EXHIBIT 2(i)
Stock Purchase Agreement
among
ENVIRO-CLEAN OF AMERICA, INC.,
ENVIROACQI CO.
and
▇▇▇▇▇▇ & SON, INC.
dated
January 1, 1999
Index to Agreement
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Page
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Article I Purchase and Sale of Stock.......................................... 1
Article II Related Matters..................................................... 3
Article III Representations and Warranties of ▇▇▇▇▇▇ and the Company ........... 5
Article IV Representations and Warranties of Acquiror and Acquiror's Subsidiary 22
Article V Covenants of ▇▇▇▇▇▇ and the Company................................. 23
Article VI Covenants of the Acquiror........................................... 25
Article VII Conditions to the Obligations of ▇▇▇▇▇▇ and the Company............. 25
Article VIII Conditions to Obligations of Acquiror and Acquiror's Subsidiary..... 27
Article IX Conduct of the Company's Business Pending the Closing............... 31
Article X Survival of Representations and Warranties.......................... 35
Article XI Termination and Abandonment......................................... 36
Article XII Miscellaneous Provisions............................................ 37
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of January 1, 1999 among ENVIRO-CLEAN OF
AMERICA, INC., a Nevada corporation (Acquiror), ENVIROACQI CO., a Nevada
corporation which is a wholly-owned subsidiary of Acquiror (Acquiror's
Subsidiary), ▇▇▇▇▇▇ & SON, INC., a New York corporation (the Company), and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as sole shareholder of the Company ("▇▇▇▇▇▇").
This Agreement sets forth the terms and conditions upon which ▇▇▇▇▇▇ will
sell to Acquiror and convey to Acquiror's Subsidiary or other entities
designated by Acquiror, and Acquiror will purchase from ▇▇▇▇▇▇ shares of common
stock, $___ par value per share, of the Company, representing all of the issued
and outstanding capital stock of the Company (the "Company Stock"). As used in
this Agreement, capitalized terms have the meanings ascribed to them in Article
II.
In consideration of the mutual agreements contained herein, intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.01. Purchase and Sale of Stock. Subject to the terms and conditions
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of this Agreement, at the Closing, ▇▇▇▇▇▇ shall sell, transfer, convey, assign
and deliver to Acquiror and Acquiror shall purchase, acquire and accept from
▇▇▇▇▇▇, the Company Stock free and clear of all liens, charges or encumbrances
of whatsoever nature.
1.02. Consideration. Subject to the terms and conditions
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of this Agreement, in reliance on the representations, warranties and agreements
of ▇▇▇▇▇▇ and the Company contained
herein, and in consideration of the sale, assignment, transfer and delivery of
the Company Stock, Acquiror or Acquiror's Subsidiary will deliver, at the
Closing:
(a) the sum of Eight Hundred and Ten Thousand Dollars ($810,000) in
cash, certified check or verified wire transfer;
(b) a promissory note in the principal amount of Five Hundred and
Forty Thousand Dollars ($540,000) due January 15, 2001 and bearing interest at a
rate of four percent (4%) per annum, with the terms and conditions set forth in
Exhibit A hereto (the "Note"); and
(c) Five Hundred Thousand (500,000) shares of Acquiror's Series A
Preferred Stock, par value $.001 per share, with terms and conditions set forth
in the Certificate of Designation of Series A Preferred Stock, the form of which
is attached as Exhibit B hereto (the Series A Shares).
1.03. Closing. The Closing of the transactions contemplated by this
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Agreement will take place at the offices of Acquiror in Dallas, Texas on January
15, 1999 at 10:00 a.m., except that any party hereto may, by giving two days'
written notice to all other parties hereto, defer the Closing to a date not
later than April 30, 1999 in order that such party may satisfy any of the
conditions required to be satisfied at or prior to the Closing.
(a) At the Closing, ▇▇▇▇▇▇ will deliver to Acquiror or Acquiror's
Subsidiary the Company Stock, together with a stock power duly endorsed for
transfer, and ▇▇▇▇▇▇ and the Company will deliver to Acquiror or Acquiror's
Subsidiary all other previously undelivered documents required to be delivered
by ▇▇▇▇▇▇ or the Company to Acquiror or Acquiror's Subsidiary at or prior to the
Closing in connection with the transactions contemplated by this Agreement.
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(b) At the Closing, there will be delivered (i) to ▇▇▇▇▇▇ by Acquiror
or Acquiror's Subsidiary, the consideration referred to in Section 1.02 hereof
to be delivered at the Closing, and (ii) to ▇▇▇▇▇▇ or the Company by Acquiror or
Acquiror's Subsidiary, all previously undelivered documents required to be
delivered by Acquiror or Acquiror's Subsidiary to ▇▇▇▇▇▇ or the Company at or
prior to the Closing.
1.04. Further Assurances. After the Closing, ▇▇▇▇▇▇ and the Company
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shall from time to time, at the request of Acquiror or Acquiror's Subsidiary and
without further cost or expense to Acquiror or Acquiror's Subsidiary, execute
and deliver such other instruments of conveyance and transfer and take such
other actions as Acquiror or Acquiror's Subsidiary may reasonably request, in
order to more effectively consummate the transactions contemplated hereby.
ARTICLE II
RELATED MATTERS
2.01. Confidentiality. Each party hereto will hold and will cause its
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employees, consultants and advisors to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all documents and information
concerning the other party furnished it by such other party or its
representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) previously known by the party to which it was furnished, (ii) in the public
domain through no fault of such party, or (iii) later lawfully acquired from
other sources by the party
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to which it was furnished), and each party will not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors in connection with this
Agreement. If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except to the extent such
information comes into the public domain through no fault of the party required
to hold it in confidence, and such information shall not be used to the
detriment of, or in relation to any investment in, the other party and all such
documents (including copies thereof) shall be returned to the other party
immediately upon the written request of such other party. Each party shall be
deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar information.
2.02. Definitions. For all purposes of this Agreement, except as
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otherwise expressly provided or unless the context otherwise requires:
"Acquiror" means Enviro-Clean of America, Inc., a corporation formed under
the laws of the State of Nevada.
"Acquiror's Subsidiary" means ENVIROACQI CO., a corporation formed under
the laws of State of Nevada.
The terms "Affiliate" and "Associate" have the meanings prescribed by Rule
12b-2 of the regulations promulgated pursuant to the Securities Exchange Act.
"Balance Sheet" means the unaudited balance sheet of the Company referred
to in Section 3.06(ii) of this Agreement.
"Closing" means the closing referred to in Section 1.03 of this Agreement.
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"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means ▇▇▇▇▇▇ & Son, Inc., a corporation formed under the laws of
the State of New York.
"Company Affiliate" means each Affiliate of the Company.
"Company Subsidiary" means any corporation of which the Company (a)
directly or indirectly owns or controls at the time outstanding shares of stock
which have in ordinary circumstances (not dependent upon the happening of a
contingency) voting power to elect a majority of the board of directors of said
corporation, or (b) of which shares of stock of the character described in the
foregoing clause (a) shall at the time be owned or controlled directly or
indirectly by the Company and one or more Company Subsidiaries as defined in the
foregoing clause (a) or by one or more such Company Subsidiaries.
