U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 KSB
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
October 10, 1997
(Date of Report)
Midland, Inc.
(Exact Name of Registrant as specified in its charter)
Colorado
(State or other jurisdiction of incorporation)
0 20697 Applied For
(Commission File Number) (IRS Employer Identification Number)
3863 Princess Lane, Dallas, Texas 75229
(Address of principal executive offices including zip code)
(214) 357 3324
(Registrant's telephone number including area code)
12528 Kirkham Ct., Nos. 6 & 7, Poway, CA 92064
(Former name or former address, if changed since last report)
Item 1. Change in Control of Registrant.
See Item 2, below.
Item 2. Acquisition or Disposition of Assets.
On October 10, 1997 (the Closing Date), Registrant, Midland,
Inc., executed, delivered and closed under a Plan and Agreement
of Purchase (the Purchase Agreement) with the shareholders (the
Shareholders) of New Departure Corporation, a Texas corporation
(the Subsidiary), and the Subsidiary itself whereby Registrant
acquired from the Shareholders all of the outstanding proprietary
interest of the Subsidiary, thereby making New Departure
Corporation a wholly owned subsidiary of Registrant.
Registrant issued and caused to be delivered to the Shareholders,
immediately subsequent to the Closing Date, 70,000 shares of its
previously authorized Series B Preferred Stock (Series B
Preferred Stock). The Series B Preferred Stock consists of
149,259 shares, with each outstanding share (i) to be
automatically converted into 150 shares of Common Stock on
October 1, 1998, or sooner at the election of the holder, (ii)
being entitled to 150 votes on each matter submitted to the
shareholders of Registrant, with certain super majority
provisions being applicable in certain instances, (iii) not being
entitled to a liquidation preference, (iv) not being redeemable
and (v) not being entitled to dividends. This series has certain
non dilution provisions applicable to it in the event of stock
dividends, stock splits and other extraordinary corporate events.
The Series B Preferred Stock is considered a common share
equivalent and, therefore, Registrant is considered for purposes
of applicable securities laws to now have an additional
10,500,000 common shares outstanding under this series of
preferred stock.
Immediately following the execution, delivery and consummation of
the Purchase Agreement, the board of directors of Registrant
(Board of Directors) was reduced to five in number, and joining
Messrs. Charles Stidham, Robert W. Marsik, E. Robert Barbee and
Arthur Malcolm to fill the remaining empty seat on the board was
R. Wayne Duke. All directors will serve until the next annual
meeting of shareholders and until their respective successors are
duly elected and qualified, or until they earlier resign or are
dismissed. No director has any contractual rights to his
position.
The newly constituted Board of Directors then appointed (i) Mr.
Duke as Chairman of the Board of Directors and as Chief Executive
Officer and President, (ii) Mr. Marsik as Executive Vice
President, and (iii) Mr. Mark S. Pierce as Secretary. The board
elected to defer the decision of who would serve Registrant as
Chief Financial and Accounting Officer and Treasurer.
The Shareholders and the Subsidiary on the Closing Date undertook
to deliver audited financial statements of the Subsidiary as of
and for the period beginning at inception of the Subsidiary up to
and including September 30, 1997, all as required by applicable
securities laws.
The Subsidiary is in the bearing and power transmission business
and is a start up company. A division of the Subsidiary will
lease Bearings and Power transmission equipment to large
corporations and provide a software interchange program to
distributors on a lease program. Another division of the
Subsidiary will acquire obsolete inventory from distributors and
liquidate inventory through an interchange program.
As a result of the acquisition of the Subsidiary, Registrant now
has the following outstanding securities: (i) 2,575,217 shares of
Common Stock; (ii) Bridge Loan Options which, upon exercise, will
require the issuance of up to an additional 1,150,980 shares of
Common Stock and additional Series A Warrants, each of which
warrants will allow for the acquisition of one additional share
of Common Stock; (iii) 117,396 shares of Series A Preferred Stock
which, upon conversion and assuming no dividends, will require
the issuance of approximately 4,108,860 shares of Common Stock,
and additional Series A warrants, each of which warrants will
allow for the acquisition of one additional share of Common
Stock; and (iv) 70,000 shares of Series B Preferred Stock which,
upon conversion and assuming no dividends, will require the
issuance of approximately 10,500,000 additional shares of Common
Stock. Registrant does not have a sufficiently authorized
capitalization to provide for the exercise and/or conversion of
all of the foregoing securities, and will, therefore, call and
hold a shareholders' meeting for the purpose of increasing its
capitalization. The Series A and B Preferred Stock, given their
terms and conditions, are considered to be a part of the same
class of securities as the Common Stock for purposes of Section
16 of the Securities Exchange Act of 1934, as amended, and Rule
144 thereunder; thus, as of the date of this report, there were
considered to be approximately 17,184,077 shares of Common Stock
outstanding.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
None.
Item 6. Resignation of Registrant's Directors.
Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The financial statements required under this item will be filed
within the time frame set forth in Form 8 KSB.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
MIDLAND, INC.
