Exhibit 2
1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made this
30th day of June 1997, by and among Gemstar Enterprises, Inc., a Nevada
corporation ("GEI"); Safe Environment Corp., a Illinois corporation ("SAFE");
and the persons listed in Exhibit A-1 hereof who are the owners of record of
all the issued and outstanding stock of SAFE who execute and deliver the
Agreement ("SAFE Stockholders"), based on the following:
Recitals
GEI wishes to acquire all the issued and outstanding stock of SAFE in
exchange for stock of GEI in a transaction intended to qualify as a tax-free
exchange pursuant to section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended. The parties intend for this Agreement to represent the
terms and conditions of such tax-free reorganization, which Agreement the
parties hereby adopt.
Agreement
Based 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:
ARTICLE I
EXCHANGE OF STOCK
1.01 Exchange of Shares. On the terms and subject to the conditions
set forth in this Agreement, on the Closing Date (as defined in Section 1.05
hereof), the SAFE Stockholders shall assign, transfer, and deliver to GEI,
free and clear of all liens, pledges, encumbrances, charges, restriction, or
known claims of any kind, nature, or description, all issued and outstanding
shares of common stock of SAFE (the "SAFE Shares") held by SAFE Stockholders
which shares shall represent all issued and outstanding shares of SAFE common
stock, and GEI agrees to acquire such shares on such date by issuing and
delivering in exchange therefor eleven (11) restricted shares (post reverse
split pursuant to Section 4.01 hereafter referred to as the "Reverse Stock
Split") of GEI common stock, par value $0.001 per share, (the "GEI Common
Stock") for every share of SAFE issued and outstanding shares of common stock
or an aggregate of 2,761,000 post split shares of Common Stock. Such shares
of GEI Common Stock shall be issued pro rata based on the number of SAFE
Shares held and as set forth opposite the SAFE Stockholders respective names
in Exhibit A-1. All 2,761,000 shares of GEI Common Stock to be issued and
delivered pursuant to this Agreement shall be appropriately adjusted to take
into account any stock split, stock dividend, reverse stock split,
recapitalization, or similar change in the GEI Common Stock which may occur
between the date of the execution of this Agreement and the Closing Date
except for the proposed Reverse Stock Split set forth in Section 4.01.
1.02 Delivery of Certificates by SAFE Stockholders. The transfer of
SAFE Shares by the SAFE Stockholders shall be effected by the delivery to GEI
at the Closing (as set forth in Section 1.05 hereof) of certificates
representing the transferred shares endorsed in blank or accompanied by stock
powers executed in blank, with all signatures medallion guaranteed and with
all necessary transfer taxes and other revenue stamps affixed and acquired at
the SAFE Stockholders' expense.
2
1.03 Operation as Wholly-Owned Subsidiary. After giving effect to
the transaction contemplated hereby, GEI will own all the issued and
outstanding shares of SAFE and SAFE will be a wholly-owned subsidiary of GEI
operating under the name Safe Environment Corp.
1.04 Further Assurances. At the Closing and from time to time
thereafter, the SAFE Stockholders shall execute such additional instruments
and take such other action as GEI may reasonably request, without undue cost
to the SAFE Stockholders in order to more effectively sell, transfer, and
assign clear title and ownership in the SAFE Shares to GEI.
1.05 Closing and Parties. The Closing contemplated hereby shall be
held at a mutually agreeable time and place on or before July 12, 1997, or on
another date not later than thirty (30) days following the date of this
Agreement (the "Closing Date"). The Agreement may be closed at any time
following approval by a majority in interest of the shareholders of GEI's
Common Stock as set forth in Section 5.01 hereof and SAFE Stockholders as set
forth in Section 5.02 hereof. All SAFE Stockholders who execute and deliver a
copy of the Agreement shall be deemed to be parties to the Agreement and bound
by all the terms, conditions, and covenants hereof. The Closing may be
accomplished by wire, express mail, overnight courier, conference telephone
call or as otherwise agreed to by the respective parties or their duly
authorized representatives. The Closing shall be in conjunction with, and
conditioned upon, the closing of the acquisition of Roli Ink Corporation set
for in section 6.10 hereof.
1.06 Closing Events.
(a) GEI Deliveries. Subject to fulfillment or waiver of the
conditions set forth in Article IV, GEI shall deliver to SAFE and SAFE
Stockholders at Closing all of the following:
(i) Certificates of good standing from the Secretary of State, issued
as of a date within five days prior to the Closing Date, certifying that GEI
is in good standing as a corporation in the State of Nevada;
(ii) Copies of the resolutions of GEI's board of directors and
shareholder minutes or consents authorizing the execution and performance of
this Agreement and the contemplated transactions, certified by the secretary
or an assistant secretary of GEI as of the Closing Date;
(iii) The certificate contemplated by Section 4.03, duly executed by
a duly authorized officer of GEI;
(iv) The certificate contemplated by Section 4.04, dated the Closing
Date, signed by the chief executive officer and principal accounting and
financial officer of GEI; and
In addition to the above deliveries, GEI shall take all steps and actions
as SAFE and SAFE Stockholders may reasonably request or as may otherwise be
necessary to consummate the transactions contemplated hereby.