"Disclosure Schedule" means the document delivered by the Company to the
Acquiror simultaneously with the execution hereof containing the information
required to be included therein pursuant to this Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
The plural of any defined term shall have a meaning correlative to such
defined term.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇ AND THE COMPANY
▇▇▇▇▇▇ and the Company hereby jointly and severally represent, covenant and
warrant to Acquiror and Acquiror's Subsidiary as follows:
3.01. Corporate Organization; Etc. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
New York and has full corporate power and authority to carry on its business as
it is now being conducted and to own the properties and assets it now owns; is
duly qualified or licensed to do business as a foreign corporation in good
standing in the jurisdictions listed in Section 3.01 of the Disclosure Schedule,
which are all the jurisdictions in which such qualification is required. The
copies of the Certificate of Incorporation and By-Laws of the Company heretofore
delivered to Acquiror or Acquiror's Subsidiary are complete and correct copies
of such instruments as presently in effect and no vote or comparable action by
the directors or shareholders of the Company has been taken to amend them.
3.02. Capitalization of the Company. As of the date of this Agreement,
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the authorized capital stock of the Company consists of ________ shares of
Common Stock, $_________ par value per share, of which __________________ shares
are issued and outstanding and no shares are held in the treasury of the
Company. All issued and outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable. ▇▇▇▇▇▇ is the record and
beneficial owner of the Company Stock, free and clear of any lien, charge,
encumbrance or interest of any kind whatsoever. ▇▇▇▇▇▇ has good and marketable
title to the Company Stock. Upon delivery to Acquiror's Subsidiary in accordance
with the terms hereof, Acquiror's Subsidiary will obtain good and marketable
title to the Company Stock, free and clear of any lien, charge, encumbrance or
interest whatsoever.
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3.03. Subsidiaries and Affiliates. The Company does not own, directly
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or indirectly, any capital stock or other equity securities of any corporation
or have any direct or indirect equity or ownership interest in any business.
3.04. Authorization, Etc. ▇▇▇▇▇▇ has full competence and authority,
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and the Company has full corporate power and authority, to enter into this
Agreement and to carry out the transactions contemplated hereby. The Board of
Directors and stockholders of the Company have taken all action required by law,
the Company's Certificate of Incorporation, its By-Laws or otherwise to be taken
by them to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and this Agreement is a
valid and binding agreement of ▇▇▇▇▇▇ and the Company enforceable in accordance
with its terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditor=s rights and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought.
3.05 No Violation. Neither the execution and delivery of this Agreement
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nor the consummation of the transactions contemplated hereby will violate any
provision of the Certificate of Incorporation or By-Laws of the Company, or,
except as specified in Section 3.05 of the Disclosure Schedule, violate, or be
in conflict with, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any security interest, lien or other encumbrance
upon any property or assets of the Company under, any agreement or commitment to
which the Company is a party or by which the Company is bound, or to which the
property of the
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Company is subject, or violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority.
3.06. Financial Statements. The Company has heretofore delivered to
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Acquiror: (i) a balance sheet of the Company as at August 31 in each of the
years 1996 through 1998; and consolidated statements of income, changes in
stockholders' equity and changes in financial position for each of the years
then ended, all certified by ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLP, independent certified
public accountants, whose reports thereon are included therein; and (ii) an
unaudited balance sheet of the Company as at December 31, 1998, and unaudited
statements of income, changes in stockholders' equity and changes in financial
position for the four month period then ended. Such consolidated balance sheets
and the notes thereto are true, complete and accurate and fairly present the
assets, liabilities and financial condition of the Company as at the respective
dates thereof, and such statements of income, changes in stockholders' equity
and changes in financial position and the notes thereto are true, complete and
accurate and fairly present the results of operations for the periods therein
referred to; all in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except, in the case of
unaudited statements, for normally recurring year-end adjustments, which
adjustments will not be material either individually or in the aggregate.
3.07. No Undisclosed Liabilities; Etc. The Company has no liabilities
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or obligations of any nature (absolute, accrued, contingent or otherwise) which
were not fully reflected or reserved against in the Balance Sheet, except for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date thereof; and the reserves reflected
in the Balance
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Sheet for such liabilities or obligations are adequate, appropriate and
reasonable.
3.08. Accounts Receivable. All accounts receivable of the Company,
-------------------
whether reflected in the Balance Sheet or otherwise, represent sales actually
made in the ordinary course of business, and are current and collectible net of
any reserves shown on the Balance Sheet (which reserves are adequate and were
calculated consistent with past practice). Subject to such reserve, each of the
accounts receivable either has been collected in full or will be collected in
full, without any set-off, within 120 days after the day on which it became due
and payable.
3.09. Inventory. All inventory of the Company, whether reflected in
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the Balance Sheet or otherwise, consists of a quality and quantity usable and
salable in the ordinary course of business, except for items of obsolete
materials and materials of below-standard quality, all of which have been
written down in the Balance Sheet to realizable market value or for which
adequate reserves have been provided therein. The quantities of all inventory of
the Company are reasonable and warranted in the present circumstances of their
respective businesses.
3.10. Interim Operations. Since the date of the Balance Sheet, the
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business of the Company has been conducted only in the ordinary and usual course
consistent with past practice. Since the date of the Balance Sheet, there have
not been any material adverse changes in the financial condition, assets or
results of operations of the Company. Since such date such assets have not been
affected in any way as a result of flood, fire, explosion or other casualty
(whether or not covered by insurance). Neither ▇▇▇▇▇▇ nor the Company is aware
of any circumstances which may cause it to suffer any material adverse change in
its business, operations or prospects.
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Since the Balance Sheet Date, the Company has not incurred any liabilities
or obligations, or paid (absolute, accrued, contingent or otherwise) except non-
material items incurred in the ordinary course of business and consistent with
past practice, which in the aggregate do not exceed $25,000.
The Company has not, since the Balance Sheet Date:
(i) permitted or allowed any of its property or assets (real, personal or
mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind, except for
liens for current taxes not yet due;
(ii) canceled any debts or waived any claims or rights of substantial
value;
(iii) sold, transferred, or otherwise disposed of any of its properties or
assets, including rights to the use of any patent, trademark, trade name or
copyright, or disposed of or disclosed (except as necessary in the conduct of
its business) to any person other than representatives of Acquiror or Acquiror's
Subsidiary any trade secret, formula, process or know-how not theretofore a
matter of public knowledge;
(iv) granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any increase in the compensation payable
or to become payable to any officer or employee, and no such increase is
customary on a periodic basis or required by agreement or understanding; or
(v) agreed, whether in writing or otherwise, to take any action described
in this Section.
