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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) APRIL 5, 1995
POWERHOUSE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
COLORADO 0-11546 84-0832977
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
1624 MARKET STREET, SUITE 303, DENVER, COLORADO 80202
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (303) 595-8555
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 5, 1996, Powerhouse Resources, Inc. (the Company) exchanged its
100% ownership of a subsidiary, Crescent Oil & Gas Corporation, for shares of
non-voting, convertible preferred stock of Monument Resources, Inc.
("Monument") of Castle Rock, Colorado. The actual number of shares of
Monument preferred stock the Company receives will vary from 3,000,000 to
4,600,000 depending on certain factors. However, the Preferred Stock
contains no voting rights and therefore Powerhouse does not presently
exercise voting control of the Company.
Under the terms of the Agreement, Monument has agreed to file a
registration statement under the Securities Act of 1933, as amended, covering
the shares of Common Stock issuable (on a one-for-one basis) upon the
conversion of the Preferred Stock to enable Powerhouse to sell such shares of
Common Stock or make a pro rata distribution of such Common Stock to the
shareholders of Powerhouse, which is a publicly held company.
Pursuant to the terms of the Agreement, effective on the closing of the
acquisition, Monument's Board of Directors was expanded to six (6) persons,
and the following persons are now Directors of Monument:
A.G. Foust (1)
Stewart A. Jackson (1)
John J. Womack (1)
Dennis C. Dowd (2)
Hunter G. Swanson (2)
____________________
(1) Continuing Directors of Monument
(2) Designees of Powerhouse.
The sixth director will be selected by the five persons named above.
The foregoing summary of the Agreement is qualified by reference to the
complete text of the Agreement which is filed as Exhibit (2) hereto, and is
incorporated herein by this reference.
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ITEM 6. BOARD OF DIRECTOR CHANGES.
On April 19, 1996, the Board of Directors of Powerhouse Resources, Inc.
accepted the resignations of John Mottram as a member of the Board of
Directors and from his executive position as Financial Director. The Board
of Directors also accepted the resignation of Malcolm Stone from each
executive position of Powerhouse, from the Board of Directors of Powerhouse
Electric Ltd. (a wholly owned subsidiary), and from the Board of Crescent Oil
& Gas Corporation (formerly a wholly owned subsidiary).
On April 19, 1996, the Board of Directors unanimously elected Robert
Roth, Esq. to the Board of Powerhouse.
Dennis C. Dowd was elected as Chief Executive Officer of Powerhouse.
Hunter Swanson was elected as Chief Financial Officer of Powerhouse.
No letters of disagreement within the meaning of Item 6 of Form 8-K have
been filed with Powerhouse by either Mr. Stone or Mr. Mottram.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBIT.
a) Financial Statements required by this Item are not yet available and
will be filed by amendment on or before June 5, 1996.
b) Pro-forma financial information required by Article 11 of Regulation
S-X is not yet available and will be filed by amendment on or before
June 5, 1996.
c) Exhibit -
2 Agreement and Plan of Reorganization among Powerhouse Resources
Inc., Crescent Oil & Gas Corporation and Monument Resources, Inc.
2(a) Addendum to Agreement and Plan of Reorganization dated March 22,
1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POWERHOUSE RESOURCES, INC.
By: /s/ DENNIS C. DOWD
--------------------------------
Dennis C. Dowd, President
Date: April 29, 1996
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AGREEMENT AND PLAN OF REORGANIZATION
by and among
MONUMENT RESOURCES, INC.
a Colorado corporation
and
CRESCENT OIL & GAS CORPORATION
a Delaware corporation
and
POWERHOUSE RESOURCES, INC.
a Colorado corporation
Dated: February 23, 1996
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TABLE OF CONTENTS
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ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
CRESCENT AND POWERHOUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 SUBSIDIARIES AND PREDECESSOR CORPORATIONS . . . . . . . . . . . . 2
Section 1.4 OPTIONS AND WARRANTS. . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5 BINDING OBLIGATION; NO DEFAULT. . . . . . . . . . . . . . . . . . 3
Section 1.6 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. . . . . . . . . . . . . . 3
Section 1.7 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.8 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.9 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.10 NO UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . . . . . . . 4
Section 1.11 ABSENCE OF CERTAIN CHANGES . . . . . . . . . . . . . . . . . . . 4
Section 1.12 PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.13 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.14 TAX RETURNS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.15 TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . . . . . . . 7
Section 1.16 CONTRACTS AND COMMITMENTS . . . . . . . . . . . . . . . . . . . . 8
Section 1.17 COMPLIANCE WITH CONTRACTS: DELIVERY OF
CERTAIN CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1.18 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.19 LABOR DIFFICULTIES. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.20 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1.21 NO CONDEMNATION OR EXPROPRIATION. . . . . . . . . . . . . . . . . 12
Section 1.22 COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.23 ENVIRONMENTAL COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 12
Section 1.24 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.25 ABSENCE OF OUESTIONABLE PAYMENTS. . . . . . . . . . . . . . . . . 15
Section 1.26 PERSONNEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.27 REAL PROPERTY HOLDING CORPORATION . . . . . . . . . . . . . . . . 15
Section 1.28 ACCURACY OF INFORMATION FURNISHED . . . . . . . . . . . . . . . . 15
Section 1.29 REAL PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.30 TITLE AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . 16
Section 1.31 TITLE TO THE EXCHANGED CRESCENT STOCK . . . . . . . . . . . . . . 16
Section 1.32 SECURITIES WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.33 CRESCENT SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . 18
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ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES OF MONUMENT. . . . . . . . . . . . . . . . 18
Section 2.1 ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.2 CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.3 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.4 OPTIONS AND WARRANTS. . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.5 BINDING OBLIGATION; NO DEFAULT. . . . . . . . . . . . . . . . . . 19
Section 2.6 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. . . . . . . . . . . . . . 19
Section 2.7 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.8 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.9 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.10 NO UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . . . . . . . 21
Section 2.11 ABSENCE OF CERTAIN CHANGES. . . . . . . . . . . . . . . . . . . . 21
Section 2.12 PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.13 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.14 TAX RETURNS . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.15 TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . . . . . . . 24
Section 2.16 CONTRACTS AND COMMITMENTS . . . . . . . . . . . . . . . . . . . . 25
Section 2.17 COMPLIANCE WITH CONTRACTS;
DELIVERY OF CERTAIN CONTRACTS . . . . . . . . . . . . . . . . . . 26
Section 2.18 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.19 LABOR DIFFICULTIES. . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.20 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.21 NO CONDEMNATION OR EXPROPRIATION. . . . . . . . . . . . . . . . . 28
Section 2.22 COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.23 ENVIRONMENTAL COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 29
Section 2.24 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.25 PERSONNEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.26 REAL PROPERTY HOLDING CORPORATION . . . . . . . . . . . . . . . . 30
Section 2.27 ACCURACY OF INFORMATION FURNISHED . . . . . . . . . . . . . . . . 30
Section 2.28 REAL PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.29 TITLE AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . 31
Section 2.30 TITLE TO THE EXCHANGED MONUMENT STOCK . . . . . . . . . . . . . . 31
Section 2.31 COMPLIANCE WITH EXCHANGE ACT. . . . . . . . . . . . . . . . . . . 32
Section 2.32 MONUMENT SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . 32
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ARTICLE III
PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.1 PLAN OF REORGANIZATION. . . . . . . . . . . . . . . . . . . . . . 32
Section 3.2 SHARE EXCHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.3 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.4 CLOSING EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.5 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.6 DIRECTORS OF MONUMENT AND CRESCENT. . . . . . . . . . . . . . . . 35
ARTICLE IV
SPECIAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.1 ACCESS TO PROPERTIES AND RECORDS. . . . . . . . . . . . . . . . . 35
Section 4.2 AVAILABILITY OF RULE 144. . . . . . . . . . . . . . . . . . . . . 35
Section 4.3 INFORMATION FOR MONUMENT REGISTRATION STATEMENT
AND PUBLIC REPORTS. . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.4 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING
THE EXCHANGED MONUMENT STOCK. . . . . . . . . . . . . . . . . . . 36
Section 4.5 THIRD PARTY CONSENTS. . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.6 ACTIONS PRIOR TO CLOSING. . . . . . . . . . . . . . . . . . . . . 36
Section 4.7 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.8 INTENT AND BINDING EFFECT . . . . . . . . . . . . . . . . . . . . 38
Section 4.9 MONUMENT RECAPITALIZATION . . . . . . . . . . . . . . . . . . . . 39
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF MONUMENT. . . . . . . . . . . . . . . . . . . 39
Section 5.1 ACCURACY OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 39
Section 5.2 OFFICER'S CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.3 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . 39
Section 5.4 OTHER ITEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.5 LOAN REPAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.6 ALLAN ARNOLD CONTRACT . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF CRESCENT. . . . . . . . . . . . . . . . . . . 40
Section 6.1 ACCURACY OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 40
Section 6.2 OFFICER'S CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.3 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . 41
Section 6.4 OTHER ITEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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ARTICLE VII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.1 BROKERS AND FINDERS . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.2 DENVER REGISTERED OFFICE. . . . . . . . . . . . . . . . . . . . . 41
Section 7.3 REGISTRATION COSTS. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.4 LAW, FORUM AND JURISDICTION . . . . . . . . . . . . . . . . . . . 42
Section 7.5 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.6 ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.7 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.8 SCHEDULES; KNOWLEDGE. . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.9 THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . 43
Section 7.10 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.11 SURVIVAL; TERMINATION . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.12 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.13 AMENDMENT OR WAIVER . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.14 INCORPORATION OF RECITALS . . . . . . . . . . . . . . . . . . . . 44
Section 7.15 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.16 HEADINGS; CONTEXT . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.17 BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.18 PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.19 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.20 FAILURE OF CONDITIONS; TERMINATION. . . . . . . . . . . . . . . . 45
Section 7.21 NO STRICT CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . 45
Section 7.22 EXECUTION KNOWING AND VOLUNTARY . . . . . . . . . . . . . . . . . 45
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (hereinafter referred to as
the "Agreement"), is entered into as of February 23, 1996, by and among
Monument Resources, Inc. ("Monument"), a Colorado corporation, Crescent Oil &
Gas Corporation ("Crescent"), a Delaware corporation and Powerhouse
Resources, Inc. ("Powerhouse"), a Colorado corporation.
PREMISES
A. This Agreement provides for the reorganization of corporate
operations of Monument and Crescent pursuant to the terms set forth in this
Agreement.
B. As part of this Agreement, Monument shall issue and exchange
1,000 shares (the "Exchanged Monument Stock") of the non-voting convertible
preferred stock, no par value, of Monument (the "Monument Common Stock") to
Powerhouse immediately prior to the closing of the transactions contemplated
by this Agreement, in exchange for 100 shares (the "Exchanged Crescent
Stock") of the common stock, $0.01 par value, of Crescent (the "Crescent
Common Stock") which constitutes 100% of the issued and outstanding common
stock of Crescent, subject to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived here from, it is hereby agreed as
follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
CRESCENT AND POWERHOUSE
As an inducement to, and to obtain the reliance of Monument, Crescent
represents and warrants, and with respect to Sections 1.31(b) and 1.32,
Powerhouse represents and warrants, as follows:
Section 1.1 ORGANIZATION. Crescent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the
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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, except where the failure to
so qualify would not have a material adverse effect upon the assets,
business, properties or operations of Crescent. Included in the Crescent
Schedules (as hereinafter defined) are complete and correct copies of the
articles of incorporation and bylaws of Crescent 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 Crescent's articles
of incorporation or bylaws. Crescent has taken all action required by law,
its articles of incorporation, its bylaws or otherwise to authorize the
execution and delivery of this Agreement. Crescent 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 1.2 CAPITALIZATION. The authorized capitalization of Crescent
consists of 200,000,000 shares of common stock, $0.01 par value (the
"Crescent Common Stock"). As of the Closing Date, there are 100 shares of
Crescent Common Stock issued and outstanding. All issued and outstanding
shares are legally issued, fully paid and nonassessable, and are not issued
in violation of the preemptive or other rights of any person.
Section 1.3 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. Except as set
forth on Schedule 1.3, Crescent does not have any subsidiaries and does not
own, beneficially or of record, any shares of any other corporation.
