EXCHANGE AGREEMENT
BETWEEN
PREPAID TELECOM CORPORATION, A NEVADA CORPORATION,
PREPAID TELECOM CORPORATION, A TEXAS CORPORATION,
AND
THE SHAREHOLDERS OF PREPAID TELECOM CORPORATION-TEXAS
Dated July 28, 2000
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EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement"), is
entered into as of this 28th day of July 2000, by and among Prepaid Telecom
Corporation, a Nevada corporation ("PTC-Nevada"), Prepaid Telecom Corporation, a
Texas corporation ("PTC-Texas"), those persons identified in Schedule A-1
attached hereto who are the beneficial owners of 2,625,000 shares of common
stock of PTC-Texas ("Common Stock"), which constitutes 100% of the outstanding
capital stock of PTC-Texas ("PTC-Texas Shareholders").
PREMISES
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This Agreement provides for the acquisition by PTC-Nevada of all of the
issued and outstanding shares of PTC-Texas solely in exchange for voting shares
of PTC-Nevada, on the terms and conditions hereinafter provided, all for the
purpose of effecting a so-called "tax-free" reorganization pursuant to Sections
368(a)(1)(B) of the Internal Revenue Code of 1954, as amended.
AGREEMENT
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NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF PTC-NEVADA
As an inducement to, and to obtain the reliance of the PTC-Texas
Shareholders, PTC-Nevada represents and warrants as follows:
Section 1.01 ORGANIZATION. PTC-Nevada is a corporation duly organized,
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validly existing, and in good standing under the laws of the State of Nevada.
PTC-Nevada 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 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 Schedule 1.01 are
complete and correct copies of the articles of incorporation, as amended, and
bylaws of PTC-Nevada as in effect on the date hereof. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof will not,
violate any provision of these articles of incorporation or bylaws. PTC-Nevada
has taken all action required by laws, its articles of incorporation, its
bylaws, or otherwise to authorize the execution and delivery of this Agreement.
PTC-Nevada has full power, authority, and legal right and has taken all action
required by law, its certificate of incorporation, bylaws, and otherwise to
consummate the transactions herein contemplated.
Section 1.02 CAPITALIZATION. The authorized capitalization of PTC-Nevada
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consists of 24,000,000 shares of common stock, $.001 par value per share, of
which 1,375,000 shares are currently issued and outstanding. A shareholder list
is set forth in Schedule 1.02. All issued and outstanding shares are legally
issued, fully paid, and non-assessable and not issued in violation of the
pre-emptive or other rights of any person. There are no options, warrants,
rights or convertible securities outstanding to purchase any capital stock of
PTC-Nevada.
Section 1.03 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. PTC-Nevada does
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not have any subsidiaries and does not own, beneficially or of record, any
shares of any other corporation.
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Section 1.04 FINANCIAL STATEMENTS.
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(a) Included in Schedule 1.04(a) is the unaudited balance sheet of
PTC-Nevada at June 30, 2000, together with an unaudited statement of
operations and cash flow from inception (October 1, 1999) through June 30,
2000.
(b) All such financial statements have been prepared in accordance
with generally accepted accounting principles. The audited balance sheet
presents fairly as of its date the financial condition of PTC-Nevada.
PTC-Nevada did not have, as of the date of such balance sheet, except as
and to the extent reflected or reserved against therein, any liabilities or
obligations (absolute or contingent) which should be reflected in a balance
sheet 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 PTC-Nevada in
accordance with generally accepted accounting principles. The statements of
income, stockholders' equity, and changes in financial condition reflect
fairly the information required to be set forth therein by generally
accepted accounting principles.
(c) PTC-Nevada has filed all state, federal, and local income tax
returns required to be filed by it from inception to the date hereof.
Included in Schedule 1.04(b) are true and correct copies of the federal
income tax returns of PTC-Nevada filed since the date of inception. None of
such federal income tax returns have been examined by the Internal Revenue
Service. Each of such income tax returns reflects the taxes due for the
period covered thereby, except for amounts which, in the aggregate, are
immaterial.
(d) PTC-Nevada does not owe any unpaid federal, state, county,
local, or other taxes (including any deficiencies, interest, or penalties)
through the date hereof, for which PTC-Nevada may be liable in its own
right or as a transferee of the assets of, or as a successor to, any other
corporation or entity. Furthermore, except as accruing in the normal
course of business, PTC-Nevada does not owe any accrued and unpaid taxes to
date of this Agreement.
(e) The books and records, financial and otherwise, of PTC-Nevada
are in all material respects complete and correct and have been maintained
in accordance with good business and accounting practices.
(f) PTC-Nevada has good and marketable title to its assets and,
except as set forth in the financial statements of PTC-Nevada or the notes
thereto, has no material contingent liabilities, direct or indirect,
matured or unmatured.