(b) SAFE's and SAFE Stockholders' Deliveries. Subject to fulfillment
or waiver of the conditions set forth in Article V and section 6.10, SAFE
and/or SAFE Stockholder's shall deliver to GEI at Closing all the following:
(i) Certificate of good standing from the Secretary of State, issued
as of a date within five days prior to the Closing Date certifying that SAFE
is in good standing as a corporation in the State of Illinois;
3
(ii) Incumbency and specimen signature certificates dated the Closing
Date with respect to the officers of SAFE executing this Agreement and any
other document delivered pursuant hereto on behalf of SAFE;
(iii) Copies of resolutions of the board of directors and of the
stockholders of SAFE authorizing the execution and performance of this
Agreement and the contemplated transactions, certified by the secretary or an
assistant secretary of SAFE as of the Closing Date;
(iv) The certificate contemplated by Section 5.03, executed by a duly
authorized officer of SAFE; and
(v) The certificate contemplated by Section 5.04, dated the Closing
Date, signed by the chief executive officer and principal accounting and
financial officer of SAFE.
In addition to the above deliveries, SAFE and SAFE Stockholders shall take all
steps and actions as GEI may reasonably request or as may otherwise be
necessary to consummate the transactions contemplated hereby.
1.07. Termination
(a) This Agreement may be terminated by the board of directors of
either GEI or SAFE at any time prior to the Closing Date if:
(i) There shall be any actual or threatened action or proceeding
before any court or any governmental body which shall seek to restrain,
prohibit, or invalidate the transactions contemplated by this Agreement and
which, in the judgment of such board of directors, made in good faith and
based upon the advice of its legal counsel, makes it inadvisable to proceed
with the transactions 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 judgment of such board of directors, made in good faith
and based on the advice of counsel, there is substantial likelihood that any
such approval will not be obtained or will be obtained only on a condition or
conditions which would be unduly burdensome, making it inadvisable to proceed
with the exchange;
In the event of termination pursuant to this paragraph (a) of Section
1.07, 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 GEI if either SAFE or SAFE
Stockholders shall fail to comply in any material respect with any of their
covenants or agreements contained in this Agreement or if any of the
representations or warranties of SAFE or SAFE Stockholders contained herein
shall be inaccurate in any material respect. In the event of termination
pursuant to this paragraph (b) of this section 1.07, no obligation, right,
remedy, or liability shall arise hereunder. All parties shall bear their own
costs incurred in connection with the negotiation, preparation, and execution
of this Agreement and the transactions contemplated hereby.
4
(c) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of SAFE (i) if shareholders of SAFE
owning more than ten percent (10%) of the issued and outstanding shares of
SAFE Stock perfect their dissenter's rights with respect to the approval of
this Agreement and the transactions contemplated hereby, or (ii) if GEI
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 GEI contained herein shall be inaccurate in any material
respect. In the event of termination pursuant to this paragraph (c) of this
section 1.07, no obligation, right, remedy, or liability shall arise
hereunder. All parties shall each bear their own costs incurred in connection
with the negotiation, preparation, and execution of this Agreement and the
transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF GEI
As an inducement to, and to obtain the reliance of SAFE and the SAFE
Stockholders, GEI represent and warrant as follows:
2.01 Organization. GEI 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 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 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
transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of GEI's articles of incorporation or
bylaws, or other agreement to which it is a party or by which it is bound.
2.02 Approval of Agreement. GEI 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
GEI has authorized and approved the execution, delivery, and performance of
this Agreement and the transactions contemplated hereby; subject to the
approval of the GEI shareholders and compliance with state and federal
corporate and securities laws.
2.03 Capitalization. The authorized capitalization of GEI
consists of 100,000,000 shares of common stock, $0.001 par value, of which
10,758,614 shares are issued and outstanding and 5,000,000 shares of preferred
stock, $0.001 par value, none of which is issued and outstanding. All issued
and outstanding shares of GEI are legally issued, fully paid, and
nonassessable and not issued in violation of the preemptive 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 GEI.