Section 1.4 OPTIONS AND WARRANTS. There are no outstanding (a)
securities convertible into or exchangeable for any of Crescent's capital
stock; or (b) options, warrants, calls or other rights (including rights to
demand registration or to sell in connection with any registration by
Crescent under the Securities Act of 1933, as amended (the "Securities Act")
to purchase or subscribe to capital stock of Crescent or securities
convertible into or exchangeable for capital stock of Crescent. Crescent is
not a party to any voting trust agreement or other contract, agreement,
arrangement, commitment, plan or understanding restricting or otherwise
relating to voting or dividend rights with respect to the Crescent Common
Stock.
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Section 1.5 BINDING OBLIGATION; NO DEFAULT. Crescent has duly taken
all action necessary to authorize the execution, delivery and performance of
this Agreement and the other instruments and agreements contemplated hereby.
Such execution, delivery and performance does not and will not, to the best
of Crescent's knowledge, constitute a default under or a violation of any
agreement, order, award, judgment, decree, statute, law, rule, regulation or
any other instrument to which Crescent is a party or by which Crescent or the
property of Crescent may be bound or may be subject. This Agreement
constitutes the legal, valid and binding obligation of Crescent, enforceable
against Crescent in accordance with its terms.
Section 1.6 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the
execution and delivery of this Agreement by Crescent nor compliance by
Crescent with the terms and conditions of this Agreement will: (a) require
Crescent to obtain the consent of any governmental agency; (b) constitute a
material default under any indenture, mortgage or deed of trust to which each
of Crescent is a party or by which Crescent or its properties may be subject;
(c) cause the creation or imposition of any lien, charge or encumbrance on
any of its assets; or (d) breach any statute or regulation of any
governmental authority, domestic or foreign, or will on the Closing Date
conflict with or result in a breach or any of the terms or conditions of any
judgment, order, injunction, decree or ruling of any court or governmental
authority, domestic or foreign, to which Crescent is subject.
Section 1.7 CONSENTS. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority or any third party is required to be made or obtained by Crescent
in connection with the execution, delivery and performance of this Agreement
and the transactions contemplated hereby.
Section 1.8 BOOKS AND RECORDS. The books of account and other
financial records of Crescent are complete and correct in all material
aspects. The minute books of Crescent, as previously made available to
Monument and its legal counsel, contain records of all meetings and
accurately reflect all other material corporate action of the stockholders,
directors and any committees of the Board of Directors of Crescent.
Section 1.9 FINANCIAL STATEMENTS. At the closing, Crescent shall
deliver to Monument true and correct copies of the audited financial
statements of Com-Tek Resources, Inc. which includes the audited accounts of
Crescent as of September 30, 1993, 1994 and for the periods then ended. The
unaudited financial statements of Crescent and/or Powerhouse as of September
30, 1995 and for the period then ended shall fairly present the financial
position of Crescent at September 30, 1995, and the results of the
operations and the changes in cash flows for the years covered by the
financial statements and shall be prepared in accordance with generally
accepted accounting principles ("GAAP"). Crescent shall also furnish
unaudited financial
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statements for the interim period ended December 31, 1995 (the "Financial
Statements").
Section 1.10 NO UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 1.10 hereto, Crescent does not have any material liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) which
were not adequately reflected or reserved against on Crescent's Financial
Statements, except for liabilities and obligations incurred since the date
thereof in the ordinary course of Crescent business and consistent with past
practice and which, in any event, in the aggregate, would not have a Material
Adverse Effect (as defined hereinafter).
Section 1.11 ABSENCE OF CERTAIN CHANGES. Except as and to the
extent set forth on Schedule 1.11 hereto or except as otherwise expressly
contemplated hereby, since the date of the Crescent Financial Statements,
Crescent has not:
(a) Suffered any material adverse change in its financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
or reserves, and no event has occurred and no action has been taken by
Crescent or, to the best knowledge of Crescent, any other person, nor is any
such event or action contemplated or, to the best knowledge of Crescent,
threatened, which might reasonably be expected to have a material adverse
effect on the assets or the operations or condition (financial or otherwise)
of Crescent's business ("Material Adverse Effect"), except that no
representation or warranty is made as to general economic conditions or
matters affecting Crescent's industry generally;
(b) Suffered any material adverse change in its business,
operations or prospects;
(c) Experienced any shortage of raw materials or supplies;
(d) Incurred any short-term or long-term liabilities or
obligations (absolute, accrued, contingent or otherwise) except items
incurred in the ordinary course of business and consistent with past
practice, none of such short-term or long-term liabilities or obligations
exceeds $2,500 individually, or $5,000 in the aggregate, (counting
obligations or liabilities arising from one transaction or a series of
similar transactions, and all periodic installments or payments under any
lease or other agreement providing for periodic installments or payments, as
a single obligation or liability), or increased or changed any assumptions
underlying or method of calculating, any bad debt, contingency or other
reserves;
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(e) Paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities and obligations reflected or
reserved against in the Crescent Financial Statements or incurred in the
ordinary course of business and consistent with past practice since the date
of the Crescent Financial Statements;
(f) Permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any
kind;
(g) Written down the value of any inventory or properties in
excess of $2,500 or written down or written off as uncollectible any notes or
accounts receivable in excess of $2,500;
(h) Canceled any debts or waived any claims or rights in
excess of $2,500;
(i) Sold, transferred or otherwise disposed of any of its
properties or assets in excess of $2,500 (real, personal or mixed, tangible
or intangible);
(j) Disposed of or permitted to lapse any rights to the use of
any Patent or Trade Name necessary to permit Crescent to conduct its business
or develop its products, or disposed of or disclosed to any person, other
than representatives of Monument, any Proprietary Information or Technical
Information not theretofore a matter of public knowledge necessary to permit
Crescent to conduct its business or develop its products;
(k) Granted any general increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit sharing or other plan or commitment) other than in the
ordinary course of business and consistent with past practice, or any
increase in the compensation (including, without limitation, salary and
bonus) payable or to become payable to any officer or key employee;
(l) Made any single capital expenditure or commitment in
excess of $2,500 for additions to property, plant, equipment or intangible
capital assets or made aggregate capital expenditures and commitments in
excess of $2,500 for additions to property, plant, equipment or intangible
capital assets;
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(m) Declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock or redeemed, purchased or
otherwise acquired, directly or indirectly, any shares of capital stock or
other securities of Crescent;
(n) Made any change in any method of accounting or accounting
practice;
(o) Paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement
with, any "Affiliate" or "Associate" of Crescent as such terms are defined in
Rule 405 promulgated by the Commission under the Securities Act, or any
officer, director or shareholder of Crescent (collectively, "Affiliates" or
individually, an "Affiliate");
(p) Made any gifts, or sold, transferred or exchanged any
property of any material value for less than the fair value thereof;
(q) Suffered any material casualty loss or damage (whether or
not covered by insurance); or
(r) Agreed, whether in writing or otherwise, to take any
action described in this Section 1.11.
Section 1.12 PLANT AND EQUIPMENT. The material plants, buildings,
fixtures, structures and equipment owned, leased or used by Crescent are in
good operating condition and repair, ordinary wear and tear excepted, are
adequate for the uses to which they are being put. Included in Schedule 1.12
hereto is an accurate and complete list of all of the fixed assets of
Crescent with a value in excess of $1,000.
Section 1.13 LEASES. Schedule 1.13 hereto is an accurate and
complete list of all leases pursuant to which Crescent leases real or any
material item of personal property. A true and correct copy of each such
lease has been delivered to Monument, and no changes have been made thereto
since the date of delivery. Except as set forth in Schedule 1.13 hereto,
each such lease is valid and in full force and effect, there are no existing
material defaults by Crescent thereunder, and, to the best knowledge of
Crescent, no event has occurred which (with notice, lapse of time or both)
would constitute a default thereunder by any party. Except as set forth on
Schedule 1.13 hereto, Crescent is presently in compliance in all material
respects with all laws, rules, regulations and ordinances relating to zoning
and land use restrictions which are applicable to any portion of the land
subject to the real property leases set forth in Schedule 1.13
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hereto. Except as set forth on Schedule 1.13 hereto, no consent is required
from the lessor under any lease of real or personal property listed on
Schedule 1.13 prior to the consummation of the transactions contemplated
hereby.
Section 1.14 TAX RETURNS. Schedule 1.14 hereto are true and
correct copies of Crescent's Tax Returns and Statements (as defined herein).
Except as set forth in Crescent's Tax Returns and Statements, Crescent has
(i) filed or has caused to be filed all federal, state and local and all
material foreign, territorial, franchise, income, sales, gross receipts and
all other tax returns and statements required to be filed by Crescent or on
its behalf and which were due prior to the date of this Agreement (the "Tax
Returns and Statements"), (ii) paid within the time and in the manner
prescribed by law all Taxes (as defined below), due for all periods ending on
or prior to the date of this Agreement, except with respect to Taxes which
are immaterial in amount and the failure to so pay or file would not result
in material penalties and would not have a Material Adverse Effect, and (iii)
established adequate reserves for the payment of all unpaid Taxes as of the
date of the Crescent Financial Statements. The Tax Returns and Statements are
true, complete and accurate, in all material respects. Since September 30,
1994, no tax assessment or deficiency has been made against Crescent nor has
any notice been given of any actual or proposed assessment or deficiency
which has not been paid or for which an adequate reserve has not been set
aside. Except as set forth in such Tax Returns and Statements, the Tax
Returns and Statements are not presently, nor have they since Crescent's
inception been, the subject of any audit or other administrative or court
proceeding by any federal, territorial, state, local or foreign governmental
agency. Crescent has not received any notice that any of the Tax Returns and
Statements is now being or will be examined or audited, and no consents
extending any applicable statute of limitations have been filed. The Tax
Returns referenced to above are those of Powerhouse in which Crescent has
been consolidated.
For purposes of this Agreement, "Taxes" shall mean any and all taxes,
payroll and employment related taxes, levies, assessments, charges or other
fees, together with any interest, penalties or other additions, imposed by
any governmental authority upon Crescent.
Section 1.15 TRANSACTIONS WITH AFFILIATES. Except as set forth on
Schedule 1.15 hereto, no Affiliate of Crescent has any interest, directly or
indirectly, in any lease, lien, contract, license, encumbrance, loan or other
agreement to which Crescent is a party, or any interest in any competitor,
supplier or customer of Crescent. Except as set forth item by item on
Schedule 1.15 hereto, Crescent is not indebted, directly or indirectly, to
any Affiliate of Crescent, for any liability or obligation, whether arising
by reason of stock ownership, contract, oral or written agreement or
otherwise. No Affiliate is
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indebted, directly or indirectly, to Crescent. Schedule 1.15 is a complete
and accurate list of all employees of Crescent owing more than $5,000 in
principal plus accrued interest, to Crescent, other than travel or other
employee advances (not exceeding $1,000 to any one person) in the ordinary
course of business, setting forth the amounts owed, the applicable interest
rates, a description of the security and the maturity dates of all such debts.
Except as set forth on Schedule 1.15 hereto, no Affiliate (i) is a
party to any contract or arrangement with Crescent pursuant to which it
directly provides material services to Crescent, or (ii) is a party to any
contract or arrangement with a third party, to which Crescent is not a party,
but under which Crescent receives any material amount of goods or services
from said third party. Except as set forth on Schedule 1.15 hereto, all
goods and services provided to Crescent by any of its Affiliates and all
goods and services provided to any of its Affiliates by Crescent, at any time
since Crescent's inception have been charged to the recipient at a price that
would have been acceptable to an unrelated third party receiving such goods
and services in an arm's-length transaction with the provider.