(Registrant)
By: /s/ R. Wayne Duke
R. Wayne Duke,
Chief Executive Officer
DATE: October 10, 1997
EXHIBITS
Exhibit 1. Plan and Agreement of Purchase between registrant and
the shareholders of New Departure, Inc.
Exhibit 2. Series B Preferred Stock Provisions
EXHIBIT 1. PLAN AND AGREEMENT OF PURCHASE
PLAN AND AGREEMENT OF PURCHASE
This Plan and Agreement of Purchase entered into in Dallas, Texas
this the 7th day of October 1997, between Midland, Inc., a
Colorado corporation (Midland or, in the alternative,
{Purchaser), New Departure corporation, a Texas corporation (New
Departure or, in the alternative, Acquired Corporation") and the
shareholders of Acquired Corporation, all as listed on the
signature page hereto by name (collectively, the Shareholders).
The Purchaser will acquire from the Shareholders all of the
issued and outstanding shares of capital stock of the Acquired
Corporation, in exchange solely for shares of voting stock of the
Purchaser. Under this Plan, the Acquired Corporation will become
a subsidiary of the Purchaser. New Departure is in the Bearing
and Power Transmission Business and is a start up company. A
division of New Departure will lease Bearings and Power
transmission equipment to large corporations and provide a
software interchange program to distributors on a lease program.
Another division of New Departures will acquire obsolete
inventory from distributors and liquidate it through its
interchange program.
ARTICLE I
EXCHANGE OF CAPITAL STOCK
Transfer of Acquired Corporation's Capital Stock
1.01 Subject to the terms and conditions of this Agreement, each
Shareholder of the Acquired Corporations will transfer and
deliver to the Purchaser on the Closing Date 100% of their
certificates for shares of Capital Stock of and in New Departure,
duly endorsed in blank.
Consideration for Transfer
1.02 In exchange for all shares transferred by the Shareholders
pursuant to Paragraph 1.01, the Purchaser will forthwith issue
and cause to be delivered to the Shareholders, at or immediately
subsequent to the Closing Date, 70,000 shares of Series B
Preferred Stock. The shares of Series B Preferred Stock shall be
convertible into 150 Shares of Common Stock for each share of
Preferred B stock at any time, at the option of the Holder, after
the Charter of Midland is amended to authorize the issuance of
Fifty Million (50,000,000) shares of Common Stock. Such amendment
shall be filed as soon as possible after this transaction closes.
Until such time as the holders of Preferred B convert they shall
be allowed to vote said preferred at any shareholders meeting as
if it had been converted. (I.E. Each share of Preferred B shall
be entitled to a vote of 150 shares of Common at any and all
shareholders meetings)
Closing Date
1.03 Subject to the conditions precedent set forth in this
Agreement, and the other obligations of the parties set forth in
the Agreement, the Plan of Purchase shall be consummated at
Dallas, Texas, on or before October 10th 1997, at 10:00 o'clock
A.M. Consummation shall include the delivery by the Shareholders
of the Acquired Corporation, all of their shares of Capital Stock
of the Acquired Corporation, as provided in Paragraph 1.01 of
this Agreement, and the delivery by the Purchaser of its shares
of Preferred Stock, as provided in Paragraph 1.02 of this
Agreement. The date of the consummation of this Agreement is
referred to as the Closing Date. It is agreed that Mr. R. Wayne
Duke shall be appointed to the board of Midland and shall be
elected Chairman/ CEO of Midland as soon as the transaction
closes. Mr. Robert W. Marsik shall remain as a member of the
board and shall be appointed Executive Vice President of Midland.
Messrs. E. Robert Barbee, Arthur Malcolm and Charles Stidham
shall remain as a member of the board of Midland as well. Mr.
Mark S. Pierce will remain Secretary of Midland.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ACQUIRED CORPORATION
Organization and Standing of Acquired Corporation
2.01 New Departure is a corporation duly organized, validly
existing, and in good standing under the laws of Texas, with
corporate power to own property and carry on their business as it
is now being conducted. Copies of the articles of incorporation
of New Departure, that have been certified by the Secretary of
New Departure and delivered to the Purchaser, are complete and
accurate as of the date of this Agreement. New Departure, is
qualified to transact business as foreign corporation and is in
good standing in all jurisdictions in which its principal
properties are located or are not required to be qualified as a
foreign corporation to transact business in any other
jurisdiction.
Subsidiaries
2.02 New Departure has no subsidiaries.
Capitalization
2.03 New Departure has an authorized capitalization of 500,000
shares, and as of the date of this Agreement Two Hundred (200)
shares are issued and outstanding, fully paid, and non
assessable. There are no outstanding subscriptions, options,
contracts, commitments, or demand relating to the authorize but
unissued stock of New Departure or other agreements of any
character under which New Departure would be obligated to issue
or purchase shares of its capital stock.
Financial Statements
2.04 (a) A Balance Sheet and Operating Statements for the
period beginning at inception and ending on September 30, 1997,
shall be prepared by New Departure and reported on and audited by
an acceptable accounting firm of auditors within 75 days of the
Closing Date. All the audited financial statements described in
this Paragraph will be prepared in conformity with generally
accepted accounting principles, applied on a consistent basis,
and present fairly the financial position of New Departure as of
and for the period ended September 30, 1997. The financial
statements and opinions will conform with the requirements of
Regulation S X and Form 8 KSB.
