UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996
---------------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 33-55254-14
PACIFIC FOREST CORPORATION
--------------------------
(Formerly Zeus Enterprises, Inc.)
(Exact name of registrant as specified in its charter)
NEVADA 87-0438451
-------------------------------------------- ----------------------------
(State or other jurisdiction of incorporation (IRS Employer Identification
or organization) Number)
1800 East Sahara, Suite 107
Las Vegas, Nevada 89104
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 792-7480
---------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ X ] Yes [ ] No
Class Outstanding as of July 1, 1996
- ---------------------------- ------------------------------------
CLASS A COMMON STOCK 1,245,000 shares
Par Value $0.001
1
<PAGE>
PART I - FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
Item 1. Financial Statements
- -------------------------------------------------------------------------------
Financial Statements Page
Consolidated Balance Sheets as at December 31, 1995 and
June 30, 1996 F-1
Consolidated Statements of Operations for the quarter ending
June 30, 1996 F-2
Consolidated Statement of Shareholders' Equity for the period
from April 16, 1986 to June 30, 1996 F-3
Consolidated Statements of Cash Flows for the quarter ending
June 30, 1996 F-4
Selected Notes to Consolidated Financial Statements F-5
- -------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
- -------------------------------------------------------------------------------
Results of Operations
During the quarter ended June 30, 1996, the Company acquired 67% of the issued
and outstanding capital of Pacific Crown (Fiji) Limited, subsequently renamed
Pacific Forest (Fiji) Limited, a Fijian based operating company. Pacific Forest
(Fiji) Limited was acquired towards the end of June, from Chancellor Investments
A.V.V., a related party, for the issuance of 100,000 shares, valuing the
acquisition at approximately $430,000. A subsequent issue of 45,000 shares was
made for debts of the Fijian company totaling approximately $393,000.
As there was no operating business in the Company prior to the acquisition of
Pacific Forest (Fiji) at the end of the quarter, the results for the quarter and
six months to June 30 do not accurately reflect the activities of the Company.
Operating results for the quarter ended June 30, 1996 are not necessarily
indicative of the results that can be expected for the year ending December 31,
1996.
During the balance of the fiscal year, it is envisaged that the Company will
continue to incur costs and make losses while it establishes its timber milling
operation in Fiji. The nature of the losses, therefore, is not operational, but
associated with the establishment of the mill. The result will be a timber mill
easily capable of producing 1,300 Cubic Yards of sawn timber per month.
2
<PAGE>
Liquidity and Capital Resources
The Balance Sheet as at June 30 reflects the assets and liabilities following
the acquisition of Pacific Forest (Fiji). The Current Assets and Current
Liabilities are immaterial at this stage, reflecting the fact that operations
have yet to commence.
Non Current Assets include the accumulation of costs with the acquisition and
establishment of a timber mill on the Fijian island of Vanua Levu. It is
estimated that the costs of completion of the mill and initial working capital
will be of the order of $750,000 which will be funded on a pro-rata basis
through Chancellor Group, Inc., a company associated with Company President,
Neil Green, and two other shareholders.
Under this arrangement, funding has already been provided amounting to $178,833,
shown as Non Current Liabilities, which will be repaid through an issue of
shares.
Subject to negotiations with the holders of the 33% of Pacific Forest (Fiji) not
already owned, being local Fijian landowners (Mataqali), and with the Fiji Trade
and Investment Board (FTIB) and Suva Stock Exchange, the Company intends to
acquire the remaining shares at a cost of $2,000,000 paid through the issuance
of shares. It is intended that these shares will be listed for trading on the
Suva Stock Exchange.
Impact of Inflation
The Company believes that its activities are not materially affected by
inflation.
Foreign Currency Exposure
At this time, the Company's exposure to Foreign Currency fluctuation is minimal,
related only to movements in the value of assets, with an offsetting movement in
liabilities. Once in production, at least 90% of the Company's revenue will be
denominated in US dollars, with costs and expenses in Fijian Dollars.
Over time, the value of the Fijian Dollar tends to track the US Dollar,
minimizing fluctuations. Risk is estimated to be small.
Exchange Rate
The Exchange Rate at June 30, 1996 was: $US1.00 = $FJD1.40
3
<PAGE>
PART II - OTHER INFORMATION
- -------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
- -------------------------------------------------------------------------------
(a) The following exhibits are included in this filing:
Acquisition / Exchange Agreement Page E-1
Financial Data Schedule
(b) Reports on Form 8-K - Not applicable.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PACIFIC FOREST CORPORATION
By: s/ Neil Alan Green
Neil Alan Green, President
Dated: July 25, 1996
5
<PAGE>
PACIFIC FOREST CORPORATION AND SUBSIDIARY
(Formerly Zeus Enterprises, Inc.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS 6/30/96
(Unaudited) 12/31/95
----------------- -----------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 10,414 $ 50,000
Accounts receivable 5,030 -0-
Prepaid expenses 40,143 -0-
Loans receivable - related parties 1,106 -0-
----------------- -----------------
TOTAL CURRENT ASSETS 56,693 50,000
PROPERTY, PLANT, AND EQUIPMENT
Buildings 21,429 -0-
Plant and equipment 775,350 -0-
Vehicles 5,005 -0-
Accumulated depreciation (47,604) -0-
----------------- -----------------
NET PROPERTY, PLANT, AND EQUIPMENT 754,180 -0-
OTHER ASSETS
Timber rights 2,143 -0-
Loan - related party 3,184 -0-
5,327 -0-
----------------- -----------------
$ 816,200 $ 50,000
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 3,725 $ -0-
----------------- -----------------
TOTAL CURRENT LIABILITIES 3,725 -0-
LONG-TERM LIABILITIES
Loans payable - related parties 223,584 -0-
----------------- -----------------
223,584 -0-
----------------- -----------------
TOTAL LIABILITIES 227,309 -0-
Minority interest in subsidiary 49,000 -0-
SHAREHOLDERS' EQUITY Common stock par value $.001:
100,000,000 shares authorized; 1,245,000 shares issued
(1,100,000 at 12/31/95) 1,245 1,100
Additional paid-in capital 730,758 50,900
(Deficit) accumulated during development stage (192,112) (2,000)
----------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 539,891 50,000
----------------- -----------------
$ 816,200 $ 50,000
================= =================
</TABLE>
See Selected Notes to Consolidated Financial Statements.
F-1
<PAGE>
PACIFIC FOREST CORPORATION AND SUBSIDIARY
(Formerly Zeus Enterprises, Inc.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
4/16/86 (date
Three Months Ended Six Months Ended of inception)
6/30/96 6/30/95 6/30/96 6/30/95 to 6/30/96
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Income $ -0- $ -0- $ -0- $ -0- $ -0-
General and administrative expenses 971 -0- 971 -0- 2,971
------------- ------------- ------------- ------------- -------------
971 -0- 971 -0- 2,971
------------- ------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE
INCOME TAXES (971) -0- (971) -0- (2,971)
PROVISION FOR INCOME TAXES -0- -0- -0- -0- -0-
------------- ------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (971) $ -0- $ (971) $ -0- $ (2,971)
============= ============= ============= ============= =============
INCOME (LOSS) PER COMMON SHARE
Net income (loss) per weighted
average common share
outstanding $ (.00) $ .00 $ (.00) $ .00
============= ============= ============= =============
Weighted average number of
common shares outstanding 1,103,187 1,000,000 1,101,593 1,000,000
============= ============= ============= =============
</TABLE>
See Selected Notes to Consolidated Financial Statements.