2.04. Financial Statements.
(a) Included in Schedule 2.04 are the audited balance sheets of GEI
as of September 30, 1996, and 1995, and the related statements of operations,
5
stockholders' equity (deficit), and cash flows for the year ended September
30, 1996, and 1995, and from the date of inception as a development stage
company (April 10, 1993) through September 30, 1996, including the notes
thereto, and the accompanying report of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, independent
certified public accountants. The information in Schedule 2.04 also includes
the balance sheet of GEI as of March 31, 1997, and 1996, and the related
statements of operations, stockholders' equity (deficit), and cash flows for
the six months ended March 31, 1997, and 1996, together with the notes thereto
and representations by the principal accounting and financial officer of GEI
to the effect that such financial statements contain all adjustments (all of
which are normal recurring adjustments) necessary to present fairly the
results of operations and financial position for the periods and as of the
dates indicated.
(b) The audited 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 GEI balance sheets present fairly, in all material respects, as of their
respective dates, the financial position of GEI. GEI 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 presently fairly
the assets of GEI in accordance with generally accepted accounting principles
under which they were prepared. The statements of operations, stockholders'
equity and cash flows present fairly the financial position and result of
operations of GEI as of their respective dates and for the respective periods
covered thereby.
(c) The books and records, financial and otherwise, of GEI 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 GEI. GEI has maintained a system of internal accounting controls, under
GEI's circumstances, 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.
(d) GEI has filed or will file as 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. GEI
has no 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 GEI, except to the extent reflected on such balance
sheet and all such dates and years and periods prior thereto and for which GEI
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
6
contemplated. 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. GEI 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 GEI, 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 outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of GEI.
2.05 Outstanding Warrants and Options. GEI has 551,145 Series "A"
warrants outstanding which entitle the holders thereof to purchase a like
number of shares of Common Stock at an exercise price of $1.60 per share and
548,864 Series "B" warrants outstanding which entitle the holders thereof to
purchase a like number of shares of Common Stock at an exercise price of $4.00
per share. GEI has no outstanding options, calls, or commitments of any
nature relating to the authorized and unissued GEI Common Stock.
2.06 Information. The information concerning GEI set forth in this
Agreement 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. GEI shall cause the schedules delivered
by it pursuant hereto and the instruments delivered to SAFE hereunder to be
updated after the date hereof up to and including the Closing Date.
2.07 Absence of Certain Changes or Events. Except as set forth in
this Agreement or the schedules hereto, since the date of the most recent GEI
balance sheet described in Section 2.04 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
GEI or (ii) any damage, destruction, or loss to GEI (whether or not covered by
insurance) materially and adversely affecting the business, operations,
properties, assets, or conditions of GEI;
(b) GEI has not (i) amended its articles of incorporation or bylaws;
(ii) declared or made, or agreed to declare or make, any payment of dividends
or distributions of any assets of any kind whatsoever to stockholders or
purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are
extraordinary or material considering the business of GEI; (iv) made any
material change in its 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 its officers or directors or any of its employees whose monthly
compensation exceeds $1,000; or (viii) made any increase in any
profit-sharing, bonus, deferred compensation, insurance, pension, retirement,
or other employee benefit plan, payment, or arrangement made to, for, or with
their officers, directors, or employees;
PAGE
7
(c) GEI 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 except as stated herein; (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 GEI 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 GEI and its
subsidiaries; 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 GEI 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 GEI.
2.08 Litigation and Proceedings. There are no actions, suits, or
administrative or other proceedings pending or, to the knowledge of GEI,
threatened by or against GEI or affecting GEI or its properties, at law or in
equity, before any court or other governmental agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind. GEI 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.
2.09 Governmental Authorizations. GEI has all licenses, franchises,
permits, and other governmental authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date of this Agreement. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by GEI of this Agreement and the consummation by GEI of
the transactions contemplated hereby.
2.10 Compliance With Laws and Regulations. GEI has complied with all
applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations,
properties, assets, or condition of GEI or except to the extent that
noncompliance would not result in the occurrence of any material liability for
GEI.
2.11 GEI Schedules. GEI has delivered to SAFE the following
schedules, which are collectively referred to as the "GEI Schedules" and which
consist of separate schedules dated as of the date of execution of this
Agreement, all certified by a duly authorized officer of GEI as complete,
true, and accurate:
(a) A schedule including copies of the articles of incorporation and
bylaws of GEI in effect as of the date of this Agreement;
8
(b) A schedule containing copies of resolutions adopted by the board
of directors of GEI approving this Agreement and the transactions herein
contemplated;
(c) A schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the GEI Schedules by
§§2.01 through 2.10.
GEI shall cause the GEI Schedules and the instruments delivered to SAFE
hereunder to be updated after the date hereof up to and including a specified
date not more than three business days prior to the Closing Date. Such
updated GEI Schedules, certified in the same manner as the original GEI
Schedules, shall be delivered prior to and as a condition precedent to the
obligation of SAFE to close.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF SAFE
As an inducement to, and to obtain the reliance of, GEI, SAFE represents
and warrants as follows:
3.01 Organization. SAFE 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 Illinois 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 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 of SAFE.
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 SAFE's articles of incorporation or
bylaws, or other agreement to which it is a party or by which it is bound.