3.11. Title to Properties; Encumbrances. The Company has good, valid
---------------------------------
and marketable
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title to all the properties and assets which it purports to own (real, personal
and mixed, tangible and intangible), including, without limitation, all the
properties and assets reflected in the Balance Sheet and all the properties and
assets purchased by the Company since the date of the Balance Sheet, which
subsequently acquired properties and assets (other than inventory and short term
investments) are listed in Section 3.11 of the Disclosure Schedule. All
properties and assets reflected in the Balance Sheet have a fair market or
realizable value at least equal to the value thereof as reflected therein, and
all such properties and assets are free and clear of all title defects or
objections, liens, claims, charges, security interests or other encumbrances of
any nature whatsoever and are not, in the case of real property, subject to any
rights of way, building use restrictions, exceptions, variances, reservations or
limitations of any nature whatsoever except, with respect to all such properties
and assets, (a) liens shown on the Balance Sheet as securing specified
liabilities or obligations with respect to which no default exists; and (b)
liens for current taxes not yet due. The rights, properties and other assets
presently owned, leased or licensed by the Company and described elsewhere in
this Agreement include all rights, properties and other assets necessary to
permit the Company to conduct their businesses in all material respects in the
same manner as their businesses have been conducted prior to the date hereof.
3.12. Plant and Equipment. The plants, structures and equipment of the
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Company are structurally sound with no defects and are in good operating
condition and repair and are adequate for the uses to which they are being put;
and none of such plants, structures or equipment are in need of maintenance or
repairs except for ordinary, routine maintenance and repairs which are not
material
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in nature or cost. Except as set forth in Section 3.12 of the Disclosure
Schedule, neither ▇▇▇▇▇▇ nor the Company has received notification that the
Company is in violation of any applicable building, zoning, anti-pollution,
health or other law, ordinance or regulation in respect of its plants or
structures or their operations and no such violation exists.
3.13. Patents, Trademarks, Trade Names, Etc. The Company owns, or is
-------------------------------------
licensed or otherwise has the full and exclusive right to use, all patents,
trademarks, trade names, copyrights, technology, know-how and processes used in
or necessary for the conduct of the business as heretofore conducted. Section
3.13 of the Disclosure Schedule contains an accurate and complete description of
(a) all patents, trademarks, trade names and copyrights used or proposed to be
used by the Company, all applications therefor, and a summary of the terms of
all licenses and other agreements relating thereto and (b) a summary of the
terms of all agreements relating to technology, know-how or processes which the
Company is licensed or authorized to use by others. Except as set forth in
Section 3.13 of the Disclosure Schedule, the Company has the sole and exclusive
right to use the patents, trademarks, trade names, copyrights, technology, know-
how and processes referred to in the Disclosure Schedule, and the consummation
of the transactions contemplated hereby will not alter or impair any such
rights; no claims have been asserted by any person to the use of any such
patents, trademarks, trade names, copyrights, technology, know-how or processes
or challenging or questioning the validity or effectiveness of any such license
or agreement, and the Company does not know of any valid basis for any such
claim; and the use of such patents, trademarks, trade names, copyrights,
technology, know-how or processes by the Company does not infringe on the rights
of
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any person.
3.14. Leases. Section 3.14 of the Disclosure Schedule contains an accurate
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and complete description of the terms of all leases pursuant to which the
Company leases real or personal property. Except as set forth in Section 3.14 of
the Disclosure Schedule, all such leases are valid, binding and enforceable in
accordance with their terms, and are in full force and effect; there are no
existing defaults by the Company thereunder; no event of default has occurred
which (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default thereunder; and all
lessors under such leases have consented (where such consent is necessary) to
the consummation of the transactions contemplated by this Agreement without
requiring modification in the rights or obligations of the lessee under such
leases. Executed counterpart copies of all consents referred to in the preceding
sentence will be delivered to Acquiror or Acquiror's Subsidiary at the Closing.
3.15. Bank Accounts. Section 3.15 of the Disclosure Schedule sets forth the
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names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which the Company maintains safe deposit
boxes or accounts of any nature and the names of all persons authorized to draw
thereon, make withdrawals therefrom or have access thereto. At the Closing,
▇▇▇▇▇▇ and the Company will deliver to Acquiror or Acquiror's Subsidiary copies
of all records, including all signature or authorization cards, pertaining to
such bank accounts.
3.16. Taxes. The Company has duly filed all tax reports and returns
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required to be filed by it and have duly paid all taxes and other charges due or
claimed to be due from it by federal, state,
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local or foreign taxing authorities (including, without limitation, those due in
respect of the properties, income, franchises, licenses, sales or payrolls of
any of them); the reserves for taxes reflected in the Balance Sheet are
adequate; and there are no tax liens upon any property or assets of the Company
except liens for current taxes not yet due. The federal income tax returns of
the Company have been examined by the Internal Revenue Service for all periods
to and including August 31, 1998; and, except to the extent shown therein, all
deficiencies asserted as a result of such examinations have been paid or finally
settled and no issue has been raised by the Internal Revenue Service in any such
examination which, by application of the same or similar principles, reasonably
could be expected to result in a proposed deficiency for any other period not so
examined. Further, no state of facts exists or has existed which would
constitute grounds for the assessment of any tax liability with respect to the
periods which have not been audited by the Internal Revenue Service. Copies of
all income tax returns for the Company in respect of all years not barred by the
statute of limitations have heretofore been delivered by the Company to Acquiror
or Acquiror's Subsidiary and all such returns are listed in Section 3.16 of the
Disclosure Schedule. The Company has not, with regard to any assets or property
held, acquired or to be acquired by the Company, filed a consent to the
application of Section 341(f)(2) of the Code.
3.17. Contracts and Commitments. Except as set forth in Section 3.17 of the
-------------------------
Disclosure Schedule:
(a) The Company has no agreements, contracts, commitments or
restrictions which are material to its business, operations or prospects or
which require the making of any
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charitable contribution;
(b) No purchase contracts or commitments of the Company continue for a
period of more than 12 months or are in excess of the normal, ordinary and usual
requirements of business or at any excessive price;
(c) There are no outstanding sales contracts, commitments or proposals
of the Company which continue for a period of more than 12 months or will result
in any loss to the Company upon completion or performance thereof, after
allowance for direct distribution expenses nor are there any outstanding
contracts, bids or sales or service proposals quoting prices which will not
result in a normal profit;
(d) The Company has no outstanding contracts with officers, employees,
agents, consultants, advisors, salesmen, sales representatives, distributors or
dealers that are not cancelable by it on notice of not longer than 30 days and
without liability, penalty or premium or any agreement or arrangement providing
for the payment of any bonus or commission based on sales or earnings;
(e) The Company has no employment agreement, or any other agreement
that contains any severance or any severance or termination pay liabilities or
obligations;
(f) Except as set forth in Section 3.17(f) of the Disclosure Schedule,
the Company has no collective bargaining or union contracts or agreements;
(g) The Company is not in default, nor is there any basis for any
valid claim of default, under any contract made or obligation owed by it;
(h) The Company has no employee (other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇) to whom it
is
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paying compensation at the annual rate of more than $100,000 for services
rendered;
(i) The Company is not restricted by agreement from carrying on its
business anywhere in the world;
(k) Except as set forth in the Balance Sheet or Section 3.17(k) of the
Disclosure Schedule, the Company has no debt obligation for borrowed money,
including guarantees of or agreements to acquire any such debt obligation of
others;
(1) Except as set forth in Section 3.17(l) of the Disclosure Schedule,
the Company has no outstanding loan to any person; and
(m) The Company has no power of attorney outstanding or any
obligations or liabilities (whether absolute, accrued, contingent or otherwise),
as guarantor, surety, co-signer, endorser, comaker, indemnitor or otherwise in
respect of the obligation of any person, corporation, partnership, joint
venture, association, organization or other entity.