Section 1.16 CONTRACTS AND COMMITMENTS. Except as set forth on
Schedule 1.16:
(a) Crescent has not entered into any outstanding agreements,
contracts or commitments or restrictions which, individually or in the
aggregate, are material to its business, operations or prospects, or which
require the making of any charitable contribution:
(b) No purchase contracts or commitments of Crescent continue
for a period of more than 30 days or are in excess of the normal, ordinary
and usual requirements of its business or, to the best knowledge of Crescent,
at any excessive price;
(c) Crescent has not entered into any contracts or commitments
pursuant to which Crescent is, as of the date hereof, required to obtain or
maintain, on behalf of itself or any of its directors, officers or employees,
any facility or personnel security clearances from the U.S. Department of
Defense or any other agency of the U.S. Government;
(d) There are no outstanding sales contracts, purchase orders,
commitments or proposals of Crescent which continue for a period of more than
30 days or will likely result in any loss to Crescent upon completion or
performance thereof;
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(e) Crescent has not entered into any outstanding contracts
with officers, employees, agents, consultants, advisors, salesmen, sales
representatives or suppliers that are not cancelable by it on notice of not
longer than 30 days and without liability, penalty or premium, or any
agreement or arrangements providing for the payment of any bonus or
commission based on sales or earnings;
(f) Crescent has not entered into any outstanding employment
agreement, or any other outstanding agreement that contains any severance or
termination pay liabilities or obligations;
(g) Crescent is not a party to any collective bargaining
agreement or other contract or agreement with any labor organization:
(h) Crescent is not restricted by agreement from carrying on
its business anywhere in the world;
(i) Crescent has not incurred any outstanding debt obligation
for borrowed money, including guarantees of or agreements to acquire any such
debt obligation of others other than as reflected on the Crescent Financial
Statements;
(j) Crescent is not a party to any contract, subcontract or
agreement with the U.S. Government or any agency or instrumentality thereof,
or with any territorial or state government or any agency or instrumentality
thereof; and
(k) Crescent has not entered into any outstanding loan with or
to any person other than (i) Monument Resources, Inc., (ii) as reflected on
the Crescent Financial Statements, and (iii) for amounts not more than $2,500
to any individual and $5,000 in the aggregate.
Section 1.17 COMPLIANCE WITH CONTRACTS: DELIVERY OF CERTAIN
CONTRACTS. Crescent is not in default under any material contract,
commitment, obligation or agreement, including, without limitation, those
listed in Schedules 1.13, 1.16 and 1.28 hereto, except for those which would
not have a Material Adverse Effect, and no act or omission by Crescent has
occurred which, with notice or lapse of time or both, would constitute such a
default under any term or provision of any such contract or agreement. To
the best knowledge of Crescent, each of the agreements referred to in
Schedules 1.13, 1.16 and 1.28 hereto is valid and in full force and effect.
To the best knowledge of Crescent, no party is in default under any agreement
referred to in Schedules 1.13, 1.16 and 1.28 hereto, and to the best
knowledge of Crescent, no act or omission has occurred by any party which,
with notice or lapse of time or both, would constitute such a default
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under any term or provision thereof. Crescent has previously delivered to
Monument a true and correct copy of each agreement, contract, commitment or
restriction listed on Schedules 1.13, 1.16 and 1.28 hereto, including all
amendments and modifications thereof.
Section 1.18 INSURANCE. Schedule 1.18 contains an accurate and
true description of all existing policies of fire, liability, worker's
compensation and all other forms of insurance owned or held by, or covering
the business, properties or assets of, Crescent. All such policies are in
full force and effect, all premiums with respect thereto covering all periods
up to and including the date hereof have been paid, and no notice of
cancellation or termination has been received by Crescent with respect to any
such policy. Such policies will remain in full force and effect through the
respective dates set forth on Schedule 1.18 without additional premiums being
paid or properly accrued as an additional liability. Schedule 1.18 also (i)
describes all products liability claims made since Crescent's inception, and
all other claims (except medical and dental) pending or made since Crescent's
inception under such insurance policies, and (ii) identifies all types of
insurable risks which Crescent and its Board of Directors has designated as
being self insured. Except as set forth in Schedule 1.18, Crescent has not
been turned down at any time since Crescent's inception for any insurance
with respect to its assets or operations, nor has its coverage been limited
by any insurance carrier to which it has applied for any such insurance or
with which it has carried insurance during the last three years.
Section 1.19 LABOR DIFFICULTIES. Except to the extent set forth
in Schedule 1.19:
(a) To the best knowledge of Crescent, no employee of Crescent
is in violation of, or has threatened any violation of, any material term of
any employment contract or any other contract or agreement relating to the
relationship of such employee with Crescent or any other party, including any
employee handbook and/or personnel policy manual of Crescent except for
violations which would not, individually or in the aggregate, have Material
Adverse Effect;
(b) Crescent has complied in all material respects with each
and every term, provision, section and part of any written employment
contract or agreement, including any employee handbook and/or personnel
policy manual, that Crescent has or has had with any individual who has
performed work for Crescent;
(c) There is no unfair labor practice charge or similar
charge, complaint, allegation or other process or claim pending or, to the
best knowledge of Crescent, threatened against Crescent before the National
Labor Relations Board (the
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"NLRB") or any other federal, territorial, state or local governmental agency
or other entity;
(d) There is not pending or, to the best knowledge of
Crescent, threatened against Crescent any complaint, charge, allegation or
other process or claim whatsoever, other than those which would not,
individually or in the aggregate, have a Material Adverse Effect, (i)
alleging any violation of the Occupational Safety and Health Act or any other
federal, territorial, state or local law governing health and/or safety in
the workplace; (ii) seeking compensation, benefits and/or penalties pursuant
to any Workers' Compensation Act or similar law; (iii) seeking any
compensation or benefits pursuant to any Unemployment Insurance Act or
similar law; (iv) alleging any violation of the Immigration Reform and
Control Act of 1986 or any similar law; (v) alleging any violation of the
Fair Labor Standards Act or any other federal, territorial, state or local
law governing wage and/or hour issues; (vi) alleging any violation of any
federal, territorial, state or local child labor law; and/or (vii) alleging
any other federal, territorial, state or local law relating to or governing
employment or labor matters.
Section 1.20 LITIGATION. Except as set forth in Schedule 1.20
hereto:
(a) There is no pending or, to the best knowledge of Crescent,
threatened complaint, charge, claim, action, suit or arbitration proceeding
before any federal, territorial, state, municipal, foreign or other court or
governmental or administrative body or agency, or any private arbitration
tribunal or any investigation or inquiry before any federal, territorial,
state, municipal, foreign or other court or governmental or administrative
body or agency against, relating to or affecting (i) Crescent or any
director, officer, agent or employee thereof in his or her capacity as such,
(ii) the assets, properties or business of Crescent, or (iii) the
transactions contemplated by this Agreement, nor, to the best knowledge of
Crescent, is there any basis for any such complaint, charge, claim, action,
suit, arbitration proceeding, investigation or inquiry which could have an
adverse effect on the assets, property, business or prospects of Crescent;
(b) There is not in effect any order, judgment or decree of
any court or governmental or administrative body or agency enjoining,
barring, suspending, prohibiting or otherwise limiting Crescent or, to the
best knowledge of Crescent, any officer, director, employee or agent thereof
from conducting or engaging in any aspect of the business of Crescent, or
requiring Crescent or, to the best knowledge of Crescent, any officer,
director, employee or agent thereof to take certain action with respect to
any aspect of the business of Crescent which could reasonably be anticipated
to have a Material Adverse Effect; and
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(c) Crescent is not in violation of or default under any
applicable order, judgment, writ, injunction or decree of any federal,
territorial, state, municipal, foreign or other court or regulatory authority.
Section 1.21 NO CONDEMNATION OR EXPROPRIATION. Neither the whole
nor any portion of the leaseholds or any other assets of Crescent is subject
to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without
payment of compensation therefor, nor, to the best knowledge of Crescent, has
any such condemnation, expropriation or taking been proposed.
Section 1.22 COMPLIANCE WITH LAW. The operations of Crescent have
been conducted in accordance with all applicable laws, regulations and other
requirements of all national governmental authorities, and of all
territories, states, municipalities and other political subdivisions and
agencies thereof having jurisdiction over Crescent, including, without
limitation, all such laws, regulations, ordinances and requirements relating
to environmental, antitrust, consumer protection, labor and employment,
zoning and land use, currency exchange, immigration, health, occupational
safety, pension, securities, defense procurement and trading with the enemy
matters, except as disclosed in Schedule 1.22 hereto and except for
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Except as set forth in Schedule 1.22, Crescent has not
received any notification since its inception of any asserted present or past
failure by Crescent to comply with such laws, regulations, ordinances or
requirements. Crescent has all permits, authorizations and consents necessary
for the operation of its business except for those which the failure to have
would not, individually or in the aggregate, have a Material Adverse Effect.
Section 1.23 ENVIRONMENTAL COMPLIANCE.
A. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
(a) "PREMISES" means any oil and gas property or facility
Crescent owns, operates or leases which relate to the business of Crescent or
which constitute any of the Crescent Assets;
(b) "HAZARDOUS SUBSTANCE" means, at any time, any substance,
material, chemical or waste the presence of which requires investigation or
remediation under, or which is or becomes regulated by, any federal, state or
local governmental authority due to its properties of being toxic, hazardous,
explosive, corrosive, flammable,
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infectious, radioactive, carcinogenic, or mutagenic, including, without
limitation, any material, waste, chemical or substance which is: (i) defined
as a "hazardous," "extremely hazardous" or "restricted hazardous" waste,
material or substance under the laws of the governmental jurisdiction where
the Premises are located and/or to which the Premises are subject; (ii)
petroleum or a petroleum product, including, without limitation, gasoline and
diesel fuel; (iii) asbestos or asbestos containing; (iv) polychlorinated
biphenyl; (v) designated as a "hazardous substance" pursuant to Section 311
of the Clean Water Act, 33 U.S.C. Section 1251 ET SEQ. (33 U.S.C. Section
1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C.
Section 1317); (vi) defined as a "hazardous waste" pursuant to Section 1004
of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ.
(42 U.S.C. Section 6903); or (vii) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 ET SEQ. ("CERCLA")
(42 U.S.C. Section 9601);
(c) "HAZARDOUS MATERIALS LAW" means any national, territorial,
state, province or local statute, ordinance, order, rule or regulation of any
type, relating to pollution or the protection of worker safety, public
safety, human health, natural resources, or the environment, including laws,
statutes, ordinances, rules or regulations relating to the emission,
discharge, release or threatened release, of pollutants, contaminants or
Hazardous Substances into ambient air, surface water, ground water or land,
or remediation or removal thereof, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or Hazardous Substances, including
without limitation those statutes and regulations referred to in Subparagraph
(b) above, the Occupational Health and Safety Act (29 U.S.C. Section 651 et
seq.); and
(d) "LOSS" means any and all of the following, whether the
result of any action of any governmental agency or a third party:
liabilities; penalties; forfeitures; suits; losses; damages; expenses; debts;
obligations; claims; fines or civil liability for violation of any Hazardous
Materials Law; costs (including the costs of investigation, defense,
settlement and attorneys' and other professional fees whether or not
litigation is instituted); or, costs and capital expenditures required for
compliance with Hazardous Materials Law.
B. Except as disclosed in Schedule 1.23 hereto:
(a) Crescent has obtained, and is in full compliance with, all
material permits, licenses or other authorizations which are required under
any Hazardous Materials Law for the operations of the business of Crescent;
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(b) Crescent is not aware of any material past, present or
future events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with, or prevent continued compliance by
Crescent with, any Hazardous Materials Law, or which may give rise to Loss to
Crescent based on or related to any Hazardous Materials Law;
(c) Crescent has not entered into any agreement with any
governmental authority or agency, or with any private entity, including, but
not limited to, any prior owners of Premises, relating in any way to
violation of any Hazardous Materials Law, or to the presence, release, threat
of release, disposal, placement on, under or about any Premises of Hazardous
Substances;
(d) Crescent has not discovered or caused, and to the best of
Crescent's knowledge, no other person has discovered or caused, any
discharge, emission, disposal or release of Hazardous Substances on the
Premises, on property formerly owned, operated or leased by Crescent or on
the property of any third party;
(e) Crescent has not discovered, and to the best of Crescent's
knowledge, no other person has discovered, any occurrence or condition on the
Premises or on any real property in the vicinity of the Premises, which could
cause the Premises to be subject to any restrictions on the ownership,
occupancy, transferability or use under any Hazardous Materials Law;
(f) Crescent has not manufactured, stored or disposed of
Hazardous Substances at any location, including, without limitation, any
disposal which was in compliance with any Hazardous Materials Law;
(g) Crescent does not use or maintain any underground storage
tanks or surface impoundments on the Premises and, to the best knowledge of
Crescent, no underground storage tanks or surface impoundments are now, or
ever have been, located on the Premises; and
(h) Crescent has not received notice of any lien in favor of
any governmental authority for (i) any liability under any Hazardous
Materials Law, or (ii) damages arising from or costs incurred by such
governmental authority in response to a release of Hazardous Substances into
the environment, nor has any such lien ever been filed or attached to the
Premises.