F-2
<PAGE>
PACIFIC FOREST CORPORATION AND SUBSIDIARY
(Formerly Zeus Enterprises, Inc.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Period from April 16, 1986 (Date of Inception) to June 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
Par Value $0.001 Paid-in Development
Shares Amount Capital Stage
------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Balances at 4/16/86 (Date of Inception) -0- $ -0- $ -0- $ -0-
Issuance of common stock (restricted) at $.002
per share at 4/16/86 1,000,000 1,000 1,000 -0-
Net loss for period (1,950)
------------- ------------- ----------------- -----------------
Balances at 12/31/86 1,000,000 1,000 1,000 (1,950)
Net loss for year (10)
------------- ------------- ----------------- -----------------
Balances at 12/31/87 1,000,000 1,000 1,000 (1,960)
Net loss for year (10)
------------- ------------- ----------------- -----------------
Balances at 12/31/88 1,000,000 1,000 1,000 (1,970)
Net loss for year (10)
------------- ------------- ----------------- -----------------
Balances at 12/31/89 1,000,000 1,000 1,000 (1,980)
Net loss for year (10)
------------- ------------- ----------------- -----------------
Balances at 12/31/90 1,000,000 1,000 1,000 (1,990)
Net loss for year (10)
------------- ------------- ----------------- -----------------
Balances at 12/31/91 1,000,000 1,000 1,000 (2,000)
Net loss for year -0-
------------- ------------- ----------------- -----------------
Balances at 12/31/92 1,000,000 1,000 1,000 (2,000)
Net income for year -0-
------------- ------------- ----------------- -----------------
Balances at 12/31/93 1,000,000 1,000 1,000 (2,000)
Net income for year -0-
------------- ------------- ----------------- -----------------
Balances at 12/31/94 1,000,000 1,000 1,000 (2,000)
Issuance of common stock (restricted) at $.50
per share at 9/12/95 100,000 100 49,900
Net income for year -0-
------------- ------------- ----------------- -----------------
Balances at 12/31/95 1,100,000 1,100 50,900 (2,000)
Issuance of common stock (restricted) at $.9796
per share to acquire subsidiary at 6/28/96 100,000 100 287,001 (189,141)
Issuance of common stock (restricted) at $8.73
per share to retire debt of subsidiary at 6/28/96 45,000 45 392,857
Net loss for period (971)
------------- ------------- ----------------- -----------------
Balances at 6/30/96 1,245,000 $ 1,245 $ 730,758 $ (192,112)
============= ============= ================= =================
</TABLE>
See Selected Notes to Consolidated Financial Statements.
F-3
<PAGE>
PACIFIC FOREST CORPORATION AND SUBSIDIARY
(Formerly Zeus Enterprises, Inc.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
4/16/86 (date
Three Months Ended Six Months Ended of inception)
6/30/96 6/30/95 6/30/96 6/30/95 to 6/30/96
------------- ------------- ------------- ------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net loss $ (971) $ -0- $ (971) $ -0- $ (2,971)
Adjustments to reconcile net (loss)
to net cash required by operating
activities:
Amortization -0- -0- -0- -0- 50
Changes in assets:
Prepaid expenses (40,000) -0- (40,000) -0- (40,000)
------------- ------------- ------------- ------------- -------------
(40,000) -0- (40,000) -0- (39,950)
------------- ------------- ------------- ------------- -------------
NET CASH REQUIRED BY
OPERATING ACTIVITIES (40,971) -0- (40,971) -0- (42,921)
CASH FLOWS FROM INVESTING
ACTIVITIES
Organization costs -0- -0- -0- -0- (50)
Cash acquired from subsidiary 1,385 -0- 1,385 -0- 1,385
------------- ------------- ------------- ------------- -------------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 1,385 -0- 1,385 -0- 1,335
CASH FLOWS FROM FINANCING
ACTIVITIES
Stock sold -0- -0- -0- -0- 52,000
------------- ------------- ------------- ------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES -0- -0- -0- -0- 52,000
------------- ------------- ------------- ------------- -------------
NET INCREASE (DECREASE)
IN CASH (39,586) -0- (39,586) -0- 10,414
CASH AT BEGINNING OF PERIOD 50,000 -0- 50,000 -0- -0-
------------- ------------- ------------- ------------- -------------
CASH AT END OF PERIOD $ 10,414 $ -0- $ 10,414 $ -0- $ 10,414
============= ============= ============= ============= =============
</TABLE>
SUPPLEMENTAL FINANCING ACTIVITIES
During the period ended June 30, 1996, the Company issued 100,000 shares of
restricted common stock to acquire a subsidiary with net assets of $147,005
at market value. The Company also issued 45,000 shares of its restricted
common stock to retire a debt owed by its subsidiary in the amount of
$392,902.
See Selected Notes to Consolidated Financial Statements.
F-4
<PAGE>
PACIFIC FOREST CORPORATION AND SUBSIDIARY
(Formerly Zeus Enterprises, Inc.)
(A DEVELOPMENT STAGE COMPANY)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated balance sheets and statements of cash flows and shareholders'
equity as of June 30, 1996 include the accounts of the Company and its 66.7%
owned subsidiary Pacific Forest (Fiji) Limited. The statements of operations are
for the Company only. All significant intercompany balances and transactions
have been eliminated in consolidation.
Accounting Methods
The Company recognizes income and expenses based on the accrual method of
accounting.
Cash and Cash Equivalents
All short term investments purchased with an original maturity of three months
or less are considered to be cash equivalents. Cash and cash equivalents
primarily include cash on hand and amounts on deposit with financial
institutions.
Dividend Policy
The Company has not yet adopted any policy regarding payment of dividends.
Income Taxes
The Company records the income tax effect of transactions in the same year that
the transactions enter into the determination of income, regardless of when the
transactions are recognized for tax purposes. Tax credits are recorded in the
year realized. Since the Company has not yet realized income as of the date of
this report, no provision for income taxes has been made.
In February 1992, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
supersedes substantially all existing authoritative literature for accounting
for income taxes and requires deferred tax balances to be adjusted to reflect
the tax rates in effect when those amounts are expected to become payable or
refundable.
At December 31, 1995 a deferred tax asset has not been recorded due to the
Company's lack of operations to provide income to use the net operating loss
carryover of $2,000 which expires as follows:
Year Ended Expires Amount
----------------------- -------------------------- -----------------
December 31, 1986 December 31, 2001 $ 1,950
December 31, 1987 December 31, 2002 10
December 31, 1988 December 31, 2003 10
December 31, 1989 December 31, 2004 10
December 31, 1990 December 31, 2005 10
December 31, 1991 December 31, 2006 10
-----------------
$ 2,000
=================
Trading Securities
The Company has adopted the reporting requirements of Statement of Financial
Accounting Standards No. 115 whereby trading securities are reported at market
value.
F-5
<PAGE>
PACIFIC FOREST CORPORATION AND SUBSIDIARY
(Formerly Zeus Enterprises, Inc.)
(A DEVELOPMENT STAGE COMPANY)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
June 30, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated to US
dollars at the exchange rate at the balance sheet date. Income statement items
are translated at an average currency exchange rate. The resulting translation
adjustment is recorded as a separate component of stockholders' equity.
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under laws of the State of Utah on April 16, 1986
and has been in the developmental stage since incorporation. On December 30,
1993, the Company was dissolved as a Utah corporation and reincorporated as a
Nevada corporation. The Company intends to operate in the industry of promoting
and developing timber plantations, and harvesting, milling and exporting timber
resources through its subsidiary Pacific Forest (Fiji) Limited, a Fijian
company.
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000 shares of its common
stock to Capital General Corporation for $2,000 cash for an average
consideration of $.002 per share. On September 12, 1995, the Company sold an
additional 100,000 shares of its common stock to Capital General Corporation for
$50,000 cash for an average consideration of $.50 per share. The Company's
authorized stock includes 100,000,000 shares of common stock at $.001 par value.
On June 28, 1996, the Company sold 100,000 shares for its common stock for
$430,000 for an average consideration of $4.30 per share for the acquisition of
the Fijian subsidiary. On June 28, 1996, the Company sold 45,000 shares of its
common stock for $393,000 for an average consideration of $8.73 to settle debts
of the Fijian subsidiary.
NOTE 4: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principals for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, all
adjustments (consisting of normal accruals) considered necessary for a fair
presentation of these financial statements have been included. Operating results
for the six months ended June 30, 1996 are not necessarily indicative of the
results that can be expected for the year ending December 31, 1996.
NOTE 5: RELATED PARTY TRANSACTIONS
The Company utilizes space on a rent-free basis in the Sydney and New York
offices of its principal shareholder, Chancellor Australia Pty Ltd. This
arrangement is expected to continue. The Company has no agreements with respect
to the maintenance or future acquisition of office facilities.
F-6
<PAGE>
PACIFIC FOREST CORPORATION AND SUBSIDIARY
(Formerly Zeus Enterprises, Inc.)
(A DEVELOPMENT STAGE COMPANY)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
June 30, 1996
NOTE 6: ACQUISITION OF SUBSIDIARY
On June 28, 1996 the Company issued 100,000 shares of its common stock to
acquire 67% of the issued and outstanding capital of Pacific Crown (Fiji) Ltd.,
subsequently renamed Pacific Forest (Fiji) Limited, in a transaction accounted
for under the purchase method of accounting.