Operations Since Balance Sheet
2.05 Since its Balance Sheet date of September 30, 1997, New
Departure has not, and prior to the Closing Date will not, have:
(a) issued or sold any stock, bond, or other corporate
securities; (b) except for liabilities incurred and obligations
entered into in the ordinary course of business, incurred any
obsolete or contingent obligation, including long term debt; (c)
except for liabilities shown on the balance sheet and current
liabilities incurred since that date in the ordinary course of
business, discharged or satisfied any lien or encumbrance, or
paid any obligation or liability; (d) mortgage, pledged, or
subjected to lien any of its assets except in the ordinary course
of business; (e) except in the ordinary course of business, sold
or transferred any of its tangible assets, or canceled any debts
or claims, or waived any rights of substantial value; (f) sold,
assigned, or transferred any patents, formulas, trademarks, trade
names, copyrights, licenses, or other intangible assets; (g)
incurred any materially adverse losses or damage, or become
involved in any strikes or other labor disputes; or (h) entered
into any transaction other than in the ordinary course of
business, except for the transaction that is the subject matter
of this Agreement.
Title to Assets
2.06 The Acquired Corporation has good and marketable title to
all its assets specified in the schedule described in Paragraph
2.07, all of which will be reflected in the balance sheet dated
September 30, 1997. All such assets are not subject to any
mortgage, pledge, lien, charge, security interest, encumbrance,
or restriction except those that: (a) will be disclosed on the
Balance Sheet as securing specified liabilities; (b) are
disclosed in the Schedule of Assets listed in Paragraph 2.07; and
(c) do not materially adversely affect the use of the asset. The
assets of New Departure are in good condition and repair, except
for reasonable wear and tear.
Schedule of Assets
2.07 Prior to the Closing Date, the Acquired Corporation will
have delivered to the Purchaser a separate Schedule of Assets,
specifically referring to this paragraph, containing a true and
complete: (a) legal description of all real property owned by
New Departure or in which New Departure has a leasehold interest;
(b) aged list of accounts receivable as of the Closing Date; (c)
list of all capitalized machinery, tools, equipment, and rolling
stock owned by New Departure that sets forth any liens, claims,
encumbrances, charges, restrictions, covenants, and conditions
concerning the listed items; (d) description of all machinery,
tools, equipment, and rolling stock in which New Departure has a
leasehold interest, with a description of each interest; (e) a
true and complete list of all patents, patent licenses,
trademarks, trademark registrations, trade names, copyrights, and
copyright registrations owned by New Departure; (f) list of all
fire and other casualty and liability policies of New Departure
in effect at the time of delivery of such schedule; and (g) all
software products, including source codes.
2.08 (a) Except as set forth in the Balance Sheet of New
Departure Corporation, dated September 30, 1997, described in
Paragraph 2.05, New Departure presently has no outstanding
indebtedness other than liabilities incurred in the ordinary
course of business or in connection with this transaction. New
Departure is not in default with respect to any terms or
conditions of any indebtedness. (b) New Departure has not made
any assignment for the benefit of creditors, nor has any
involuntary or voluntary petition in bankruptcy been filed by or
against New Departure.
Litigation
2.09 (a) New Departure is not a party to, nor has it been
threatened with, any litigation or governmental proceeding that,
if decided adversely to them, would have a material adverse
effect on the transaction contemplated by this Agreement, or on
the financial condition, net worth, prospects, or business of New
Departure. To the best of the Acquired Corporation's knowledge,
it is not aware of any facts that might result in any action,
suit, or other proceeding that would result in any material
adverse change in the business or financial condition of New
Departure. (b) To the best of its knowledge, New Departure is
not infringing on or otherwise acting adversely to any
copyrights, trademark rights, patent rights, or licenses owned by
any other person, and there is not pending claim or threatened
action with respect to such rights. New Departure is not
obligated to make any payments in the form of royalties, fees, or
otherwise to any owner or of any patent, trademark, trade name,
or copyright.
Compliance With Law and Other Instruments
2.10 The business operation of New Departure has been and is
being conducted in accordance with all applicable laws, rules,
and regulations of all authorities. New Departure is not in
violation of, or in default under, any terms or provision of its
Articles of Incorporation, its Bylaws, or of any lien, mortgage,
lease, agreement, instrument, order, judgment, or decree, or any
other type of restriction that would prevent consummation of the
exchange of securities contemplated by this Agreement.