Section 1.24 EMPLOYEE BENEFITS. Except for the plans, agreements,
arrangements and practices set forth in Schedule 1.24 hereto (collectively,
the "Employment Plans"),
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neither Crescent nor any Affiliate maintains or contributes to, or is
obligated or required to contribute to, any bonus, deferred compensation,
severance or termination pay, pension, profit sharing, stock purchase, stock
grant, stock option, group life insurance, health care, hospitalization
insurance, disability, retirement or any other employee benefit or fringe
benefit plan, agreement, arrangement or practice, whether formal or informal
and whether legally binding or not, which covers employees of Crescent.
Neither Crescent nor any Affiliate has any commitment, whether formal or
informal and whether legally binding or not, to create or contribute to any
additional such plan.
Section 1.25 ABSENCE OF QUESTIONABLE PAYMENTS. Neither Crescent
nor, to the best knowledge of Crescent, any of its directors, officers,
agents, employees or other persons acting on its behalf or for its benefit
has used any corporate or other funds for unlawful contributions, payments,
gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds for such purpose. Neither
Crescent nor, to the best knowledge of Crescent, any of its directors,
officers, agents, employees or other persons acting on its behalf or for its
benefit has accepted or received any unlawful contributions, payments, gifts,
or expenditures.
Section 1.26 PERSONNEL. Schedule 1.26 hereto is a true and
complete list of the wage rates for all non-salaried and salaried employees
of Crescent by classification.
Section 1.27 REAL PROPERTY HOLDING CORPORATION. Crescent is not a
U.S. Real Property Holding Corporation within the meaning of Section
897(c)(2) of the Code.
Section 1.28 ACCURACY OF INFORMATION FURNISHED. No representation
or warranty by Crescent contained in this Agreement or in respect of the
exhibits, schedules or documents delivered to Monument by Crescent and
expressly referred to herein, and no statement contained in any certificate
furnished or to be furnished by or on behalf of Crescent pursuant hereto, or
in connection with the transactions contemplated hereby, contains, or will
contain as of the date such representation or warranty is made or such
certificate is or will be furnished, and as of the Closing Date, any untrue
statement of a material fact, or omits, or will omit to state as of the date
such representation or warranty is made or such certificate is or will be
furnished, any material fact which is necessary to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading. True and correct copies of each agreement and
other document referred to in the schedules hereto have been furnished by
Crescent to Monument.
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Section 1.29 REAL PROPERTIES. Schedule 1.29 hereto is an accurate
and complete list of all real property owned by Crescent, 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.
Section 1.30 TITLE AND RELATED MATTERS. Crescent has good and
marketable title to and is the sole and exclusive owner of all of its
material properties, inventory, interests in properties and assets, real and
personal, Patents, copyrights, trademarks, service marks and Trade Names
(collectively, the "Crescent Assets") which are reflected in the most recent
Crescent balance sheet and the Crescent Schedules 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 the Crescent Schedules.
Section 1.31 TITLE TO THE EXCHANGED CRESCENT STOCK. (a) Upon delivery
to Monument of the certificates described in Section 3.2 of this Agreement,
Monument will receive good and marketable title to the Exchanged Crescent
Stock, which shall constitute one hundred percent (100%) of the issued and
outstanding capital stock of Crescent, all of such the Exchanged Crescent
Stock shall be received by Monument as validly issued, fully paid and
nonassessable, free and clear of all pledges, liens, encumbrances, security
interests, equities, options, claims, charges, limitations on voting rights
or rights to receive dividends, or other restrictions of any kind (other than
any generally imposed by federal, corporate or territorial securities laws or
as otherwise provided for in this Agreement). (b) From the date of this
Agreement through the Closing Date, each of the Powerhouse Stockholders
agrees that it will not sell, transfer hypothecate, pledge, assign, suffer
any lien to be incurred with respect to or otherwise dispose of any of the
shares of Exchanged Crescent Stock.
Section 1.32 SECURITIES WARRANTIES. With respect to the Exchanged
Monument Stock to be delivered by Monument pursuant to the provisions of
Section 3.2 hereof, Powerhouse hereby represents and warrants to Monument
that:
(a) The shares of Exchanged Monument Stock are being acquired
for the account of each of the Powerhouse Stockholders and not with a view to
sale in connection with any distribution of the Exchanged Monument Stock;
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(b) Powerhouse is acquiring the Exchanged Monument Stock
hereunder without having received any form of general solicitation or general
advertising;
(c) Powerhouse or its representative, if any, has been
provided with, or given reasonable access to, full and fair disclosure of all
material information concerning Monument;
(d) Powerhouse understands and hereby acknowledges that the
Exchanged Monument Stock will be issued pursuant to (i) an exemption from the
laws of the State of Colorado and the rules and regulations promulgated
thereunder, and (ii) an exemption from the registration requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission (the "Commission") promulgated thereunder; that the Exchanged
Monument Stock will be restricted securities as defined in Rule 144(a)(3)
promulgated under the Securities Act; in part, Monument's reliance upon such
exemptions is based on the representations and warranties made by Powerhouse
in this Section 1.32;
(e) Powerhouse agrees that the certificates to be issued in
respect of the Exchanged Monument Stock may bear a legend in a form
satisfactory to counsel for Monument reflecting the status of the Exchanged
Monument Stock as restricted securities under Rule 144(a)(3) promulgated
under the Securities Act and acknowledges that the transfer agent or
registrar for Monument may be instructed to restrict the transfer of the
Exchanged Monument Stock in accordance with such legend and any other
restrictions provided in this Agreement;
(f) Powerhouse hereby agrees that it will not sell, transfer,
hypothecate, pledge, assign or otherwise dispose of any of the Exchanged
Monument Stock, except pursuant to the terms of this Agreement and to a
registration statement filed under the provisions of the Securities Act, a
favorable no-action or interpretive letter received from the Commission or an
opinion of counsel satisfactory to Monument that such sale, transfer,
hypothecation, pledge, assignment or other disposition is exempt from the
registration requirements of the Securities Act and in Colorado, pursuant to
an opinion of counsel satisfactory to Monument that such sale, transfer,
hypothecation, pledge, assignment or other disposition is exempt from the
registration requirements of the Securities Act and does not in any way
violate the terms of this Agreement; and
(g) Powerhouse hereby acknowledges that: (i) the shares of
Exchanged Monument Stock referred to herein are being acquired after adequate
investigation of the business plan and prospects of Monument; (ii) that
Powerhouse is not relying upon the accuracy of any predictions as to the
future prospects or developments of Monument
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or its business and is well informed as to the business of Monument and has
reviewed its operations and financial statements; (iii) Powerhouse or its
professional advisors have discussed the financial condition and business
operations of Monument with the officers, directors and principal
stockholders of Monument and has been afforded the opportunity to ask
questions with respect thereto; and (iv) Powerhouse specifically acknowledges
that the shares of Exchanged Monument Stock are speculative and involve a
very high degree of risk and that there can be no assurance that Monument
will achieve its business objectives or, in particular, that it will ever
have cash available for distribution to its stockholders.
Section 1.33 CRESCENT SCHEDULES. Crescent shall cause the Crescent
Schedules and the instruments and data delivered to Monument hereunder to be
updated after the date hereof up to and including the Closing Date, as
hereinafter defined.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF MONUMENT
As an inducement to, and to obtain the reliance of Crescent, Monument
represents and warrants as follows:
Section 2.1 ORGANIZATION. Monument is a corporation duly organized,
validly existing and in good standing under the laws of the state of Colorado
and has the corporate power and is duly authorized, qualified, franchised and
licensed under all applicable laws, regulations, ordinances and orders of
public authorities to own all of its properties and assets and to carry on
its business in all material respects as it is now being conducted, including
qualification to do business as a foreign corporation in the states in which
the character and location of the assets owned by it or the nature of the
business transacted by it requires qualification, except where the failure to
so qualify would not have a material adverse effect upon the assets,
business, properties or operations of Monument. Included in the Monument
Schedules (as hereinafter defined) are complete and correct copies of the
articles of incorporation, amended articles of incorporation (collectively,
hereinafter referred to as the "articles of incorporation") and bylaws of
Monument 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 Monument's articles of incorporation or bylaws. Monument has
taken all action required by law, its articles of incorporation, its bylaws
or otherwise to authorize the execution and delivery of this Agreement.
Monument has full power, authority and legal
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right and has taken all action required by law, its articles of
incorporation, bylaws or otherwise to consummate the transactions herein
contemplated.
Section 2.2 CAPITALIZATION. The authorized capitalization of Monument
consists of 10,000,000 shares of common stock (the "Monument Common Stock")
and 1,000,000 shares of preferred stock, no par value per share ("Preferred
Stock"). As of the Closing Date, there are 4,587,000 shares of Monument
Common Stock issued and outstanding and no shares of Preferred Stock are
issued and outstanding. All issued and outstanding shares are legally
issued, fully paid and nonassessable and not issued in violation of the
preemptive rights or other rights of any person.
Section 2.3 SUBSIDIARIES. Monument does not have any subsidiaries and
does not own, beneficially or of record, any other corporation.
Section 2.4 OPTIONS AND WARRANTS. Except as set forth on Schedule
2.4, there are no outstanding (a) securities convertible into or exchangeable
for any of Monument's capital stock; or (b) options, warrants, calls or other
rights (including rights to demand registration or to sell in connection with
any registration by Monument under the Securities Act to purchase or
subscribe to capital stock of Monument or securities convertible into or
exchangeable for capital stock of Monument. Monument is not a party to any
voting trust agreement or other contract, agreement, arrangement, commitment,
plan or understanding restricting or otherwise relating to voting or dividend
rights with respect to the Monument Common Stock.
Section 2.5 BINDING OBLIGATION; NO DEFAULT. Monument has duly taken
all action necessary to authorize the execution, delivery and performance of
this Agreement and the other instruments and agreements contemplated hereby.
Such execution, delivery and performance does not and will not, to the best
of Monument knowledge, constitute a default under or a violation of any
agreement, order, award, judgment, decree, statute, law, rule, regulation or
any other instrument to which Monument is a party or by which Monument or the
property of Monument may be bound or may be subject. This Agreement
constitutes the legal, valid and binding obligation of Monument, enforceable
against Monument in accordance with its terms.
Section 2.6 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Except as set
forth on Schedule 2.6, neither the execution and delivery of this Agreement
by Monument nor compliance by Monument with the terms and conditions of this
Agreement will: (a) require Monument to obtain the consent of any
governmental agency; (b) constitute a material default under any indenture,
mortgage or deed of trust to which each of Monument is a party or by which
each of Monument or its properties may be subject;
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(c) cause the creation or imposition of any lien, charge or encumbrance on
any of its assets; or (d) breach any statute or regulation of any
governmental authority, domestic or foreign, or will on the Closing Date
conflict with or result in a breach or any of the terms or conditions of any
judgment, order, injunction, decree or ruling of any court or governmental
authority, domestic or foreign, to which Monument is subject.
Section 2.7 CONSENTS. Except as set forth on Schedule 2.7, no
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or any third party is required
to be made or obtained by Monument in connection with the execution, delivery
and performance of this Agreement and the transactions contemplated hereby.
Section 2.8 BOOKS AND RECORDS. The books of account and other
financial records of Monument are complete and correct in all material
aspects. The minute books of Monument, as previously made available to
Crescent and its legal counsel, contain records of all meetings and
accurately reflect all other material corporate action of the stockholders,
directors and any committees of the Board of Directors of Monument.
Section 2.9 FINANCIAL STATEMENTS. Schedule 2.9 attached hereto are
true and correct copies of Monument's audited financial statements, including
Monument's audited balance sheets as of September 30, 1994 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended September 30, 1993, 1994 and 1995 (the "Monument
Audited Financial Statements"); and true and correct copies of Monument's
unaudited balance sheets as of December 31, 1995, and the related unaudited
statements of operations and cash flows for the three (3) month periods ended
December 31, 1994 and 1995 (the "Monument Unaudited Financial Statements").