Section 1.05 INFORMATION. The information concerning PTC-Nevada set forth
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in this Agreement and in Schedules attached hereto is complete and accurate in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading.
Section 1.06 OPTIONS OR WARRANTS. There are no existing options,
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warrants, calls, or commitments of any character relating to the authorized and
unissued PTC-Nevada common stock.
Section 1.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
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this Agreement or Schedule 1.07, since June 30, 2000:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of PTC-Nevada; or
(ii) any damage, destruction, or loss to PTC-Nevada (whether or not covered
by insurance) materially and adversely affecting the business, operations,
properties, assets, or condition of PTC-Nevada;
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(b) PTC-Nevada 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 extraordinary or material considering the business of
PTC-Nevada; (iv) made any material change in its method of management,
operation, or accounting; (v) entered into any other material transaction;
(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 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;
(c) PTC-Nevada has not (i) borrowed or agreed to borrow any funds
or incurred, or become subject to, any material obligation or liability
(absolute or contingent); (ii) paid any material obligation or liability
(absolute or contingent) other than current liabilities reflected in or
shown on the most recent PTC-Nevada balance sheet; (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 $1,000), 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); (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 PTC-Nevada; or (v) issued, delivered,
or agreed to issue or deliver any stock, bonds or other corporate
securities including debentures (whether authorized and unissued or held as
treasury stock); and
(d) to the best knowledge of PTC-Nevada, PTC-Nevada 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 PTC-Nevada.
Section 1.08 TITLE AND RELATED MATTERS. PTC-Nevada has good and marketable
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title to all of its properties, inventory, interests in properties, and assets,
real and personal, which are reflected in the most recent audited balance sheet
or acquired after that date (except properties, 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; and (c) as described in Schedule 1.08. Except as set forth in
Schedule 1.08, PTC-Nevada 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 PTC-Nevada's business. Except as set forth in Schedule 1.08, no
third party has any right to, and PTC-Nevada 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, tradenames, or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, or finding, would
have a materially adverse affect on the business, operations, financial
condition, income, or business prospects of PTC-Nevada or any material portion
of its properties, assets, or rights.
Section 1.09 LITIGATION AND PROCEEDINGS. There are no actions, suits,
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proceedings, or investigations pending or, to the knowledge of PTC-Nevada after
reasonable investigation, threatened by or against PTC-Nevada or affecting
PTC-Nevada 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. PTC-Nevada does not have any 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 of any circumstances which, after reasonable investigation,
would result in the discovery of such a default.
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Section 1.10 CONTRACTS.
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(a) Except as included or described in Schedule 1.10, there are no
material contracts, agreements, franchises, license agreements, or other
commitments to which PTC-Nevada is a party or by which it or any of its
assets, products, technology, or properties are bound;
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which PTC-Nevada is a party or by which its properties
are bound and which are material to the operations of PTC-Nevada taken as a
whole are valid and enforceable by PTC-Nevada in all respects, except as
limited by bankruptcy and insolvency laws and by other laws affecting the
rights of creditors generally;
(c) PTC-Nevada is not a party to or bound by, and the properties
of PTC-Nevada 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, or in the future may (as far as PTC-Nevada can now foresee)
materially and adversely affect, the business, operations, properties,
assets, or condition of PTC-Nevada; and
(d) Except as included or described in Schedule 1.10 or reflected
in the most recent PTC-Nevada balance sheet, PTC-Nevada is not a party to
any oral or written (i) contract for the employment of any officer or
employee; (ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit or retirement plan, agreement, or
arrangement covered by Title IV of the Employee Retirement Income Security
Act, as amended; (iii) agreement, contract, or indenture relating to the
borrowing of money; (iv) guaranty of any obligation, other than one on
which PTC-Nevada 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 $1,000 in the aggregate; (vi)
collective bargaining agreement; (vii) agreement with any present or former
officer or director of PTC-Nevada or (viii) contract, agreement, or other
commitment involving payments by it of more than $1,000 in the aggregate.
Section 1.11 MATERIAL CONTRACT DEFAULTS. PTC-Nevada is not in default in
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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 PTC-Nevada and there is no event of default
in any material respect under any such contract, agreement, lease, or other
commitment in respect of which PTC-Nevada has not taken adequate steps to
prevent such a default from occurring.
Section 1.12 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
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Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which PTC-Nevada
is a party or to which any of its properties or operations are subject.
Section 1.13 GOVERNMENTAL AUTHORIZATIONS. PTC-Nevada has all licenses,
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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 PTC-Nevada of this Agreement and the consummation by
PTC-Nevada of the transactions contemplated hereby.
Section 1.14 COMPLIANCE WITH LAWS AND REGULATIONS. PTC-Nevada has
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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 PTC-Nevada or except to the
extent that noncompliance would not result in the incurrence of any material
liability for PTC-Nevada.