F-7
<PAGE>
PACIFIC FOREST CORPORATION AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Year Six Months
ended ended
12/31/95 6/30/96
----------------- -----------------
<S> <C> <C>
Operating Revenue $ -0- $ -0-
Cost of Sales -0- -0-
GROSS PROFIT (LOSS) -0- -0-
General and Administrative expenses 136,403 53,709
----------------- -----------------
136,403 53,709
----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES (136,403) (53,709)
PROVISION FOR INCOME TAXES -0- -0-
----------------- -----------------
NET INCOME (LOSS) $ (136,403) $ (53,709)
================= =================
INCOME (LOSS) PER COMMON SHARE
Net income (loss) per weighted average common share
outstanding $ (.11) $ (.04)
================= =================
Weighted average number of common shares outstanding 1,200,000 1,200,000
================= =================
</TABLE>
F-8
<PAGE>
ACQUISITION / EXCHANGE AGREEMENT
THIS ACQUISITION / EXCHANGE AGREEMENT (this "Agreement"), is entered into this
28th day of June, 1996
BETWEEN:
PACIFIC FOREST CORPORATION, a Nevada corporation of 1800 E. Sahara, Suite 107,
Las Vegas, Nevada 89104 USA ("Pacific")
AND:
CHANCELLOR INVESTMENTS A.V.V., (a shareholder of PACIFIC CROWN (FIJI) LIMITED),
a corporation incorporated in Aruba, of Dominicanessen straat 22, Oranjestad,
Aruba ("Chancellor")
Premises
A. Pacific is a corporation existing under the laws of the state of Nevada,
having been incorporated on December 30, 1993.
B. Pacific Crown (Fiji) Limited is a corporation existing under the laws of
Fiji having been incorporated on April 7, 1995 ("PCFL").
C. Chancellor Investments A.V.V., a shareholder of PCFL owns 67% of the issued
and paid up capital of PCFL.
D. The parties have negotiated a transaction whereby all of the shares of PCFL
owned by Chancellor will be exchanged for similar shares of common stock of
Pacific based on the terms and conditions of this Agreement.
E. The parties have reached agreement as to the business terms of the
transaction and desire to set forth in this Agreement the details thereof.
Agreement
NOW, THEREFORE, on the stated premises, which are incorporated herein by
reference, and for and in consideration of the mutual covenants and agreements
hereinafter set forth, the mutual benefits to the parties to be derived
herefrom, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, it is hereby agreed as follows:
E-1
<PAGE>
ARTICLE 1
Acquisition/Exchange
Section 1.01 The Acquisition/Exchange.
At Closing, as herein defined, and subject to all the terms, covenants, and
conditions set forth in this Agreement, Pacific hereby agrees to issue and
deliver to Chancellor a certificate or certificates representing 100,000 shares
of Pacific Exchanged Stock, and Chancellor agrees to assign, transfer, and
deliver to Pacific, free and clear of any and all liens, pledges, encumbrances,
charges, restrictions, or claims of any kind, nature, or description,
certificates representing shares of the issued and outstanding capital stock of
PCFL held by Chancellor, constituting 67% of the issued and outstanding voting
capital stock of PCFL prior to the Closing, so that 6,000 shares of PCFL shall
be exchanged for 100,000 shares of Pacific Exchanged Stock, as herein defined.
Section 1.02 Adjustments to Exchange Ratio.
For all relevant purposes of the Acquisition/Exchange of PCFL Stock, the number
of shares of Pacific Exchanged Stock to be issued and delivered pursuant to this
Agreement shall be approximately adjusted to take into account any issue of
Pacific Exchanged Stock which may occur between the date of the execution of
this Agreement and the date of delivery of such shares.
Section 1.03 Closing.
The closing ("Closing") of the transactions contemplated by this Agreement shall
be on a date and at such time and place as the parties may agree ("Closing
Date"), within the thirty (30) day period commencing with the last to occur of
the following;
(a) The final date prescribed by any state or federal regulatory agency
pursuant to any state or federal law, rule, or regulation prior to
which the transactions may not be effectuated; and
(b) The satisfaction of all other conditions precedent to Closing.
Section 1.04 Closing Events
(a) Pacific's Deliveries. Subject to fulfilment or waiver of the
conditions set forth in Article VI, Pacific shall deliver to
Chancellor at Closing all the following:
(i) Certificate of good standing from the appropriate authorities,
issued as of a date within sixty days prior to the Closing Date,
certifying that Pacific is in good standing as a corporation in
the state of Nevada;
(ii) Incumbency and specimen signature certificates dated the Closing
Date with respect to the officers of Pacific executing this
Agreement and any other document delivered pursuant hereto on
behalf of Pacific;
(iii)Copies of the resolutions of Pacific's board of directors
authorizing the execution and performance of this Agreement and
the contemplated transactions, certified by the respective
secretary or an assistant secretary of Pacific as of the Closing
Date;
(iv) The certificate contemplated by Section 5.01, duly executed by a
duly authorized officer of Pacific;
(v) The certificate contemplated by Section 5.02, dated the Closing
Date, signed by the chief executive officer and principal
accounting and financial officer of Pacific; and in addition to
the above deliveries, Pacific shall take all steps and actions as
Chancellor may reasonably request or as may otherwise be
necessary to consummate the transactions contemplated hereby.
E-2
<PAGE>
(b) Chancellor's Deliveries. Subject to fulfilment or waiver of the
conditions set forth in Article V, Chancellor shall deliver to Pacific
at Closing the certificate contemplated by Section 6-02, executed by a
duly authorized officer of PCFL.
In addition to the above deliveries, Chancellor shall take all steps and actions
as Pacific may reasonably request or as may otherwise be necessary to consummate
the transactions contemplated hereby.
Section 1.05 Termination
(a) This Agreement may be terminated by the board of directors of either
Pacific or Chancellor at any time prior to the Effective 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 judgement of such board of
directors, made in good faith and based upon the advice of its
legal counsel, makes it inadvisable to proceed with the merger
and consolidation contemplated by this Agreement;
(ii) Any of the transactions contemplated hereby are disapproved by
any regulatory authority whose approval is required to consummate
such transactions or in the judgement of such board of directors,
made in good faith and based on the advise 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 exchange;
In the event of termination pursuant to this paragraph (a) of Section 1.05, no
obligation, right, or liability shall arise hereunder, and each party shall bear
all of the expenses incurred by it in connection with the negotiation,
preparation, and execution of this Agreement and the transactions contemplated
hereby.
(b) This Agreement may be terminated at any time prior to the Closing Date
by action of the board of directors of Chancellor, if Pacific 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 Pacific contained herein shall be
inaccurate in any material respect. In the event of termination
pursuant to this paragraph (b) of this Section 1.05, no obligation,
right, remedy, or liability shall arise hereunder. Pacific and
Chancellor shall each bear their own costs incurred in connection with
the negotiation, preparation, and execution of this Agreement and the
transactions contemplated hereby.
(c) This Agreement may be terminated at any time prior to the Closing Date
by action of the board of directors of Pacific if Chancellor shall
fail to comply in any material respect with any of its covenants or
agreements contained in this Agreement of if any of the
representations or warranties of Chancellor contained herein shall be
inaccurate in any material respect. In the event of termination
pursuant to this paragraph (c) of this Section 1.05, no obligation,
right, remedy, or liability shall arise hereunder. Pacific and
Chancellor shall each bear their own costs incurred in connection with
the negotiation, preparation, and execution of this Agreement and the
transactions contemplated hereby.
E-3
<PAGE>
ARTICLE II
Representations, Covenants, and
Warranties of Pacific
As an inducement to, and to obtain the reliance of, Chancellor, Pacific
represents and warrants as follows:
Section 2.01 Organization
(a) Pacific is, and will be on the Closing Date, a corporation duly
organized, validly existing, and in good standing under the laws of
the state of Nevada and has the corporate power and is and will be
duly authorized, qualified, franchised, and licensed under all
applicable laws, regulations, ordinances, and order 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,
and there are no other jurisdictions in which it is not so qualified
in which the character and location of the assets owned by it or the
nature of the material business transacted by it requires
qualification, except where failure to do so would not have a material
adverse effect on its business, operations, properties, assets, or
condition. The execution and delivery of this Agreement does not, and
the consummation of the transaction contemplated by this Agreement in
accordance with the terms hereof will not, violate any provision of
Pacific's articles of incorporation or bylaws, or other agreement to
which it is a party or by which it is bound.
Section 2.02 Approval of Agreements
Pacific has full power, authority, and legal right and has taken, or will take,
all action required by law, its articles of incorporation, bylaws, and otherwise
to execute and deliver this Agreement and to consummate the transactions herein
contemplated. The board of directors of Pacific has authorized and approved the
execution, delivery, and performance of this Agreement and the transactions
contemplated hereby. Included in Schedule 2.02 is a certified copy of a
resolution duly adopted by the board of directors of Pacific evidencing such
approval. No approval of this transaction by the shareholders of Pacific is
required. This Agreement has been duly authorized, executed, and delivered by
Pacific and is the legal, valid and binding obligation of Pacific, enforceable
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, or other laws affecting enforcement or creditors' rights
generally and by general principles of equity.
Section 2.03 Capitalization
The authorized capitalization of Pacific consists of 100,000,000 shares of
Common stock, par value $0.001 per share, 1,100,000 shares of which are issued
and outstanding, (collectively referred to as "Pacific Stock"). All issued and
outstanding shares of Pacific are legally issued, fully paid, and non-assessable
and not issued in violation of the pre-emptive or other right of any person.
