Exhibit 10.2
STOCK PURCHASE AGREEMENT
dated July 23, 1999
for the purchase of
all the outstanding shares
of capital stock of
XXXXXX ENTERPRISES, INC.
between
xxxxxxxXXXXX.xxx
Buyer
and
XXXXX XXXXXX
Seller
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 23rd day of July, 1999 by and between xxxxxxxXXXXX.xxx ("Buyer")
and XXXXX XXXXXX ("Seller") with respect to all of the outstanding capital
stock of XXXXXX ENTERPRISES, INC., a Nevada corporation (the "Company"),
owned by Seller.
R E C I T A L S
A. Seller owns of record and beneficially, one thousand (1,000)
shares of capital stock of the Company representing all of the issued and
outstanding shares of capital stock of the Company (the "Shares"); and
B. Buyer desires to acquire and Seller desires to sell the Shares
on the terms and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties
hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES.
(a) On the terms and subject to the conditions of this
Agreement, Seller agrees to sell, assign, transfer and convey the Shares to
Buyer and Buyer agrees to purchase the Shares from Seller.
(b) The purchase and sale of the Shares shall be consummated
on the Closing Date (as hereinafter defined).
1.2 THE PURCHASE PRICE. The aggregate consideration ("Purchase
Price") to be paid by Buyer to Seller for the Shares shall be (i) Four
Hundred Thousand Dollars ($400,000.00) payable Two Hundred Thousand
($200,000) in cash and Two Hundred Thousand Dollars ($200,000) by delivery of
a Promisory Note in the form of Exhibit "A" hereto and (ii) One Hundred
Thousand (100,000) shares of common stock of the Buyer ("Buyer Shares").
1.3 SECURITY. The Promissory Note shall be secured by the pledge
of all of the outstanding common stock of the Company pursuant to a Pledge
Agreement in the form of Exhibit "B" hereto.
1.4 CLOSING. Upon satisfaction of all conditions to the
obligations of the parties contained herein (other than such conditions as
shall have been waived in accordance with the terms hereof), Seller will
sell, transfer, assign and deliver the Shares to Buyer, and Buyer will
acquire the Shares from Seller, at the Closing. Buyer shall pay the Purchase
Price to Seller by delivery of a cashiers' check for the cash portion of the
purchase price and delivery of certificates representing the Buyer Shares.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce Buyer to enter into this Agreement, to purchase the
Shares and to consummate the other transactions contemplated herein, Seller
makes the representations and warranties set forth in this Article 2 which
representations and warranties will be true and correct on the date of this
Agreement and on the Closing Date. Any reference herein to the "knowledge"
of Seller or similar words to that effect means the actual knowledge of
Seller and without the performance of additional inquiries by Seller in
connection with the execution and delivery of this Agreement.
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as
now conducted. The Company is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure so to qualify would
have a Material Adverse Effect on its business properties, prospects or
financial condition. Schedule 2.1 contains a list of all jurisdictions in
which the Company is qualified or licensed to do business. The Company does
not own (and has not at any time during the five (5) years preceding the date
set forth above owned) of record or beneficially any outstanding equity
securities or other ownership interest in any corporation, partnership or
other legal entity. "Material Adverse Effect" with respect to the Company
means an individual or cumulative adverse change in or effect on the
business, customers, customer relations, operations, properties, working
capital condition (financial or otherwise), assets, properties or liabilities
of the Company which is reasonably expected to be materially adverse to the
business, properties, working capital condition (financial or otherwise),
assets, or liabilities of the Company or would prevent the Company or the
Seller from consummating the transactions contemplated hereby.
2.2 CAPITALIZATION OF THE COMPANY. The authorized capital stock of
the Company consists of one thousand (1,000) shares of common stock, no par
value, of which one thousand (1,000) shares are issued and outstanding. All
issued and outstanding shares of capital stock are duly authorized, validly
issued, fully paid and non-assessable and were not issued in violation of,
preemptive rights. There are no other shares of capital stock issued and
outstanding, no shares of treasury stock, and no outstanding securities
convertible into or exchangeable for any of the Company's capital stock or
options, warrants, calls or other rights, with respect to the issued capital
stock of the Company, or to purchase or subscribe to capital stock of the
Company or securities convertible into or exchangeable for capital stock of
the Company. Seller is not a party to any voting trust agreement or other
contract, agreement, arrangement, commitment, plan, or understanding
restricting or otherwise relating to the Shares. Upon the consummation of
the transactions contemplated hereby, the Buyer will acquire good and
marketable title to the Shares free and clear of all Encumbrances. For
purposes of this Agreement, "Encumbrances" means pledges, liens, security
interests, restrictions, claims or charges of any kind.
2.3 AUTHORIZATION. Seller has full power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby
(including, without limitation, the power to sell, transfer and convey the
Shares). No action, consent or approval by or filing with any person or
entity, including, without limitation, any federal, territorial, state,
municipal, foreign or other court or governmental or administrative body or
agency or any securities or commodities exchange is required in connection
with the execution, delivery and performance by Seller of this
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Agreement and consummation by Seller of the transactions contemplated herein.
Without limiting the generality of the foregoing, Seller has full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. This Agreement is the legal, valid and binding
obligation of Seller enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the rights of creditors generally.
2.4 NON-CONTRAVENTION. Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated herein will: (i) violate or be in conflict with any provision
of the articles of incorporation or bylaws of the Company; (ii) be in
conflict with, or constitute a default, however defined (or an event which,
with the giving of due notice or lapse of time, or both, would constitute
such a default), under, or cause or permit the acceleration of the maturity
of, or give rise to any right of termination, cancellation, imposition of
fees or penalties under any debt, note, bond, lease, mortgage, indenture,
license, obligation, contract, commitment, franchise, permit, instrument or
other agreement or obligation to which the Company or Seller is a party or by
which the Company or Seller or any of the Company's or Seller's properties or
assets is or may be bound or result in the creation or imposition of any
Encumbrance upon any property or assets of the Company or Seller under any
debt, obligation, contract, agreement or commitment to which the Company or
Seller is a party or by which the Company or Seller or any of the Company's
or Seller's assets or properties are bound; or (iii) violate any Law of any
Authority. "Laws" means any statute, treaty, law, judgment, writ,
injunction, decision, decree, order, regulation, ordinance or other similar
authoritative matters. "Authority" or "Authorities" means any foreign,
federal, state or local governmental or quasi-governmental, administrative,
regulatory or judicial court, department, commission, agency, board, bureau,
instrumentality or other authority.
2.5 CONSENTS AND APPROVALS. With respect to the Company and
Seller, no Consent from any individual or entity, including, without
limitation, any Authority, is required in connection with the execution,
delivery or performance of this Agreement by the Company or Seller or the
consummation by the Company or Seller of the transactions contemplated
herein. "Consent" means any consent, approval, order or authorization of or
from, or registration, notification, declaration or filing with any
individual or entity, including, without limitation, any Authority.
2.6 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. Schedule 2.6
hereto will consist of true and complete copies of the unaudited balance
sheet and statements of operations, equity and cash flows of the Company at
December 31, 1998 and for the three calendar years then ended and the
unaudited balance sheet and statements of operations, equity and cash flows
of the Company at and for the six months ended June 30, 1999 ("Financial
Statements"). The Financial Statements are in accordance with the books and
records of the Company and have been prepared in good faith using accounting
principles which have been consistently applied for all periods.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. To Seller's knowledge,
the Company does not have any material liabilities or obligations of any
nature (absolute, accrued, contingent or otherwise) which were not reflected
or reserved against on the Financial Statements, except for liabilities and
obligations incurred since the date thereof in the ordinary course of the
Company's business and consistent with past practice and which, in any event,
in the aggregate, would not have a material adverse effect on the financial
condition or business of the Company. For
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purposes of this Section 2.7, the term "liabilities" shall include, without
limitation, any indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or unfixed,
asserted or unasserted, xxxxxx or inchoate, liquidated or unliquidated,
secured or unsecured.