Contractual Obligations
2.11 New Departure is not a party to or bound by any written or
oral: (a) contract not made in the ordinary course of business;
(b) contract with any labor union other than in the ordinary
course of business; (c) bonus, pension, profit sharing,
retirement, stock option, hospitalization, group insurance, or
similar plan providing employee benefits other than in the
ordinary course of business; (d) any real or personal property
lease or lessor other than in the ordinary course of business;
(e) advertising contract or contract for public relations
services other than in the ordinary course of business; (f)
purchase, supply, or service contracts in excess of $10,000
each, or in the aggregate of $100,000 for all such contracts
other than in the ordinary course of business; (g) deed of
trust, mortgage, conditional sales contract, security agreement,
pledge agreement, trust receipt, or any other agreement
subjecting any of assets or properties of New Departure to a
lien, encumbrance, or other restriction other than in the
ordinary course of business; (h) term contract continuing for a
period of more than 1 years that is not terminable without
liability to New Departure or its successors other than in the
ordinary course of business; or (i) contract that (1) contains a
predetermination of price or similar type of provision; or (2)
provides for a fixed price for goods or services sold. New
Departure has performed all obligations required to be performed
by it to date and is not in material default under any of the
contracts, leases, or other arrangements by which it is bound.
None of the parties with whom New Departure has contractual
arrangements are in default of their obligations.
Changes in Compensation
2.12 Since the Balance Sheet date of September 30, 1997, New
Departure has not granted any general pay increase to employees
or changed the rate of compensation, commission, or bonus payable
to any officer, employee, director, agent, or stockholder other
than in the normal course of business.
Inventories
2.13 Since the Balance Sheet date of September 30, 1997, New
Departure has continued to replenish its inventories in the
customary manner of entities engaged in the business New
Departure conducts, and will continue to do so until the Closing
Date.
Records
2.14 All of the account books, minute books, stock certificate
books, and stock transfer ledgers of New Departure are complete
and accurate.
No Brokers or Finders
2.15 All negotiations on the part of the Shareholders related to
this Agreement have been accomplished solely by the Shareholders
without the assistance of any person employed as a broker or
finder. The Shareholders have done nothing to give rise to any
valid claims against New Departure for a brokers commission,
finder's fee, or any similar charge.
Taxes
2.16 New Departure has filed all income tax returns and, in each
jurisdiction where qualified or incorporated, all income tax and
franchise tax returns that are required to be filed. New
Departure have paid all taxes as shown on the returns as has
become due, and have paid all assessments received that have
become due.
Full Disclosure
2.17 As of the Closing Date the Acquired Corporation will have
disclosed all events, conditions, and facts materially affecting
the business and prospects of New Departure. The Acquired
Corporation has not withheld knowledge of any events, conditions,
and facts that it has reasonable grounds to know may materially
affect the business and prospects of New Departure. None of the
representations and warranties made by the Acquired Corporation
in this Agreement or set forth in any other instrument furnished
to Purchaser contained any untrue statement of a material fact,
or fails to state a material fact.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Organization and Standing of Purchaser
3.01 Midland is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Colorado,
with corporate power to own property and carry on its business as
it is now being conducted. Copies of the articles of
incorporation of Midland have been certified by the Secretary
of State of Colorado, will be delivered to the Acquired
Corporation, and are complete and accurate as of the date of this
Agreement. Midland is qualified as a foreign corporation to
transact business in other jurisdictions.
Subsidiaries
3.02 Midland one subsidiary, known as Americas's Coffee Cup,
Inc., which is also a Colorado corporation.
Capitalization
3.03 Midland has an authorized capitalization of 10,000,000
shares of common stock of the par value of $0.40 per share.
Midland will amend its charter to increase the authorized to
50,000,000 as soon as possible after the closing of this
transaction. There will be at the Closing Date no outstanding
options, contracts, calls, commitments, or demands relating to
the authorized but unissued stock of Midland except as follows:
(a) 2,575,217 shares of common stock issued and outstanding in
the hands of the public; (b) 1,150,980 shares of common stock of
the Purchaser underlying certain "Bridge Loan Options" issued in
connection with Purchaser's recently completed public offering,
as well as 2,635,650 warrants underlying said options, each of
which allow the acquisition of one share of Purchaser's common
stock; (c) 1,890,000 shares of common stock underlying the
shares of Series A Preferred Stock issued to the persons
purchasing said shares in Purchaser's recently completed public
offering, as well as 2,700,000 warrants underlying said preferred
shares, each of which allow the acquisition of one share of
Purchaser's common stock; and (d) 2,218,860 shares of common
stock underlying the 63,396 shares of Series A Preferred Stock
issued subsequent to the recent public offering and 3,169,800
warrants underlying said series A Preferred Shares. Midland has
1,000,000 shares of preferred stock authorized, of which
approximately 117,396 shares have been issued. Other than as set
forth above, there are no other outstanding options, calls,
contracts or commitments relating to authorized but unissued
Common or Preferred Stock, except the shares of Series B
preferred to be issued herein.
Financial Statements
3.04 Midland has delivered to the Acquired Corporation the
balance sheet of Midland of June 30, 1997 and the related
statements of income and retained earnings of Midland for the
period ended June 30, 1997, all of which are true as of the
signing of this agreement. The December 31, 1996, 10 KSB and the
Prospectus dated August 14, 1996, have also been delivered to the
Shareholders. All the financial statements listed in this
Paragraph present fairly the financial condition of Midland at
the specified dates and the results of its operations for the
period specified. The statements were prepared in accordance
with generally accepted accounting principles applied in a manner
consistent with prior accounting periods.