The Monument Audited Financial Statements, together with the notes thereto,
fairly present the financial position of Monument at September 30, 1995, and
the consolidated results of the operations and the changes in stockholders'
equity and cash flows for Monument for the periods covered by the Monument
Audited Financial Statements and have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied with
prior periods. The Monument Unaudited Financial Statements fairly present
the financial position of Monument at December 31, 1995, and the consolidated
results of the operations and cash flows for Monument for the periods then
ended and have been prepared in accordance with GAAP consistently applied
with prior periods. (The Monument Audited Financial Statements and Monument
Unaudited Financial Statements are collectively referred to herein as the
"Monument Financial Statements.")
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Section 2.10 NO UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 2.10 hereto, Monument does not have any material liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) which
were not adequately reflected or reserved against on the Monument Financial
Statements, except for liabilities and obligations incurred since the date
thereof in the ordinary course of Monument's business and consistent with
past practice and which, in any event, in the aggregate, would not have a
Material Adverse Effect.
Section 2.11 ABSENCE OF CERTAIN CHANGES. Except as and to the extent
set forth on Schedule 2.11 hereto or except as otherwise expressly
contemplated hereby, since the date of the Monument Financial Statements,
Monument has not:
(a) Suffered any material adverse change in its financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
or reserves, and no event has occurred and no action has been taken by
Monument or, to the best knowledge of Monument, any other person, nor is any
such event or action contemplated or, to the best knowledge of Monument,
threatened, which might reasonably be expected to have a material adverse
effect on the assets or the operations or condition (financial or otherwise)
of Monument's business ("Material Adverse Effect"), except that no
representation or warranty is made as to general economic conditions or
matters affecting Monument's industry generally;
(b) Suffered any material adverse change in its business,
operations or prospects;
(c) Experienced any shortage of raw materials or supplies;
(d) Incurred any short-term or long-term liabilities or
obligations (absolute, accrued, contingent or otherwise) except items
incurred in the ordinary course of business and consistent with past
practice, none of such short-term or long-term liabilities or obligations
exceeds $10,000 individually, or $25,000 in the aggregate, (counting
obligations or liabilities arising from one transaction or a series of
similar transactions, and all periodic installments or payments under any
lease or other agreement providing for periodic installments or payments, as
a single obligation or liability), or increased or changed any assumptions
underlying or method of calculating, any bad debt, contingency or other
reserves;
(e) Paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of
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liabilities and obligations reflected or reserved against in the Monument
Financial Statements or incurred in the ordinary course of business and
consistent with past practice since the date of the Monument Financial
Statements;
(f) Permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any
kind;
(g) Written down the value of any inventory or properties in
excess of $10,000 (including write-downs by reason of shrinkage or markdown)
or written down or written off as uncollectible any notes or accounts
receivable in excess of $10,000;
(h) Canceled any debts or waived any claims or rights in
excess of $10,000;
(i) Sold, transferred or otherwise disposed of any of its
properties or assets in excess of $10,000 (real, personal or mixed, tangible
or intangible);
(j) Disposed of or permitted to lapse any rights to the use of
any Patent or Trade Name necessary to permit Monument to conduct its business
or develop its products, or disposed of or disclosed to any person, other
than representatives of Crescent, any Proprietary Information or Technical
Information not theretofore a matter of public knowledge necessary to permit
Monument to conduct its business or develop its products;
(k) Granted any general increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit sharing or other plan or commitment) other than in the
ordinary course of business and consistent with past practice, or any
increase in the compensation (including, without limitation, salary and
bonus) payable or to become payable to any officer or key employee;
(1) Made any single capital expenditure or commitment in
excess of $10,000 for additions to property, plant, equipment or intangible
capital assets or made aggregate capital expenditures and commitments in
excess of $10,000 for additions to property, plant, equipment or intangible
capital assets;
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(m) Declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock or redeemed, purchased or
otherwise acquired, directly or indirectly, any shares of capital stock or
other securities of Monument;
(n) Made any change in any method of accounting or accounting
practice;
(o) Paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement
with, any "Affiliate" or "Associate" of Monument as such terms are defined in
Rule 405 promulgated by the Commission under the Securities Act, or any
officer, director or shareholder of Monument (collectively, "Affiliates" or
individually, an "Affiliate");
(p) Made any gifts, or sold, transferred or exchanged any
property of any material value for less than the fair value thereof;
(q) Suffered any material casualty loss or damage (whether or
not covered by insurance); or
(r) Agreed, whether in writing or otherwise, to take any
action described in this Section 2.11.
Section 2.12 PLANT AND EQUIPMENT. The material plants, buildings,
fixtures, structures and equipment owned, leased or used by Monument are in
good operating condition and repair, ordinary wear and tear excepted, are
adequate for the uses to which they are being put. Included in Schedule 2.12
hereto is an accurate and complete list of all of the fixed assets of
Monument with a value in excess of $1,000.
Section 2.13 LEASES. Schedule 2.13 hereto is an accurate and complete
list of all leases pursuant to which Monument leases real or any material
item of personal property. A true and correct copy of each such lease has
been delivered to Crescent, and no changes have been made thereto since the
date of delivery. Except as set forth in Schedule 2.13 hereto, each such
lease is valid and in full force and effect, there are no existing material
defaults by Monument thereunder, and, to the best knowledge of Monument, no
event has occurred which (with notice of lapse of time or both) would
constitute a default thereunder by any party. Except as set forth on
Schedule 2.13 hereto, Monument is presently in compliance in all material
respects with all laws, rules, regulations and ordinances relating to zoning
and land use restrictions which are applicable to any portion of the land
subject to the real property leases set forth in
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Schedule 2.13 hereto. Except as set forth on Schedule 2.13 hereto, no
consent is required from the lessor under any lease of real or personal
property listed on Schedule 2.13 prior to the consummation of the
transactions contemplated hereby.
Section 2.14 TAX RETURNS. Schedule 2.14 hereto are true and correct
copies of Monument's Tax Returns and Statements (as defined herein). Except
as set forth in Monument's Tax Returns and Statements, Monument has (i) filed
or has caused to be filed all federal, state and local and all material
foreign, territorial, franchise, income, sales, gross receipts and all other
tax returns and statements required to be filed by Monument or on its behalf
and which were due prior to the date of this Agreement (the "Tax Returns and
Statements"), (ii) paid within the time and in the manner prescribed by law
all Taxes (as defined below), due for all periods ending on or prior to the
date of this Agreement, except with respect to Taxes which are immaterial in
amount and the failure to so pay or file would not result in material
penalties and would not have a Material Adverse Effect, and (iii) established
adequate reserves for the payment of all unpaid Taxes as of the date of the
Monument Financial Statements. The Tax Returns and Statements are true,
complete and accurate, in all material respects. Since September 30, 1989,
no tax assessment or deficiency has been made against Monument nor has any
notice been given of any actual or proposed assessment or deficiency which
has not been paid or for which an adequate reserve has not been set aside.
Except as set forth in such Tax Returns and Statements, the Tax Returns and
Statements are not presently, nor have they since Monument's inception been,
the subject of any audit or other administrative or court proceeding by any
federal, territorial, state, local or foreign governmental agency. Monument
has not received any notice that any of the Tax Returns and Statements is now
being or will be examined or audited, and no consents extending any
applicable statute of limitations have been filed.
For purposes of this Agreement, "Taxes" shall mean any and all taxes,
payroll and employment related taxes, levies, assessments, charges or other
fees, together with any interest, penalties or other additions, imposed by
any governmental authority upon Monument.
Section 2.15 TRANSACTIONS WITH AFFILIATES. Except as set forth on
Schedule 2.15 hereto, no Affiliate of Monument has any interest, directly or
indirectly, in any lease, lien, contract, license, encumbrance, loan or other
agreement to which Monument is a party, or any interest in any competitor,
supplier or customer of Monument. Except as set forth item by item on
Schedule 2.15 hereto, Monument is not indebted, directly or indirectly, to
any Affiliate of Monument, for any liability or obligation, whether arising
by reason of stock ownership, contract, oral or written agreement or
otherwise. No Affiliate is indebted, directly or indirectly, to Monument.
Schedule 2.15 is a complete
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and accurate list of all employees of Monument owing more than $5,000 in
principal (provided that the aggregate principal amount owed by employees to
Monument not set forth on Schedule 2.15 shall not exceed $25,000) plus
accrued interest, to Monument, other than travel or other employee advances
(not exceeding $1,000 to any one person) in the ordinary course of business,
setting forth the amounts owed, the applicable interest rates, a description
of the security and the maturity dates of all such debts.
Except as set forth on Schedule 2.15 hereto, no Affiliate (i) is a
party to any contract or arrangement with Monument pursuant to which it
directly provides material services to Monument, or (ii) is a party to any
contract or arrangement with a third party, to which Monument is not a party,
but under which Monument receives any material amount of goods or services
from said third party. Except as set forth on Schedule 2.15 hereto, all
goods and services provided to Monument by any of its Affiliates and all
goods and services provided to any of its Affiliates by Monument, at any time
since Monument's inception have been charged to the recipient at a price that
would have been acceptable to an unrelated third party receiving such goods
and services in an arm's-length transaction with the provider.
Section 2.16 CONTRACTS AND COMMITMENTS. Except as set forth on
Schedule 2.16:
(a) Monument has not entered into any outstanding agreements,
contracts or commitments or restrictions which, individually or in the
aggregate, are material to its business, operations or prospects, or which
require the making of any charitable contribution;
(b) No purchase contracts or commitments of Monument continue
for a period of more than 30 days or are in excess of the normal, ordinary
and usual requirements of its business or, to the best knowledge of Monument,
at any excessive price;
(c) Monument has not entered into any contracts or commitments
pursuant to which Monument is, as of the date hereof, required to obtain or
maintain, on behalf of itself or any of its directors, officers or employees,
any facility or personnel security clearances from the U.S. Department of
Defense or any other agency of the U.S. Government;
(d) There are no outstanding sales contracts, purchase orders,
commitments or proposals of Monument which continue for a period of more than
30
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days or will likely result in any loss to Monument upon completion or
performance thereof;
(e) Monument has not entered into any outstanding contracts
with officers, employees, agents, consultants, advisors, salesmen, sales
representatives or suppliers that are not cancelable by it on notice of not
longer than 30 days and without liability, penalty or premium, or any
agreement or arrangements providing for the payment of any bonus or
commission based on sales or earnings;
(f) Monument has not entered into any outstanding employment
agreement, or any other outstanding agreement that contains any severance or
termination pay liabilities or obligations;
(g) Monument is not a party to any collective bargaining
agreement or other contract or agreement with any labor organization;
(h) Monument is not restricted by agreement from carrying on
its business anywhere in the world;
(i) Monument has not incurred any outstanding debt obligation
for borrowed money, including guarantees of or agreements to acquire any such
debt obligation of others other than as reflected on the Monument's Financial
Statements;
(j) Monument is not a party to any contract, subcontract or
agreement with the U.S. Government or any agency or instrumentality thereof,
or with any territorial or state government or any agency or instrumentality
thereof; and
(k) Monument has not entered into any outstanding loan with or
to any person other than (i) Crescent, (ii) as reflected on the Monument's
Financial Statements, and (iii) for amounts not more than $5,000 to any
individual and $25,000 in the aggregate.
Section 2.17 COMPLIANCE WITH CONTRACTS; DELIVERY OF CERTAIN CONTRACTS.
Monument is not in default under any material contract, commitment,
obligation or agreement, including, without limitation, those listed in
Schedules 2.13, 2.16 and 2.30 hereto, except for those which would not have a
Material Adverse Effect, and no act or omission by Monument has occurred
which, with notice or lapse of time or both, would constitute such a default
under any term or provision of any such contract or agreement. Each of the
agreements referred to in Schedules 2.13, 2.16 and 2.30 hereto is valid and
in full force and effect. To the best knowledge of Monument, no party is in
default
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under any agreement referred to in Schedules 2.13, 2.16 and 2.30 hereto, and
to the best knowledge of Monument, no act or omission has occurred by any
party which, with notice or lapse of time or both, would constitute such a
default under any term or provision thereof. Monument has previously
delivered to Crescent a true and correct copy of each agreement, contract,
commitment or restriction listed on Schedules 2.13, 2.16 and 2.30 hereto,
including all amendments and modifications thereof.