2.8 ABSENCE OF CERTAIN ACTIONS. Since June 30, 1999, Seller has
not on behalf of Seller or the Company:
(a) Taken any action which might reasonably be expected to
have a material adverse effect on the business or financial condition of the
Company;
(b) Incurred any short-term or long-term liabilities or
obligations (absolute, accrued, contingent or otherwise) other than in the
ordinary course of business and consistent with past practice;
(c) Subjected any of the Company's property or assets (real,
personal or mixed, tangible or intangible) to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind;
(d) Canceled any debts or waived any claims or rights of
material value to the Company or agreed on behalf of Seller or the Company to
reduce or otherwise modify the payment terms of any account receivable owing
to the Company other than trade-outs of product for goods and services
provided to the Company;
(e) Sold, transferred or otherwise disposed of any of the
Company's properties or assets (real, personal or mixed, tangible or
intangible), except in the ordinary course of business and consistent with
past practice; or
(f) Agreed, whether in writing or otherwise, to take any
action described in this Section 2.8.
2.9 NO CLAIMS BASED ON SELLER'S ACTS. Except as otherwise
disclosed to Buyer in writing prior to the Closing, there is no threatened
charge or claim relating to or affecting: (i) the Company or Seller in his
capacity as a director, officer, employee or agent of the Company or (ii) the
assets, properties or business of the Company, nor, to Seller's knowledge, is
there any basis for any such charge or claim based on the affirmative acts of
Seller which could have an adverse effect on the assets, property or business
of the Company.
2.10 PERMITS. To Seller's knowledge, the Company has all franchises,
permits, licenses, and any similar authority necessary for the conduct of its
business as now being conducted the lack of which could have a Materially
Adverse Effect on the business, properties, prospects or financial condition
of the Company.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS AND LAW. The Company is not
in violation or default in any material respect of any provision of its
Articles of Incorporation, Bylaws or, to Seller's knowledge, any material
contract to which it is a party or by which it is bound or, to Seller's
knowledge, of any federal or state judgment, order, writ, decree, statute,
rule or regulation applicable to the Company. To Seller's knowledge, the
Company has not previously failed and is not currently failing to comply with
any applicable Laws relating to the business of
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the Company or the operation of its assets, including, without limitation,
any import, export and immigration laws. There are no proceedings and no
proceedings are pending or to the Seller's knowledge threatened, nor has the
Company or Seller received any written notice regarding any violation of any
Law, including, without limitation, any requirement of any Authority.
2.12 LITIGATION. There are no actions, suits, proceedings or
investigations pending or currently threatened against the Company that might
result, either individually or in the aggregate, in any material adverse
change in the assets, business properties, prospects or financial condition
of the Company, or in any material change in the current equity ownership of
the Company.
2.13 ASSETS; NET WORTH.
(a) Except as set forth in the Financial Statements, the
Company has good and marketable title to all of its assets and properties
(including fee simple record title to all real property) whether or not
reflected in the most recent Balance Sheet or acquired after the date
thereof, free and clear of any Lien, other than Permitted Liens. "Liens"
means any mortgage, pledge, lien, security interest, conditional or
installment sales agreement, encumbrance, claim, easement, right of way,
tenancy, covenant, encroachment, restriction or charge of any kind or nature
(whether or not of record). "Permitted Liens" means (i) liens securing
specific Liabilities shown on the most recent Balance Sheet with respect to
which no breach, violation or default exists; (ii) mechanics', carriers',
workers' or other like liens arising in the ordinary course of business;
(iii) minor imperfections of title which do not individually or in the
aggregate, impair the continued use and operation of the real property assets
and fixtures to which they relate in the operation of the Company as
currently conducted; and (iv) liens for current taxes not yet due and payable.
(b) To Seller's knowledge, except as set forth in SCHEDULE
2.13(b), (i) all real properties owned and leased by the Company are free
from any structural defects, in good operating condition and repair, with no
material maintenance, repair or replacement having been deferred or
neglected, suitable for the intended use and free from other material
defects; (ii) each such real property and its present use conform in all
respects to all occupational, safety or health, zoning, planning,
subdivision, platting and similar Laws; and (iii) all public utilities
necessary for the use and operation of any facilities on the aforesaid real
properties are available for use or access at such properties and there is no
legal or physical impairment to free ingress or egress from any of such
facilities or real properties. Neither the Company nor Seller is a foreign
person, as the term foreign person is defined in Section 1445(f)(3) of the
Internal Revenue Code of 1986, as amended (the "Code").
(c) To Seller's knowledge, except as set forth in SCHEDULE
2.13(c), the machinery, equipment, vehicles and other personal property used
by the Company (whether or not reflected on the most recent Balance Sheet or
acquired after the date thereof) are in operating condition and fit for the
intended purposes thereof.
(d) To Seller's knowledge, the Company owns or leases all of
the assets and properties, and is a party to all licenses and other
agreements, presently used or necessary to carry on the business or
operations of the Company as presently conducted. At the Closing, the
Company will be leasing the real property on which the Company conducts its
business and a mat cutter from Seller or an affiliate of Seller. To the
knowledge of Seller, the Company does
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not own or lease any assets or properties that are not used in the ordinary
course of the Company's business. All leasehold interests relating to real
property, machinery, equipment, vehicles and other personal property are
valid and in full force and effect and enforceable in accordance with their
terms and there does not exist any violation, breach, or default thereof or
thereunder.
2.14 INVENTORIES. Except as set forth in Schedule 2.14, all
inventory as of the date of the most recent Balance Sheet is, and as of the
Closing Date will be, valued at the lower of cost or market. Except as set
forth in Schedule 2.14, all inventory of the Company, whether reflected in
the most recent Balance Sheet or otherwise, (i) consists of a quality and
quantity useable and salable in the ordinary course of business, and (ii) the
present quantities of all inventory of the Company are reasonable in the
present circumstances for the business as currently conducted or as proposed
to be conducted.
2.15 TRADE ACCOUNTS RECEIVABLE; NOTES RECEIVABLE AND PAYABLES.
(a) To Seller's knowledge, except as set forth in SCHEDULE
2.15, (i) the Company has good right, title and interest in and to all trade
accounts receivable and notes receivable reflected in the most recent Balance
Sheet and those acquired and generated since the date of the most recent
Balance Sheet (except for those paid since the date of the most recent
Balance Sheet) (the "Account Receivables"); (ii) none of such Account
Receivables is subject to any Lien, other than Permitted Liens; (iii) all of
the Account Receivables owing to the Company constitute valid and enforceable
claims arising from bona fide transactions in the ordinary course of
business, and there are no known claims, refusals to pay or other rights of
set-off against any thereof; (iv) no account or note debtor is delinquent in
payment by more than ninety (90) days; and (v) the reserve established by the
Company on the most recent Balance Sheet is adequate to cover any doubtful
accounts.