There are no dividends or other amounts due or payable with respect to any of
the shares of capital stock of Pacific.
Section 2.04 Subsidiaries and Predecessors
Pacific does not own, beneficially or of record, any equity securities in any
other entity. Pacific has no "predecessor," as that term is defined under
generally accepted accounting principles or Regulation S-X promulgated by the
Securities and Exchange commission (the "SEC").
Section 2.05 Financial Statements
(a) Included in the information referred to in Section 2.06 are the
audited balance sheets of Pacific as of December 31, 1995, and 1994,
and the statements of operations, stockholders' equity and cash flows
for the years ended December 31, 1995, 1994, and 1993, including the
notes thereto and the accompanying report of Smith and Company,
Certified Public Accountants.
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(b) All such audited and unaudited financial statements have been prepared
in accordance with generally accepted accounting principles
consistently applied throughout the periods involved as explained in
the notes to such financial statements. The Pacific balance sheets
present fairly, in all material respects, as of their respective
dates, the financial position of Pacific. Pacific did not have, as of
the date of any such balance sheets, except as and to the extent
reflected or reserved against therein, any liabilities or obligations
(absolute or contingent) which should be reflected in a balance sheet
or the notes thereto prepared in accordance with generally accepted
accounting principles under which they were prepared, and all assets
reflected therein present fairly the assets of Pacific in accordance
with generally accepted accounting principals under which they were
prepared.
(c) All such financial statements have been presented in accordance with
the requirements of Regulation S-X promulgated by the SEC regarding
the form of content of and requirements for financial statements to be
filed with the SEC.
(d) The books and records, financial and otherwise, of Pacific are in all
material respects complete and correct and have been maintained in
accordance with sound business and bookkeeping practices so as to
accurately and fairly reflect, in reasonable detail, the transactions
and dispositions of the assets of Pacific. Pacific has maintained a
system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions have been and are executed
in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit the preparation
of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such
statements and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals,
and appropriate action is taken with respect to any differences.
(e) Pacific has filed or will have filed as of the Closing Date all tax
returns required to be filed by them from inception to the Closing
Date. All such returns and reports are accurate and correct in all
material respects. Pacific does not have any liabilities with respect
to the payment of any federal, state, county, local, or other taxes
(including any deficiencies, interest, or penalties) accrued for or
applicable to the period ended on the date of the most recent audited
balance sheet of Pacific, except to the extent reflected on such
balance sheet and adequately provided for, and all such dates and
years and periods prior thereto and for which Pacific may at said date
have been liable in its own right or as transferee of the assets of,
or as successor to, any other corporation or entity, except for taxes
accrued but not yet due and payable, and no deficiency assessment or
proposed adjustment of any such tax return is pending, proposed or
contemplated. Proper and accurate amounts of taxes have been withheld
by or on behalf of Pacific with respect to all compensation paid to
employees of Pacific for all periods ending on or before the date
hereof, and all deposits required with respect to compensation paid to
such employees have been made, in complete compliance with the
provisions of all applicable federal, state, and local tax and other
laws. None of such income tax returns has been examined or is
currently being examined by the Internal Revenue Service, and no
deficiency assessment or proposed adjustment of any such return is
pending, proposed or contemplated. Pacific has not made any election
pursuant to the provisions of any applicable tax laws (other than
elections that relate solely to methods of accounting, depreciation,
or amortization) that would have a material adverse affect on Pacific,
its financial condition, its business as presently conducted or
proposed to be conducted, or any of its respective properties or
material assets. There are no tax liens upon any of the assets of
Pacific. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of
Pacific.
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Section 2.06 Information
The information concerning Pacific set forth in this Agreement; in the Schedules
delivered by Pacific pursuant hereto were, as of their respective dates,
complete and accurate in all material respects and did not contain any untrue
statement of a material fact or omit to state a material fact required to make
the statements made, in light of the circumstances under which they were made,
not misleading. Pacific shall cause the schedules delivered by it pursuant
hereto and the instruments and data delivered to Chancellor hereunder to be
updated after the date hereof up to and including the Closing Date.
Section 2.07 Absence of Certain Changes or Events
------------------------------------
Except as set forth in this Agreement, since the date of the most recent Pacific
balance sheet described in Section 2.05 and included in the information referred
to in Section 2.06:
(a) There has not been (i) any material adverse change in the business,
operations, properties, level of inventory, assets, or condition of
Pacific or (ii) any damage, destruction, or loss to Pacific (whether
or not covered by insurance) materially and adversely affecting the
business, operations, properties, assets, or conditions of Pacific;
(b) Pacific has not (i) amended its articles or incorporation or bylaws;
(ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets or any kind whatsoever to
stockholders or purchased or redeemed, or agreed to purchase or
redeem, any of its capital stock; (iii) waived any rights of value
which in the aggregate are extraordinary or material considering the
business of Pacific; (iv) made any material change in the method of
management, operation, or accounting; (v) entered into any other
material transactions; (vi) made any accrual or arrangement for or
payment of bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer or
employee; (vii) increased the rate of compensation payable or to
become payable by it to any of their officers or directors or any of
its employees whose monthly compensation exceeds $1000; or (viii) made
any increase in any profit-sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan,
payment, or arrangement made to, for, or with their officers,
directors, or employees;
(c) Pacific has not (i) granted or agreed to grant any options, warrants,
or other rights for their stocks, bonds, or other corporate securities
calling for the issuance thereof other than those currently
outstanding, if any; (ii) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability
absolute or contingent) except liabilities incurred in the ordinary
course of business; (iii) paid any material obligation or liability
(absolute or contingent) other than current liabilities reflected in
or shown on the most recent Pacific balance sheet and current
liabilities incurred since that date in the ordinary course of
business; (iv) sold or transferred, or agreed to sell or transfer, any
of its assets, properties, or rights (except assets, properties, or
rights not used or useful in its business which, in the aggregate have
a value of less than $5000 or canceled, or agreed to cancel, any debts
or claims (except debts and claims which in the aggregate are of a
value of less than $5000); (v) made or permitted any amendment or
termination of any contract, agreement, or license to which it is a
party if such amendment or termination is material, considering the
business of Pacific; or (vi) issued, delivered, or agreed to issue or
deliver any stock, bonds, or other corporate securities including
debentures (whether authorized and unissued or held as treasury
stock); and
(d) To the best knowledge of Pacific, it has not become subject to any law
or regulation which materially and adversely affects, or in the future
may adversely affect, the business, operations, properties, assets, or
condition of Pacific.
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Section 2.08 Title and Related Matters
Except as disclosed in the most recent audited Pacific balance sheet and the
notes thereto, Pacific has good and marketable title to all of its properties,
inventory, interests in properties, and assets, which are reflected in the most
recent Pacific balance sheet or acquired after that date (except those sold or
otherwise disposed of since such date in the ordinary course of business), free
and clear of all mortgages, security interests, royalties, liens, pledges,
charges, or encumbrances, except (i) statutory liens or claims not yet
delinquent; and (ii) 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.
ARTICLE III
Representations, Covenants, and
Warranties of Chancellor on June 28, 1996
As an inducement to, and to obtain the reliance of, Pacific, Chancellor
represents and warrants as follows:
Section 3.01 Organization
PCFL is and will be on the Closing Date a corporation duly organized, validly
existing, and in good standing under the laws of Australia and has the corporate
power and is and will be 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, and there are no other
jurisdictions in which it is not so qualified in which the character and
location of the assets owned by it or the material business transacted by it
requires qualification, except where failure to do so would not have a material
adverse effect on the business, operations, properties, assets, or condition of
PCFL. 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 PCFL's articles of
incorporation or bylaws or other agreement to which it is a party or by which it
is bound.
Section 3.02 Capitalization
The authorized capitalization of PCFL consists of 10,000 shares of common stock,
par value $F1.00 ("PCFL Stock"), of which 9,002 shares are issued and
outstanding. All issued and outstanding shares of PCFL are legally issued, fully
paid, and nonassessable and not issued in violation of the pre-emptive or other
right of any person. There are no dividends or other amounts due or payable with
respect to any of the shares of capital stock of PCFL.
Section 3.03 Subsidiaries or Predecessors
There are no subsidiaries or predecessors as those terms are defined under
generally accepted accounting principles or regulation S-X promulgated by the
SEC.
Section 3.04 Financial Statements
(a) Included in Schedule 3.05 are the audited balance sheets of PCFL as of
31 December, 1995, and the related statements of operations,
stockholders' equity, and cash flows for the year then ended including
the notes thereto and the accompanying report of KPMG Peat Marwick,
Chartered Accountants.