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Section 1.15 INSURANCE. All the insurable properties of PTC-Nevada are
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insured in their full replacement value against all risks customarily insured
against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Such policy or policies containing substantially
equivalent coverage will be outstanding on the date of consummation of the
transactions contemplated by this Agreement.
Section 1.16 APPROVAL OF AGREEMENT. The board of directors of PTC-Nevada
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has authorized the execution and delivery of this Agreement and has approved the
transactions contemplated hereby, and approved the submission of this Agreement
and the transactions contemplated hereby to the shareholders of PTC-Nevada for
their approval with the recommendation that the reorganization be accepted.
Section 1.17 MATERIAL TRANSACTIONS OR AFFILIATIONS. Set forth in Schedule
-------------------------------------
1.17 is a description of every material contract, agreement, or arrangement
between PTC-Nevada 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 PTC-Nevada to own beneficially, 5% or more of the issued
and outstanding common stock of PTC-Nevada 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. In all of such transactions, the amount paid or
received, whether in cash, in services, or in kind, is, had been during the full
term thereof, and is required to be during the unexpired portion of the term
thereof, no less favorable to PTC-Nevada than terms available from otherwise
unrelated parties in arm's length transactions. Except as disclosed in Schedule
1.17 or otherwise disclosed herein, no officer, director, or 5% shareholder of
PTC-Nevada has, or has had since inception of PTC-Nevada, any interest, direct
or indirect, in any material transaction with PTC-Nevada. There are no
commitments by PTC-Nevada, whether written or oral, to lend any funds to, borrow
any money from, or enter into any other material transaction with, any such
affiliated person.
Section 1.18 LABOR RELATIONS. PTC-Nevada has not had a work stoppage
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resulting from labor problems. To the knowledge of PTC-Nevada, no union or
other collective bargaining organization is organizing or attempting to organize
any employee of PTC-Nevada.
Section 1.19 PTC-NEVADA SCHEDULES. PTC-Nevada has delivered to PTC-Texas
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as part of this Agreement, the following additional schedules, all certified by
the chief executive officer of PTC-Nevada as complete, true, and correct:
(a) schedule 1.19(a)containing a description of all real property
owned by PTC-Nevada, 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;
(b) schedule 1.19(b) listing the accounts receivable and notes and
other obligations receivable of PTC-Nevadaas of June 30, 2000, or that
arose thereafter other than in the ordinary course of business of
PTC-Nevada, 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 creditor;
(c) schedule 1.19(c) listing the accounts payable and notes and
other obligations payable of PTC-Nevada as of June 30, 2000, or that arose
thereafter other than in the ordinary course of the business of PTC-Nevada,
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 or payable
to PTC-Nevada respecting such obligations;
(d) schedule 1.19(d) containing a copy of the board of directors'
and shareholders' minutes of PTC-Nevada since inception.
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ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE PTC-TEXAS SHAREHOLDERS
As an inducement to, and to obtain reliance of PTC-Nevada, PTC-Texas
Shareholders represent and warrant as follows:
Section 2.01 OWNERSHIP OF PTC-TEXAS SHARES. Each PTC-Texas Shareholder
-------------------------------
hereby represents and warrants with respect to itself that it is the legal and
beneficial owner of the number of PTC-Texas shares set forth opposite its name
at the foot of this agreement, free and clear of any claims, charges, equities,
liens, security interests, and encumbrances whatsoever, and each such
shareholder has full right, power, and authority to transfer, assign, convey,
and deliver its PTC-Texas shares; and delivery of such shares at the closing
will convey to PTC-Nevada good and marketable title to such shares free and
clear of any claims, charges, equities, liens, security interests, and
encumbrances whatsoever.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF PTC-TEXAS AND PTC-TEXAS SHAREHOLDER
As an inducement to, and to obtain the reliance of PTC-Nevada, PTC-Texas
and the PTC-Texas Shareholders represent and warrant as follows:
Section 3.01 ORGANIZATION. PTC-Texas is a corporation duly organized,
------------
validly existing, and in good standing under the laws of the state of Texas.
PTC-Texas 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 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 Schedule 3.01 are complete
and correct copies of the articles of incorporation, as amended, and bylaws of
PTC-Texas as in effect on the date hereof. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not, violate any
provision of these articles of incorporation or bylaws. PTC-Texas has taken all
action required by laws, its articles of incorporation, its bylaws, or otherwise
to authorize the execution and delivery of this Agreement. PTC-Texas has full
power, authority, and legal right and has taken all action required by law, its
articles of incorporation, bylaws, and otherwise to consummate the transactions
herein contemplated.