(b) All trade accounts payable and notes payable of the
Company reflected in the most recent Balance Sheet and those acquired and
generated since the date of the most recent Balance Sheet (except for those
paid since the date of the most recent Balance Sheet) (the "Accounts
Payables") arose from bona fide transactions in the ordinary course of the
Company's business and, except as set forth on SCHEDULE 2.15, no such
Accounts Payable is delinquent by more than thirty (30) days in its payment.
2.16. CONTRACTS; NO CONTRACT DEFAULTS.
(a) SCHEDULE 2.16 contains an accurate and complete list and
description of:
(i) All real property in which the Company has a
leasehold or other interest or which is used by the Company in
connection with the operation of its business, together with a
description of each lease, sublease, license, or any other
instrument under which the Company claims or holds such leasehold
or other interest or right to the use thereof or pursuant to which
the Company has assigned, sublet or granted any rights therein,
identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms thereof.
(ii) All machinery, tools, equipment, motor vehicles,
rolling stock and other tangible personal property (other than
inventory and supplies), owned,
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leased or used by the Company, except for items having a value of
less than Five Thousand Dollars ($5,000) which do not, in the
aggregate, have a total value of more than Twenty-Five Thousand
Dollars ($25,000), setting forth with respect to all such listed
property a summary description of all leases, Liens, restrictions,
covenants and conditions relating thereto, identifying the parties
thereto, the rental or other payment terms, expiration date and
cancellation and renewal terms thereof.
(iii) All contracts, agreements and commitments, whether
or not fully performed, in respect of the issuance, sale or
transfer of the capital stock, bonds, options, warrants or other
securities of the Company or pursuant to which the Company has
acquired any substantial portion of its business or assets.
(iv) All contracts, agreements, commitments or
understandings that restrict the Company from carrying on its
businesses or any part thereof anywhere in the world or from
competing in any line of business with any person or entity.
(v) All purchase or sale contracts or agreements that
call for aggregate purchases or sales in excess, over the course
of such contract or agreement, of Five Thousand Dollars ($5,000)
or which continues for a period of more than twelve (12) months
(including, without limitation, periods covered by any option to
renew or extend by either party) which is not terminable on sixty
(60) days' or less notice without cost or other Liability at or
any time after the Closing.
(vi) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or
retirement plans, employee stock options or stock purchase plans,
group life, health and accident insurance and other employee
benefit plans, agreements, arrangements or commitments, whether or
not legally binding, including, without limitation, holiday,
vacation and other bonus practices, to which the Company is a
party or is bound or which relate to the operation of the
Company's business.
(vii) All contracts, commitments, agreements and
arrangements with any "disqualified individual" (as defined in
Section 280G(c) of the Code) which contains any severance or
termination pay liabilities which would result in a disallowance
of the deduction for any "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) under Section 280G of the Code.
(viii) The names and current annual salary rates of all
persons (including independent commission agents) whose annual
compensation (direct or indirect) from the Company is currently at
the rate of more than Fifty Thousand Dollars ($50,000) per annum
and showing separately for each such person the amounts paid or
payable as salary, bonus payments and any indirect compensation
for the year ended December 31, 1998 and to be paid for the year
ended December 31, 1999.
(ix) The names of all of the Company's directors and
officers.
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(x) All contracts, agreements and commitments, whether
written or oral, relating to the sale of the Company's products,
including, without limitation, any sales representative,
distributor or reseller agreements (the "Sales Agreements").
(xi) All contracts, agreements and commitments, whether
or not fully performed, relating to or arising out of the business
of the Company and not otherwise disclosed pursuant to this
Section 2.16.
To Seller's knowledge, all contracts, agreements, leases, licenses and
commitments (the "Assumed Contracts") required to be listed in SCHEDULE 2.16
(other than those which have been fully performed) are valid and binding,
enforceable in accordance with their respective terms, and are in full force
and effect and none of the Assumed Contracts contain a provision requiring
the consent of any party with respect to the consummation of the transaction
contemplated herein. To Seller's knowledge, the Company is not in breach,
violation or default, however defined, in the performance of any of its
obligations under any Assumed Contract, and no facts or circumstances exist
which, whether with the giving of due notice, lapse of time, or both, would
constitute such a breach, violation or default thereunder or thereof; and no
other parties thereto are in breach, violation or default, however defined,
thereunder or thereof, and no facts or circumstances exist which, whether
with the giving of due notice, lapse of time, or both, would constitute such
a breach, violation or default thereunder or thereof. All of the Sales
Agreements are terminable by the Company without notice and without Liability
of any kind. None of the Assumed Contracts is subject to renegotiation with
any government entity.
2.17 INTELLECTUAL PROPERTY RIGHTS. Schedule 2.17 contains a
listing of all (i) patents, patent applications (collectively the "Patents"),
(ii) copyrights, copyright applications (the "Copyrights"), (iii) tradenames,
registered and common law trademarks, trademark applications (the
"Trademarks"), (iv) service marks, service xxxx applications (the "Service
Marks"), and (v) computer programs and other computer software, trade
secrets, plans and specifications, inventions, know-how, technology,
proprietary processes and formulae (the "Trade Secrets") necessary or used in
connection with the conduct of the business of the Company (the Patents,
Copyrights, Trademarks, Service Marks and Trade Secrets are collectively
referred to as "Intellectual Property Rights"). To Seller's knowledge, the
Company owns, has the unrestricted right to use and has sole and exclusive
possession of and has good and valid title to, or sufficient license or other
rights to, all of the Intellectual Property Rights, free and clear of all
Liens. To Seller's knowledge, the use of all Intellectual Property Rights
necessary or required for the conduct of the business of the Company as
presently conducted and as proposed to be conducted does not and will not
infringe or violate any trade secrets, plans and specifications, patents,
copyrights, tradenames, registered and common law trademarks, trademark
applications, service marks, service xxxx applications, computer programs and
other computer software, inventions, know-how, technology, proprietary
processes and formulae or other intellectual property rights of any other
person or entity (the "Third Party Intellectual Property Rights"). The
Company is not using any confidential information or trade secrets of others.
All agreements relating to licenses of Intellectual Property Rights granted
by or to the Company are set forth in the Schedule 2.17 and, to Seller's
knowledge, are in good standing, valid and effective in accordance with their
respective terms and there is not, under any of such licenses, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default,
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or would constitute a basis for a claim of force majeure or other claim of
excusable delay or non-performance), in each case by the Company or by any
other party thereto.