Section 2.18 INSURANCE. Schedule 2.18 contains an accurate and true
description of all existing policies of fire, liability, worker's
compensation and all other forms of insurance owned or held by, or covering
the business, properties or assets of, Monument. All such policies are in
full force and effect, all premiums with respect thereto covering all periods
up to and including the date hereof have been paid, and no notice of
cancellation or termination has been received by Monument with respect to any
such policy. Such policies will remain in full force and effect through the
respective dates set forth on Schedule 2.18 without additional premiums being
paid or properly accrued as an additional liability. Schedule 2.18 also (i)
describes all products liability claims made since Monument's inception, and
all other claims (except medical and dental) pending or made since Monument's
inception under such insurance policies and (ii) identifies all types of
insurable risks which Monument and its Board of Directors has designated as
being self insured. Except as set forth in Schedule 2.18, Monument has not
been turned down at any time since Monument's inception for any insurance
with respect to its assets or operations, nor has its coverage been limited
by any insurance carrier to which it has applied for any such insurance or
with which it has carried insurance during the last three years.
Section 2.19 LABOR DIFFICULTIES. Except to the extent set forth in
Schedule 2.19:
(a) To the best knowledge of Monument, no employee of Monument
is in violation of, or has threatened any violation of, any material term of
any employment contract or any other contract or agreement relating to the
relationship of such employee with Monument or any other party, including any
employee handbook and/or personnel policy manual of Monument except for
violations which would not, individually or in the aggregate, have Material
Adverse Effect; and
(b) Monument has complied in all material respects with each
and every term, provision, section and part of any written employment
contract or agreement, including any employee handbook and/or personnel
policy manual, that Monument has or has had with any individual who has
performed work for Monument;
Section 2.20 LITIGATION. Except as set forth in Schedule 2.20 hereto:
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(a) There is no pending or, to the best knowledge of Monument,
threatened complaint, charge, claim, action, suit or arbitration proceeding
before any federal, territorial, state, municipal, foreign or other court or
governmental or administrative body or agency, or any private arbitration
tribunal or any investigation or inquiry before any federal, territorial,
state, municipal, foreign or other court or governmental or administrative
body or agency against, relating to or affecting (i) Monument or any
director, officer, agent or employee thereof in his or her capacity as such,
(ii) the assets, properties or business of Monument, or (iii) the
transactions contemplated by this Agreement, nor, to the best knowledge of
Monument, is there any basis for any such complaint, charge, claim, action,
suit, arbitration proceeding, investigation or inquiry which could have an
adverse effect on the assets, property, business or prospects of Monument;
(b) There is not in effect any order, judgment or decree of
any court or governmental or administrative body or agency enjoining,
barring, suspending, prohibiting or otherwise limiting Monument or, to the
best knowledge of Monument, any officer, director, employee or agent thereof
from conducting or engaging in any aspect of the business of Monument, or
requiring Monument or, to the best knowledge of Monument, any officer,
director, employee or agent thereof to take certain action with respect to
any aspect of the business of Monument which could reasonably be anticipated
to have a Material Adverse Effect; and
(c) Monument is not in violation of or default under any
applicable order, judgment, writ, injunction or decree of any federal,
territorial, state, municipal, foreign or other court or regulatory authority.
Section 2.21 NO CONDEMNATION OR EXPROPRIATION. Neither the whole nor
any portion of the leaseholds or any other assets of Monument is subject to
any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without
payment of compensation therefor, nor, to the best knowledge of Monument, has
any such condemnation, expropriation or taking been proposed.
Section 2.22 COMPLIANCE WITH LAW. The operations of Monument have been
conducted in accordance with all applicable laws, regulations and other
requirements of all national governmental authorities, and of all
territories, states, municipalities and other political subdivisions and
agencies thereof having jurisdiction over Monument, including, without
limitation, all such laws, regulations, ordinances and requirements relating
to environmental, antitrust, consumer protection, labor and employment,
zoning and land use, currency exchange, immigration, health, occupational
safety, pension,
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securities, defense procurement and trading with the enemy matters, except as
disclosed in Schedule 2.22 hereto and except for violations which would not,
individually or in the aggregate, have a Material Adverse Effect. Except as
set forth in Schedule 2.22, Monument has not received any notification since
its inception of any asserted present or past failure by Monument to comply
with such laws, regulations, ordinances or requirements. Monument has all
permits, authorizations and consents necessary for the operation of its
business except for those which the failure to have would not, individually
or in the aggregate, have a Material Adverse Effect.
Section 2.23 ENVIRONMENTAL COMPLIANCE.
Except as disclosed in Schedule 2.23 hereto:
(a) Monument has obtained, and is in full compliance with, all
material permits, licenses or other authorizations which are required under
any Hazardous Materials Law for the operations of the business of Monument;
(b) Monument is not aware of any material past, present or
future events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with, or prevent continued compliance by
Monument with, any Hazardous Materials Law, or which may give rise to Loss to
Monument based on or related to any Hazardous Materials Law;
(c) Monument has not entered into any agreement with any
governmental authority or agency, or with any private entity, including, but
not limited to, any prior owners of Premises, relating in any way to
violation of any Hazardous Materials Law, or to the presence, release, threat
of release, disposal, placement on, under or about any Premises of Hazardous
Substances;
(d) Monument has not discovered or caused, and to the best of
Monument's knowledge, no other person has discovered or caused, any
discharge, emission, disposal or release of Hazardous Substances on the
Premises, on property formerly owned, operated or leased by Monument or on
the property of any third party;
(e) Monument has not discovered, and to the best of Monument's
knowledge, no other person has discovered, any occurrence or condition on the
Premises or on any real property in the vicinity of the Premises, which could
cause the Premises to be subject to any restrictions on the ownership,
occupancy, transferability or use under any Hazardous Materials Law;
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(f) Monument has not manufactured, stored or disposed of
Hazardous Substances at any location, including, without limitation, any
disposal which was in compliance with any Hazardous Materials Law;
(g) Monument does not use or maintain any underground storage
tanks or surface impoundments on the Premises and, to the best knowledge of
Monument, no underground storage tanks or surface impoundments are now, or
ever have been, located on the Premises; and
(h) Monument has not received notice of any lien in favor of
any governmental authority for (i) any liability under any Hazardous
Materials Law, or (ii) damages arising from or costs incurred by such
governmental authority in response to a release of Hazardous Substances into
the environment, nor has any such lien ever been filed or attached to the
Premises.
Section 2.24 EMPLOYEE BENEFITS. Except for the plans, agreements,
arrangements and practices set forth in Schedule 2.24 hereto (collectively,
the "Employment Plans"), neither Monument nor any Affiliate maintains or
contributes to, or is obligated or required to contribute to, any bonus,
deferred compensation, severance or termination pay, pension, profit sharing,
stock purchase, stock grant, stock option, group life insurance, health care,
hospitalization insurance, disability, retirement or any other employee
benefit or fringe benefit plan, agreement, arrangement or practice, whether
formal or informal and whether legally binding or not, which covers employees
of Monument. Neither Monument nor any Affiliate has any commitment, whether
formal or informal and whether legally binding or not, to create or
contribute to any additional such plan.
Section 2.25 PERSONNEL. Schedule 2.25 hereto is a true and complete
list of the wage rates for all non-salaried and salaried employees of
Monument by classification.
Section 2.26 REAL PROPERTY HOLDING CORPORATION. Monument is not a U.S.
Real Property Holding Corporation within the meaning of Section 897(c)(2) of
the Code.
Section 2.27 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by Monument contained in this Agreement or in respect of the
exhibits, schedules or documents delivered to Crescent by Monument and
expressly referred to herein, and no statement contained in any certificate
furnished or to be furnished by or on behalf of Monument pursuant hereto, or
in connection with the transactions contemplated hereby, contains, or will
contain as of the date such representation or warranty is made or such
certificate is or will be furnished, and as of the Closing Date, any untrue
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statement of a material fact, or omits, or will omit to state as of the date
such representation or warranty is made or such certificate is or will be
furnished, any material fact which is necessary to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading. True and correct copies of each agreement and
other document referred to in the schedules hereto have been furnished by
Monument to Crescent.
Section 2.28 REAL PROPERTIES. Schedule 2.28 hereto is an accurate and
complete list of all real property owned by Monument, 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.
Section 2.29 TITLE AND RELATED MATTERS. Monument has good and
marketable title to and is the sole and exclusive owner of all of its
material properties, inventory, interests in properties and assets, real and
personal, Patents copyrights, trademarks, service marks and Trade Names
(collectively, the "Monument Assets") which are reflected in the most recent
Monument balance sheet and the Monument Schedules 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 the Monument Schedules. Except as set
forth in the Monument Schedules, Monument owns free and clear of any liens,
claims, encumbrances, royalty interests or other restrictions or limitations
of any nature whatsoever, and all procedures, techniques, marketing plans,
business plans, methods of management or other information utilized in
connection with Monument's business. Except as set forth in the Monument
Schedules, no third party has any right to, and Monument has not received any
notice of infringement of or conflict with asserted rights of others with
respect to any product, technology, data, trade secrets, know-how,
proprietary techniques, trademarks, service marks, trade names or copyrights
which, 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 or financial condition of Monument or any material portion of its
properties, assets or rights.
Section 2.30 TITLE TO THE EXCHANGED MONUMENT STOCK. Upon delivery to
the Crescent Stockholders of the certificates described in Section 3.2 of
this Agreement, the Crescent Stockholders will receive good and marketable
title to the Exchanged Monument Stock, all of the Exchanged Monument Stock
shall be received by the
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Crescent Stockholders as validly issued, fully paid and nonassessable, free
and clear of all pledges, liens, encumbrances, security interests, equities,
options, claims, charges, limitations on voting rights or rights to receive
dividends, or other restrictions of any kind (other than any generally
imposed by federal, corporate or territorial securities laws or as otherwise
provided for in this Agreement).
Section 2.31 COMPLIANCE WITH EXCHANGE ACT. As of the Closing, Monument
shall be current in all filings required to be tendered to the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Crescent has heretofore been
furnished with true, complete and correct copies of the following: (a)
Monument's Annual Report on Form 10-KSB for the fiscal year ended September
30, 1995, as filed with the Commission, (b) Monument's Quarterly Report on
Form 10-QSB for the fiscal quarter ended December 31, 1995, as filed with the
Commission, and (c) all other reports or registration statements filed by
Monument with the Commission since December 31, 1995 (collectively, the
"Commission Filings"). Since December 31, 1995, Monument has filed all
reports, registration statements and other documents required to be filed by
it under the Exchange Act. The Commission Filings were prepared in
accordance and complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be.
None of such forms, reports and statements, including, without limitation,
any financial statements, exhibits and schedules included therein and
documents incorporated therein by reference, at the time filed, or declared
or it became effective, as the case may be, contained, or now contains, and
at the Closing Date will contain, an untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 2.32 MONUMENT SCHEDULES. Monument shall cause the Monument
Schedules and the instruments to be delivered to Crescent hereunder to be
updated after the date hereof up to and including the Closing Date.
ARTICLE III
PLAN OF REORGANIZATION
Section 3.1 PLAN OF REORGANIZATION. As a result of and immediately
upon the completion of the transactions contemplated by this Agreement: (a)
Powerhouse shall own 1,000 shares of Exchanged Monument Stock, and (b)
Monument shall own 100 shares of Exchanged Crescent Stock, which shall
constitute 100% of the issued and outstanding Crescent Common Stock. The
transactions contemplated by this Agreement
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are intended to qualify as a tax free corporate reorganization as described
in Section 368(a)(1) of the Internal Revenue Code of 1986, as amended.
Section 3.2 SHARE EXCHANGE. The 100 issued and outstanding shares of
Crescent Common Stock (the "Exchanged Crescent Stock") shall be exchanged
into 1,000 shares of Monument Convertible Non-Voting Preferred Stock (the
"Exchanged Monument Stock"), as follows:
(a) On the Closing Date, Monument shall issue and deliver
1,000 shares of Exchanged Monument Stock to Powerhouse in accordance with the
terms and conditions of the Escrow Agreement attached as Schedule 3.2(a)
attached hereto, in exchange for 100 shares of Exchanged Crescent Stock,
which constitute one hundred percent (100%) of the issued and outstanding
common stock of Crescent. Monument shall not issue or exchange any
fractional shares or interests in the Exchanged Monument Stock in connection
with the foregoing exchange;
(b) The shares of nonvoting Preferred Stock of Monument shall
be automatically convertible into up to 5,500,000 shares of Monument's no par
value Common Stock simultaneously with the effectiveness of a registration
statement on Form S-1 to be filed with the United States Securities and
Exchange Commission. The number "up to 5,500,000 shares" is based on a
preliminary valuation of the assets of Crescent as of January 1, 1996 are set
forth on Schedule 3.2 attached hereto, and if subsequent due diligence
indicates a different value, then the number of shares will be adjusted
accordingly in accordance with the valuations set forth on Schedule 3.2
hereto; and
(c) Powerhouse shall provide for the full cooperation of
Powerhouse and its Board of Directors to effectuate both the Closing and the
subsequent transactions referred to immediately above in (b).