3.02 Approval of Agreement. SAFE and the SAFE Stockholders have full
power, authority, and legal right and have taken, or will take, all action
required by law, its articles of incorporation, bylaws, or otherwise to
execute and deliver this Agreement and to consummate the transactions herein
contemplated. The board of directors of SAFE have authorized and approved the
execution, delivery, and performance of this Agreement and the transactions
contemplated hereby; subject to the approval of the SAFE Stockholders and
compliance with state and federal corporate and securities laws.
3.03 Capitalization. The authorized capitalization of SAFE consists
of three hundred fifty thousand (350,000) shares, no par value, of which as of
the date hereof two hundred fifty one thousand (251,000) shares are issued and
outstanding. All issued and outstanding shares of SAFE are legally issued,
fully paid, and nonassessable and not issued in violation of the preemptive 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 SAFE.
PAGE
9
3.04 Financial Statements.
(a) Included in Schedule 3.04 are the audited balance sheet of SAFE
as of December 31, 1996, and 1995, and the related statements of operations,
cash flows, and stockholders' equity for the period from inception on November
4, 1987, to December 31, 1996, including the notes thereto, and the
accompanying report of ▇▇▇▇▇▇ & ▇▇▇▇▇, LTD., independent certified public
accountants. At or prior to the Closing Date, SAFE shall deliver the
unaudited balance sheet of SAFE as of March 31, 1997, and 1996, and the
related statements of operations, stockholders' equity (deficit), and cash
flows for the three months ended March 31, 1997, and 1996, together with the
notes thereto and representations by the chief operating officer of SAFE to
the effect that such financial statements contain all adjustments (all of
which are normal recurring adjustments) necessary to present fairly the
results of operations and financial position for the periods and as of the
dates indicated.
(b) The audited financial statements delivered pursuant to Section
3.04(a) have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved. The
financial statements of SAFE present fairly, as of their respective dates, the
financial position of SAFE. SAFE 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 any financial statements or the notes thereto prepared in
accordance with generally accepted accounting principles, and all assets
reflected therein present fairly the assets of SAFE, in accordance with
generally accepted accounting principles. The statements of revenue and
expenses and cash flows present fairly the financial position and result of
operations of SAFE as of their respective dates and for the respective periods
covered thereby.
(c) SAFE 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.
SAFE has no material 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 unaudited balance sheet of SAFE, 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 SAFE 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 to SAFE's knowledge 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
SAFE with respect to all material compensation paid to employees of SAFE 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. To SAFE's knowledge, 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. SAFE 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 SAFE, 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 SAFE. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any tax return of SAFE.
10
(d) The books and records, financial and otherwise, of SAFE 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 SAFE. SAFE 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.
3.05 Information. The information concerning SAFE set forth in this
Agreement and in the schedules delivered by SAFE 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. SAFE shall cause the schedules delivered by SAFE pursuant
hereto and the instruments delivered to GEI hereunder to be updated after the
date hereof up to and including the Closing Date.
3.06 Absence of Certain Changes or Events. Except as set forth in
this Agreement since the date of the most recent SAFE balance sheet described
in Section 3.04 and included in the information referred to in Section 3.05:
(a) There has not been (i) any material adverse change in the
business, operations, properties, level of inventory, assets, or condition of
SAFE or (ii) any damage, destruction, or loss to SAFE (whether or not covered
by insurance) materially and adversely affecting the business, operations,
properties, assets, or conditions of SAFE.
(b) SAFE has not (i) amended its articles of incorporation or bylaws;
(ii) declared or made, or agreed to declare or make, any payment of dividends
or distributions of any assets of any kind whatsoever to stockholders or
purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are
extraordinary or material considering the business of SAFE; (iv) made any
material change in its 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 its officers or directors or any of its employees whose monthly
compensation exceeds $1,000; or (viii) made any increase in any
profit-sharing, bonus, deferred compensation, insurance, pension, retirement,
or other employee benefit plan, payment, or arrangement made to, for, or with
their officers, directors, or employees;
(c) SAFE 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
11
than current liabilities reflected in or shown on the most recent SAFE 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 SAFE; 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 SAFE, 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 SAFE.
3.07 Title and Related Matters. Except as provided herein or
disclosed in the most recent SAFE balance sheet and the notes thereto, SAFE
has good and marketable title to all of its properties, inventory, interests
in properties, and assets, which are reflected in the most recent SAFE balance
sheet or acquired after that date (except properties, interests in properties,
and assets sold or otherwise disposed of since such date in the ordinary
course of business), free and clear of all mortgages, 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.
3.08 Litigation and Proceedings. Except as otherwise disclosed in
Schedule 3.08, there are no actions, suits, or proceedings pending or, to the
knowledge of SAFE, threatened by or against SAFE or affecting SAFE, at law or
in equity, before any court or other governmental agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind. SAFE 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.