2.18 ENVIRONMENTAL MATTERS. Neither the Company, any subsidiary or
former subsidiary of the Company, nor to Seller's knowledge, any previous
owner, tenant, occupant or user of any property owned or leased by or to the
Company or by or to any subsidiary or former subsidiary (the "Properties")
engaged in or permitted direct or indirect operations or activities upon, or
any use or occupancy of the Properties, or any portion thereof, for the
purpose of or in any way involving the handling, manufacture, treatment,
storage, use, generation, emission, release, discharge, refining, dumping or
disposal of any Environmentally Regulated Materials (whether legal or
illegal, accidental or intentional, direct or indirect) on, under, in or
about the Properties, or transported any Environmentally Regulated Materials
to, from or across the Properties, nor are any Environmentally Regulated
Materials presently constructed, deposited, stored, placed or otherwise
located on, under, in or about the Properties, nor have any Environmentally
Regulated Materials migrated from the Properties upon or beneath other
properties, nor have any Environmentally Regulated Materials migrated or
threatened to migrate from other properties upon, about or beneath the
Properties. To Seller's knowledge, the Properties do not contain any: (i)
underground or aboveground storage tanks; (ii) asbestos; (iii) equipment
using PCBs; (iv) underground injection xxxxx; or (v) septic tanks in which
process waste water or any Environmentally Regulated Materials have been
disposed. For purposes of this Agreement, "Environmental and Occupational
Safety and Health Law" means any common law or duty, case law or other Law,
that (i) regulates, creates standards for or imposes liability or standards
of conduct concerning any element, compound, pollutant, contaminant, or toxic
or hazardous substance, material or waste, or any mixture thereof, or relates
in any way to emissions or releases into the environment or ambient
environmental conditions, or conduct affecting such matters, or (ii) is
designed to provide safe and healthful working conditions or reduce
occupational safety and health hazards. Such laws shall include, but not be
limited to, the National Environmental Policy Act, 42 U.S.C. Sections 4321
et seq., the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Sections 9601 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Sections 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Sections 1251 et seq., the Federal Clean
Air Act, 42 U.S.C. Sections 7401 et seq., the Toxic Substances Control Act,
15 U.S.C. Sections 2601 et seq., the Emergency Planning and Community Right
to Know Act, 42 U.S.C. Section 11011, the Hazard Communication Act, 29
U.S.C. Sections 651 et seq., the Occupational Safety and Health Act, 29
U.S.C. Sections 651 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. Section 136, and any case law interpretations,
amendments or restatements thereof, or similar enactments thereto, as is now
or at any time hereafter may be in effect, as well as their international,
state and local counterparts. For purposes of this Agreement,
"Environmentally Regulated Materials" means any element, compound, pollutant,
contaminant, substance, material or waste, or any mixture thereof,
designated, listed, referenced, regulated or identified pursuant to any
Environmental and Occupational Safety and Health Law.
2.19 EMPLOYEE BENEFIT PLANS. All employee benefit plans, as defined
in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and any other employee benefit plan or fringe benefit arrangement of any
nature whatsoever established, maintained or contributed to by the Company
comply in all material respects with the requirements of all applicable laws,
including but not limited to ERISA, and no employee pension benefit plan (as
defined in ERISA) has incurred or assumed an "accumulated funding deficiency"
as defined by
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ERISA or has incurred or assumed any material liability (other than for the
payment of premiums) to the Pension Benefit Guaranty Corporation.
2.20 TAX RETURNS. The Company has filed all tax returns and reports
as required by law. These returns and reports are true and correct in all
material respects. The Company has paid all taxes and other assessments due
(other than those which are being contested in good faith by the Company).
The provision for taxes of the Company is adequate for taxes due or accrued
as of the date hereof.
2.21 BANK ACCOUNTS. Schedule 2.20 contains a list of the names of
all financial institutions, investment banking and brokerage houses, and
other similar institutions at which the Company maintains accounts, deposits,
safe deposit boxes of any nature, and the names of all persons authorized to
draw thereon or make withdrawals therefrom; and the names of all persons, if
any, holding tax or other powers of attorney from the Company and a summary
of the terms thereof.
2.22 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company,
Seller nor any director, officer, employee or agent of the Company, nor any
other person acting on behalf of the Company or Seller, has, directly or
indirectly, within the past five (5) years given or agreed to give any gift
or similar benefit to any customer, supplier, governmental employee or other
person who is or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which (i) might subject the Company, Seller or Buyer to any
damage or penalty in any civil, criminal or governmental litigation
proceeding, (ii) if not given in the past, might have had an adverse effect
on the assets, business or operations of the Company as reflected in the
Financial Statements, or (iii) if not continued in the future, might
adversely affect the Company's assets, business, operations or prospects or
which might subject the Company, Seller or Buyer to suit or penalty in any
private or governmental litigation or proceeding.
2.23 ORDERS, COMMITMENTS AND RETURNS. All accepted and unfulfilled
orders for the sale of products with a customer and the performance of
services entered into by the Company and all outstanding contracts or
commitments for the purchase of supplies, materials and services were made in
bona fide transactions in the ordinary course of business. There are no
claims against the Company to return products by reason of alleged
over-shipments, defective products or otherwise, or of products in the hands
of customers, retailers or distributors under an understanding that such
products would be returnable.
2.24 PRODUCTS AND WARRANTIES. To Seller's knowledge, each product
manufactured, sold, leased, or delivered by the Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and meets or exceeds the standards required by all Laws
now in effect and neither the Company nor Seller knows of any pending
legislation, ordinance or regulation, which if adopted, would have a Material
Adverse Effect upon the products sold by the Company. To Seller's knowledge,
the Company does not have any Liability (and there is no basis for any
present or any future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of it giving rise to any
Liability) for replacement or repair of any product manufactured, sold,
leased, or delivered by the Company or other damages in connection therewith.
No product manufactured, sold, leased, or delivered by the Company is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease.
10
2.25 PRODUCT LIABILITY; AUTO LIABILITY AND WORKERS' COMPENSATION.
To Seller's knowledge, the Company does not have any Liability (and there is
no basis for any present or any future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to
any Liability) arising out of: (i) any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered by the Company; or (ii) any injury to individuals
or property as a result of the ownership or lease by the Company of any
automobile. There are no open workers' compensation claims against the
Company.
2.26 CUSTOMER. The Company has not received any notice (written or
oral) within six months prior to the date of this Agreement that any customer
of the Company representing five (5%) of more of the revenues of the Company
during the prior twelve months will terminate its relationship with the
Company or, as the case may be, decrease its business with the Company, as a
result of the transactions contemplated by this Agreement or for any other
reason.
2.27 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to the Buyer, are complete and correct in all material respects.
Prior to the Closing, the minute books of the Company will contain accurate
and complete records of all formal meetings held of, and corporate action
taken by, the shareholders, the Board of Directors, and committees of the
Board of Directors of the Company. At the Closing, all of those books and
records will be in the possession of the Company.
2.28 BROKERS. Neither the Company, Seller nor any of its
directors, officers or employees has employed any broker, finder, or
financial advisor or incurred any liability for any brokerage fee or
commission, finder's fee or financial advisory fee, in connection with the
transactions contemplated hereby, nor is there any basis known to Seller for
any such fee or commission to be claimed by any person or entity.
2.29 ACCESS TO INFORMATION; FULL KNOWLEDGE. The Buyer Shares to be
received by Seller pursuant to this Agreement are being acquired for Seller's
own account, for investment purposes only and not with a view to any public
resale, public distribution or public offering thereof within the meaning of
the Securities Act of 1933, as amended (the "1933 Act") or any state
securities or Blue Sky law and such Buyer Shares will not be sold or
otherwise disposed of except in compliance with the 1933 Act, or in reliance
upon an exemption therefrom and in compliance with any state securities or
Blue Sky laws. The Buyer Shares have not been registered under the 1933 Act
or any state securities or Blue Sky law. Seller agrees that he, either alone
or with a representative, has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
prospective investment in the Buyer Shares and is able to bear the economic
consequences thereof. In making the decision to invest in the Buyer Shares,
Seller has relied upon Buyer's Confidential Private Placement Memorandum of
even date herewith, the representations and warranties of Buyer contained in
this Agreement and independent investigations made by him and, to the extent
believed by Seller to be appropriate, Seller's representatives, including
Seller's own professional, tax and other advisors. The Seller and his
representatives have been given a full opportunity to examine all documents
and to ask questions of, and to receive answers from Buyer and its
representatives concerning the terms of the transfer of the Shares to Buyer,
the Seller's investment in the Buyer Shares and the business of Buyer and
such other information as Seller desired in order to evaluate an investment
in the Buyer Shares, and all such questions have
11
been answered to the full satisfaction of Seller. Seller has evaluated the
merits and risks of an investment in the Buyer Shares and has determined that
the Buyer Shares are a suitable investment for Seller in light of Seller's
overall financial condition and prospects. Buyer has not made any
representation, warranty, acknowledgment or covenant, in writing or
otherwise, to the Seller regarding the value of the Buyer Shares or the tax
consequences, if any, of the sale of the Shares or of the resale of the Buyer
Shares by Seller. Seller acknowledges that the Buyer Shares are personal to
Seller and may not be transferred or assigned. Seller has consented to the
placing of the following legend on the certificates for the Buyer Shares:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY BE SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED ONLY IF A
REGISTRATION STATEMENT DESCRIBING SUCH PROPOSED
TRANSACTION IS IN EFFECT PURSUANT TO THE PROVISIONS
OF THAT ACT OR IF, IN THE OPINION OF COUNSEL, WHICH
OPINION AND COUNSEL SHALL BE SATISFACTORY TO THE
ISSUER OF THESE SHARES AND ITS COUNSEL, AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THAT ACT IS
AVAILABLE.