Financial Condition Since Balance Sheet Date
3.05 Since the Balance Sheet date of June 30, 1997, there are
changes, events, and conditions that have occurred that
materially and adversely affect the financial condition, assets,
business, or prospects of Midland, and said conditions have been
disclosed.
Title to Assets
3.06 All book assets of Midland are in existence in its
possession, are in good condition and repair, and conform to all
applicable zoning and building laws and ordinances. Midland has
good and marketable title to all of its assets and, except as
shown on its financial statements as of June 30, 1997 holds such
assets subject to no mortgage, lien, or encumbrance.
Status of Transferred Shares
3.07 The shares of stock of Midland that are to be issued and
delivered to Shareholders pursuant to the terms of this agreement
will be validly authorized and issued, and will be fully paid and
non assessable. No shareholder of Midland will have any
preemptive right of subscription or purchase with respect to the
shares to be transferred.
Indebtedness
3.08 Except as set forth in the balance sheet of Midland of June
30, 1997, there is not outstanding indebtedness other than
liabilities incurred in the ordinarily course of business or in
connection with this transaction. Midland is in default with
respect to terms and conditions of indebtedness related to
Brothers Coffee and Ralph's Supermarkets on rent and the judgment
in favor of Brothers, Abraham & Christiansen and Daymar.
Litigation
3.09 Midland is not a party to, nor had it been threatened with
any litigation or governmental proceeding that could have a
material, adverse effect on the transaction contemplated by this
Agreement or on the financial condition of Midland other than
Matossin, Abraham and Christensen and Restaurant Blend and Daymar
Corporation.
Purchaser's Authority
3.10 The execution and performance of this Agreement have been
duly authorized by all requisite corporate action to allow the
Series B Preferred Stock to be issued, including the voting and
conversion rights and subject to shareholder approval shall
increase the authorized Common Stock to 50,000,000. This
Agreement constitutes a valid and binding obligation of Midland
in accordance with its terms. No provision of the Articles of
Incorporation, Bylaws, minutes, share certificates, or contracts
prevents Midland from delivering good title to its shares of
Midland capital stock in the manner contemplated by this
Agreement.
Brokers
3.11 Midland has not retained nor otherwise utilized the
services of any broker or finder in connection with the
transaction contemplated by this Agreement. Midland has done
nothing to give rise to any valid claims against the Acquired
Corporation for a brokerage commission, finder's fee, or any
similar charge.
ARTICLE IV
SURVIVAL OF WARRANTIES AND LIABILITIES
Nature and Survival of Representations and Warranties
4.01 All statements of fact contained in this Agreement, or in
any memorandum, certificate, letter, document, or other
instrument delivered by or on behalf of New Departure and
Midland pursuant to this agreement shall be deemed
representations and warranties made by any such party,
respectively, to each other party under this agreement. The
covenants, representations, and warranties of the parties and the
shareholders shall survive the Closing Date, and all inspections,
examinations, or audits on behalf of the parties and the
shareholder for a period of one (1) year following the Closing
Date.
Indemnification; Expenses
4.02 The Acquired Corporation shall pay its own expenses
incurred by them arising out of this Agreement and the
transactions contemplated in this Agreement, including but not
limited to all fees and expenses of its counsel and accountants.
Whether or not this Agreement is terminated, each of the parties
shall bear all expenses incurred by it in connection with this
Agreement and in the consummation of the transactions
contemplated by and in preparation for the Agreement.
Minority Shareholders
4.03 All shareholders of the Acquired Corporation shall have no
liability under this Agreement for any breach of the
representations or warranties made by New Departure under this
Agreement.
ARTICLES V
COMPLIANCE WITH SECURITIES LAWS
Unregistered Stock Under Federal Securities Act
5.01 Each shareholder of the Acquired Corporation acknowledges
that the shares of the Purchaser's Stock to be delivered to the
Shareholder pursuant to this Agreement have not been registered
under the Securities Act of 1933, as amended (the 1933 Act), and
that, therefore, the stock is not fully transferable except as
permitted under various exemptions contained in the 1933 Act and
the rules of the Securities and Exchange Commission interpreting
the 1933 Act. The provisions contained in the Paragraph 9.01 are
intended to ensure compliance with the 1933 Act.
No Distribution of Stock to Public
5.02 Each shareholder of the Acquired Corporation represents and
warrants to the Purchaser that the shareholder is acquiring the
shares of the Purchaser's Stock under this Agreement for the
shareholder's own account for investment, and not for the purpose
of resale or any other distribution of the shares. Each
shareholder also represents and warrants that the shareholder has
no present intention of disposing of all or any part of such
shares at any particular time, for any particular price, or on
the happening of any particular circumstances. Each shareholder
acknowledges that the Purchaser is relying on the truth and
accuracy of the warranties and representations set forth in this
Paragraph in issuing the shares without first registering the
shares under the 1933 Act.