3.09 Material Contract Defaults. SAFE is not in default in any
material respect under the terms of any outstanding contract, agreement,
lease, or other commitment which is material to the business, operations,
properties, assets, or condition of SAFE, and there is no event of default or
other event which, with notice or lapse of time or both, would constitute a
default in any material respect under any such contract, agreement, lease, or
other commitment in respect of which SAFE has not taken adequate steps to
prevent such a default from occurring.
3.10 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed
of trust, or other material contract, agreement, or instrument to which SAFE
is a party or to which any of its properties or operations are subject.
12
3.11 Governmental Authorizations. SAFE has all licenses, franchises,
permits, and other governmental authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date of this Agreement. Except for compliance with federal and state
securities and corporation laws, as hereinafter provided, no authorization,
approval, consent, or order of, or registration, declaration, or filing with,
any court or other governmental body is required in connection with the
execution and delivery by SAFE of this Agreement and the consummation by SAFE
of the transactions contemplated hereby.
3.12 Compliance With Laws and Regulations. SAFE has complied with
all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations,
properties, assets, or condition of SAFE or except to the extent that
noncompliance would not result in the occurrence of any material liability for
SAFE.
3.13 Insurance. All of the insurable properties of SAFE are insured
for full replacement value (subject to reasonable deductibles) against losses
due to fire and other casualty, with extended coverage, and other risks
customarily insured against by persons operating similar properties in the
localities where such properties are located and under valid and enforceable
policies issued by insurers of recognized responsibility. Such policy or
policies containing substantially equivalent coverage will be outstanding and
in full force at the Closing Date, as hereinafter defined.
3.14 SAFE Schedules. SAFE has delivered to GEI the following
schedules, which are collectively referred to as the "SAFE Schedules" and
which consist of separate schedules dated as of the date of execution of this
Agreement, all certified by the chief executive officer of SAFE as complete,
true, and accurate:
(a) A schedule including copies of the articles of incorporation and
bylaws of SAFE and all amendments thereto in effect as of the date of this
Agreement;
(b) A schedule containing copies of resolutions adopted by the board
of directors of SAFE approving this Agreement and the transactions herein
contemplated as referred to in Section 3.02;
(c) A schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or condition
of SAFE since the most recent SAFE balance sheet, required to be provided
pursuant to Section 3.04 hereof; and
(d) A schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the SAFE Schedules
by Sections 3.01 through 3.13.
SAFE shall cause the SAFE Schedules and the instruments delivered to GEI
hereunder to be updated after the date hereof up to and including a specified
date not more than three business days prior to the Closing Date. Such
updated SAFE Schedules, certified in the same manner as the original SAFE
Schedules, shall be delivered prior to and as a condition precedent to the
obligation of GEI to close.
13
ARTICLE IV
CONDITIONS PRECEDENT TO OBLIGATIONS OF SAFE AND THE SAFE STOCKHOLDERS
The obligations of SAFE and the SAFE Stockholder under this Agreement are
subject to the satisfaction, at or before the Closing Date, of the following
conditions:
4.01. Reverse Split. GEI shall call and hold a meeting of its
shareholders, or obtain the written consent of a majority of its shareholders,
to approve a 5 to 1 reverse split of its issued and outstanding Common Stock
which reverse split shall be implemented prior to the Closing of the
transaction contemplated in this Agreement. The reverse split shall not
affect the authorized but unissued shares of the Company but will have the
effect of increasing the exercise price of the outstanding warrants and
reducing the shares issueable on exercise of the outstanding warrants of the
Company.
4.02 Shareholder Approval. GEI shall call and hold a meeting of
its shareholders, or obtain the written consent of a majority of its
shareholders, to approve the transactions contemplated by this agreement
including the acquisition of SAFE through the issuance of GEI Common Stock for
all of the issued and outstanding SAFE Shares and a change in the name of GEI
to "CG Industries, Inc."
4.03 Accuracy of Representations. The representations and warranties
made by GEI 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 GEI shall have performed or complied with
all covenants and conditions required by this Agreement to be performed or
complied with by GEI prior to or at the Closing. SAFE shall be furnished with
certificates, signed by duly authorized officers of GEI and dated the Closing
Date, to the foregoing effect.
4.04 Officer's Certificates. SAFE shall have been furnished with
certificates dated the Closing Date and signed by the duly authorized chief
executive officer of GEI to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of GEI
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, representations of government
agencies, and GEI's own documents, the certificate shall represent that:
(a) This Agreement has been duly approved by GEI's board of directors
and has been duly executed and delivered in the name and on behalf of GEI by
its duly authorized officers pursuant to, and in compliance with, authority
granted by the board of directors of GEI pursuant to a unanimous consent.