Section 3.02 CAPITALIZATION. The authorized capitalization of PTC-Texas
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consists of 10,000,000 shares of common stock, no par value per share, of which
2,625,000 shares are currently issued and outstanding. A shareholder list is
set forth in Schedule A-1. All issued and outstanding shares are legally
issued, fully paid, and non-assessable and not issued in violation of the
pre-emptive or other rights of any person. There are no options, warrants,
rights or convertible securities outstanding to purchase any capital stock of
PTC-Nevada.
Section 3.03 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. PTC-Texas does
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not have any subsidiaries and does not own, beneficially or of record, any
shares of any other corporation.
Section 3.04 FINANCIAL STATEMENTS.
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(a) Included in Schedule 3.04 (a) is an unaudited balance sheet of
PTC-Texas at June 30, 2000, together with an unaudited statement of
operations and cash flow for the period from inception (July 2, 1999) to
June 30, 2000.
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(b) All such financial statements have been prepared in accordance
with generally accepted accounting principles. The audited balance sheet
presents fairly as of its date the financial condition of PTC-Texas.
PTC-Texas did not have, as of the date of such balance sheet, except as and
to the extent reflected or reserved against therein, any liabilities or
obligations (absolute or contingent) which should be reflected in a balance
sheet 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 PTC-Texas in
accordance with generally accepted accounting principles. The statements of
income, stockholders' equity, and changes in financial condition reflect
fairly the information required to be set forth therein by generally
accepted accounting principles.
(c) PTC-Texas has filed all state, federal, and local income tax
returns required to be filed by it from inception to the date hereof.
Included in Schedule 3.04(b) are true and correct copies of the federal
income tax returns of PTC-Texas. None of such federal income tax returns
have been examined by the Internal Revenue Service. Each of such income tax
returns reflects the taxes due for the period covered thereby, except for
amounts which, in the aggregate, are immaterial.
(d) PTC-Texas does not owe any unpaid federal, state, county,
local, or other taxes (including any deficiencies, interest, or penalties)
through the date hereof, for which PTC-Texas may be liable in its own right
or as a transferee of the assets of, or as a successor to, any other
corporation or entity. Furthermore, except as accruing in the normal course
of business, PTC-Texas does not owe any accrued and unpaid taxes to date of
this Agreement.
(e) The books and records, financial and otherwise, of PTC-Texas
are in all material respects complete and correct and have been maintained
in accordance with good business and accounting practices.
(f) PTC-Texas has good and marketable title to its assets and,
except as set forth in Schedule 3.04(f) or the financial statements of
PTC-Texas or the notes thereto, has no material contingent liabilities,
direct or indirect, matured or unmatured.
Section 3.05 INFORMATION. The information concerning PTC-Texas set forth
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in this Agreement and in Schedules attached hereto is complete and accurate in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading.
Section 3.06 OPTIONS OR WARRANTS. There are no existing options,
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warrants, calls, or commitments of any character relating to the authorized and
unissued PTC-Texas common stock.
Section 3.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
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this Agreement or Schedule 3.07, since June 30, 2000:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of PTC-Texas; or
(ii) any damage, destruction, or loss to PTC-Texas (whether or not covered
by insurance) materially and adversely affecting the business, operations,
properties, assets, or condition of PTC-Texas;
(b) PTC-Texas has not (i) amended its certificate 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 extraordinary or material considering the business of
PTC-Texas; (iv) made any material change in its method of management,
operation, or accounting; (v) entered into any other material transaction;
(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 employees whose monthly compensation exceeds $5,000; 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;
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(c) PTC-Texas 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 liabilities incurred in the ordinary course
of business; (ii) paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent PTC-Texas balance sheet, and current liabilities incurred since
that date in the ordinary course of business; (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 $10,000), 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 $10,000); (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 PTC-Texas; or (v) issued, delivered, or agreed to issue or
deliver any stock, bonds or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); and
(d) to the best knowledge of the PTC-Texas Shareholders, PTC-Texas
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 PTC-Texas.
Section 3.08 TITLE AND RELATED MATTERS. PTC-Texas has good and marketable
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title to all of its properties, inventory, interests in properties, and assets,
real and personal, which are reflected in the most recent balance sheet or
acquired after that date (except properties, 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; and (c) as described in Schedule 3.08. Except as set forth in
Schedule 3.08, PTC-Texas 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 PTC-Texas's business. Except as set forth in Schedule 3.08, no
third party has any right to, and PTC-Texas 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, tradenames, or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, or finding, would
have a materially adverse affect on the business, operations, financial
condition, income, or business prospects of PTC-Texas or any material portion of
its properties, assets, or rights.
Section 3.09 LITIGATION AND PROCEEDINGS. There are no actions, suits,
----------------------------
proceedings, or investigations pending or, to the knowledge of PTC-Texas or the
PTC-Texas Shareholders after reasonable investigation, threatened by or against
PTC-Texas or affecting PTC-Texas 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. PTC-Texas or the PTC-Texas Shareholders do
not have any 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 of any circumstances
which, after reasonable investigation, would result in the discovery of such a
default.