(b) All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved. The balance sheets of PCFL present
fairly, as of their respective dates, the financial position of PCFL.
PCFL
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did not have, as of the date of any such balance sheets, except as and
to the extent reflected or reserved against therein, any liabilities
or obligations (absolute or contingent) which should be reflected in a
balance sheet or the notes thereto prepared in accordance with
generally accepted accounting principles, and all assets reflected
therein present fairly the assets of PCFL, in accordance with
generally accepted accounting principles. The statements of
operations, stockholders' equity, and cash flows present fairly the
financial position and results of operations of PCFL as of their
respective dates and for the respective periods covered thereby. PCFL
maintains and will continue to maintain a standard system of
accounting established and maintained in a manner permitting the
preparation of financial statements in accordance with generally
accepted accounting principles.
(c) All such financial statements have been presented in accordance with
the requirements of Regulation S-X promulgated by the SEC regarding
the form and content of and requirements for financial statements to
be filed with the SEC.
(d) The books and records, financial and otherwise, of PCFL are in all
material respects complete and correct and have been maintained in
accordance with sound business and bookkeeping practices so as to
accurately and fairly reflect, in reasonable detail, the transactions
and dispositions of the assets of PCFL. PCFL has maintained a system
of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions have been and are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit the preparation of
financial statements in conformity with generally accepted accounting
principles or any other criteria applicable to such statements and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals, and
appropriate action is taken with respect to any differences.
(e) PCFL has filed or will have filed as of the Closing Date all tax
returns required to be filed by it from inception to the Closing Date.
All such returns and reports are accurate and correct in all material
respects. PCFL has no liabilities with respect to the payment of any
federal, sate, county, local, or other taxes (including any
deficiencies, interest or penalties) accrued for or applicable to the
period ended on the date of the most recent unaudited balance sheet of
PCFL except to the extent reflected on such balance sheet and
adequately provided for, and all such dates and years and periods
prior thereto and for which PCFL may at said date have been liable in
its own right or as transferee of the assets of, or as successor to,
any other corporation or entity, except for taxes accrued but not yet
due and payable, and no deficiency assessment or proposed adjustment
of any such tax return is pending, proposed or contemplated. Proper
and accurate amounts of taxes have been withheld by or on behalf of
PCFL with respect to all compensation paid to employees of PCFL for
all periods ending on or before the date hereof, and all deposits
required with respect to compensation paid to such employees have been
made, in complete compliance with the provisions of all applicable
federal, state, and local tax and other laws. None of such income tax
returns has been examined or is currently being examined by the Fiji
Tax Bureau, and no deficiency assessment or proposed adjustment of any
such return is pending, proposed, or contemplated. PCFL has not made
any election pursuant to the provisions of any applicable tax laws
(other than elections that relate solely to methods of accounting,
depreciation, or amortization) that would have a material adverse
affect on PCFL, its financial condition, its business as presently
conducted or proposed to be conducted, or any of its properties or
material assets. There are no tax liens upon any of the assets of
PCFL. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of PCFL.
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Section 3.05 Information
The information concerning PCFL set forth in this Agreement and in the schedules
delivered by PCFL pursuant hereto is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading. PCFL shall cause the
schedules delivered by PCFL pursuant hereto and the instruments and data
delivered to Pacific hereunder to be updated after the date hereof up to and
including the Closing Date.
Section 3.06 Options or Warrants
There are no existing options, warrants, calls, or commitments of any character
relating to the authorized and unissued PCFL common stock.
Section 3.07 Absence of Certain Changes or Events
------------------------------------
Except as set forth in this Agreement since the date of the most recent 31
December, 1995 balance sheet described in Section 3.04 and included in Schedule
3.05:
(a) There has not been (i) any material adverse change in the business,
operations, properties, level of inventory, assets, or condition of
PCFL or (ii) and damage, destruction, or loss to PCFL (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets, or conditions of PCFL;
(b) PCFL has not (i) amended its articles of incorporation or bylaws; (ii)
declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to
stockholders or purchased or redeemed, or agreed to purchase or
redeem, any of its capital stock; (ii) waived any rights of value
which in the aggregate are extraordinary or material considering the
business of PCFL; (iv) made any material change in its method of
management, operation, or accounting which is material to PCFL; (v)
entered into any other material transactions; (vi) made any accrual or
arrangement for or payment of bonuses or special compensation of any
kind or any severance or termination pay to any present or former
officer or employee; (vii) increased the rate of compensation payable
or to become payable by it to any of its officers or directors or any
of its employees whose monthly compensation exceed $1,000; or (viii)
made any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan,
payment, or arrangement made to, for, or with its officers, directors,
or employees;
(c) PCFL has not (i) granted or agreed to grant any options, warrants, or
other rights for its stocks, bonds, or other corporate securities
calling for the issuance thereof; (ii) borrowed or agreed to borrow
any funds or incurred, or become subject to, any material obligation
or liability (absolute or contingent) except liabilities incurred in
the ordinary course of business; (iii) paid any material obligation or
liability (absolute or contingent) other than current liabilities
reflected in or shown on the most recent PCFL balance sheet and
current liabilities incurred since that date in the ordinary course of
business; (iv) sold or transferred, or agreed to sell or transfer, any
of its assets, properties, or rights (except assets, properties, or
rights not used or useful in its business which , in the aggregate
have a value of less than $5,000) or canceled, or agreed to cancel,
any debts or claims (except debts and claims which in the aggregate
are of a value of less than $5,000); (v) made or permitted any
amendment or termination of any contract, agreement, or license to
which it is a party if such amendment or termination is material,
considering the business of
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PCFL; or (vi) issued, delivered, or agreed to issue or deliver any
stock, bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); and
(d) To the best knowledge of Chancellor, PCFL has not become subject to
any law or regulation which materially and adversely affects, or in
the future may adversely affect, the business, operations, properties,
assets, or condition of PCFL.
Section 3.08 Litigation and Proceedings
There are no actions, suits, or proceedings pending or, to the knowledge of
Chancellor threatened by or against PCFL or affecting domestic or foreign, or
before any arbitrator of any kind. PCFL does not have any knowledge of any
default on its part with respect to any judgment, order, writ, injunction,
decree, award, rule, or regulation of any court, arbitrator, or governmental
agency or instrumentality.
ARTICLE IV
SPECIAL COVENANTS TO BE SATISFIED PRIOR TO CLOSING
Section 4.01 Activities of Pacific, and PCFL
-------------------------------
(a) From and after the date of this Agreement until the Closing Date and
except as set forth in the respective schedules to be delivered by
Pacific and PCFL pursuant hereto or as permitted or contemplated by
this Agreement, Pacific and PCFL will each:
(i) Carry on its business in substantially the same manner as it has
heretofore;
(ii) Maintain in full force and effect insurance comparable in amount
and in scope of coverage to that now maintained by it;
(iii)Perform in all material respects all of its obligations under
material contracts, leases, and instruments relating to or
affecting its assets, properties, and business;
(iv) Use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain
its relationships with its material suppliers and customers;
(v) Duly and timely file for all taxable periods ending on or prior
to the Closing Date all federal, state, county, and local tax
returns required to be filed by or on behalf of such entity or
any of its subsidiaries or for which such entity or any of its
subsidiaries may be held responsible and shall pay, or cause to
pay, all taxes required to be shown as due and payable on such
returns, as well as all instalments of tax due and payable during
the period commencing on the date of this Agreement and ending on
the Closing Date. All such tax returns shall be prepared in a
manner consistent with the preparation of prior years' tax
returns except as required by law or as agreed to by the parties
hereto prior to the filing thereof;
(vi) Withhold from each payment made on or prior to the Closing Date
to each employee of such corporation the amount of all taxes
required to be withheld therefrom and will pay the same, before
becoming delinquent, to the proper tax receiving officers; and
(vii)Fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal, state,
county and local laws and all rules, regulations, and orders
imposed by federal, state, county and local governmental
authorities.
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(b) From and after the date of this Agreement and except as provided
herein until the Closing Date, Pacific and PCFL will not:
(i) Make any change in its articles of incorporation or bylaws;
(ii) Take any action described in Section 2.07 in the case of Pacific,
or Section 3.07 in the case of PCFL;
(iii)Enter into or amend any contract, agreement, or other instrument
of any of the types described in such party's schedules, except
that a party may enter into or amend any contract, agreement, or
other instrument in the ordinary course of business; and
(iv) Enter into any agreement, waiver, or other arrangement providing
for an extension of time with respect to payment by, or
assessment against, such entity or any of its subsidiaries of any
tax due and payable with respect to the period commencing on the
date of this Agreement and ending on the Closing Date.