Section 3.3 CLOSING. The closing ("Closing") of the transactions
contemplated by this Agreement shall be as of March 15, 1996 ("Closing
Date"), unless a different date is mutually agreed to in writing by the
parties hereto.
Section 3.4 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
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in order to effectuate or evidence the transactions contemplated hereby.
However, in no event shall the Closing occur without the satisfaction or
waiver of the conditions set forth in Sections 6 and 7 of this Agreement.
Section 3.5 TERMINATION.
(a) This Agreement may be terminated by the board of directors
of either Monument or Crescent at any time prior to the Closing Date if:
(i) there shall be any actual or threatened action or
proceeding before any court or any governmental body which shall
seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement and which, in the judgment of such
board of directors, made in good faith and based on the advice of
its legal counsel, makes it inadvisable to proceed with the merger
and consolidation contemplated by this Agreement; or
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is required
to consummate such transactions or in the judgment of such board of
directors, made in good faith and based on the advice of counsel,
there is substantial likelihood that any such approval will not be
obtained or will be obtained only on a condition or conditions
which would be unduly burdensome, making it inadvisable to proceed
with the merger and consolidation.
In the event of termination pursuant to this paragraph (a) of Section 3.5, no
obligation, right or liability shall arise hereunder, and each party shall
bear all of the expenses incurred by it in connection with the negotiation,
drafting and execution of this Agreement and the transactions herein
contemplated;
(b) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of Monument if Crescent
shall fail to comply in any material respect with any of its covenants or
agreements contained in this Agreement or if any of the representations or
warranties of Crescent contained herein shall be inaccurate in any material
respect. If this Agreement is terminated pursuant to this paragraph (b) of
Section 3.5, this Agreement shall be of no further force or effect, and no
obligation, right or liability shall arise hereunder; and
(c) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of Crescent if Monument
shall fail to comply in any material respect with any of its covenants or
agreements contained in this
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Agreement or if any of the representations or warranties of Monument
contained herein shall be inaccurate in any material respect. If this
Agreement is terminated pursuant to this paragraph (c) of Section 3.5, this
Agreement shall be of no further force or effect and no obligation, right or
liability shall arise hereunder.
Section 3.6 DIRECTORS OF MONUMENT AND CRESCENT. Each of the boards of
directors of Monument and Crescent shall consist of five (5) directors and
four (4) directors, respectively. Each of the directors shall hold office
until his or her successors shall have been duly elected and shall have
qualified or until his or her earlier death, resignation or removal. The
names of these directors shall be as follows:
MONUMENT CRESCENT
--------- ---------
DIRECTORS DIRECTORS
--------- ---------
A. G. Foust A. G. Foust
D. C. Dowd D. C. Dowd
H. Swanson H. Swanson
J. Womack J. Womack
S. Jackson
(sixth Director to be appointed by
reconstructed Board)
ARTICLE IV
SPECIAL COVENANTS
Section 4.1 ACCESS TO PROPERTIES AND RECORDS. Monument and Crescent
will each afford to the officers and authorized representatives of the other
full access to the properties, books and records of Monument and Crescent, 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
Monument and Crescent, as the case may be, as the other shall from time to
time reasonably request.
Section 4.2 AVAILABILITY OF RULE 144. Each of the parties acknowledge
that the stock of Monument to be issued pursuant to this Agreement will be
"restricted securities," as that term is defined in Rule 144 promulgated
pursuant to the Securities Act. Monument is under no obligation, except as
set forth herein, to register such shares under the Securities Act.
Notwithstanding the foregoing, however, Monument will use
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its best efforts to: (a) make publicly available on a regular basis not less
than annually, business and financial information regarding Monument so as to
make available to the stockholders of Monument the provisions of Rule 144
pursuant to subparagraph (c)(l) thereof; and (b) within ten (10) days of any
written request of any stockholder of Monument, Monument will provide to such
stockholder written confirmation of compliance with such of the foregoing
subparagraph as may then be applicable. The stockholders of Monument holding
restricted securities of Monument as of the date of this Agreement, and their
respective heirs, administrators, personal representatives, successors and
assigns, are intended third party beneficiaries of the provisions set forth
herein. The covenants set forth in this Section 4.2 shall survive the Closing
and the consummation of the transactions herein contemplated.
Section 4.3 INFORMATION FOR MONUMENT REGISTRATION STATEMENT AND PUBLIC
REPORTS. Crescent and Powerhouse will furnish Monument with all information
concerning Crescent and Powerhouse, including all financial statements,
required for inclusion in any registration statement or public report
required to be filed by Monument pursuant to the Securities Act, the Exchange
Act or any other applicable federal or state law. Crescent represents and
warrants to Monument that, to the best of its knowledge and belief, all
information so furnished for either such registration statement or other
public release by Monument, including the financial statements described in
Section 1.9, shall be true and correct in all material respects without
omission of any material fact required to make the information stated not
misleading.
Section 4.4 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE
EXCHANGED MONUMENT STOCK. The consummation of this Agreement and the
transactions herein contemplated, including the issuance of the Exchanged
Monument Stock to the Crescent Stockholders 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
Powerhouse acquires such securities.
Section 4.5 THIRD PARTY CONSENTS. Monument, Crescent and Powerhouse
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 4.6 ACTIONS PRIOR TO CLOSING.
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(a) From and after the date of this Agreement until the
Closing Date and except as set forth in the Monument or Crescent Schedules or
as permitted or contemplated by this Agreement, Monument and Crescent,
respectively, will each:
(i) carry on its business in substantially the same manner
as it has heretofore;
(ii) maintain and keep its properties in states of
good repair and condition as at present, except for depreciation
due to ordinary wear and tear and damage due to casualty;
(iii) maintain in full force and effect insurance
comparable in amount and in scope of coverage to that now
maintained by it;
(iv) perform in all material respects all of its
obligations under material contracts, leases and instruments
relating to or affecting its assets, properties and business;
(v) use its reasonable commercial 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 Monument nor Crescent will:
(i) except as otherwise specifically set forth herein, make
any change in their respective certificates or articles of
incorporation or bylaws;
(ii) take any action described in Section 1.11 in the
case of Crescent, or in Section 2.11, in the case of Monument (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
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instrument in the ordinary course of
business involving the sale of goods or services.
Section 4.7 INDEMNIFICATION.
(a) Crescent hereby agrees to indemnify Monument and each of
the officers and directors of Monument as of the date of execution of this
Agreement and as of the Closing Date 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 in 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; and
(b) Monument hereby agrees to indemnify Crescent and each of
the officers and directors of Crescent as of the date of execution of this
Agreement and as of the Closing Date 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 in this Agreement. The indemnification
provided for in this Paragraph shall survive the Closing and consummation of
the transactions contemplated hereby and termination of this Agreement.
Section 4.8 INTENT AND BINDING EFFECT. It is the bonafide intent of
the parties hereto that the transaction be effectuated as soon as possible
and that the events to occur after the Transaction also be effectuated as
soon as reasonable practicable thereafter. In particular, the intent of the
parties is to distribute, on a prorata basis, to the shareholders of
Powerhouse who reside either in the United States or in the United Kingdom,
or elsewhere, their share of the Common Stock of Monument based on the
equivalent number of shares to be received upon conversion of Monument's
Preferred Stock to Common Stock. By execution hereof, the Chairman of
Powerhouse represents that the Powerhouse Board of Directors has agreed to
the prorata distribution of Monument Common Stock subject only to
registration of such securities with the appropriate authorities. In that
regard, Powerhouse, by signing below, agrees to use its best efforts to
assist in completing the Agreement and in closing such Agreement and in the
activities to be contemplated in the Agreement regarding the spinoff of
Monument
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Common Stock. Powerhouse shall not solicit nor shall it entertain
any offers with respect to Crescent or its assets or its operations pending
completion of this Agreement.
Section 4.9 MONUMENT RECAPITALIZATION. When reasonably practicable
after the Closing Date, Monument will undertake to obtain additional
authorized capital sufficient to enable it to convert its Preferred Stock to
Common Stock as contemplated hereunder or, in the alternative, it will cause
a reverse split of its Common Stock in a ratio that will result in sufficient
authorized capitalization to effect the transaction contemplated hereunder.
In the latter event the consideration to be issued by Monument hereunder
shall be proportionately adjusted.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
OF MONUMENT
The obligations of Monument under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by Crescent 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 as of the date of this Agreement
(except for changes therein permitted by this Agreement), and Crescent shall
have performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by Crescent prior to or at the
Closing. Monument shall be furnished with a certificate, signed by a duly
authorized officer of Crescent and dated the Closing Date, to the foregoing
effect.
Section 5.2 OFFICER'S CERTIFICATE. Monument shall have been furnished
with a certificate dated the Closing Date and signed by a duly authorized
officer of Crescent to the effect that no litigation, proceeding,
investigation or inquiry is pending or, to the best knowledge of Crescent,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the Crescent Schedules, by or against Crescent which
might result in any material adverse change in any of the assets, properties,
business or operations of Crescent.
Section 5.3 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 nor shall any event have occurred which,
with the lapse of time or the
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giving of notice, may cause or create any material adverse change in the
financial condition, business or operations of Crescent.
Section 5.4 OTHER ITEMS. Monument shall have received such further
documents, certificates or instruments relating to the transactions
contemplated hereby as Monument may reasonably request.
Section 5.5 LOAN REPAYMENT. Prior to the Closing Date but not later
than March 15, 1996, Powerhouse shall have paid all loans and accrued
interest (approximately $300,000) due to Monument.
Section 5.6 ALLAN ARNOLD CONTRACT. At Closing, Powerhouse will have
satisfied the Allan Arnold Employment Agreement and obtained a general
release and waiver from Mr. Arnold. In addition, Powerhouse shall have paid
as of the Closing Date all of Crescent's accrued expenses which are estimated
not to exceed $50,000.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF CRESCENT
The obligations of Crescent under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 6.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by Monument 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 date of this Agreement, and Monument
shall have performed and complied with all covenants and conditions required
by this Agreement to be performed or complied with by Monument prior to or at
the Closing. Crescent shall have been furnished with a certificate, signed
by a duly authorized executive officer of Monument and dated the Closing
Date, to the foregoing effect.
Section 6.2 OFFICER'S CERTIFICATE. Crescent shall have been furnished
with a certificate dated the Closing Date and signed by a duly authorized
officer of Monument to the effect that no litigation, proceeding,
investigation or inquiry is pending or, to the best knowledge of Monument,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the Monument Schedules, by or against Monument which
might result in any material adverse change in any of the assets, properties,
business or operations of Monument.
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Section 6.3 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 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
Monument.
Section 6.4 OTHER ITEMS. Crescent shall have received such further
documents, certificates, or instruments relating to the transactions
contemplated hereby as Crescent may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.1 BROKERS AND FINDERS. Neither Monument, nor Crescent, nor
any of their respective officers, directors, agents or employees has employed
any investment banker, broker or finder, or incurred any liability on behalf
of Monument or Crescent, as the case may be, for any investment banking fees,
brokerage fees, commissions or finder's fees, in connection with the
transactions contemplated by this Agreement. The parties each agree to
indemnify the other against any other claim by any third person for any
commission, brokerage or finder's fee or other payment with respect to this
Agreement or the transactions contemplated hereby based on any alleged
agreement or understanding between the indemnifying party and such third
person, whether express or implied from the actions of the indemnifying party.
Section 7.2 DENVER REGISTERED OFFICE. After Closing, Powerhouse
agrees to pay Monument/Crescent the sum of $1,000 per month for office rent,
telephone, postage and other miscellaneous costs which will be necessary to
maintain a registered office and registered agent within the State of
Colorado as required by Colorado law and to maintain a Colorado and United
States office and agent for NASD, NASDAQ and other regulatory purposes.