2.30 ACCURACY OF INFORMATION. No representation or warranty by
Seller contained in this Agreement or in respect of the exhibits, schedules,
lists or other documents delivered to Buyer and referred to herein, and no
statement contained in any certificate furnished or to be furnished by or on
behalf of Seller pursuant hereto, or in connection with the transactions
contemplated hereby, contains, or will contain as of the date such
representation or warranty is made or such certificate is or will be
furnished, any untrue statement of a material fact, or omits, or will omit to
state as of the date such representation or warranty is made or such
certificate is or will be furnished, any material fact which is necessary to
make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 3
TITLE
In order to induce Buyer to enter into this Agreement, to purchase the
Shares and to consummate the transactions contemplated herein, Seller
represents and warrants to Buyer that he is the owner, beneficially and of
record, of the Shares and has good, valid and marketable title to the Shares
free and clear of all liens, encumbrances, security interests or claims,
whatsoever, with full power and authority to deliver the Shares to Buyer in
accordance with the terms of this Agreement. Seller will convey to Buyer at
the Closing good, valid and marketable title to the Shares free and clear of
all liens, encumbrances, security interests, restrictions or claims
whatsoever.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
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In order to induce Seller to enter into this Agreement and to sell the
Shares and consummate the other transactions contemplated herein, Buyer makes
the representations and warranties set forth in this Article 4.
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada, has all requisite corporate power and authority
to own and operate its properties and assets and to carry on its business as
now conducted. Buyer is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
Material Adverse Effect on its business properties, prospects or financial
condition. Buyer is not qualified or licensed to do business in any other
state or jurisdiction. Buyer does not own (and has not at any time during
the five (5) years preceding the date set forth above owned) of record or
beneficially any outstanding equity securities or other ownership interest in
any corporation, partnership or other legal entity. "Material Adverse
Effect" with respect to Buyer means an individual or cumulative adverse
change in or effect on the business, customers, customer relations,
operations, properties, working capital condition (financial or otherwise),
assets, properties or liabilities of Buyer which is reasonably expected to be
materially adverse to the business, properties, working capital condition
(financial or otherwise), assets, or liabilities of Buyer or would prevent
Buyer from consummating the transactions contemplated hereby.
4.2 CAPITALIZATION OF BUYER. The authorized capital stock of Buyer
consists of ten million (10,000,000) shares of common stock, no par value, of
which five million (5,000,000) shares are issued and outstanding and an
additional one million (1,000,000) shares are reserved for issuance for sale
pursuant to Buyer's Confidential Private Placement Memorandum of even date
herewith. All issued and outstanding shares of capital stock are duly
authorized and validly issued and were not issued in violation of preemptive
rights. There are no other shares of capital stock issued and outstanding,
no shares of treasury stock, and no outstanding securities convertible into
or exchangeable for any of Buyer's capital stock or options, warrants, calls
or other rights, with respect to the issued capital stock of Buyer, or to
purchase or subscribe to capital stock of Buyer or securities convertible
into or exchangeable for capital stock of the Buyer. Upon the consummation
of the transactions contemplated hereby, the Buyer will acquire good and
marketable title to the Buyer Shares free and clear of all Encumbrances. For
purposes of this Agreement, "Encumbrances" means pledges, liens, security
interests, restrictions, claims or charges of any kind.
4.3 AUTHORIZATION. Buyer has full power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby
(including, without limitation, the power to issue the Buyer Shares). No
action, consent or approval by or filing with any person or entity,
including, without limitation, any federal, territorial, state, municipal,
foreign or other court or governmental or administrative body or agency or
any securities or commodities exchange is required in connection with the
execution, delivery and performance by Buyer of this Agreement and
consummation by Buyer of the transactions contemplated herein. Without
limiting the generality of the foregoing, Buyer has full power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. This Agreement is the legal, valid and binding obligation of Buyer
enforceable in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency or similar laws affecting the rights of
creditors generally.
13
4.4 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. True and
complete copies of the unaudited balance sheet and statements of operations
of Buyer at June 30, 1999 and for the period from inception to June 30, 1999
are included in the Buyer's Confidential Private Placement Memorandum of even
date herewith ("Buyer Financial Statements"). The Buyer Financial Statements
are in accordance with the books and records of Buyer and have been prepared
in good faith.
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. To Buyer's knowledge,
Buyer does not have any material liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise) which were not reflected or
reserved against on the Buyer Financial Statements, except for liabilities
and obligations incurred since the date thereof in the ordinary course of
Buyer's business and consistent with past practice and which, in any event,
in the aggregate, would not have a material adverse effect on the financial
condition or business of Buyer. For purposes of this Section 4.5, the term
"liabilities" shall include, without limitation, any indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, asserted or unasserted, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured.
4.6 NO CLAIMS BASED ON BUYER'S ACTS. Except as otherwise disclosed
to Seller in writing prior to the Closing, there is no threatened charge or
claim relating to or affecting the assets, properties or business of Buyer,
nor, to Buyer's knowledge, is there any basis for any such charge or claim
based on the affirmative acts of Buyer which could have an adverse effect on
the assets, property or business of Buyer.
4.7 PERMITS. To Buyer's knowledge, Buyer has all franchises,
permits, licenses, and any similar authority necessary for the conduct of its
business as now being conducted the lack of which could have a Materially
Adverse Effect on the business, properties, prospects or financial condition
of Buyer.
4.8 COMPLIANCE WITH OTHER INSTRUMENTS AND LAW. Buyer is not in
violation or default in any material respect of any provision of its Articles
of Incorporation, Bylaws or, to Buyer's knowledge, any material contract to
which it is a party or by which it is bound or, to Buyer's knowledge, of any
federal or state judgment, order, writ, decree, statute, rule or regulation
applicable to Buyer. To Buyer's knowledge, Buyer has not previously failed
and is not currently failing to comply with any applicable Laws relating to
the business of Buyer or the operation of its assets, including, without
limitation, any import, export and immigration laws. There are no
proceedings and no proceedings are pending or to Buyer's knowledge
threatened, nor has Buyer received any written notice regarding any violation
of any Law, including, without limitation, any requirement of any Authority.
4.9 LITIGATION. There are no actions, suits, proceedings or
investigations pending or currently threatened against Buyer that might
result, either individually or in the aggregate, in any material adverse
change in the assets, business properties, prospects or financial condition
of Buyer, or in any material change in the current equity ownership of Buyer.