Section 4.02 Stockholder Approval
If required by the jurisdiction of incorporation of PCFL subsequent to the
execution and delivery of this Agreement, PCFL shall, at a meeting of its
stockholders duly called by the board of directors of PCFL to be held as soon as
practicable, present for the authorization and approval of the stockholders of
PCFL, in accordance with the applicable provisions of the laws of the United
States of America of PCFL and all applicable federal and state securities laws,
this Agreement.
Section 4.03 Access to Properties and Records
--------------------------------
PCFL will afford to the officers and authorized representatives of Pacific full
access to the properties, books, and records of PCFL in order that Pacific may
have full opportunity to make such reasonable investigation as it shall desire
to make of the affairs of PCFL and will furnish Pacific with such additional
financial and operating data and other information as to the business and
properties of PCFL as Pacific shall from time to time reasonably request.
Section 4.04 Additional Financial Statements
In connection with the information to be provided pursuant to this Article IV,
PCFL shall provide additional audited and unaudited financial statements as soon
as reasonably practicable for inclusion by Pacific in any application or
disclosure document required to be prepared in connection with this Agreement
and the transactions contemplated hereby or in connection with a future
registration statement.
(a) All such financial information referred to herein shall be prepared in
accordance with the uniform accounting rules with respect to the form
and content for financial statements filed under the Securities Act or
the Exchange Act of 1934, as amended (the "Exchange Act"), as
contained in Regulation S-X promulgated by the SEC. All financial
statements furnished for an interim period shall be accompanied by a
statement that all adjustments necessary to make it a fair statement
of the results of operations for such interim period or periods have
been included.
(b) To the extent required, Pacific and PCFL shall utilize their best
efforts and cooperate to provide the information necessary to present
the pro forma consolidated and consolidating financial statements and
pro forma consolidated and consolidating summary information,
including a pro forma consolidated and consolidating balance sheet,
pro forma consolidated and consolidating income statements, pro forma
summaries of earnings (with aggregate an per-share earnings), and pro
forma (combined basis) earnings date for all periods required to be
presented and in the form and manner required for use in the form 8-k
and proxy statement or any other document required to be field with
the SEC or state securities agency, including the presentation of
Pacific financial statements under generally accepted accounting
principles.
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(c) PCFL represents and warrants to Pacific that the financial statements
delivered or to be delivered pursuant to this section will be, when
delivered, prepared in accordance with the generally accepted
accounting principles consistently applied throughout the periods
involved. The balance sheets included in such financial statements
shall present fairly the financial condition of PCFL as of their
respective dates. As of the date of any such balance sheets, except as
and to the extent reflected or reserved against in such balance
sheets, there will not be any liabilities or obligations (absolute or
contingent) which should be reflected in a balance sheet or the notes
thereto prepared in accordance with generally accepted accounting
principles. The income statements included in such financial
statements prepared and delivered pursuant to this section shall
present fairly the results of operations of PCFL for the respective
periods indicated. The statements of changes in financial position or
cash flows prepared and delivered in accordance with this section
shall present fairly the information which should be presented therein
in accordance with generally accepted accounting principles, except as
otherwise indicated in the notes thereto. Such financial statements
shall not be materially and adversely different from the financial
statements of PCFL included in the Schedules.
Section 4.05 Transactions With Affiliates
Chancellor will prove that PCFL shall provide to Pacific, for possible inclusion
in SEC fillings, a description of every material contract, agreement, or
arrangement between PCFL and any person who is or has ever been an officer of
director of PCFL or person owning of record, or known by PCFL to own
beneficially, 5% or more of the issued and outstanding PCFL Stock and which is
to be performed in whole or in part after the date hereof or was entered into
within three years before the date hereof. PCFL represents and warrants that, in
all of such circumstances, the contract, agreement, or arrangement was for a
bona fide business purpose of PCFL and the amount paid or received, whether in
cash, in services, or in kind, is, has been during the full term thereof, and is
required to be during the unexpired portion of the term there of, no less
favorable to PCFL than terms available from otherwise unrelated parties in
arm's-length transactions. Except as disclosed in such description, no officer
or director of PCFL, or 10% shareholder of PCFL has, or has had during the
preceding three years, any interest, directly or indirectly, in any material
transaction with PCFL. The description shall also include a description of any
commitment by PCFL, whether written or oral, to lend any funds to, borrow any
money from, or enter into any other material transaction with, any such
affiliated person.
Section 4.06 Indemnification by Chancellor.
Chancellor will indemnify and hold harmless Pacific and its directors and
officers, and each person, if any, who controls Pacific within the meaning of
the Securities Act, from and against any and all loses, claims, damages,
expenses, liabilities, or actions to which any of them may become subject under
applicable law (including the Securities Act and the Exchange Act) and will
reimburse them for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any claims or actions, whether or not
resulting in liability, insofar as such losses, claims, damages, expenses,
liabilities, or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any application or
statement filed with a governmental body or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary in order to make the statements therein not
misleading, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing by
Chancellor expressly for use therein. Chancellor agrees at any time upon the
request of Pacific to furnish to them a written letter or statement confirming
the accuracy of the information with respect to PCFL contained in any report or
other application or statement referred to in this Article IV, or in any draft
of any such documents, and confirming that the information with respect to PCFL
contained in such
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document or draft was furnished by Chancellor, indicating the inaccuracies or
omissions contained in such document or draft or indicating the information not
furnished by Chancellor expressly for use therein. The indemnity agreement
contained in this Section 4.06 shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of Pacific and
shall survive the consummation of the transactions contemplated by this
Agreement.
Section 4.07 Indemnification by Pacific
Pacific will indemnify and hold harmless Chancellor, its directors and officers,
and each person, if any, who controls Chancellor within the meaning of the
Securities Act, from and against any and all losses, claims, damages, expenses,
liabilities, or actions to which any of them may become subject under applicable
law (including the Securities Act and the Exchange Act) and will reimburse them
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any claims, damages, expenses, liabilities, or
actions arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any alleged omission to state therein
a material fact required to be stated therein, or necessary in order to make the
statements therein not misleading, but only insofar as any such statement or
omission was made in reliance upon and in conformity with information furnished
in writing by Pacific expressly for use therein. Pacific agrees at any time upon
the request of Chancellor to furnish to it a written letter or statement
confirming the accuracy of the information with respect to Pacific and its
subsidiaries contained in any information / proxy statement, report, or other
application or statement referred to in this Article IV, or in any draft of any
such document, and confirming that the information with respect to Pacific
contained in such document or draft was furnished by Pacific, indicating the
inaccuracies or omissions contained in such document or draft or indicating the
information not furnished by Pacific expressly for use therein. The indemnity
agreement contained in this Section 4.07 shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of
Chancellor and shall survive the consummation of the transactions contemplated
by this Agreement.
Section 4.08 Sales Under Regulation S
(a) Pacific will use its best efforts to comply with the reporting
requirements of the Exchange Act.
(b) Upon being informed in writing by any Affiliated Pacific Stockholder
or Restricted Transferee that such person intends to sell any acquired
Shares under Regulation S promulgated under the Securities Act
(including any rule adopted in substitution or replacement thereof),
Pacific will certify in writing to such person that it has filed all
of the reports required to be filed by it under the Exchange Act to
enable such person to sell such person's Acquired Shares under
Regulation S or will inform such person in writing that it has not
filed any such report or reports.
(c) If any certificate representing any Acquired Shares is presented to
Pacific's transfer agent for registration of transfer in connection
with any sale theretofore made under Regulation S, provided, that such
certificate is duly endorsed for transfer by the appropriate person(s)
or accompanied by a separate stock power duly executed by the
appropriate person(s), in each case accomplished by reasonable
assurances that such endorsements are genuine and effective, and is
accompanied by an opinion of counsel satisfactory to Pacific and its
counsel that such transfer has complied with the requirements of
Regulation S, Pacific will promptly instruct its transfer agent to
register such transfer and to issue one or more new certificates free
of any stop-transfer order or restrictive legend.
Section 4.09 The Acquisition of Pacific Exchanged Stock
------------------------------------------
The consummation of this Agreement and the merger contemplated herein, including
the issuance of the Pacific Exchanged Stock to Chancellor in exchange for 6,000
shares of the issued and outstanding PCFL Stock as contemplated hereby,
constitutes the offer and sale of securities under the Securities Act and
E-13
<PAGE>
applicable state statutes. Such transactions shall be consummated in reliance on
exemptions from the registration and prospectus delivery requirements of such
statues which depend, among other items, on the circumstances under which such
securities are acquired.
(a) In order to provide documentation for reliance upon exemptions from
the registration and prospectus delivery requirements for such
transactions, the approval by Chancellor and Pacific of this Agreement
and the transactions contemplated hereby and/or the delivery of
appropriate separate representations shall constitute the parties
acceptance of, and concurrence in, the following representations and
warranties:
(i) Chancellor acknowledges that neither the SEC nor the securities
commission of any state or other federal agency has made any
determination as to the merits of acquiring the Pacific Exchanged
Stock, and that this transaction involves certain risks.