(b) The representations and warranties of GEI 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 GEI up to and
including the date of the certificate.
(d) All conditions required by this Agreement have been met,
satisfied, or performed by GEI.
14
(e) 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 GEI 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.
(f) There is no action, suit, proceeding, inquiry, or investigation
at law or in equity by any public board or body Pending or threatened against
GEI, wherein an unfavorable decision, ruling, or finding would have an adverse
effect on the financial condition of GEI, the operation of GEI, or the
acquisition and reorganization contemplated herein, or any material agreement
or instrument by which GEI is bound or would in any way contest the existence
of GEI.
4.05 No Material Adverse Change. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial
conditions, business, or operations of GEI, 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
GEI.
4.06 Good Standings. SAFE shall have received certificates of good
standing from the appropriate authorities, dated as of the date within five
days prior to the Closing Date, certifying that GEI is in good standing as a
corporation in the State of Nevada.
4.07 Other Items. SAFE shall have received such further documents
certificates, or instruments relating to the transactions contemplated hereby
as SAFE may reasonably request.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF GEI
The obligations of GEI under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
5.01. Shareholder Approval. GEI shall call and hold a meeting of its
shareholders, or obtain through a majority written consent of its
shareholders, whereby the shareholders of GEI authorize and approve this
Agreement and the transactions contemplated hereby.
5.02 SAFE Shareholders. Holders of all of the issued and
outstanding SAFE Shares shall agree to this Agreement and the exchange of
shares.
5.03 Accuracy of Representations. The representations and warranties
made by SAFE 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 SAFE shall have performed or complied with
all covenants and conditions required by this Agreement to be performed or
complied with by SAFE prior to or at the Closing. GEI shall be furnished with
a certificate, signed by a duly authorized officer of SAFE and dated the
Closing Date, to the foregoing effect.
PAGE
15
5.04 Officer's Certificates. GEI shall have been furnished with
certificates dated the Closing Date and signed by the duly authorized chief
executive officer of SAFE to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of SAFE,
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, representations of government
agencies, and SAFE's own documents, the certificate shall represent that:
(a) This Agreement has been duly approved by SAFE's board of
directors and shareholders and has been duly executed and delivered in the
name and on behalf of SAFE by its duly authorized officers pursuant to, and in
compliance with, authority granted by the board of directors of SAFE pursuant
to a unanimous consent of its board of directors and a majority vote of its
stockholders;
(b) The representations and warranties of SAFE 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 SAFE up to and including the date of the
certificate;
(d) All authorizations, consents, approvals, registrations, and/or
filing with any governmental body, agency, or court required in connection
with the execution and delivery of the documents by SAFE 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
(e) Except as otherwise disclosed in Schedule 3.08, there is no
action, suit, proceeding, inquiry, or investigation at law or in equity by any
public board or body Pending or threatened against SAFE, wherein an
unfavorable decision, ruling, or finding would have an adverse affect on the
financial condition of SAFE, the operation of SAFE, or the acquisition and
reorganization contemplated herein, or any material agreement or instrument by
which SAFE is bound or would in any way contest the existence of SAFE.
5.05 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 SAFE, nor
shall any event have occurred which, with the lapse of time or the giving of
notice, may cause of create any material adverse change in the financial
condition, business, or operations of SAFE.
5.06 Good Standing. GEI shall have received a certificate of good
standing from the appropriate authority, dated as of a date within five days
prior to the Closing Date, certifying that the SAFE is in good standing as a
corporation in the State of Illinois.
5.07 Other Items. GEI shall have received such further documents
certificates, or instruments relating to the transactions contemplated hereby
as GEI may reasonably request.
PAGE
16
ARTICLE VI
SPECIAL COVENANTS TO BE SATISFIED PRIOR TO CLOSING
6.01 Activities of GEI and SAFE.
(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 GEI and
SAFE pursuant hereto or as permitted or contemplated by this Agreement, GEI
and SAFE 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 it 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 or for which such entity 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 installments 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; and
(vi) Fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws and all
rules, regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement and except as provided
herein until the Closing Date, GEI and SAFE will not:
(i) Make any change in its articles of incorporation or bylaws;
(ii) 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
(iii) Enter into any agreement for the sale of SAFE securities
without the prior approval of GEI.
6.02 Access to Properties and Records. SAFE will afford to the
officers and authorized representatives of GEI full access to the properties,
books, and records of SAFE in order that GEI may have full opportunity to make
such reasonable investigation as it shall desire to make of the affairs of
SAFE and will furnish GEI with such additional financial and operating GEI and
other information as to the business and properties of SAFE as GEI shall from
time to time reasonably request.