3.18. Customers and Suppliers. Sections 3.18(a) and (b), respectively, of
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the Disclosure Schedule sets forth: (a) a list of (i) the ten largest customers
of the Company in terms of sales during the fiscal year ended August 31, 1998
and (ii) the ten largest customers of the Company (on a consolidated basis) in
terms of sales during the four (4) months ended December 31, 1998, showing the
approximate total sales by the Company to each such customer during the fiscal
year ended
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August 31, 1998 and the four (4) months ended December 31, 1998, respectively;
(b) a list of (i) the ten largest suppliers of the Company in terms of purchases
during the fiscal year ended August 31, 1998, and (ii) the ten largest suppliers
of the Company in terms of purchases during the four (4) months ended December
31, 1998, showing the approximate total purchases by the Company from each such
supplier during the fiscal year ended August 31, 1998 and the four (4) months
ended December 31, 1998, respectively. Except to the extent set forth in Section
3.18(c) of the Disclosure Schedule, there has not been any material adverse
change in the business relationship of the Company with any customer or supplier
named in Sections 3.18(a) and 3.18(b) of the Disclosure Schedule. Except for the
customers and suppliers named in Sections 3.18(a) and 3.18(b) of the Disclosure
Schedule, the Company had no customer who accounted for more than 5% of
Company's sales during the fiscal year ended August 31, 1998, or any supplier
from whom it purchased more than 5% of the goods or services which it purchased
during the fiscal year ended August 31, 1998.
3.19. Orders, Commitments and Returns. Section 3.19(a) of the Disclosure
-------------------------------
Schedule sets forth the aggregate amounts of all accepted and unfulfilled orders
for the sale of merchandise entered into by the Company which provide for sales
of more than $25,000 in the aggregate to any one customer as of December 31,
1998, and the aggregate amount to be paid by the Company pursuant to all
contracts or commitments for the purchase of supplies by them as of December 31,
1998 all of which orders, contracts and commitments will have been made in the
ordinary course of business. Section 3.19(b) of the Disclosure Schedule sets
forth as of December 31, 1998 each claim against the Company or any Company
Subsidiary to return in excess of an aggregate of $25,000 of
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merchandise by reason of alleged overshipments, defective merchandise or
otherwise, or of merchandise in the hands of customers under an understanding
that such merchandise would be returnable.
3.20. Agreements in Full Force and Effect. All contracts, agreements,
-----------------------------------
plans, leases, policies and licenses referred to in the Disclosure Schedule are
valid and in full force and effect, and true copies thereof have been heretofore
made available to Acquiror or Acquiror's Subsidiary.
3.21. Insurance. Section 3.21(a) of the Disclosure Schedule contains an
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accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the
Company. All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date of the Closing
have been paid, and no notice of cancellation or termination has been received
with respect to any such policy. Such policies are sufficient for compliance
with all requirements of law and of all agreements to which the Company is a
party; are valid, outstanding and enforceable policies; provide adequate
insurance coverage for the assets and operations of the Company; will remain in
full force and effect through the respective dates set forth in Section 3.21(a)
of the Disclosure Schedule without the payment of additional premiums; and will
not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Section 3.21(b) of the Disclosure
Schedule identifies all risks which the Company, its Board of Directors or
officers have designated as being self insured. The Company has not been refused
any insurance with respect to its assets or operations, nor has its coverage
been limited, by any insurance carrier to which it has applied for any
19
such insurance or with which it has carried insurance during the last three
years.
3.22. Labor Difficulties. Except to the extent set forth in Section 3.22 of
------------------
the Disclosure Schedule, (a) the Company is in compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor
practice; (b) there is no unfair labor practice complaint against the Company
pending before the National Labor Relations Board; (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or
affecting the Company; (d) no representation question exists respecting the
employees of the Company; (e) no grievance nor any arbitration proceeding
arising out of or under collective bargaining agreements is pending and no claim
therefor exists; (f) no collective bargaining agreement which is binding on the
Company restricts the Company from relocating or closing any of its operations;
and (g) the Company has not experienced any work stoppage or other labor
difficulty at any time during its last three (3) fiscal years or since the
Balance Sheet Date.
3.23. Fringe Benefit Plans. Except as set forth in Section 3.23 of the
--------------------
Disclosure Schedule, the Company has no bonus, deferred compensation, pension,
profit-sharing, retirement, stock purchase, stock option or any other fringe
benefit plan, arrangement or practice, whether formal or informal. Section 3.23
of the Disclosure Schedule contains an accurate and complete description of, and
sets forth the annual amount payable pursuant to, each bonus, deferred
compensation, pension, profit-sharing or retirement plan or arrangement, and
each other fringe benefit plan, of the Company, whether formal or informal. The
aggregate of such amounts did not exceed $25,000 for the fiscal year ended
August 31, 1998 and the Balance Sheet reflects in the aggregate an accrual of
all amounts
20
accrued but unpaid under the aforesaid plans and arrangements as of the Balance
Sheet Date. The Company has no commitment, whether formal or informal and
whether legally binding or not, to create any additional such plan or
arrangement.
3.24. Litigation. Except as set forth in Section 3.24 of the Disclosure
----------
Schedule, there is no action, suit, inquiry, proceeding or investigation by or
before any court or governmental or other regulatory or administrative agency or
commission pending or threatened against or involving the Company or which
questions or challenges the validity of this Agreement or any action taken or to
be taken by the Company pursuant to this Agreement or in connection with the
transactions contemplated hereby; nor is there any valid basis for any such
action, proceeding or investigation. Except as set forth in Section 3.24 of the
Disclosure Schedule, the Company is not in default under or in violation of, nor
is there any valid basis for any claim of default under or violation of, any
contract, commitment or restriction to which it is a party or by which it is
bound. The Company is not subject to any judgment, order or decree entered in
any lawsuit or proceeding which may have an adverse effect on its business
practices or on its ability to acquire any property or conduct its business in
any area.
3.25. Consents and Approvals of Governmental Authorities. Except as set
--------------------------------------------------
forth in Section 3.25 of the Disclosure Schedule, no consent, approval or
authorization of, or declaration, filing or registration with any person or
governmental or regulatory authority is required in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
21
3.26. Compliance with Law. The operations of the Company have been
-------------------
conducted in accordance with all applicable laws, regulations and other
requirements of all national governmental authorities, and of all states,
municipalities and other political subdivisions and agencies thereof, having
jurisdiction over the Company. Neither ▇▇▇▇▇▇ nor the Company has received any
notification of any asserted present or past failure by the Company to comply
with such laws, rules or regulations.