Section 3.10 CONTRACTS.
---------
(a) Except as included or described in Schedule 3.10, there are no
material contracts, agreements, franchises, license agreements, or other
commitments to which PTC-Texas is a party or by which it or any of its
assets, products, technology, or properties are bound;
8
<PAGE>
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which PTC-Texas is a party or by which its properties
are bound and which are material to the operations of PTC-Texas taken as a
whole are valid and enforceable by PTC-Texas in all respects, except as
limited by bankruptcy and insolvency laws and by other laws affecting the
rights of creditors generally;
(c) PTC-Texas is not a party to or bound by, and the properties of
PTC-Texas 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, or in the future may (as far as PTC-Texas can now foresee)
materially and adversely affect, the business, operations, properties,
assets, or condition of PTC-Texas; and
(d) Except as included or described in Schedule 3.10 or reflected
in the most recent PTC-Texas balance sheet, PTC-Texas 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, agreement, or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii) agreement,
contract, or indenture relating to the borrowing of money; (iv) guaranty of
any obligation, other than one on which PTC-Texas 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
$10,000 in the aggregate; (vi) collective bargaining agreement; (vii)
agreement with any present or former officer or director of PTC-Texas or
(viii) contract, agreement, or other commitment involving payments by it of
more than $10,000 in the aggregate.
Section 3.11 MATERIAL CONTRACT DEFAULTS. PTC-Texas 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 PTC-Texas and there is no event of default
in any material respect under any such contract, agreement, lease, or other
commitment in respect of which PTC-Texas or the PTC-Texas Shareholders have not
taken adequate steps to prevent such a default from occurring.
Section 3.12 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, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which PTC-Texas
is a party or to which any of its properties or operations are subject.
Section 3.13 GOVERNMENTAL AUTHORIZATIONS. PTC-Texas 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 PTC-Texas of this Agreement and the consummation by
PTC-Texas of the transactions contemplated hereby.
Section 3.14 COMPLIANCE WITH LAWS AND REGULATIONS. PTC-Texas 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 PTC-Texas or except to the extent that noncompliance
would not result in the incurrence of any material liability for PTC-Texas.
Section 3.15 INSURANCE. All the insurable properties of PTC-Texas are
---------
insured in their full replacement value against all risks customarily insured
against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Such policy or policies containing substantially
equivalent coverage will be outstanding on the date of consummation of the
transactions contemplated by this Agreement.
9
<PAGE>
Section 3.16 APPROVAL OF AGREEMENT. The board of directors of PTC-Texas
----------------------
has authorized the execution and delivery of this Agreement and has approved the
transactions contemplated hereby.
Section 3.17 MATERIAL TRANSACTIONS OR AFFILIATIONS. Set forth in Schedule
-------------------------------------
3.17 is a description of every material contract, agreement, or arrangement
between PTC-Texas 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 PTC-Texas or PTC-Texas Shareholders to own beneficially, 5%
or more of the issued and outstanding common stock of PTC-Texas 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. In all of such
transactions, the amount paid or received, whether in cash, in services, or in
kind, is, had been during the full term thereof, and is required to be during
the unexpired portion of the term thereof, no less favorable to PTC-Texas than
terms available from otherwise unrelated parties in arm's length transactions.
Except as disclosed in Schedule 3.17 or otherwise disclosed herein, no officer,
director, or 5% shareholder of PTC-Texas has, or has had since inception of
PTC-Texas, any interest, direct or indirect, in any material transaction with
PTC-Texas. There are no commitments by PTC-Texas, whether written or oral, to
lend any funds to, borrow any money from, or enter into any other material
transaction with, any such affiliated person.
Section 3.18 LABOR RELATIONS. PTC-Texas has not had a work stoppage
----------------
resulting from labor problems. To the knowledge of PTC-Texas and PTC-Texas
Shareholders, no union or other collective bargaining organization is organizing
or attempting to organize any employee of PTC-Texas.
Section 3.19 PTC-TEXAS SCHEDULES. PTC-Texas has delivered to PTC-Texas as
-------------------
part of this Agreement, the following additional schedules, all certified by the
chief executive officer of PTC-Texas as complete, true, and correct:
(a) schedule 3.19(a) containing a description of all real property
owned by PTC-Texas, 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;
(b) schedule 3.19(b) listing the accounts receivable and notes and
other obligations receivable of PTC-Texas as of June 30, 2000, or that
arose thereafter other than in the ordinary course of business of
PTC-Texas, 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 creditor;
(c) schedule 3.19(c) listing the accounts payable and notes and
other obligations payable of PTC-Texas as of June 30, 2000, or that arose
thereafter other than in the ordinary course of the business of PTC-Texas,
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 or payable
to PTC-Texas respecting such obligations;
(d) schedule 3.19(d) containing a copy of the board of directors'
and shareholders' minutes of PTC-Texas since inception.