No Transfers in Violation of the 1933 Act
5.03 Each shareholder of the Acquired Corporation covenants and
represents that none of the shares of Midland Stock that will be
issued to the shareholder pursuant to this Agreement, will be
offered, sold, assigned, pledged, transferred, or otherwise
disposed of except after full compliance with all of the
applicable provisions of the 1933 Act and the rules and
regulations of the Securities and Exchange Commission under the
1933 Act. Therefore, each shareholder agrees not to sell or
otherwise dispose of any of the shares of the Purchaser's Stock
received pursuant to this Agreement unless the shareholder: (a)
has delivered to the Purchaser a written legal opinion in form
and substance satisfactory to counsel for the Purchaser to the
effect that the disposition is permissible under the terms of the
1933 Act and regulations interpreting the 1933 Act; (b) has
complied with the registration and prospectus requirements of the
1933 Act relating to such a disposition; or (c) has presented
the Purchaser satisfactory evidence that such a disposition is
exempt from registration under Section 4(1) of the 1933 Act. The
Purchaser shall place a stop transfer order against transfer of
the shares until one of the conditions set forth in this
subparagraph has been met.
Investment Legend on Certificate
5.04 Each shareholder of the Acquired Corporation agrees that
the certificates evidencing the shares the shareholder will
receive under this Agreement will contain substantially the
following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN
FOR INVESTMENT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE UNLESS A REGISTRATION STATEMENT UNDER THE FEDERAL SECURITIES
ACT OF 1933, AS AMENDED, IS IN EFFECT FOR THE SECURITIES, OR ANY
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS IN
FACT APPLICABLE TO SUCH OFFER OR SALE.
Indemnification by Shareholders
5.05 If any time in the future any of the shareholders of the
Acquired Corporation sell or otherwise dispose of any of such
shares of Common Stock received from the purchaser without
registration under the 1933 Act or any similar federal statute
that may then be in effect, such shareholder agrees to indemnify
and hold harmless the Purchaser against any claim, liabilities,
penalties, costs, and expenses that may be asserted against or
suffered by the Purchaser as a result of the such disposition.
Future Registration
5.06 If within three (3) years after the Closing Date the
Purchaser decides to file a registration statement under the 1933
Act, covering a sale by the Purchaser or a shareholder of the
Purchaser of shares of the Purchaser's Common Stock for cash, the
Purchaser will mail to each shareholder written notice of its
intent to file such a registration statement. If a shareholder
delivers a written request to the Purchaser within twenty (20)
days after the mailing of such notice setting forth the number of
shares of Common Stock the shareholder intends to dispose of, the
purchaser agrees to use its best efforts to include such shares
of each shareholder in the registration statement. However, the
Purchaser shall not be so obligated to register the shares if in
the opinion of counsel for the Purchaser such shares may be
disposed of without compliance with the registration and
prospectus requirements of the 1933 Act. If, in spite of the
best efforts of the Purchaser, the inclusion of all of the shares
that each shareholder intends to sell is not acceptable to the
managing underwriter or underwriters of the offering, the
Purchaser may limit the number of shares of each shareholder to
be sold to ten percent (10% of the total number of shares being
offered in the registration statement. If the offering is not
completed within ninety (90) days after the effective date of the
registration statement, the Purchaser shall be entitled to de
register any unsold portion of such shares. The manner and
conduct of any such registration, including the contents of such
registration statement and of any related underwriting or other
agreements shall be entirely in the control and discretion of the
purchaser. Each shareholder agrees to cooperate with the
Purchaser in the preparation and filing of any registration
statement prepared and filed under this Subparagraph. The
Purchaser shall bear all out of pocket expenses except for
registration fees incurred in performing the obligations under
this Subparagraph except that each shareholder shall make the
customary agreements, representations, warranties, and
indemnification's to the underwriters in any such offering with
respect to any shares included at the shareholder's request.
Securities Act
5.07 It is agreed that the consummation of this Agreement is not
subject to issuance by the Texas of Colorado Securities
Commissioner of any permit and any other requirements of Texas or
Colorado law applying to the issuance and transfer of the
Purchaser's stock in exchange for shares of Capital Stock of New
Departure.
ARTICLE VI
MISCELLANEOUS
Amendment
6.01 This Agreement may be amended or modified at any time and
in any manner only by an instrument in writing executed by the
President of New Departure and the President of Midland
provided it has been approved by the Shareholders of each party.
Extension of Time; Waiver
6.02 Either New Departure or Midland may, in writing: (a)
extend the time for the performance of any of the obligations of
any other party to the Agreement; (b) waive any inaccuracies and
misrepresentations contained in this Agreement or any document
delivered pursuant to the Agreement made by any other party to
the Agreement; (c) waive compliance with any of the covenants or
performance of any obligations contained in this Agreement by any
other party to the Agreement; and/or (d) waive the fulfillment
of any condition precedent to the performance by any other party
to the Agreement.
Assignment; Binding Nature; Beneficiaries
6.03 (a) Neither this entire Agreement nor any right created by
the Agreement shall be assignable by either New Departure or
Midland without the prior written consent of the other, except by
the laws of succession. (b) Except as limited by the provisions
of subparagraph (a), this Agreement shall be binding on and inure
to the benefit of the respective successors and assigns of the
parties, as well as the parties. (c) Nothing in this Agreement,
expressed or implied, is intended to confer upon any person,
other than the parties and their successors, any rights or
remedies under this Agreement.