3.27. Environmental Protection. Except as set forth in Section 3.27 of the
------------------------
Disclosure Schedule, the Company has obtained all permits, licenses and other
authorizations which are required under federal, state and local laws relating
to pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials or wastes.
Except as set forth in Section 3.27 of the Disclosure Schedule, the Company is
in full compliance with all terms and conditions of the required permits,
licenses and authorizations, and is also in full compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those laws or contained in
any regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder. Except as set forth in
Section 3.27 of the Disclosure Schedule, neither ▇▇▇▇▇▇ nor the Company is aware
of, nor has ▇▇▇▇▇▇ or the Company received notice of, any past,
22
present or future events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent continued
compliance, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation, based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste.
3.29. ERISA. The Company has no benefit plans that are subject to the
-----
Employee Retirement Income Security Act of 1974, as amended (ERISA).
3.30. Brokers and Finders. Neither ▇▇▇▇▇▇, the Company nor any of its
-------------------
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
3.31. Personnel. Section 3.31 of the Disclosure Schedule sets forth a true
---------
and complete list of:
(a) the names and current salaries of all directors and elected and
appointed officers, and each employee whose annual compensation is in excess of
$50,000 of the Company, the number of shares of the Company Stock owned
beneficially or of record, or both, by each such person and the amount of annual
compensation of each and the family relationships, if any, among such persons;
and
(b) all group insurance programs in effect for employees of the
Company. The Company is not in default with respect to any of its obligations
referred to in the preceding sentence.
23
3.32. Insider Interests. Except as set forth in Section 3.32 of the
-----------------
Disclosure Schedule, no officer or director of the Company has any material
interest in any property, real or personal, tangible or intangible, including
without limitation, inventions, patents, trademarks or trade names, used in or
pertaining to the business of the Company.
3.33. Products Liability. Except as set forth in Section 3.33 of the
------------------
Disclosure Schedule, there is no action, suit, inquiry, proceeding or
investigation by or before any court or governmental or other regulatory or
administrative agency or commission pending or threatened against or involving
the Company relating to any product alleged to have been manufactured or sold by
the Company and alleged to have been defective, or improperly designed or
manufactured, nor is there any valid basis for any such action, proceeding or
investigation.
3.34. Disclosure. No representations or warranties by ▇▇▇▇▇▇ or the
----------
Company in this Agreement and no statement contained in any document (including,
without limitation, financial statements and the Disclosure Schedule),
certificate, or other writing furnished or to be furnished by ▇▇▇▇▇▇ or the
Company to Acquiror or any of its representatives pursuant to the provisions
hereof or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.
24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR'S
SUBSIDIARY
Acquiror and Acquiror's Subsidiary, jointly and severally, represent and
warrant to ▇▇▇▇▇▇ and the Company as follows:
4.01. Corporate Organization; Etc. Acquiror and Acquiror's Subsidiary
---------------------------
are corporations duly organized, validly existing and in good standing under the
laws of the State of Nevada. All the issued and outstanding shares of capital
stock of Acquiror's Subsidiary have been duly authorized by all necessary
corporation action and are validly issued, fully paid and nonassessable and are
owned by Acquiror.
4.02. Authorization; Etc. Acquiror and Acquiror's Subsidiary have full
------------------
corporate power and authority to enter into this Agreement, to execute and
deliver the Note and to carry out the transactions contemplated hereby and
thereby. The Boards of Directors of Acquiror and Acquiror's Subsidiary have
taken all action required by law, their respective Certificates of Incorporation
and By-Laws or otherwise to authorize the execution and delivery of this
Agreement, the Note and the transactions contemplated hereby, and each of the
Agreement and the Note is a valid and binding agreement of Acquiror and
Acquiror's Subsidiary enforceable in accordance with its terms except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable
25
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
4.03. No Violation. Neither the execution and delivery of this
------------
Agreement or the Note nor the consummation of the transactions contemplated
hereby will violate any provisions of the respective Certificate of
Incorporation or By-Laws of Acquiror or Acquiror's Subsidiary, or violate, or be
in conflict with, or constitute a default under, or cause the acceleration of
the maturity of any debt or obligation pursuant to, any agreement or commitment
to which Acquiror or Acquiror's Subsidiary is a party or by which Acquiror or
Acquiror's Subsidiary is bound, or violate any statute or law or any judgment,
decree, order, regulation or rule of any court or governmental authority.
4.04. Series A Shares Authorized. The Series A Shares have been duly
--------------------------
authorized by the Board of Directors of Acquiror, and when issued at the Closing
as provided herein, will contain substantially the terms and conditions set
forth in Exhibit B hereto, and will be validly issued, fully paid and non-
assessable.
ARTICLE V
COVENANTS OF ▇▇▇▇▇▇ AND THE COMPANY
▇▇▇▇▇▇ and the Company hereby jointly and severally covenant and agree with
Acquiror:
5.01. Full Access. The Company shall, and ▇▇▇▇▇▇ shall cause the
-----------
Company to, afford to Acquiror, its counsel, accountants and other
representatives full access to the plants, offices, warehouses, properties,
books and records of the Company in order that Acquiror may have full
opportunity to make such investigations as it shall desire to make of the
affairs of the Company; and the Company will, and ▇▇▇▇▇▇ will cause the Company
to, cause its officers and accountants to
26
furnish such additional financial and operating data and other information as
Acquiror shall from time to time request.
5.02. Approval of Stockholders. The Company and its officers and
------------------------
directors shall (a) cause a meeting of the Company's stockholders to be duly
called and held as soon as practicable for the purpose of voting on this
Agreement, (b) recommend approval and adoption of this Agreement to the
Company's stockholders and (c) use their best efforts to obtain the necessary
approval and adoption of this Agreement by the Company's stockholders.
5.03. Consents of Company Lenders, Etc. The Company shall, and ▇▇▇▇▇▇
--------------------------------
shall cause the Company to, use its best efforts to obtain at the earliest
practicable date and prior to the Closing all consents necessary to the
consummation of the transactions contemplated hereby and will provide to
Acquiror copies of each such consent promptly after it is obtained.
5.04. Supplements to Disclosure Schedule. From time to time prior to
----------------------------------
the Closing, ▇▇▇▇▇▇ and the Company will promptly supplement or amend the
Disclosure Schedule with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in the Disclosure Schedule. No supplement or amendment
of the Disclosure Schedule made pursuant to this section shall be deemed to cure
any breach of any representation of or warranty made in this Agreement unless
Acquiror specifically agrees thereto in writing.