ARTICLE IV
PLAN OF EXCHANGE
Section 4.01 THE EXCHANGE. On the terms and subject to the
-------------
conditions set forth in this Agreement, on the Closing Date (as defined in
Section 4.05), each of the PTC-Texas Shareholders hereby agrees to assign,
transfer, and deliver to PTC-Nevada, 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 PTC-Texas set after his
signature at the foot of this Agreement, in the aggregate constituting all of
the issued and outstanding shares of common stock of PTC-Texas, or 2,625,000
shares, and PTC-Nevada agrees to acquire such shares on such date by issuing and
delivering in exchange therefor solely shares of PTC-Nevada restricted common
stock, par value $0.001, in the amount of one (1) share of PTC-Nevada for each
outstanding share of PTC-Texas, or an aggregate amount of 2,625,000 shares of
PTC-Nevada common stock, or approximately 65.6%of the outstanding shares of
PTC-Nevada common stock to be issued and outstanding, all of which shall be
subject to the provisions of this Agreement (the "Exchanged PTC-Nevada Stock").
10
<PAGE>
At the Closing, each of the PTC-Texas Shareholders shall, on surrender of his
certificate or certificates representing such PTC-Texas shares to the registrar
and transfer agent, be entitled to receive a certificate or certificates
evidencing shares of the Exchanged PTC-Nevada Stock as provided herein. Upon
the consummation of the transaction contemplated herein, all shares of capital
stock of PTC-Texas shall be held by PTC-Nevada.
Section 4.02 RESERVED.
--------
Section 4.03 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"), within the ten-day period commencing with
the last to occur of the following: the PTC-Nevada shareholders' meeting or
such date as may be prescribed by any federal or state regulatory agency or
authority prior to which the transactions contemplated hereby may not be
effectuated. Such Closing shall take place at a mutually agreeable time and
place.
Section 4.06 CLOSING EVENTS. At the Closing, each of the respective
---------------
parties hereto shall execute, acknowledge, and deliver (or shall cause 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.
ARTICLE V
SPECIAL COVENANTS
Section 5.01 STOCKHOLDER MEETING OF PTC-NEVADA. As soon as practicable
-----------------------------------
following the execution of this Agreement, and prior to the Closing, PTC-Nevada
shall call a special meeting of its shareholders to approve the following
proposals:
(a) the authorization and approval of this Agreement and the
transactions contemplated thereby; and
(B) to take such other actions as the directors may determine are
appropriate.
Section 5.02 ACCESS TO PROPERTIES AND RECORDS. PTC-Nevada and PTC-Texas
---------------------------------
will each afford to the officers and authorized representatives of the other
full access to the properties, books, and records of each other as the case may
be, in order that each may have 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 each other, as the case
may be, as the other shall from time to time reasonably request.
Section 5.03 DELIVERY OF BOOKS AND RECORDS. At the Closing, each company
-----------------------------
shall deliver each other the originals of the corporate minute books, books of
account, contracts, records, and all other books or documents now in each
company's possession or its representatives.
Section 5.04 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE EXCHANGED
-------------------------------------------------------------
STOCK. The consummation of this Agreement and the transactions herein
-----
contemplated, including the issuance of the Exchanged PTC-Nevada Stock to the
shareholders of PTC-Texas as contemplated hereby, constitutes the offer and sale
of securities under the Securities Act and applicable state statutes. Such
transaction shall be consummated in reliance on exemptions from the registration
and prospectus delivery requirements of such statutes which depend, inter alia,
upon the circumstances under which the PTC-Texas Shareholders acquire such
securities. In connection with reliance upon exemptions from the registration
and prospectus delivery requirements for such transactions, at the Closing the
PTC-Texas Shareholders shall deliver to PTC-Nevada letters of representation in
the form attached hereto as Schedule 5.04.
11
<PAGE>
Section 5.05 THIRD PARTY CONSENTS AND CERTIFICATES. PTC-Nevada and
-----------------------------------------
PTC-Texas agree to cooperate with each other in order to obtain any required
third party consents to this Agreement and the transactions herein and therein
contemplated.
Section 5.06 ACTIONS PRIOR TO CLOSING.
---------------------------
(a) From and after the date of this Agreement until the Closing
Date and except as set forth in the Agreement or Schedules attached hereto
or as permitted or contemplated by this Agreement, PTC-Nevada and PTC-Texas
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 obligation
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 PTC-Texas nor PTC-Nevada will:
(i) make any change in their articles of incorporation
(except as provided for in Section 5.01) or bylaws;
(ii) take any action described in section 1.07 in the case of
PTC-Nevada , or in section 3.07, in the case of PTC-Texas (all except
as permitted therein or as disclosed in the applicable party's
schedules); or
(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.