17
6.03 Indemnification by SAFE. SAFE will indemnify and hold harmless
GEI and its directors and officers, and each person, if any, who controls GEI
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
Securities 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 material fact contained in any application or statement filed
with a governmental body or arising 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 SAFE expressly for
use therein. The indemnity agreement contained in this Section 6.03 shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of GEI and shall survive the consummation of the
transactions contemplated by this Agreement for a period of two years.
6.04. Indemnification by GEI. GEI will indemnify and hold harmless
SAFE, the SAFE Stockholders, SAFE's directors and officers, and each person,
if any, who controls SAFE 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 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 GEI expressly for
use therein. The indemnity agreement contained in this Section 6.04 shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of SAFE and shall survive the consummation of the
transactions contemplated by this Agreement for a period of two years.
6.05 The Acquisition of GEI Common Stock. GEI, SAFE and the SAFE
Stockholders agree and understand that the consummation of this Agreement
including the issuance of the GEI Common Stock to the shareholders of SAFE in
exchange for the SAFE Common Stock as contemplated hereby, constitutes the
offer and sale of securities under the Securities Act and applicable state
statutes. GEI, SAFE and SAFE Stockholders agree such transactions shall be
consummated in reliance on exemptions from the registration and prospectus
delivery requirements of such statutes 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 signing of this Agreement and the delivery of appropriate
separate representations shall constitute the parties acceptance of, and
concurrence in, the following representations and warranties:
18
(i) SAFE Stockholders acknowledge 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 GEI Common Stock, and that this
transaction involves certain risks.
(ii) SAFE Stockholders have received and read the Agreement and
understand the risks related to the consummation of the transactions herein
contemplated.
(iii) SAFE Stockholders have such knowledge and experience in
business and financial matters that they are capable of evaluating each
business.
(iv) SAFE Stockholders have been provided with copies of all
materials and information requested by the SAFE Stockholders or their
representatives, 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 SAFE Stockholders have provided to GEI or
their representatives concerning their suitability and intent to hold shares
in GEI following the transactions contemplated hereby is complete, accurate,
and correct.
(vi) SAFE Stockholders have not offered or sold any securities of GEI
or interest in this Agreement and have no present intention of dividing the
GEI Common 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 or nonoccurrence of any predetermined event or
circumstance.
(vii) SAFE Stockholders understand that the GEI Common 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
not involving any public offering and that any disposition of the subject GEI
Common Stock may, under certain circumstances, be inconsistent with this
exemption and may make SAFE Stockholders 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 GEI Common 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 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 rule 144 promulgated under the Securities Act, and, after one
year after the date the GEI Common Stock or SAFE Shares are fully paid for, as
calculated in accordance with rule 144(d), sales of securities in reliance
upon rule 144 can only be made in limited amounts in accordance with the terms
and conditions of that rule. After two years from the date the securities are
19
fully paid for, as calculated in accordance with rule 144(d), 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) SAFE Stockholders acknowledge that the shares of GEI Common
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. GEI is not under any
obligation to register the GEI Common Stock under the Securities Act. If rule
144 is available after one year and prior to two years following the date the
shares are fully paid for, only routine sales of such GEI Common Stock in
limited amounts can be made in reliance upon rule 144 in accordance with the
terms and conditions of that rule. GEI is not under any obligation to make
rule 144 available, except as may be expressly agreed to by it in writing in
this Agreement, and in the event rule 144 is not available, compliance with
regulation A or some other disclosure exemption may be required before SAFE
Stockholders can sell, transfer, or otherwise dispose of such GEI Common Stock
without registration under the Securities Act. GEI's registrar and transfer
agent will maintain a stop transfer order against the registration or transfer
of the GEI Common Stock, and the certificates representing the GEI Common
Stock will bear a legend in substantially the following form so restricting
the sale of such securities:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND ARE
"RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT.
(ix) GEI may refuse to register further transfers or resales of the
GEI Common Stock in the absence of compliance with rule 144 unless the SAFE
Stockholders furnish the GEI with a "no-action" or interpretive letter from
the SEC or an opinion of counsel reasonably acceptable to GEI stating that the
transfer is proper. Further, unless such letter or opinion states that the
shares of GEI Common Stock are free of any restrictions under the Securities
Act, GEI may refuse to transfer the securities to any transferee who does not
furnish in writing to GEI the same representations and agree to the same
conditions with respect to such GEI Common Stock as set forth herein. GEI may
also refuse to transfer the GEI Common Stock if any circumstances are present
reasonably indicating that the transferee's representations are not accurate.
(b) In connection with the transaction contemplated by this
Agreement, SAFE, the SAFE Stockholders, and GEI 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,
and the appropriate regulatory authority in the states where the SAFE
Stockholders reside unless an exemption requiring no filing is available in
such jurisdictions, 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, SAFE, the SAFE Stockholders, and GEI shall execute and
deliver to the other, at or prior to the Closing, such further letters of
representation, acknowledgment, suitability, or the like as GEI or SAFE and
its counsel may reasonably request in connection with reliance on exemptions
from registration under such securities laws including but not limited to an
investment letter.
