanding taken or made by or on
behalf of ONYI.
11.21 ONYI has filed all periodic reports required to be filed with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), each of which, as amended, complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the rules and regulations promulgated thereunder, and no such filing
contained any material fact which was false or misleading or omitted to include
any material fact the omission of which would make the disclosure false and
misleading.
12. MISCELLANEOUS
12.1 ONYI and USSE each shall conduct its business in material
compliance of all applicable laws, ordinances, regulations and other
requirements of any federal, state, county, municipal or other government and
will obtain all necessary permits, licenses or other consents for the lawful
operation of its business, the failure of which would have a material adverse
impact on the business of such party.
12.2 Notices. Any notice, demand or delivery to be given or to be served
upon any party in connection with this Agreement must be in writing, and must
be given by a nationally recognized overnight courier and shall be deemed to
have been received on the date such notice is placed with such courier or, if
given otherwise than by courier, it shall be deemed to have been received on the
date that it is personally or directly delivered to the party to whom it is
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addressed. Such notices, as provided herein, shall be given to the parties
hereto at the addresses set forth in the preamble hereto.
Any party hereto may at any time by giving ten (10) days' prior written
notice to the other party hereto, designate any other address in substitution of
the foregoing address to which such notice shall be sent.
12.3 Prior to closing of the Reorganization transaction, ONYI and USSE
acknowledge that the parties have not intended to create a franchise
relationship between themselves and that USSE has not represented this
distribution arrangement to be a "franchise" as defined in 16 C.F.R. Sec. 436
et. seq., or as defined in any applicable state franchise laws, prior to or
during the negotiation of this Agreement. The parties acknowledge that the USSE
has made no representation that any form of business operations or management
plan, manual, or advice, or any marketing plan or system, would be provided to
or necessarily implemented by ONYI. ONYI acknowledges that ONYI has not been
provided with, or required under the terms of this Agreement to adopt or utilize
any marketing plan or system, nor has USSE prescribed to ONYI, in whole or in
part, any form of marketing plan or system in relation to this Agreement. ONYI
further acknowledges that ONYI has not been required under the terms of this
Agreement to adopt the business format of, or a business format substantially
similar to the business format utilized by USSE. The parties agree that in the
event it is determined that a franchise agreement has been entered into by the
parties, the ONYI acknowledges that it has received the necessary information
from the USSE as required by the Federal Trade Commission; further that USSE has
made no representations relating to the potential income from operations by ONYI
and that a copy of this Agreement was furnished to the ONYI at least five (5)
days prior to the execution hereof.
12.4 This Agreement contains the entire agreement of the parties and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties not embodied herein shall be of any force or effect. No failure of
USSE to exercise any power given it hereunder, or to insist upon the strict
compliance of ONYI of any obligation hereunder, and no custom or practice of the
parties at variance with the terms hereof shall constitute a waiver of USSE's
right to demand exact compliance with the terms hereof.
12.5 This Agreement shall be governed by and construed solely and
exclusively in accordance with the laws of the state of Mississippi without
regard to any statutory or common-law provision pertaining to conflicts of laws.
12.6 The Parties agree that all controversies, claims, disputes and matters
in question arising out of, or related to, this Agreement, the breach of this
Agreement, the purchase of the ONYI's securities pursuant to this Agreement or
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any other matter or claim whatsoever shall be decided by courts of competent
jurisdiction in Adams County, Mississippi, to the exclusion of all other places
of venue, for all matters that arise under this Agreement.
12.7 In the event it becomes necessary for either party herein to seek
legal means to enforce the terms of this Agreement, the prevailing party is
entitled to payment of all of its reasonable attorneys' fees, costs and
expenses, including any cost reasonably and necessarily incurred by the
prevailing party as a necessary incident to the prosecution or defense, through
all proceedings and appeals.
12.8 If any term or provision of this Agreement is held invalid, illegal or
unenforceable in any respect for any reason, that invalidity, illegality or
unenforceability shall not affect any other term or provision hereof, and this
Agreement shall be interpreted and construed as if such term or provision, to
the extent the same shall have been held to be invalid, illegal or
unenforceable, had never been contained herein.
12.9 Each of the parties hereby acknowledge and agree that money damages may
not be an adequate remedy for any breach or threatened breach of any of the
provisions of this Agreement and that, in such event, they may, in addition to
any other rights and remedies existing in their favor, apply to any court of
competent jurisdiction in Adams County, Mississippi for specific performance,
injunctive and/or other relief in aid of arbitration to preserve and protect the
rights of the parties pending action by the arbitration panel.
12.10 This Agreement may be executed in several counterparts, each of which
shall be deemed an original. A facsimile signature on this agreement shall be
deemed to be an original.
12.11 The parties agree that each has participated equally in the creation
and drafting of this Agreement, and that each party to this Agreement has had
the opportunity to seek independent legal counsel prior to entering into this
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth above.
"USSE"
U.S. SUSTAINABLE ENERGY CORPORATION
By: /s/ John Rivera
John Rivera, President
"ONYI"
ORIGINALLY NEW YORK, INC.
By: /s/ Taylor Moffitt
Taylor Moffitt, President