Notices
6.04 Any notice or other communication required or permitted by
this Agreement must be in writing and shall be deemed to be
properly given when delivered in person to an officer of the
other party, when deposited in the United States mails for
transmittal by certified or registered mail, postage prepaid, or
when deposited with a public telegraph company for transmittal,
charges prepaid, provided that the communication is addressed:
(a) In the case of New Departure Corporation, to:
PO Box 29415
Dallas, TX 75229 0415
or to such other person or address designated by New Departure
Corporation to receive notice.
(b) In the case of Midland, to:
Mark S. Pierce
1999 Broadway, Ste. 3235
Denver, Colorado 80202
or to such other person or address designated by Midland, Inc. to
receive notice.
Headings
6.05 Paragraph and other headings contained in this Agreement
are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Entire Agreement
6.06 This instrument and the exhibits to this instrument contain
the entire, and supersedes any previous agreements, Agreement
between the parties with respect to the transaction contemplated
by the Agreement. It may be executed in any number of
counterparts by the aggregate of the counterparts together
constitute only one and the same instrument.
Effect of Partial Invalidity
6.07 In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability enforceability shall
not affect any other provisions of this Agreement, but this
Agreement shall be constructed as if it never contained any such
invalid, illegal, or unenforceable provisions.
Controlling Law
6.08 The validity, interpretation, and performance of this
agreement shall be controlled by and construed under the laws of
the state of Texas, the State in which this Agreement is being
executed.
Attorney's Fees
6.09 If any action at law or in equity, including an action for
declaratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorney's fees from the other
party. The attorney's fees may be ordered by the court in the
trial of any action described in this Paragraph or may be
enforced in a separate action brought for determining attorney's
fees.
Specific Performance
6.10 The parties declare that it is impossible to measure in
money the damages that will accrue to a party or its successors
as a result of the other parties' failure to perform any of the
obligations under this Agreement. Therefore, if a party or its
successor institutes any action or proceeding to enforce the
provisions of this Agreement, any party opposing such action or
proceeding agrees that specific performance may be sought and
obtained for any breach of this Agreement.
Executed on the 7h day of October, 1997, in Dallas Texas.
PURCHASER: Midland, Inc.
By:/s/ Robert W. Marsik
Robert W. Marsik, President
ACQUIRED CORPORATION: New Departure Corporation
By: /s/ R. Wayne Duke
R. Wayne Duke, President
THE SHAREHOLDERS:
SPRING VALLEY TRUST
By: /s/ R. Wayne Duke
R. Wayne Duke, Trustee
SPRING VALLEY TRUST II
By: /s/ R. Wayne Duke
R. Wayne Duke, Trustee
EXHIBIT 2 PREFERRED STOCK PROVISIONS
SERIES B: CONVERTIBLE, VOTING PREFERRED STOCK PROVISIONS
The Series B Convertible, Voting Preferred Stock (the Preferred
Stock or the Series B Preferred Stock) shall consist of one (1)
series of One Hundred Forty Nine Thousand Two Hundred and Fifty
Nine (149,259) shares of the preferred stock of America's Coffee
Cup, Inc., d/b/a Wayward Ventures, Inc. (the Company), with each
share to be identical to every other in all respects. The
following sets forth the provisions of the Series B Preferred
Stock.
Part 1: Dividends
Dividend Obligation. The holders of the issued and outstanding
Series B Preferred Stock shall not be entitled to receive any
dividends on their shares of stock.
Part 2: Conversion
(2.01) Conversion Price and Automatic Conversion. Each share of
outstanding Series B Preferred Stock is convertible into One
Hundred Fifty (150) shares of the common stock of the Company
(the Conversion Amount and the Company, respectively) at any time
prior to October 1,1998, at the sole option of the holder of each
share of Series B Preferred Stock. On October 1, 1998, the
Series B Preferred Stock shall automatically convert into One
Hundred fifty (150) shares of Common Stock.
(2.02) Exercise Procedure. Any share of Series B Preferred
Stock shall be deemed to have been exercised when the Company
shall have received the certificate evidencing such shares
appropriately endorsed to reflect conversion thereof, whereupon
the Company shall issue the shares of Common Stock to which the
exercising shareholder is entitled.
(2.03) Reservation of Shares. The Company shall at all times
reserve and keep available for the purpose of effecting the
conversion of the Series B Preferred Stock the full number of
shares of Common Stock then deliverable upon the conversion of
all shares of the then outstanding Series B Preferred Stock.
(2.04) Fractional Shares. No fractional share of Common Stock
shall be issued upon conversion of a Series B Preferred Stock
share, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay to the holder an
amount equal to the book value allocable to the fractional share
of Common Stock which would have otherwise been issued, as
determined using Generally Accepted Accounting Principles.
(2.05) Payment of Taxes. The Company shall pay any and all
taxes that may be required in respect of the issuance or delivery
of Common Stock on conversion of a share of Series B Preferred
Stock. The Company shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in
the issuance and delivery of Common Stock in a name other than
that in which the shares being converted were registered, and no
such issuance or delivery shall be made unless and until the
person requesting such has paid to the Company the amount of any
such tax, or has established to the satisfaction of the Company
that such tax has been paid.