20
(d) SAFE, the SAFE Stockholders, and GEI 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.
6.06 GEI Liabilities. Immediately prior to the Closing Date, GEI
shall have no material assets and no liabilities, and all expenses related to
this Agreement or otherwise shall have been paid.
6.07 Securities Filings. GEI shall be responsible for the
preparation and filing of a form D with the Securities and Exchange Commission
and SAFE shall be responsible for all filing in any state where its SAFE
Shareholders shall reside and all future filings required as a result of the
transaction contemplated by this Agreement necessary to comply with any
federal, state or regulatory security laws.
6.09 New Board of Directors and Officers. Upon closing of the
transactions contemplated by this Agreement, the current board of directors
and officers of GEI shall resign and in their place nominees of SAFE shall be
appointed.
6.10 Acquisition of Roli Ink Corporation. Prior to closing, GEI
shall enter into agreements substantially similar to this Agreement, to
purchase all of the issued and outstanding stock of Roli Ink Corporation, a
Wisconsin corporation for 2,200,056 post reverse split shares of GEI common
stock, respectively.
ARTICLE VII
MISCELLANEOUS
7.01 Brokers. GEI, SAFE and SAFE Stockholders agree that there were
no finders or brokers involved in bringing the parties together or who were
instrumental in the negotiation, execution, or consummation of this
Agreement. Further, GEI and SAFE each agree to indemnify the other against
any claim by any third person for any commission, brokerage, or finder's fee
or other payment with respect to this Agreement or the transactions
contemplated hereby based on any alleged agreement or understanding between
such party and such third person, whether express or implied, from the actions
of such party.
The covenants set forth in this section shall survive the Closing Date
and the consummation of the transactions herein contemplated.
7.02 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 state income taxes and on no
representation, warranty, or assurance from any other party or such other
party's legal, accounting, or other adviser.
7.03 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.
21
7.04 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered, if
sent by facsimile or telecopy transmission or other electronic communication
confirmed by registered or certified mail, postage prepaid, or if sent by
prepaid overnight courier addressed as follows:
If to GEI, to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ If to SAFE, to: ▇▇▇▇ ▇▇▇▇▇
Gemstar Enterprises, Inc. Safe Environment Corp.
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices, hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered or sent by
facsimile or telecopy transmission or other electronic communication, or one
day after the date so sent by overnight courier.
7.05 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 attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
7.06 Schedules; Knowledge. Whenever in any section of this Agreement
reference is made to information set forth in the schedules provided by GEI or
SAFE such reference is to 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.
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 courses of dealing, understandings, agreements, representations,
or warranties, written or oral, except as set forth herein.
7.08 Survival; Termination. The representations, warranties, and
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated.
7.09 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.
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
22
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.
7.11 GEI's Materiality Threshold. It is understood by the parties
that GEI has no operations and only limited assets. Accordingly, the parties
to this Agreement hereby agree that the term "materiality" as used in this
Agreement relative to GEI, shall represent a dollar amount in excess of
$25,000.
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly
authorized, as of the date first above written.
GEMSTAR ENTERPRISES, INC., SAFE ENVIRONMENT CORP.,
a Nevada corporation a Illinois corporation
By:/S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President By:/S/▇▇▇▇ ▇▇▇▇▇, Pres.
Its Duly Authorized Officer
STATE OF UTAH )
ss.
COUNTY OF SALT LAKE)
On this 30th day of June, 1997, personally appeared before me ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, whose identity is personally known to me and who by me duly sworn,
did say that he is the President of Gemstar Enterprises, Inc. and that said
document was signed by him of behalf of said corporation by authority of its
bylaws, and said ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ acknowledged to me that said corporation
executed the same.
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Notary Public [Seal]
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇. ▇-▇
▇▇▇, ▇▇ ▇▇▇▇▇
My Commission Expires August 10, ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇)
ss.
COUNTY OF ▇▇▇▇ )
On this 3rd day of July, 1997 personally appeared before me ▇▇▇▇ ▇▇▇▇▇,
whose identity is personally known to me and who by me duly sworn, did say
that he is the president of Safe Environment Corp. and that said document was
signed by him of behalf of said corporation by authority of its bylaws, and
said ▇▇▇▇ ▇▇▇▇▇ acknowledged to me that said corporation executed the same.
/S/ ▇▇▇▇▇ ▇▇▇▇▇
"Official Seal"
Notary Public, State of Illinois
My Commission Expires 6-2-99
PAGE
23
Exhibit A-1
Safe Environment Corp.
List of Shareholders
Number
Of GEI
Number Shares
Of SAFE To be
Shares Received
Name of Shareholder Owned In Exchange Signature
------------------- -------- ----------- ---------