5.05. Other Transactions. Neither the Company nor its Board of
------------------
Directors shall enter into any discussions concerning, or approve or recommend
to the holders of any shares of its capital
27
stock, any merger, consolidation, disposition of all or substantially all of its
business, properties or assets (other than pursuant to this Agreement), any
tender offer, acquisition or other business combination, or proposal therefor,
or furnish or cause to be furnished any information concerning the business,
properties or assets of the Company to any party in connection with any tender
offer or other transaction involving the acquisition of the Company or all or
any substantial part of its assets by any person other than Acquiror or
Acquiror's Subsidiary. ▇▇▇▇▇▇ shall cause the Company to comply with the
provisions of this Section 5.05.
5.06. Covenant to Satisfy Conditions. Each of the Company and ▇▇▇▇▇▇
------------------------------
will use their best efforts to ensure that the conditions set forth in Article
VIII hereof are satisfied, insofar as such matters are within the control of any
of them.
5.07. Certificates. At the Closing ▇▇▇▇▇▇ and the Company will furnish
------------
Acquiror with such certificates of its officers and others to evidence
compliance with the covenants set forth in this Article V as may be reasonably
requested by Acquiror.
ARTICLE VI
COVENANTS OF THE ACQUIROR
6.01. Federal Securities and Blue Sky Filings. Acquiror will take all
---------------------------------------
such action as may be necessary under all applicable federal securities laws and
regulations or the securities or Blue Sky laws of the States or other political
subdivisions of the United States in connection with the transactions
contemplated hereby.
6.02. Eligibility for Trading. Acquiror will use its best efforts to
-----------------------
maintain the eligibility
28
of Acquiror's Common Stock for trading on the NASD OTC Bulletin Board.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF ▇▇▇▇▇▇ AND THE COMPANY
Each and every obligation of ▇▇▇▇▇▇ and the Company under this Agreement to
be performed on or before the Closing shall be subject to the satisfaction, on
or before the Closing, of each of the following conditions, unless waived in
writing by ▇▇▇▇▇▇ and the Company:
7.01. Representations and Warranties True. The representations and
-----------------------------------
warranties of Acquiror and Acquiror's Subsidiary contained herein shall be in
all material respects true and accurate as of the date when made at and as of
the Closing as though such representations and warranties were made at and as of
such date, except for changes expressly permitted or contemplated by the terms
of this Agreement.
7.02. Performance. Acquiror and Acquiror's Subsidiary shall have performed
-----------
and complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing.
7.03. Approval of Company's Stockholders. The approval of the stockholders
----------------------------------
of the Company referred to in Section 5.02(c) hereof shall have been obtained.
7.04. No Governmental Proceeding or Litigation. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
29
contemplated hereby; provided that, in the case of such a proceeding brought by
a person other than a governmental body, the condition set forth in this
sentence of this Section 7.04 shall be deemed to have been satisfied if the
Company shall have been provided with an opinion of counsel to Acquiror to the
effect that it is reasonably probable that the relief sought in such proceeding
will not be granted.
7.05. Certificates. Acquiror and Acquiror's Subsidiary shall have
------------
furnished to ▇▇▇▇▇▇ and the Company such certificates of their officers and
others to evidence compliance with the conditions set forth in this Article VII
as may be reasonably requested by ▇▇▇▇▇▇ and the Company.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF ACQUIROR AND ACQUIROR'S SUBSIDIARY
Each and every obligation of Acquiror and Acquiror's Subsidiary under this
Agreement to be performed on or before the Closing shall be subject to the
satisfaction, on or before the Closing, of each of the following conditions,
unless waived in writing by Acquiror:
8.01. Representations and Warranties True. The representations and
-----------------------------------
warranties contained in Article III hereof, the Disclosure Schedule and in all
certificates and other documents delivered and to be delivered by ▇▇▇▇▇▇ and the
Company to Acquiror or Acquiror's Subsidiary or their representatives pursuant
hereto or in connection with the transactions contemplated hereby shall be true,
complete and accurate as of the date when made at and as of the Closing Date as
though such representations and warranties were made at and as of such date,
except for changes expressly
30
permitted or contemplated by the terms of this Agreement.
8.02. Performance. ▇▇▇▇▇▇ and the Company shall have performed and
-----------
complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing.
8.03. Investigations; Etc. Neither any investigation of the Company by
-------------------
Acquiror or Acquiror's Subsidiary, nor the Disclosure Schedule or any supplement
thereto nor any other document delivered to Acquiror or Acquiror's Subsidiary as
contemplated by this Agreement, shall have revealed any facts or circumstances
which, in the sole and exclusive judgment of Acquiror, reflect in a material
adverse way on the financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves, business, operations or prospects of the
Company.
8.04. Approval of Company's Stockholders; Etc. The approval of the
---------------------------------------
stockholders of the Company referred to in Section 5.02(c) hereof and all
consents from third parties and government agencies required to consummate the
transactions contemplated hereby shall have been obtained.
8.05. No Government Proceeding or Litigation. No suit, action,
--------------------------------------
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby or which in the sole and exclusive judgment of Acquiror
might have a material adverse effect on the business or financial condition of
the Company.
8.06. No Injunction. On the Closing Date there shall be no effective
-------------
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated as so provided
31
or imposing any conditions on the consummation of the transaction contemplated
hereby which the Acquiror deems unacceptable in its sole discretion.
8.07. Material Change. From the date of the Balance Sheet to the
---------------
Closing Date, the Company shall not have suffered any adverse change (whether or
not such change is referred to or described in any supplement to the Disclosure
Schedule) in its business, prospects, financial condition, working capital,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves or
operations.