Section 5.07 INDEMNIFICATION.
---------------
(a) PTC-Texas and the PTC-Texas Shareholders hereby agree to
indemnify PTC-Nevada and each of the officers, agents and directors of
PTC-Nevada 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 III
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. Indemnification shall include the
right of the indemnified party to set-off with prior notice.
12
<PAGE>
(b) PTC-Nevada hereby agrees to indemnify PTC-Texas and each of
the officers, agents and directors of PTC-Texas 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 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. Indemnification shall include the right of the indemnified
party to set-off with prior notice.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PTC-NEVADA
The obligations of PTC-Nevada under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 6.01 ACCURACY OF REPRESENTATIONS. The representations and
-----------------------------
warranties made by PTC-Texas and the PTC-Texas Shareholders 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), and
PTC-Texas and the PTC-Texas Shareholders shall have performed or complied with
all covenants and conditions required by this Agreement to be performed or
complied with by PTC-Texas and the PTC-Texas Shareholders prior to or at the
Closing. PTC-Texas shall be furnished with a certificate, signed by a duly
authorized officer of PTC-Texas and dated the Closing Date, to the foregoing
effect.
Section 6.02 OFFICER'S CERTIFICATES. PTC-Nevada shall have been furnished
----------------------
with a certificate dated the Closing Date and signed by a duly authorized
officer of PTC-Texas to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of PTC-Texas
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
Section 6.03 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
--------------------------
shall not have occurred any material adverse change in the financial condition,
business, or operations of PTC-Texas nor shall any event have occurred which,
with the lapse of time or the giving of notice, may cause or create any material
adverse change in the financial condition, business, or operations of PTC-Texas.
Section 6.04 GOOD STANDING. PTC-Nevada shall have received a certificate
-------------
of good standing from the Secretary of State of the State of Texas or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that PTC-Texas is in good standing as a corporation in the state of
Texas and has filed all tax returns required to have been filed by it to date
and has paid all taxes reported as due thereon.
Section 6.05 OTHER ITEMS.
------------
(a) PTC-Nevada shall have received uniform commercial code
certificates from the appropriate state of local authority or agency for
each county and state in which any personal property of PTC-Texas with a
value in excess $1,000 is situated, dated as of the Closing Date, to the
effect that there are no liens on such personal property, other than those
disclosed in a Schedule attached hereto.
13
<PAGE>
(b) PTC-Nevada shall have received such further documents,
certificates, or instruments relating to the transactions contemplated
hereby as PTC-Nevada may reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PTC-TEXAS
AND THE PTC-TEXAS SHAREHOLDERS
The obligations of PTC-Texas and the PTC-Texas Shareholders under this
Agreement are subject to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 7.01 ACCURACY OF REPRESENTATIONS. The representations and
-----------------------------
warranties made by PTC-Nevada 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, and PTC-Nevada shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed or complied with by PTC-Nevada prior to or at the
Closing. PTC-Texas shall have been furnished with a certificate, signed by a
duly authorized executive officer of PTC-Nevada and dated the Closing Date, to
the foregoing effect.
Section 7.02 STOCKHOLDER APPROVAL. The stockholders of PTC-Nevada shall
---------------------
have approved this Agreement, the transactions contemplated hereby, and the
other matters described in Section 4.01.
Section 7.03 OFFICER'S CERTIFICATE. PTC-Texas shall have been furnished
----------------------
with a certificate dated the Closing Date and signed by a duly authorized
executive officer of PTC-Nevada to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of PTC-Nevada
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
Section 7.04 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
--------------------------
shall not have occurred any material adverse change in the financial condition,
business, or operations of PTC-Nevada nor shall any event have occurred which,
with the lapse of time or the giving of notice, may cause or create any material
adverse change in the financial condition, business, or operations of
PTC-Nevada.
Section 7.05 GOOD STANDING. PTC-Texas shall have received a certificate
--------------
of good standing from the Secretary of State of the State of Nevada or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that PTC-Nevada is in good standing as a corporation in the State of
Nevada and has filed all tax returns required to have been filed by it to date
and has paid all taxes reported as due thereon.
Section 7.06 OTHER ITEMS.
------------
(a) PTC-Texas shall have received uniform commercial code
certificates from the appropriate state of local authority or agency for
each county and state in which any personal property of PTC-Nevada with a
value in excess $1,000 is situated, dated as of the Closing Date, to the
effect that there are no liens on such personal property, other than those
disclosed in a Schedule attached hereto.
(b) PTC-Texas shall have received a shareholders list of
PTC-Nevada containing the name, address, and number of shares held by each
PTC-Nevada shareholder as of the date of Closing certified by an executive
officer of PTC-Nevada as being true, complete, and accurate.