4.10 ASSETS; NET WORTH.
(a) Except as set forth in the Buyer Financial Statements,
Buyer has good and marketable title to all of its assets and properties
(including fee simple record title to all real
14
property) whether or not reflected in the most recent Balance Sheet or
acquired after the date thereof, free and clear of any Lien, other than
Permitted Liens. "Liens" means any mortgage, pledge, lien, security
interest, conditional or installment sales agreement, encumbrance, claim,
easement, right of way, tenancy, covenant, encroachment, restriction or
charge of any kind or nature (whether or not of record). "Permitted Liens"
means (i) liens securing specific Liabilities shown on the most recent
Balance Sheet with respect to which no breach, violation or default exists;
(ii) mechanics', carriers', workers' or other like liens arising in the
ordinary course of business; (iii) minor imperfections of title which do not
individually or in the aggregate, impair the continued use and operation of
the real property assets and fixtures to which they relate in the operation
of Buyer as currently conducted; and (iv) liens for current taxes not yet due
and payable.
(b) To Buyer's knowledge, (i) all real properties owned and
leased by Buyer are free from any structural defects, in good operating
condition and repair, with no material maintenance, repair or replacement
having been deferred or neglected, suitable for the intended use and free
from other material defects; (ii) each such real property and its present use
conform in all respects to all occupational, safety or health, zoning,
planning, subdivision, platting and similar Laws; and (iii) all public
utilities necessary for the use and operation of any facilities on the
aforesaid real properties are available for use or access at such properties
and there is no legal or physical impairment to free ingress or egress from
any of such facilities or real properties. Buyer is not a foreign person, as
the term foreign person is defined in Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
(c) To Buyer's knowledge, the machinery, equipment, vehicles
and other personal property used by Buyer (whether or not reflected on the
most recent Balance Sheet or acquired after the date thereof) are in
operating condition and fit for the intended purposes thereof.
(d) To Buyer's knowledge, Buyer owns or leases all of the
assets and properties, and is a party to all licenses and other agreements,
presently used or necessary to carry on the business or operations of Buyer
as presently conducted. To the knowledge of Buyer, Buyer does not own or
lease any assets or properties that are not used in the ordinary course of
Buyer's business. All leasehold interests relating to real property,
machinery, equipment, vehicles and other personal property are valid and in
full force and effect and enforceable in accordance with their terms and
there does not exist any violation, breach, or default thereof or thereunder.
4.11 TRADE ACCOUNTS RECEIVABLE; NOTES RECEIVABLE AND PAYABLES.
(a) To Buyer's knowledge, (i) Buyer has good right, title
and interest in and to all trade accounts receivable and notes receivable
reflected in its most recent Balance Sheet and those acquired and generated
since the date of its most recent Balance Sheet (except for those paid since
the date of the most recent Balance Sheet) (the "Account Receivables"); (ii)
none of such Account Receivables is subject to any Lien, other than Permitted
Liens; (iii) all of the Account Receivables owing to Buyer constitute valid
and enforceable claims arising from bona fide transactions in the ordinary
course of business, and there are no known claims, refusals to pay or other
rights of set-off against any thereof; (iv) no account or note debtor is
delinquent in payment by more than ninety (90) days; and (v) the reserve
established by Buyer on its most recent Balance Sheet is adequate to cover
any doubtful accounts.
15
(b) All trade accounts payable and notes payable of Buyer
reflected in the most recent Balance Sheet and those acquired and generated
since the date of the most recent Balance Sheet (except for those paid since
the date of the most recent Balance Sheet) (the "Accounts Payables") arose
from bona fide transactions in the ordinary course of Buyer's business and,
no such Accounts Payable is delinquent by more than thirty (30) days in its
payment.
4.12 CONTRACTS; NO CONTRACT DEFAULTS.
(a) SCHEDULE 4.12 contains an accurate and complete list and
description of:
(i) All real property in which Buyer has a leasehold or
other interest or which is used by Buyer in connection with the
operation of its business, together with a description of each
lease, sublease, license, or any other instrument under which
Buyer claims or holds such leasehold or other interest or right to
the use thereof or pursuant to which Buyer has assigned, sublet or
granted any rights therein, identifying the parties thereto, the
rental or other payment terms, expiration date and cancellation
and renewal terms thereof.
(ii) All machinery, tools, equipment, motor vehicles,
rolling stock and other tangible personal property (other than
inventory and supplies), owned, leased or used by Buyer, except
for items having a value of less than Five Thousand Dollars
($5,000) which do not, in the aggregate, have a total value of
more than Twenty-Five Thousand Dollars ($25,000), setting forth
with respect to all such listed property a summary description of
all leases, Liens, restrictions, covenants and conditions relating
thereto, identifying the parties thereto, the rental or other
payment terms, expiration date and cancellation and renewal terms
thereof.
(iii) All contracts, agreements and commitments, whether
or not fully performed, in respect of the issuance, sale or
transfer of the capital stock, bonds, options, warrants or other
securities of Buyer or pursuant to which Buyer has acquired any
substantial portion of its business or assets.
(iv) All contracts, agreements, commitments or
understandings that restrict Buyer from carrying on its businesses
or any part thereof anywhere in the world or from competing in any
line of business with any person or entity.
(v) All purchase or sale contracts or agreements that
call for aggregate purchases or sales in excess, over the course
of such contract or agreement, of Fifty Thousand Dollars ($50,000)
or which continues for a period of more than twelve (12) months
(including, without limitation, periods covered by any option to
renew or extend by either party) which is not terminable on sixty
(60) days' or less notice without cost or other Liability at or
any time after the Closing.
(vi) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or
retirement plans, employee stock options or stock purchase plans,
group life, health and accident insurance and other
16
employee benefit plans, agreements, arrangements or commitments,
whether or not legally binding, including, without limitation,
holiday, vacation and other bonus practices, to which Buyer is a
party or is bound or which relate to the operation of Buyer's
business.
(vii) All contracts, commitments, agreements and
arrangements with any "disqualified individual" (as defined in
Section 280G(c) of the Code) which contains any severance or
termination pay liabilities which would result in a disallowance
of the deduction for any "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) under Section 280G of the Code.
(viii) All contracts, agreements and commitments, whether
written or oral, relating to the sale of the Company's products,
including, without limitation, any sales representative,
distributor or reseller agreements (the "Buyer's Sales
Agreements").
(ix) All contracts, agreements and commitments, whether
or not fully performed, relating to or arising out of the business
of the Company and not otherwise disclosed pursuant to this
Section 4.12.
To Buyer's knowledge, all contracts, agreements, leases, licenses and
commitments (the "Buyer's Contracts") required to be listed in SCHEDULE 4.12
(other than those which have been fully performed) are valid and binding,
enforceable in accordance with their respective terms, and are in full force
and effect and none of the Buyer's Contracts contain a provision requiring
the consent of any party with respect to the consummation of the transaction
contemplated herein. To Buyer's knowledge, Buyer is not in breach, violation
or default, however defined, in the performance of any of its obligations
under any Buyer's Contract, and no facts or circumstances exist which,
whether with the giving of due notice, lapse of time, or both, would
constitute such a breach, violation or default thereunder or thereof; and no
other parties thereto are in breach, violation or default, however defined,
thereunder or thereof, and no facts or circumstances exist which, whether
with the giving of due notice, lapse of time, or both, would constitute such
a breach, violation or default thereunder or thereof. All of the Buyer's
Sales Agreements are terminable by the Company without notice and without
Liability of any kind. None of the Buyer's Contracts is subject to
renegotiation with any government entity.