8.09. Opinion of Counsel to ▇▇▇▇▇▇ and the Company. ▇▇▇▇▇▇ and the
--------------------------------------------
Company shall have delivered to Acquiror an opinion of counsel to ▇▇▇▇▇▇ and the
Company reasonably acceptable to Acquiror, dated as of the Closing Date, in form
and substance satisfactory to Acquiror, to the effect that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation;
(b) The Company is duly qualified as a foreign corporation and in good
standing in each jurisdiction in which such qualification is necessary;
(c) The Company has the corporate power and authority to carry on its
business as it is now being conducted and to own the properties and assets it
now owns, and the Company has the full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby;
(d) The authorized capital stock of the Company consists of ______
shares of
32
Common Stock, $_______ par value per share, and, stating the number of such
shares which are issued and outstanding and that such issued shares have been
duly and validly authorized and issued and are fully paid and nonassessable;
(e) Based upon an examination of the records of the Company, to the
best of the knowledge of such counsel except as disclosed in this Agreement or
pursuant hereto, there are no outstanding options, warrants or other rights to
purchase or acquire any capital stock of the Company;
(f) All corporate action by the Company required in order to
authorize the transactions contemplated hereby has been duly and validly taken;
and this Agreement has been duly executed and delivered by ▇▇▇▇▇▇ and the
Company and is the valid and binding obligation of ▇▇▇▇▇▇ and the Company
enforceable in accordance with its terms except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors, rights, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought;
(g) ▇▇▇▇▇▇ has complete and unrestricted power to sell, convey,
assign, transfer and deliver to Acquiror the Company Stock to be sold,
conveyed, assigned, transferred and delivered pursuant hereto; and the
instruments of sale, conveyance, assignment and transfer executed and delivered
to Acquiror or Acquiror's Subsidiary hereunder are duly executed, are valid and
binding obligations of ▇▇▇▇▇▇;
33
(h) Neither the execution and delivery of this Agreement by ▇▇▇▇▇▇ or
the Company nor the consummation of the transactions contemplated hereby will
violate the Certificate of Incorporation or By-Laws of the Company or any
Company Subsidiary or, will violate, conflict with, or constitute a default
under, or cause the acceleration of maturity of any debt or obligation pursuant
to, or result in the creation or imposition of any security interest, lien or
other encumbrance upon any property or assets of the Company under, any
contract, commitment, agreement, trust, understanding, arrangement or
restriction of any kind to which the Company is a party or by which the Company
is bound or violate any statute or law, or any judgment, decree, order,
regulation or rule of any court or governmental authority;
(i) Neither ▇▇▇▇▇▇ nor the Company is engaged in or threatened with
any legal action or other proceeding or has incurred or been charged with or is
under investigation with respect to any violation of any federal, state or local
law or administrative regulation which if adversely determined might adversely
affect or impair the business or condition, financial or otherwise, of the
Company, except as specifically disclosed by the Company in this Agreement or
pursuant hereto;
(j) No consent of any governmental body nor of any other person, is
required for the consummation by ▇▇▇▇▇▇ or the Company of the transactions
contemplated hereby, except consents the need for which is disclosed in sections
3.04, 3.05, 3.14 and 3.25 of the Disclosure Schedule, all of which have been
duly and validly obtained;
(k) To the best knowledge of such counsel, the Company is in
compliance with all applicable laws and regulations;
34
(l) No facts have come to the attention of such counsel which would
lead them to believe that any representation or warranty of ▇▇▇▇▇▇ or the
Company contained herein or in the Disclosure Schedule or any supplement thereto
is incorrect, false or misleading; and
(m) As to such other matters incident to the matters herein
contemplated as Acquiror and its counsel may reasonably request, including the
form of all documents and the validity of all proceedings.
8.09. Consents Obtained. All consents referred to in Sections 3.04,
-----------------
3.05, 3.14 and 3.25 shall have been obtained.
8.10. Employment Contract. At or prior to the Closing, Acquiror shall
-------------------
have entered into a contract with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ satisfactory to Acquiror
providing for his employment by Acquiror commencing upon the Closing.
ARTICLE IX
CONDUCT OF THE COMPANY'S BUSINESS PENDING THE CLOSING
Pending the Closing, and except as otherwise expressly consented to or
approved by Acquiror in writing:
9.01. Regular Course of Business. The Company will, and ▇▇▇▇▇▇ will
--------------------------
cause the Company to, carry on its business diligently and substantially in the
same manner as heretofore conducted, and the Company shall not institute any new
methods of manufacture, purchase, sale, lease, management, accounting or
operation or engage in any transaction or activity, enter into any agreement or
make any commitment, except in the ordinary course of business and consistent
with past practice.
35
9.02. Amendments. No change or amendment shall be made in the Certificate
----------
of Incorporation or By-Laws of the Company.
9.03. Capital Changes; Dividends; Redemptions. The Company will not
---------------------------------------
issue or sell any shares of its capital stock or other securities except
pursuant to the valid conversion of securities or exercise of options described
in Section 3.02 of the Disclosure Schedule, acquire directly or indirectly, by
redemption or otherwise, any such capital stock, reclassify or split-up any such
capital stock, declare or pay any dividends thereon in cash, securities or other
property or make any other distribution with respect thereto, or grant or enter
into any options, warrants, calls or commitments of any kind with respect
thereto.
9.04. Subsidiaries. The Company will not organize any new subsidiary,
------------
acquire any capital stock or other equity securities of any corporation or
acquire any equity or ownership interest in any business.
9.05. Organization. The Company shall use its best efforts to preserve
------------
its corporate existence and business organization intact, to keep available to
Acquiror its officers and key employees, and to preserve for Acquiror its
relationships with licensors, suppliers, distributors, customers and others
having business relations with it.
9.06. Certain Changes. The Company will not:
---------------
(a) Borrow or agree to borrow any funds or incur, or assume or
become subject to, whether directly or by way of guarantee or otherwise, any
obligation or liability (absolute or contingent), except obligations and
liabilities incurred in the ordinary course of business and
36
consistent with past practice;
(b) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business and consistent with past
practice of liabilities or obligations reflected or reserved against in the
Balance Sheet or incurred in the ordinary course of business and consistent with
past practice since the date of the Balance Sheet;
(c) Prepay any obligation having a fixed maturity of more than 90
days from the date such obligation was issued or incurred;
(d) Permit or allow any of its property or assets (real, personal or
mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien or
encumbrance, except for those of a kind permitted under Section 3.11 hereof;
(e) Write down the value of any inventory or write off as
uncollectible any notes or accounts receivable;
(f) Cancel any debts or waive any claims or rights of substantial
value or sell, transfer, or otherwise dispose of any of its properties or
assets, except in the ordinary course of business and consistent with past
practice;
(g) Dispose of or permit to lapse any rights to the use of any
patent, trademark, trade name or copyright, or dispose of or disclose to any
person any trade secret, formula, process or know-how not theretofore a matter
of public knowledge;
(h) Grant any general increase in the compensation of officers or
employees
37
(including any such increase pursuant to any bonus, pension, profit sharing or
other plan or commitment) or any increase in the compensation payable or to
become payable to any officer or employee;
(i) Make any single capital expenditure or commitment in excess of
$10,000 for additions to property, plant or equipment or make aggregate capital
expenditures and commitments in excess of $10,000 (on a consolidated basis) for
additions to property, plant or equipment;
(j) Pay, loan or advance any amount to, or sell transfer or lease
any properties or assets to, or enter into any agreement or arrangement with,
any of its officers or directors or any affiliate or associate of any of its
officers or directors, except for directors' fees and compensation to officers
at rates not exceeding the rates of compensation paid during the fiscal year
ended August 31, 1998;
(k) Change any of the banking or safe deposit arrangements
described in Section 3.15 of the Disclosure Schedule;
(l) Grant or extend any power of attorney or act as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any person, corporation, partnership, joint venture, association,
organization or other entity; or
(m) Agree, whether in writing or otherwise, to do any of the
foregoing.
9.07. Contracts. No contract or commitment will be entered into, and
---------
no purchase of raw material or supplies and no sale of assets will be made, by
or on behalf of the Company, except (i) normal contracts or commitments for the
purchase of, and normal purchases of, raw materials or
38
supplies, made in the ordinary course of business and consistent with past
practice, (ii) normal contracts or commitments for the sale of, and normal sales
of, inventory in the ordinary course of business and consistent with past
practice, and (iii) other contracts, commitments, purchases or sales in the
ordinary course of business and consistent with past practice not in excess of
$10,000 in the aggregate.