(ii) Chancellor has received and read the Agreement and understand the
risks related to the consummation of the transactions herein
contemplated.
(iii)Chancellor has such knowledge and experience in business and
financial matters that it is capable of evaluating Pacific and
its business operations.
(iv) Chancellor has been provided with a copy of this Agreement and
the related disclosure schedules of the parties hereto plus all
materials and information requested by Chancellor or its
representative, including any information requested to verify any
information furnished (to the extent such information is
available or can be obtained without unreasonable effort or
expense), and the parties have been provided the opportunity for
direct communication regarding the transactions contemplated
hereby.
(v) All information which Chancellor has provided to Pacific or its
agents or representatives concerning their suitability and intent
to hold shares in Pacific following the transactions contemplated
hereby is complete, accurate, and correct.
(vi) Chancellor has not offered or sold any securities of PCFL or
interest in this Agreement and have no present intention of
dividing the Pacific Exchanged Stock to be received or the rights
under this Agreement with others or of reselling or otherwise
disposing of any portion of such stock or rights, either
currently or after the passage of a fixed or determinable period
of time or on the occurrence of non-occurrence of any
predetermined event or circumstance.
(vii)Chancellor understands that the Pacific Exchanged Stock has not
been registered, but is being acquired by reason of a specific
exemption under the Securities Act as well as under certain state
statutes for transactions by an issuer not involving any public
offering and that any disposition of the subject Pacific
Exchanged Stock may, under certain circumstances, be inconsistent
with this exemption and may make the undersigned an "underwriter"
within the meaning of the Securities Act. It is understood that
the definition of "underwriter" focuses upon the concept of
"distribution" and that any subsequent disposition of the subject
Pacific Exchanged Stock can only be effected in transactions
which are not considered distributions. Generally, the term
"distribution" is considered synonymous with "public offering" or
any other offer or sale involving general solicitation or general
advertising. Under present law, in determining whether a
distribution occurs when securities are sold into the public
market, under certain circumstances one must consider the
availability of public information regarding the issuer, a
holding period for the securities sufficient to assure that the
persons desiring to sell the securities without registration
first bear
E-14
<PAGE>
the economic risk of their investment, and a limitation on the
number of securities which the stockholder is permitted to sell
and on the manner of sale, thereby reducing the potential impact
of the sale on the trading markets. These criteria are set forth
specifically in Regulation S promulgated under the Securities
Act, which allows sales of securities in reliance upon Regulation
S only in limited amounts in accordance with the terms and
conditions of that rule, after 41 days after the date the Pacific
Exchanged Stock is acquired from Pacific and the Pacific
Exchanged Stock is fully paid for, as calculated in accordance
with Regulation S. After 41 days from the date the securities
acquired from Pacific and are fully paid for, as calculated in
accordance with Regulation S, they can generally be sold without
meeting those conditions, provided the holder is not (and has not
been for the preceding three months) an affiliate of the issuer.
(viii) Chancellor acknowledges that the shares of Pacific Exchanged
Stock must be held and may not be sold, transferred, or otherwise
disposed of for value unless they are subsequently registered
under the Securities Act or an exemption from such registration
is available. Pacific is under no obligation to register the
Pacific Exchanged Stock under the Securities Act, except as may
be expressly agreed to by it in writing. If Regulation S is
available (and no assurance is given that it will be except as
expressly set forth in this Agreement), after 41 days following
the date the shares are fully paid for, only routine sales of
such Pacific Exchanged Stock in limited amounts can be made in
reliance upon Regulation S in accordance with the terms and
conditions of that rule. Pacific is under no obligation to the
parties to make Regulation S available, except as may be
expressly agreed to by it in writing in this Agreement, and in
the event Regulation S is not available, compliance with
regulation A or some other disclosure exemption may be required
before Chancellor can sell, transfer, or otherwise dispose of
such Pacific Exchanged Stock without registration under the
Securities Act. Pacific registrar and transfer agent will
maintain a stop transfer order against the registration or
transfer of the Pacific Exchanged Stock, and the certificate
representing the Pacific Exchanged Stock will bear a legend in
substantially the following form so restricting the sale of such
securities:
THE SHARES COVERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, A U.S. PERSON: (i) AS PART OF THEIR
DISTRIBUTION AT ANY TIME; OR (ii) OTHERWISE UNTIL FORTY DAYS
AFTER THE DATE ("THE RESTRICTED PERIOD"), EXCEPT IN EITHER CASE
IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.
PURCHASER ACKNOWLEDGES THAT THE SHARES REPRESENTED HEREBY HAVE
BEEN SOLD IN COMPLIANCE WITH REGULATION S.
(ix) Pacific may refuse to register further transfers, or resales of
the Pacific Exchanged Stock in the absence of compliance with
Regulation S unless the undersigned furnishes the issuer with a
"no-action" or interpretive letter from the SEC or an opinion of
counsel reasonably acceptable to Pacific stating that the
transfer is proper. Further, unless such letter or opinion states
that the shares of Pacific Exchanged Stock are free of any
restrictions under the Securities Act, Pacific may refuse to
transfer the Pacific Exchanged Stock to any transferee who does
not furnish in writing to it the same representations and agree
to the same conditions with respect to such Pacific Exchanged
Stock as set forth herein. Pacific may also refuse to transfer
the Pacific Exchanged Stock if any circumstances are present
reasonably indicating that the transferee's representations are
not accurate.
E-15
<PAGE>
(b) In connection with the transaction contemplated by this Agreement,
PCFL and Pacific shall each file, with the assistance of the other and
their respective legal counsel, such notices, applications, reports,
or other instruments as may be deemed by them to be necessary or
appropriate in an effort to document reliance on such exemptions,
including a notice on form D to be filed with the SEC and the
appropriate regulatory authority in the state or country where
Chancellor reside unless an exemption requiring no filing is available
in such jurisdiction, all to the extent and in the manner as may be
deemed by such parties to be appropriate.
(c) In order to more fully document reliance on the exemptions as provided
herein, Chancellor shall execute and deliver to Pacific, at or prior
to the Closing, such further letters of representation,
acknowledgment, suitability or the like as Pacific and its counsel may
reasonably request in connection with reliance on exemptions from
registration under such securities laws.
(d) Pacific and Chancellor acknowledge that the basis for relying on
exemptions from registration or qualifications are factual, depending
on the conduct of the various parties, and that no legal opinion or
other assurance will be required or given to the effect that the
transactions contemplated hereby are in fact exempt from registration
or qualification.
Section 4.10 Third Party Consents
Pacific and Chancellor agree to cooperate with each other in order to obtain any
third party consents to this Agreement and the transactions herein contemplated
that are required.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF CHANCELLOR
The obligations of Chancellor under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.01 Accuracy of Representations
The representations and warranties made by Pacific in this Agreement were true
when made and shall be true at the Closing Date with the same force and affect
as if such representations and warranties were made at and as of the Closing
Date (except for changes therein permitted by this Agreement ), and Pacific
shall have performed or complied with all covenants and conditions required by
this Agreement to be performed or complied with by Pacific prior to or at the
Closing. Chancellor shall be furnished with certificates, signed by duly
authorised officers of Pacific and dated the Closing Date, to the foregoing
effect.
Section 5.02 Officer's Certificates
Chancellor shall have been furnished with certificates dated the Closing Date
and signed by the duly authorised chief executive officer and principal
accounting and financial officer of Pacific to the effect that no litigation,
proceeding, investigation or inquiry is pending or, to the best knowledge of
Pacific threatened, which might result in an action to enjoin or prevent the
consummation of the transaction contemplated by this Agreement. Furthermore,
based on certificates of good standing, representations of government agencies,
and Pacific's own documents, the certificate shall represent that:
(a) This Agreement has been duly approved by Pacific's board of Directors
and has been duly executed and delivered in the name and on behalf of
Pacific by its duly authorised officers pursuant to, and in compliance
with, authority granted by the board of directors of Pacific pursuant
to a unanimous consent.
E-16
<PAGE>
(b) The representations and warranties of Pacific set forth in this
Agreement are true and correct as of the date of the certificate.
(c) There have been no material adverse changes in Pacific up to and
including the date of the certificate.
(d) All conditions required by this Agreement to have been met, satisfied,
or performed by Pacific have been met.
(e) The consummation of the transactions contemplated by this Agreement
does not violate any law, regulation, order, writ, injunction or
decree of any court or governmental body or result in the creation or
imposition of any mortgage, lien, charge or encumbrance of any nature
upon any of the properties of Pacific pursuant to any mortgage,
resolution agreement or instrument to which Pacific is a party.