4.13 INTELLECTUAL PROPERTY RIGHTS. Schedule 4.13 contains a
listing of all (i) patents, patent applications (collectively the "Patents"),
(ii) copyrights, copyright applications (the "Copyrights"), (iii) tradenames,
registered and common law trademarks, trademark applications (the
"Trademarks"), (iv) service marks, service xxxx applications (the "Service
Marks"), and (v) computer programs and other computer software, trade
secrets, plans and specifications, inventions, know-how, technology,
proprietary processes and formulae (the "Trade Secrets") necessary or used in
connection with the conduct of the business of Buyer (the Patents,
Copyrights, Trademarks, Service Marks and Trade Secrets are collectively
referred to as "Intellectual Property Rights"). To Buyer's knowledge, Buyer
owns, has the unrestricted right to use and has sole and exclusive possession
of and has good and valid title to, or sufficient license or other rights to,
all of the Intellectual Property Rights, free and clear of all Liens. To
Buyer's knowledge, the use of all Intellectual Property Rights necessary or
required for the conduct of the business of Buyer as presently conducted and
as proposed to be conducted does not and will not infringe or violate any
trade secrets, plans and specifications, patents, copyrights, tradenames,
17
registered and common law trademarks, trademark applications, service marks,
service xxxx applications, computer programs and other computer software,
inventions, know-how, technology, proprietary processes and formulae or other
intellectual property rights of any other person or entity (the "Third Party
Intellectual Property Rights"). Buyer is not using any confidential
information or trade secrets of others. All agreements relating to licenses
of Intellectual Property Rights granted by or to Buyer are set forth in the
Schedule 4.13 and, to Buyer's knowledge, are in good standing, valid and
effective in accordance with their respective terms and there is not, under
any of such licenses, any existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default, or
would constitute a basis for a claim of force majeure or other claim of
excusable delay or non-performance), in each case by Buyer or by any other
party thereto.
4.14 ENVIRONMENTAL MATTERS. Neither Buyer, any subsidiary or former
subsidiary of Buyer, nor to Buyer's knowledge, any previous owner, tenant,
occupant or user of any property owned or leased by or to Buyer or by or to
any subsidiary or former subsidiary (the "Buyer Properties") engaged in or
permitted direct or indirect operations or activities upon, or any use or
occupancy of the Buyer Properties, or any portion thereof, for the purpose of
or in any way involving the handling, manufacture, treatment, storage, use,
generation, emission, release, discharge, refining, dumping or disposal of
any Environmentally Regulated Materials (whether legal or illegal, accidental
or intentional, direct or indirect) on, under, in or about the Buyer
Properties, or transported any Environmentally Regulated Materials to, from
or across the Buyer Properties, nor are any Environmentally Regulated
Materials presently constructed, deposited, stored, placed or otherwise
located on, under, in or about the Buyer Properties, nor have any
Environmentally Regulated Materials migrated from the Buyer Properties upon
or beneath other properties, nor have any Environmentally Regulated Materials
migrated or threatened to migrate from other properties upon, about or
beneath the Buyer Properties. To Buyer's knowledge, the Buyer Properties do
not contain any: (i) underground or aboveground storage tanks; (ii) asbestos;
(iii) equipment using PCBs; (iv) underground injection xxxxx; or (v) septic
tanks in which process waste water or any Environmentally Regulated Materials
have been disposed.
4.15 EMPLOYEE BENEFIT PLANS. All employee benefit plans, as defined
in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and any other employee benefit plan or fringe benefit arrangement of any
nature whatsoever established, maintained or contributed to by Buyer comply
in all material respects with the requirements of all applicable laws,
including but not limited to ERISA, and no employee pension benefit plan (as
defined in ERISA) has incurred or assumed an "accumulated funding deficiency"
as defined by ERISA or has incurred or assumed any material liability (other
than for the payment of premiums) to the Pension Benefit Guaranty Corporation.
4.16 TAX RETURNS. Buyer has filed all tax returns and reports as
required by law. These returns and reports are true and correct in all
material respects. Buyer has paid all taxes and other assessments due (other
than those which are being contested in good faith by Buyer). The provision
for taxes of Buyer is adequate for taxes due or accrued as of the date hereof.
4.17 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Buyer nor any
director, officer, employee or agent of Buyer, nor any other person acting on
behalf of Buyer, has, directly or indirectly, within the past five (5) years
given or agreed to give any gift or similar benefit to any customer,
supplier, governmental employee or other person who is or may be in a
position to help or hinder the business of Buyer (or assist Buyer in
connection with any actual or proposed
18
transaction) which (i) might subject Buyer to any damage or penalty in any
civil, criminal or governmental litigation proceeding, (ii) if not given in
the past, might have had an adverse effect on the assets, business or
operations of Buyer as reflected in the Buyer Financial Statements, or (iii)
if not continued in the future, might adversely affect Buyer's assets,
business, operations or prospects or which might subject Buyer to suit or
penalty in any private or governmental litigation or proceeding.
4.18 BROKERS. Neither Buyer nor any of its directors, officers or
employees has employed any broker, finder, or financial advisor or incurred
any liability for any brokerage fee or commission, finder's fee or financial
advisory fee, in connection with the transactions contemplated hereby, nor is
there any basis known to Buyer for any such fee or commission to be claimed
by any person or entity.
4.19 ACCESS TO INFORMATION; FULL KNOWLEDGE. The Shares being
purchased by Buyer pursuant to this Agreement are being acquired for Buyer's
own account, for investment purposes only and not with a view to any public
resale, public distribution or public offering thereof within the meaning of
the Securities Act of 1933, as amended (the "1933 Act") or any state
securities or Blue Sky law and such Shares will not be sold or otherwise
disposed of except in compliance with the 1933 Act, or in reliance upon an
exemption therefrom and in compliance with any state securities or Blue Sky
laws. The Shares have not been registered under the 1933 Act or any state
securities or Blue Sky law. Buyer agrees that it has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the prospective investment in the Shares and is able
to bear the economic consequences thereof. In making the decision to invest
in the Shares, Buyer has relied upon the representations and warranties of
Seller contained in this Agreement and independent investigations made by it
and, to the extent believed by Buyer to be appropriate, Buyer's
representatives, including Buyer's professional, tax and other advisors.
Buyer and its representatives have been given a full opportunity to examine
all documents and to ask questions of, and to receive answers from Seller and
the Company and their respective representatives concerning the terms of the
purchase of the Shares by Buyer, the Buyer's investment in the Shares and the
business of the Company and such other information as Buyer desired in order
to evaluate an investment in the Shares, and all such questions have been
answered to the full satisfaction of Buyer. Buyer has consented to the
placing of the following legend on the certificates for the Shares:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY BE SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED ONLY IF A
REGISTRATION STATEMENT DESCRIBING SUCH PROPOSED
TRANSACTION IS IN EFFECT PURSUANT TO THE PROVISIONS
OF THAT ACT OR IF, IN THE OPINION OF COUNSEL, WHICH
OPINION AND COUNSEL SHALL BE SATISFACTORY TO THE
ISSUER OF THESE SHARES AND ITS COUNSEL, AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THAT ACT IS
AVAILABLE.
4.20 CONSENTS AND APPROVALS. No Consent is required by any person or
entity, including, without limitation, any Authority, in connection with the
execution, delivery and
19
performance by Buyer of this Agreement, or the consummation of the
transactions contemplated herein, other than any Consent which, if not made
or obtained, will not, individually or in the aggregate, have a material
adverse effect on the business of Buyer taken as a whole.