(2.06) Registration, Approval and Listing. If any shares of
Common Stock required to be issued upon conversion of Series B
Preferred Stock shall require registration with or approval by
any governmental authority under any federal or state law, or
listing on any national securities exchange before such shares
may be issued, the Company shall, at its own expense, cause the
accomplishment of the same, and shall expeditiously work towards
accomplishment of the same; however, each holder of Series B
Preferred Stock shall be obligated to assist the Company to the
fullest extent possible in its endeavors.
(2.07) Delivery of New Certificates. Certificates for Common
Stock acquired upon conversion shall be delivered to the holder
named therein within 15 business days after exercise and delivery
to the Company. Unless all shares of Series B Preferred Stock
are converted, the Company shall, within the aforesaid period,
prepare a new certificate, substantially identical to that
surrendered, representing the balance of the shares previously
represented which have not been converted.
(2.08) Converted Series B Preferred Stock to be Canceled or
Returned to Treasury. The Company, by resolution of its Board
of Directors, may, in its sole discretion, either cancel or
return to treasury any shares of Series B Preferred Stock
converted or for any other reason acquired.
Part 3: Redemption
Optional and Mandatory Redemption. No one, including the
Company, shall be entitled to redeem the Series B Preferred Stock
under any circumstances at any time.
Part 4: Liquidation.
The Series B Preferred Stock shall not be entitled to
preferential liquidation rights over any other class or series of
stock previously or which may subsequently be issued by the
Company.
Part 5: Sinking Fund
The Series B Preferred Stock shall not be entitled to the
establishment of any sinking fund for any purpose.
Part 6: Voting Rights
(6.01) General Voting Right. The Series B Preferred Stock shall
be entitled to vote on any and all matters which the holders of
Common Stock and Series A Preferred Stock are entitled to vote.
The Series B Preferred Stock shall vote as a class with the
Common Stock and the Series A Preferred Stock on all matters,
other than as set forth below in this Part 6, and each
outstanding share of Series B Preferred Stock shall be entitled
to One Hundred and Fifty (150) votes on each matter submitted for
approval.
(6.02) Separate Voting Approval of Series B Preferred Stock
Required. As long as any share of Series B Preferred Stock is
outstanding, the Company shall not, without the approval of the
holders of no less than two thirds (2/3) of the outstanding
Series B Preferred Stock:
(a) amend or repeal any revision of, or add any provision to,
the articles of incorporation governing the Company, if such
action would alter or change the preferences, rights, privileges,
or powers of, or the restrictions provided for the benefit of,
the Series B Preferred Stock;
(b) authorize, create or issue shares of any class of stock
having any preference or priority superior to any preference or
priority of the Series B Preferred Stock, or authorize, create,
or issue shares of stock of any class or any obligations
convertible into or exchangeable for, or having optional rights
to purchase, any shares of stock of the Company having any such
preferences; or
(c) make any provision in the Bylaws governing the Company
imposing any restrictions upon the right to transfer or
hypothecate the Series B Preferred Stock, except provisions
required by the laws of the State of Colorado.
Part 7: Adjustment of Conversion Amount.
The Conversion Amount shall be subject to adjustment as follows:
(7.01) If prior to the expiration of the conversion period by
its terms the Company shall issue any shares of Common Stock as a
share dividend or shall subdivide the number of outstanding
shares of Common Stock into a greater number of shares, the
Conversion Amount shall be increased proportionately.
Conversely, if the Company shall reduce the number of shares of
Common Stock outstanding by combining such shares into a smaller
number of shares, the Conversion Amount shall be decreased
proportionately.
(7.02) Notwithstanding the provisions of this Part 7, no
adjustments of the Conversion Amount shall be made whereby such
amount is adjusted in an amount by less than ten shares of Common
Stock, or until the aggregate of such adjustments shall equal or
exceed ten shares of Common Stock.
(7.03) No adjustment of the Conversion Amount shall be made as a
result of or in connection with the issuance of Common Stock
pursuant to (i) options, warrants, and/or share purchase
agreements outstanding or in effect on the date hereof (ii) the
establishment of additional option or warrant plans of the
Company, (iii) the modification, renewal or extension of any plan
now in effect or hereafter created, (iv) the issuance of Common
Stock on exercise of any options pursuant to such plans, (v) the
issuance of Common Stock in connection with an acquisition,
consolidation, recapitalization or merger of any type, (vi)
compensation or similar arrangements for officers, employees,
contractors, consultants or agents of the Company or any
subsidiary or (vii) the issuance of Common Stock in private or
public offerings.
(7.04) Before taking any action which would cause an adjustment
reducing the Conversion Amount to less than the par value of the
Common Stock issuable upon conversion of the Series B Preferred
Stock, the Company shall take any corporate action which may, in
the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and non
assessable shares of Common Stock at the adjusted Conversion
Amount.
Part 8: Additional Provisions.
The Series B Preferred Stock may be subordinated in any respect
to the terms and provisions of the Common Stock and to the terms
and provisions of any other series of the outstanding preferred
stock of the Company which may be issued and become outstanding
subsequent to the Series B Preferred Stock, unless specifically
provided to the contrary above.