Section 7.3 REGISTRATION COSTS. The costs of filing registration,
qualification, listing and other filings with United States and United
Kingdom regulatory authorities to effect the "spin-off" contemplated
hereunder shall be shared by Monument and Powerhouse on an equal basis. Such
costs are estimated to be those set forth on Schedule 7.3 hereto. Should
Powerhouse fail to pay its share of the expenses contemplated herein, or
provide adequate assurance to Monument with respect to such expenses within
30 days after receipt of estimates of such from all professionals involved,
the number of shares of Monument Preferred Stock shall be reduced by 10%.
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Section 7.4 LAW, FORUM AND JURISDICTION. This Agreement shall be
construed and interpreted in accordance with the laws of the State of
Colorado. The parties agree that any dispute arising under this Agreement,
whether during the term of the Agreement or at any subsequent time, shall be
resolved exclusively in the courts of the State of Colorado and the parties
hereby submit to the jurisdiction of such courts for all purposes provided
herein and appoint the Secretary of State of the State of Colorado as agent
for service of process for all purposes provided herein.
Section 7.5 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to
its or sent by overnight mail, registered mail or certified mail, postage
prepaid, or by prepaid telegram, or when telecopied and followed by
confirmation copy hand-delivered or sent by first class mail, addressed as
follows:
If to Monument:
Monument Resources, Inc.
513 Wilcox Street
Post Office Box 1450
Castle Rock, Colorado 80104
Attention: Anton G. Foust
If to Crescent:
Crescent Oil & Gas Corporation, Inc.
1624 Market Street, Suite 303
Denver, Colorado 80202
Attention: Dennis C. Dowd
If to Powerhouse:
Powerhouse Resources, Inc.
21 Knightsbridge
London SW1X 7LY
Attention: Malcolm Stone
and
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Powerhouse Resources, Inc.
1624 Market Street, Suite 303
Denver, Colorado 80202
Attention: Dennis C. Dowd
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 7.6 ATTORNEYS' 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 7.7 CONFIDENTIALITY. Each party hereto agrees with the other
parties that, unless and until the merger contemplated by this Agreement has
been consummated, they and their representatives will hold in strict
confidence all data and information obtained with respect to another party or
any subsidiary thereof from any representative, officer, director or
employee, or from any books or records or from personal inspection, of such
other party, and shall not use such data or information or disclose the same
to others, except: (i) to the extent such data 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 7.8 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules
delivered pursuant to this Agreement.
Section 7.9 THIRD PARTY BENEFICIARIES. This contract is solely among
Monument and Crescent and, as otherwise 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.
Section 7.10 ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof. 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,
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representations or warranties, written or oral, except as set forth herein.
This Agreement may not be amended or modified, except by a written agreement
signed by all parties hereto.
Section 7.11 SURVIVAL; TERMINATION. The representations, warranties
and covenants of the respective parties shall survive the Closing Date of the
merger and the consummation of the transactions herein contemplated.
Section 7.12 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
taken together shall be but a single instrument.
Section 7.13 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.
Section 7.14 INCORPORATION OF RECITALS. All of the recitals hereof are
incorporated by this reference and are made a part hereof as though set forth
at length herein.
Section 7.15 EXPENSES. Each of the parties to this Agreement shall
bear all of its own expenses incurred by it in connection with the
negotiation of this Agreement and in the consummation of the transactions
provided for herein and the preparation therefor.
Section 7.16 HEADINGS; CONTEXT. The headings of the sections and
paragraphs contained in this Agreement are for convenience of reference only
and do not form a part hereof and in no way modify, interpret or construe the
meaning of this Agreement.
Section 7.17 BENEFIT. This Agreement shall be binding upon and shall
insure only to the benefit of the parties hereto, and their permitted assigns
hereunder. This Agreement shall not be assigned by any party without the
prior written consent of the other party.
44
<PAGE>
Section 7.18 PUBLIC ANNOUNCEMENTS. Except as may be required by law,
neither party shall make any public announcement or filing with respect to
the transactions provided for herein without the prior consent of the other
party hereto.
Section 7.19 SEVERABILITY. In the event that any particular provision
or provisions of this Agreement or the other agreements contained herein
shall for any reason hereafter be determined to be unenforceable, or in
violation of any law, governmental order or regulation, such unenforceability
or violation shall not affect the remaining provisions of such agreements,
which shall continue in full force and effect and be binding upon the
respective parties hereto.
Section 7.20 FAILURE OF CONDITIONS; TERMINATION. In the event any of
the conditions specified in this Agreement shall not be fulfilled on or
before the Closing Date, either of the parties have the right either to
proceed or, upon prompt written notice to the other, to terminate and rescind
this Agreement without liability to any other party. The election to proceed
shall not affect the right of such electing party reasonably to require the
other party to continue to use its efforts to fulfill the unmet conditions.
Section 7.21 NO STRICT CONSTRUCTION. The language of this Agreement
shall be construed as a whole, according to its fair meaning and intendment,
and not strictly for or against either party hereto, regardless of who
drafted or was principally responsible for drafting the Agreement or terms or
conditions hereof.
Section 7.22 EXECUTION KNOWING AND VOLUNTARY. In executing this
Agreement, the parties severally acknowledge and represent that each: (a)
has fully and carefully read and considered this Agreement; (b) has been or
has had the opportunity to be fully apprised of its attorneys of the legal
effect and meaning of this document and all terms and conditions hereof; (c)
has been afforded the opportunity to negotiate as to any and all terms
hereof; and (d) is executing this Agreement voluntarily, free from any
influence, coercion or duress of any kind.
45
<PAGE>
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly
authorized, and entered into and closed as of the date first above written at
Denver, Colorado.
("Monument")
MONUMENT RESOURCES, INC.
By: /s/ ANTON G. FOUST
---------------------------------
Anton G. Foust, President
("Crescent")
CRESCENT OIL & GAS
CORPORATION
By: /s/ DENNIS C. DOWD
---------------------------------
Dennis C. Dowd, Vice President
and Director
("Powerhouse")
POWERHOUSE RESOURCES, INC.
By:
---------------------------------
Malcolm Stone, Chairman
46
<PAGE>
ADDENDUM TO
AGREEMENT AND PLAN OF REORGANIZATION
THIS ADDENDUM TO AGREEMENT AND PLAN OF REORGANIZATION is made and
entered into this 22nd day of March, 1996, by and among Monument Resources,
Inc. ("Monument"), a Colorado corporation, Crescent Oil & Gas Corporation
("Crescent"), a Delaware corporation and Powerhouse Resources, Inc.
("Powerhouse"), a Colorado corporation.
WHEREAS, an Agreement and Plan of Reorganization dated February 23, 1996
has heretofore been executed by the parties; and
WHEREAS, the parties wish to make certain changes in the terms and
conditions set forth therein;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein set forth and the mutual benefits of the parties to be
derived here from, it is hereby agreed as follows:
1. Section 3.3 of the Agreement and Plan of Reorganization is hereby
amended to delete the date March 15, 1996 and to substitute therefore the date
March 22, 1996. The dates will also be changed accordingly in other sections
of the Agreement and Plan of Reorganization, and in particular Section 5.5
thereof, which date shall also be changed in said section to March 22, 1996;
provided however that closing shall be into escrow and the shares to be
exchanged will only be released from such escrow if the loan described in
Section 5.5 is repaid by April 5, 1996. Failure to pay such loan by such date
will terminate the escrow and the Agreement and Plan of Reorganization.
2. The Suimork Oil Depot ("Suimork") property is to be deleted from
Schedule 3.2 appended to the referenced Agreement and Plan of Reorganization.
Suimork is to be listed on Schedule 3.2A and valued at 600,000 shares of
Common Stock to be represented by a proportionate number of the shares of
Preferred Stock to be issued hereunder. The Board of Directors of Monument
shall have three months to conduct due diligence investigations of the Suimork
project and during such three month period may in its sole discretion accept
or reject such opportunity. If rejected, Suimork shall remain the property of
Powerhouse. If accepted, the 600,000 equivalent shares of Common Stock shall
be treated the same as the initial 3,000,000 shares described below.
3. Section 3.2(b) of the Agreement and Plan of Reorganization shall
be amended to provide that the shares of non-voting Preferred Stock of
Monument shall be automatically convertible into 3,000,000 shares of
Monument's no par value
<PAGE>
Common Stock simultaneously with the earlier of (i) sale of such shares or
(ii) the effectiveness of a Registration Statement on Form S-1 filed with the
United States Securities & Exchange Commission. In addition, shares of
Monument's non-voting Preferred Stock representing 1,000,000 shares of
Monument Common Stock shall be issued, as of the Closing Date, into escrow to
be held by such escrow agent until the sale of the shares or the effective
date of the Registration Statement referred to in the preceding sentence. If
at such date of sale or upon such effective date Powerhouse has paid, if
necessary, one-half of its share of registration costs provided in Section
7.3 of the Agreement and Plan of Reorganization or as called for in paragraph
4 below (valued at $50,000), and/or if it has paid or otherwise provided for
the obligation to Alan Arnold (valued at $100,000) as set forth in Section
5.6, and/or if it has paid or otherwise satisfied liabilities associated with
the Kansas oil properties (assumed to be $50,000), then such shares shall be
released to Powerhouse and will be treated the same as the initial 3,000,000
shares described above. If any one or two or three of the foregoing
obligations are not met, the number of shares to be distributed to Powerhouse
will be reduced accordingly based on the ratio that the particular item
involved bears to the total of the three items (i.e., $200,000). In
connection herewith, Sections 5.6 and 7.3 of the Agreement and Plan of
Reorganization are hereby deleted and replaced with the potential reduction
in shares payable to Powerhouse as described above in this paragraph.
4. All shares of non-voting Preferred Stock issued or issuable under
the Agreement and Plan of Reorganization as modified by this Addendum shall be
held in Trust by a Trust Committee consisting of Malcolm Stone, Dennis C. Dowd
and Hunter S. Swanson. The Board of Monument shall determine succession to
the Trust Committee necessitated for any reason including, but not limited to,
resignation, infirmity or death. Majority vote of the Trustees shall be
required for all decisions of the Trust. The Trustees shall use their best
efforts during the one year period from April 5, 1996 to sell the shares of
Common Stock into which such shares of Preferred Stock are convertible (i) in
a manner designed not to disrupt, either in the short term or long term, an
orderly market in Monument's trading securities; (ii) conduct such sales in
the United Kingdom with and in compliance with its laws and the securities
laws of the United States or in any other jurisdiction if such sale is in
accordance with applicable law; and (iii) failing the above, will cause such
shares to be distributed on a pro rata basis to Powerhouse shareholders as
soon as reasonably practicable after such one year period (or its extension),
or before if it is deemed necessary to qualify such shares of Common Stock for
NASDAQ SmallCap trading; provided however, if at April 4, 1997 fewer than 25%
of the common shares issued pursuant to the Agreement and Plan of
Reorganization are still held by the Trust, the Trustees may extend their
right to manage and sell such shares for an additional year through April 5,
1998. Finally, Monument
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<PAGE>
shall have a three-day right of first refusal to purchase such shares at the
price offered by any bona-fide purchaser and Monument shall have an absolute
right, at any time such shares are held by the Trust to purchase any or all
of such shares at a price of $0.50 (U.S.) per share.
5. If a prorated distribution to shareholders occurs, Monument shall
not be required to issue fractional shares nor shares in less than one round
lot (i.e., 100 shares) unless, in the sole discretion of this Board of
Directors of Monument, it deems it prudent to issue shares in amounts of fewer
than one round lot (i.e., 100 shares).
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Addendum to Agreement and Plan of Reorganization to be executed by their
respective officers, hereunto duly authorized.
("Monument")
MONUMENT RESOURCES, INC.
By: /s/ ANTON G. FOUST
---------------------------------
Anton G. Foust, President
("Crescent")
CRESCENT OIL & GAS
CORPORATION
By: /s/ DENNIS C. DOWD
---------------------------------
Dennis C. Dowd, Vice President
and Director
("Powerhouse")
POWERHOUSE RESOURCES, INC.
By: /s/ MALCOLM STONE
---------------------------------
Malcolm Stone, Chairman
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