9.08. Insurance; Property. The Company shall adequately insure all
-------------------
property, real, personal and mixed, owned or leased by the Company, against all
ordinary and insurable risks; and all such property shall be used, operated,
maintained and repaired in a careful and reasonably efficient manner.
9.09. No Default. Neither ▇▇▇▇▇▇ nor the Company shall do any act or
----------
omit to do any act, or permit any act or omission to act, which will cause a
breach of any material contract or commitment of the Company or which would
cause the breach of any warranty made hereunder.
9.10. Compliance With Laws. The Company shall duly comply with all laws
--------------------
applicable to it and its properties, operations, business and employees.
9.11. Tax Returns. The Company shall, and ▇▇▇▇▇▇ shall cause the
-----------
Company to, prepare and file all federal, state, local and foreign tax returns
and amendments thereto required to be filed by the Company. The Company and
▇▇▇▇▇▇ will ensure that Acquiror shall have a reasonable opportunity to review
each such return and amendment prior to the filing thereof.
39
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.01. Investigations; Survival of Warranties. The respective
--------------------------------------
representations and warranties of ▇▇▇▇▇▇, the Company, Acquiror's Subsidiary and
Acquiror contained herein or in any certificates or other documents delivered
prior to or at the Closing shall not be deemed waived or otherwise affected by
any investigation made by any party hereto. Each and every such representation
and warranty shall expire with, and be terminated and extinguished by, the
Closing or the termination of the Agreement pursuant to Section 11.01 hereof or
otherwise, and thereafter neither ▇▇▇▇▇▇, Acquiror, the Company nor Acquiror's
Subsidiary nor any officer, director or principal thereof shall be under any
liability whatsoever with respect to any such representation or warranty. This
Section 10.01 shall have no effect upon any other obligation of the parties
hereto, whether to be performed before or after the Closing.
ARTICLE XI
TERMINATION AND ABANDONMENT
11.01. Methods of Termination. The transactions contemplated herein may
----------------------
be terminated and/or abandoned at any time but not later than the Closing:
(a) By mutual consent of ▇▇▇▇▇▇ and the respective Boards of
Directors of Acquiror and the Company; or
(b) By the Board of Directors of Acquiror on or after April 30,
1999, or such later date as may be established pursuant to Section 1.03 hereof,
if any of the conditions provided for in
40
Article VIII of this Agreement shall not have been met or waived in writing by
Acquiror prior to such date; or
(c) By ▇▇▇▇▇▇ and the Board of Directors of the Company on or after
April 30, 1999, or such later date as may be established pursuant to Section
1.03 hereof, if any of the conditions provided for in Article VII of this
Agreement shall not have been met or waived in writing by the Company prior to
such date.
11.02. Procedure Upon Termination. In the event of termination and
--------------------------
abandonment by the Board of Directors of Acquiror or by ▇▇▇▇▇▇ and the Board of
Directors of the Company, or both, pursuant to Section 11.01 hereof, written
notice thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated and/or abandoned, without
further action by Acquiror or ▇▇▇▇▇▇ and the Company. If the transactions
contemplated by this Agreement are terminated and/or abandoned as provided
herein:
(a) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) All confidential information received by any party hereto with
respect to the business of any other party or its subsidiaries shall be treated
in accordance with Section 2.01 hereof; and
(c) No party hereto shall have any liability or further obligation
to any other party to this Agreement except as stated in subparagraphs (a) and
(b) of this Section 11.02.
41
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified and supplemented by written agreement of the
respective Boards of Directors of the Company and Acquiror and by ▇▇▇▇▇▇ or by
their respective officers authorized by such Boards of Directors at any time
prior to the Closing with respect to any of the terms contained herein.
12.02. Waiver of Compliance. Any failure of ▇▇▇▇▇▇ and the Company, on the
--------------------
one hand, or Acquiror, on the other, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the Chairman
of the Board or the President of Acquiror or by ▇▇▇▇▇▇, on behalf of himself and
the Company, respectively, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
12.03. Expenses; Transfer Taxes, Etc. Whether or not the transaction
-----------------------------
contemplated by this Agreement shall be consummated, ▇▇▇▇▇▇ and the Company
agree that all fees and expenses incurred by them in connection with this
Agreement shall be borne by them and Acquiror agrees that all fees and expenses
incurred by it in connection with this Agreement shall be borne by it,
including, without limitation as to ▇▇▇▇▇▇, the Company or Acquiror, all fees of
their respective counsel, actuaries and accountants. Acquiror agrees that it
will pay all sales, transfer or other taxes which may be payable in connection
with the transactions contemplated by this Agreement.
42
12.04. Notices. All notices, requests, demands and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, certified or registered mail
with postage prepaid:
(a) If to ▇▇▇▇▇▇ or the Company, to:
▇▇▇▇▇▇ & Son, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as the Company shall furnish to Acquiror or
Acquiror's Subsidiary in writing.
(b) If to Acquiror or Acquiror's Subsidiary, to:
Enviro-Clean of America, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(with a copy to:)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇, LLP
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as Acquiror shall furnish to the Company in
writing.
12.05. Assignment. This Agreement and all of the provisions hereof shall
----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns,
43
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties, (except by operation of law and except
that Acquiror may assign its rights, but not its obligations, under this
Agreement to any subsidiary of Acquiror). If such assignment shall be made by
Acquiror, such subsidiary shall be entitled to all of the rights and shall
assume all of the obligations of Acquiror hereunder, provided that Acquiror
shall guarantee the performance of such subsidiary's obligations under this
Agreement and shall deliver evidence thereof reasonably satisfactory to the
Company.
12.06. Publicity. Neither ▇▇▇▇▇▇, the Company nor Acquiror shall make or
---------
issue, or cause to be made or issued, any announcement or written statement
concerning this Agreement or the transactions contemplated hereby for
dissemination to the general public without the prior consent of the other
party. This provision shall not apply, however, to any announcement or written
statement required to be made by law or the regulations of any federal or state
governmental agency or any stock exchange, except that the party required to
make such announcement shall, whenever practicable, consult with the other party
concerning the timing and content of such announcement before such announcement
is made.
12.07. Governing Law. This Agreement and the legal relations among the
-------------
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to its conflicts of law doctrine.
12.08. Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
44
12.09. Headings. The headings of the Sections and Articles of this
--------
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
12.10. Entire Agreement. This Agreement, including the Exhibits hereto, the
----------------
Disclosure Schedule and the other documents and certificates delivered pursuant
to the terms hereof, set forth the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and supersede
all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto.
12.11. Third Parties. Except as specifically set forth or referred to
-------------
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be affixed hereto, all as
of the day and year first above written.
________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as sole shareholder of the Company
▇▇▇▇▇▇ & SON, INC.
By:_______________________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
Attest:
__________________________
Name:
Title:
ENVIRO-CLEAN OF AMERICA, INC.
By:_______________________________________________
Name:
Title:
Attest:
__________________________
Name:
Title:
ENVIROACQI CO.
By:_______________________________________________
Name:
Title:
Attest:
__________________________
Name:
Title:
46