(c) PTC-Texas shall have received such further documents,
certificates, or instruments relating to the transactions contemplated
hereby as PTC-Texas may reasonably request.
14
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.01 BROKERS. PTC-Nevada and PTC-Texas agree that there were no
-------
finders or brokers involved in bringing the parties together or who were
instrumental in the negotiation, execution, or consummation of this Agreement,
except Capital Solutions, which PTC-Texas has agreed to issue a warrant.
PTC-Texas and PTC-Nevada each agree to indemnify the other against any claim
by any third person other than those described above for any commission,
brokerage, or finders' fee arising from the transactions contemplated hereby
based on any alleged agreement or understanding between the indemnifying party
and such third person, whether express or implied from the actions of the
indemnifying party.
Section 8.02 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 matters of state law, with the laws of
Texas.
Section 8.03 NOTICES. Any notices or other communications required or
-------
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to PTC-Nevada, to: Prepaid Telecom Corporation - NEVADA
5903 Richmond Avenue
Houston, Texas 77057
If to PTC-Texas to: Mr. Patrick Stephenson, President
Prepaid Telecom Corporation - TEXAS
5903 Richmond Avenue
Houston, Texas 77057
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 as of the date so delivered, mailed, or
telegraphed.
Section 8.04 ATTORNEY'S FEES. In the event that any party institutes any
---------------
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the breaching party or parties shall reimburse the
non-breaching party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
Section 8.05 CONFIDENTIALITY. Each party hereto agrees with the other
---------------
parties 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, os 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; and (ii) to the extent that
such data or information must be used or disclosed in order to consummate the
transactions contemplated by this Agreement.
Section 8.06 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 8.07 THIRD PARTY BENEFICIARIES. This contract is solely between
--------------------------
PTC-Nevada and PTC-Texas and the PTC-Texas Shareholders, and, except as
specifically provided, no director, officer, stockholder, employee, agent,
independent contractor, or any other person or entity shall be deemed to be a
third party beneficiary of this Agreement.
15
<PAGE>
Section 8.08 ENTIRE AGREEMENT. This Agreement represents the entire
-----------------
agreement between the parties relating to the subject matter hereof, including
this Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
Section 8.09 SURVIVAL; TERMINATION. The representations, warranties, and
---------------------
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated.
Section 8.10 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 8.11 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 be 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 hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended.
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16
<PAGE>
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.
PREPAID TELECOM CORPORATION, A NEVADA
CORPORATION
By: //s// Patrick Stephenson
----------------------------------
Patrick Stephenson, President
PREPAID TELECOM CORPORATION, A TEXAS
CORPORATION
By: //s// Patrick Stephenson
----------------------------------
Patrick Stephenson, President
PTC-TEXAS SHAREHOLDERS
//s// Patrick Stephenson
-------------------------------------
Patrick Stephenson (2,493,750 Shares)
//s// Frank Neukomm
-------------------------------------
Frank Neukomm (65,625 Shares)
//s// J.T. Williams
-------------------------------------
J.T. Williams (65,625 Shares)
17
<PAGE>
SCHEDULE A-1
NUMBER OF PTC-TEXAS CONVERTED TO NUMBER
PTC-TEXAS SHAREHOLDERS SHARES HELD OF SHARES OF PTC-NEVADA
---------------------- ----------- -----------------------
Patrick Stephenson 2,493,750 2,493,750
Frank Neukomm 65,625 65,625
J.T. Williams 65,625 65,625
18
<PAGE>
LIST OF SCHEDULES
SCHEDULE SCHEDULE DESCRIPTION
--------- --------------------
A-1 PTC-Texas Shareholders
1.01 PTC-Nevada Organization
1.02 PTC-Nevada Capitalization and Shareholder list
1.04(a) PTC-Nevada Financial Statements
1.04(b) PTC-Nevada Income Tax
1.07 PTC-Nevada Absence of Certain Changes or Events
1.08 PTC-Nevada Title and Related Matters
1.10 PTC-Nevada Contracts
1.17 PTC-Nevada Material Transactions or Affiliations
1.19(a) PTC-Nevada Real Property
1.19(b) PTC-Nevada Accounts Receivable
1.19(c) PTC-Nevada Accounts Payable
3.01 PTC-Texas Organization
3.04(a) PTC-Texas Financial Statements
3.04(b) PTC-Texas Income Tax
3.04(f) PTC-Texas Assets
3.07 PTC-Texas Absence of Certain Changes or Events
3.08 PTC-Texas Title and Related Matters
3.10 PTC-Texas Contracts
3.17 PTC-Texas Material Transactions or Affiliations
3.19(a) PTC-Texas Real Property
3.19(b) PTC-Texas Accounts Receivable
3.19(c) PTC-Texas Accounts Payable
5.04 Special Covenants and Representations Regarding the Exchange
Stock
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