(f) All authorizations, consents, approvals, registrations, and/or filings
with any governmental body, agency or court required in connection
with the execution and delivery of the documents by Pacific have been
obtained and are in full force and effect or, if not required to have
been obtained, will be in full force and effect by such time as may be
required.
(g) There is no action, suit, proceeding, inquiry or investigation at law
or in equity by any public board or body pending or threatened against
Pacific wherein an unfavorable decision ruling, or finding would have
an adverse affect on the financial condition of Pacific the operation
of Pacific, or the acquisition and reorganization contemplated herein,
or any material agreement or instrument by which Pacific is bound or
would in any way contest the existence of Pacific.
Section 5.03 No Material Adverse Change
Prior to the Closing Date, there shall not have occurred any material adverse
change in the financial condition, business or operations of Pacific, 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 Pacific.
Section 5.04 Good Standing
Chancellor shall have received certificates of good standing from the
appropriate authorities, dated as of a date within five days prior to the
Closing Date, certifying that Pacific is in good standing as a corporation in
the state of Nevada.
Section 5.05 Other Items
Chancellor shall have received such further documents , certificates, or
instruments relating to the transaction contemplated hereby as Chancellor may
reasonably request.
ARTICLE V1
CONDITIONS PRECEDENT TO OBLIGATIONS OF
PACIFIC
The obligations of Pacific under this Agreement are subject to the satisfaction,
at or before the Closing Date, of the following conditions:
E-17
<PAGE>
Section 6.01 Accuracy of Representations
The representation and warranties made by Chancellor regarding its stock
ownership and PCFL in this Agreement were true when made and shall be true at
the Closing Date with the same force and affect as if such representations and
warranties were made at and as of the Closing Date (except for changes therein
permitted by this Agreement ), and PCFL shall have performed or complied with
all covenants and conditions required by this Agreement to be performed or
complied with by PCFL prior to or at the Closing. Pacific shall be furnished
with a certificate, signed by a duly authorised officer of PCFL and dated the
Closing Date, to the foregoing effect.
Section 6.02 Officer's Certificates
Pacific shall have been furnished with certificates dated the Closing date and
signed by a duly authorised chief executive officer and principal accounting and
financial officer of PCFL or by Chancellor to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge of
PCFL or Chancellor, threatened which might result in an action to enjoin or
prevent the consummation of the transactions contemplated by this Agreement.
Furthermore, based on certificates of good standing, representation of
government agencies, and PCFL's and/or Chancellor's own documents, the
certificate shall represent that:
(a) This Agreement has been duly approved by PCFL's and/or Chancellor's
board of directors and has been duly executed and delivered in the
name and on behalf of PCFL by its duly authorised officers pursuant to
, and in compliance with, authority granted by the board of directors
of PCFL.
(b) The representations and warranties of Chancellor set forth in this
Agreement are true and correct as of the date of the certificate:
(c) Except as provided or permitted herein, there have been no material
adverse changes in PCFL up to and including the date of the
certificate:
(d) All conditions required by this Agreement to have been met, satisfied
or performed by PCFL and Chancellor have been met.
(e) The consummation of the transactions contemplated by this Agreement
does not violate any law, regulation order, writ injunction or decree
of any court or governmental body or result in the creation or
imposition of any mortgage, lien, charge or encumbrance of any nature
upon any of the properties of PCFL, pursuant to any mortgage,
resolution, agreement, or instrument to which PCFL or Chancellor is a
party.
(f) All authorisations, consents, approvals, registrations and/or filings
with any governmental body, agency or court required in connection
with the execution and delivery of the documents by PCFL have been
obtained and are in full force and effect or, if not required to have
been obtained will be in full force and effect by such time as may be
required; and
(g) There is no action, suit, proceeding, inquiry or investigation at law
or in equity by any public board or body pending or threatened against
PCFL wherein an unfavourable decision, ruling or finding would have an
adverse affect on the financial condition of PCFL, the operation of
PCFL or the acquisition and reorganisation contemplated herein, or any
material agreement or instrument by which PCFL is bound or would in
any way contest the existence of PCFL.
Section 6.03 No Material Adverse Change
Except as provided or permitted herein, prior to the Closing Date, there shall
not have occurred any material adverse change in the financial condition,
business or operations of PCFL, nor shall any event
E-18
<PAGE>
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 PCFL.
Section 6.04 Other Items
Pacific shall have received such further documents, certificates, or instruments
relating to the transactions contemplated hereby as Pacific may reasonably
request.
ARTICLE V11
MISCELLANEOUS
Section 7.01 No Representation Regarding Tax Treatment
------------------------------------------
No representation or warranty is being made by any party to any other regarding
the treatment of this transaction for federal or state income taxation. Each
party has relied exclusively on its own legal, accounting and other tax adviser
regarding the treatment of this transaction for federal and stage income taxes
and on no representations, warranty or assurance from any other party or such
other party's legal, accounting or other adviser.
Section 7.02 Governing Law
This Agreement shall be governed by, enforced and construed under and in
accordance with the laws of the United States of America and, with respect to
matters of state law, with the laws of the state of Nevada and with respect to
matters governing corporations organised under the laws of such state.
Section 7.03 Notices
All notices, demands, requests or other communications required or authorised
hereunder shall be deemed given sufficiently if in writing and if personally
delivered, if sent by facsimile transmission, confirmed with a written copy
thereof sent by overnight express delivery, if sent by registered mail or
certified mail, return receipt requested and postage prepaid; or if sent by
overnight express delivery:
If to Pacific to: 1800 E. Sahara, Suite 107,
Las Vegas Nevada 89104 USA
With Copy to: David S. Stevens
Level 2, 55 Hunter Street,
Sydney NSW 2000 Australia Fax: 612-233 3860
If to Chancellor to: Stanley Looman
Dominicanessen straat 22,
Oranjestad, Aruba Telecopy No: 0011-2978 36546
or such other addresses and facsimile numbers as shall be furnished by any party
in the manner for giving notices hereunder and any such notice demand, request
or other communication shall be deemed to have been given as of the date so
delivered or sent by facsimile transmission three days after the date so mailed
or one day after the date so sent by overnight delivery.
Section 7.04 Attorney's Fees
In the event that any party institutes any action or suit to enforce this
Agreement or to secure relief from any default hereunder or breach hereof, the
breaching party or parties shall reimburse the nonbreaching party or parties for
all costs, including reasonable attorney's fees, incurred in connection
therewith and in enforcing or collecting any judgement rendered therein.
E-19
<PAGE>
Section 7.05 Schedules: Knowledge
Whenever in any section of this Agreement reference is made to information set
forth in the schedules provided by Pacific, or Chancellor, such reference is to
information specifically set forth in such schedules and clearly marked to
identify the information specifically set forth in such schedules and clearly
marked to identify the section of this Agreement to which the information
relates. Whenever any representation is made to the "knowledge" of any party, it
shall be deemed to be a representation that no officer or director of such
party, after reasonable investigation, has any knowledge of such matters.
Section 7.06 Third Party Beneficiaries
This contract is solely between Pacific and Chancellor, and, except as
specifically provided, no director, officer, stockholder, employee, agent,
independent contractor, or any other person or entity shall be deemed to be a
third party beneficiary of this Agreement.
Section 7.07 Entire Agreement
This Agreement represents the entire agreement between the parties relating to
the subject matter hereof. All previous agreements between the parties whether
written or oral, have been merged into this Agreement. This Agreement alone
fully and completely expresses the agreement of the parties relating to the
subject matter hereof. There are no other course of dealing, understandings,
agreements, representations, or warranties, written or oral except as set forth
herein.
Section 7.08 Survival: Termination
The representations, warranties, and covenants of the respective parties shall
service the Closing Date and the consummation of the transactions herein
contemplated.
Section 7.9 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 7.10 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 such
remedies may be enforced concurrently 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 thereof may be extended by a writing signed by the party or
parties for whose benefit the provision is intended.
E-20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officer, hereunto duly authorized as of the date first above
written.
For and on behalf of Chancellor:
By: Neil A. Green
Power of Attorney
S\- Neil A. Green
Pacific,
a Nevada Corporation
By: David S. Stevens
S/- David S. Stevens
E-21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Pacific
Forest Corporation and Subsidiary June 30, 1996 financial statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,414
<SECURITIES> 0
<RECEIVABLES> 5,030
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,693
<PP&E> 801,784
<DEPRECIATION> (47,604)
<TOTAL-ASSETS> 816,200
<CURRENT-LIABILITIES> 3,725
<BONDS> 0
0
0
<COMMON> 1,245
<OTHER-SE> 538,646
<TOTAL-LIABILITY-AND-EQUITY> 816,200
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 971
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (971)
<INCOME-TAX> 0
<INCOME-CONTINUING> (971)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (971)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