4.21 ISSUANCE OF BUYER SHARES. The Buyer Shares to be issued to
Seller, upon delivery to Seller and receipt of the certificates for the
Shares by the Buyer, will be validly issued, fully paid and nonassessable.
Buyer has all requisite power and authority to issue, sell and deliver the
Buyer Shares in accordance with and upon the terms and conditions set forth
herein; and all corporate action required to be taken by Buyer for the due
and proper authorization, issuance, sale and delivery of the Buyer Shares has
been validly and sufficiently taken. Upon delivery of the Shares by Seller
to Buyer, the Buyer Shares will be, upon issuance and delivery thereof, duly
authorized, validly issued, fully paid and nonassessable.
4.22 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by Buyer contained in this Agreement, Buyer's Confidential Private
Placement Memorandum of even date herewith or in respect of the exhibits,
schedules, lists or other documents delivered to Seller and referred to
herein, and no statement contained in any certificate furnished or to be
furnished by or on behalf of Buyer pursuant hereto, or in connection with the
transactions contemplated hereby, contains, or will contain as of the date
such representation or warranty is made or such certificate is or will be
furnished, any untrue statement of a material fact, or omits, or will omit to
state as of the date such representation or warranty is made or such
certificate is or will be furnished, any material fact which is necessary to
make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
20
ARTICLE 5
COVENANTS OF SELLER
5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement, during the period from the date of this Agreement to the
Closing Date, Seller will cause the Company to conduct its business and
operations according to its ordinary and usual course of business, to
preserve substantially intact its business organizations and to preserve its
current relationships with customers, employees, suppliers and other persons
with which it has significant business relations. Without limiting the
generality of the foregoing, and, except as otherwise expressly provided in
this Agreement, prior to the Closing Date, without the prior written consent
of Buyer's President, Seller agrees that the Company will not:
(a) adopt any amendment to its articles of incorporation or
bylaws;
(b) issue, reissue, sell, deliver or pledge or authorize or
propose the issuance, reissuance, sale, delivery or pledge of shares of
capital stock of any class, or debt or other securities convertible into
capital stock of any class, or any rights, warrants or options to acquire
any convertible securities or capital stock;
(c) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its other
securities;
(d) (i) excluding regularly scheduled principal payments,
create, incur, assume or repay any long-term debt (including obligations
in respect of capital leases), or, except in the ordinary course of
business, create, incur, assume, repay, maintain or permit to exist any
short-term debt; or (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person;
(e) (i) increase in any manner the compensation of any of its
directors, officers or other employees; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
permitted by any existing plan, agreement or arrangement to any such
director, officer or employee, whether past or present; or (iii) commit
itself to any additional pension, profit-sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or to any employment agreement or
consulting agreement (arising out of prior employment) with or for the
benefit of any person, or, except to the extent required to comply with
applicable law, amend any of such plans or any of such agreements in
existence on the date of this Agreement;
(f) (i) sell, transfer, or otherwise dispose of, or agree to
sell, transfer, or otherwise dispose of, any properties or assets, real,
personal or mixed, (other than in the ordinary course of business) or
(ii) mortgage or encumber any properties or assets, real, personal or
mixed;
(g) permit any of its current insurance (or reinsurance)
policies to be canceled or terminated or any of the coverage thereunder
to lapse, unless simultaneously with such
21
termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than coverage remaining under those
canceled, terminated or lapsed are in full force and effect;
(h) enter into other agreements, commitments or contracts not
in the ordinary course of business or in excess of current requirements;
(i) modify, amend or terminate any contract, waive, release,
relinquish or assign any contract or other right or claim;
(j) settle or compromise any suit, claim or dispute or
threatened suit, claim or dispute;
(k) except in the ordinary course of business, incur, assume,
suffer or become subject to, whether directly or by way of guarantee or
otherwise, any Liabilities which, individually or in the aggregate, are
material to the conduct of the businesses of the Company or hereof would
have a Material Adverse Effect on the Company;
(l) pay, discharge or satisfy any Liabilities of the Company
other than the payment, discharge or satisfaction in the ordinary course
of business and consistent with past practice;
(m) sell, transfer, or otherwise dispose of any of the
Company's properties or assets (real, personal or mixed, tangible or
intangible), other than inventory in the ordinary course of business and
consistent with past practice;
(n) permit or allow any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any Lien,
except for Liens for current taxes not yet due;
(o) write down the value of any Company inventory (including
write-downs by reason of shrinkage or xxxx-down) or write off as
uncollectible any of the Company's notes or accounts receivable, except
for immaterial write-downs and write-offs in the ordinary course of
business and consistent with past practice;
(p) dispose of, license, transfer or permit to lapse any rights
to the use of any of the Company's Intellectual Property Rights to any
individual, corporation, partnership, joint venture, association, trust,
unincorporated organization or, as applicable, any other entity other
than representatives of Buyer;
(q) make or enter into any commitment of the Company for
capital expenditures for additions to property, plant, equipment or
intangible capital assets;
(r) pay, lend or advance any amount to, or sell, transfer or
lease any of the Company's properties or assets (real, personal or mixed,
tangible or intangible) to, or enter into any agreement or arrangement
with, any of its officers, directors, shareholders or employees or any
affiliate or associate of any of its officers, directors, shareholders or
employees;
22
(s) terminate, enter into or amend in any material respect any
contract, agreement, lease, license or commitment identified in any
Schedule hereto, or take any action or omit to take any action which will
cause a breach, violation or default (however defined) under any such
items, except in the ordinary course of business and consistent with past
practice;
(t) acquire any of the business or assets of any other person
or entity except purchases in the ordinary course of business;
(u) change its accounting methods, principles or practices; or
(v) agree in writing or otherwise to take any of the foregoing
actions.
5.2 NO SOLICITATION OF ALTERNATE TRANSACTION. Seller will not, and
will ensure that the Company, its directors, officers and employees,
independent contractors, consultants, counsel, accountants, investment
advisors and other representatives and agents will not, directly or
indirectly, solicit or entertain offers from, negotiate with, provide any
nonpublic information to, enter into any agreement with, or in any manner
encourage, discuss, accept or consider any proposal of, any third party
relating to the acquisition of the Company, its assets or business, in whole
or in part, whether through a tender offer (including a self tender offer),
exchange offer, merger, consolidation, sale of substantial assets or of a
significant amount of assets, sale of securities, acquisition of the
Company's securities, liquidation, dissolution or similar transactions
involving the Company or any division of the Company (such proposals,
announcements or transactions being called herein "Acquisition Proposals").
The Company will promptly inform the Buyer of any inquiry (including the
terms thereof and the identity of the third party making such inquiry) which
it may receive in respect of an Acquisition Proposal and furnish to the Buyer
a copy of any such written inquiry.
5.3 FULL ACCESS TO BUYER. Throughout the period prior to Closing,
the Company and Seller will cause the Company to afford to Buyer and its
directors, officers, employees, counsel, accountants, investment advisors and
other authorized representatives and agents, access to the facilities,
properties, books and records of the Company in order that Buyer may have
full opportunity to make such investigations as it desires to make of the
affairs of the Company; provided, however, that Seller will not make
available the list of the Company's vendors prior to Closing. The Company
will furnish such additional financial and operating data and other
information in its possession as Buyer will, from time to time, reasonably
request, including, without limitation, access to the working papers of its
independent certified public accountants; provided, however, that any such
investigation shall not affect or otherwise diminish or obviate in any
respect any of the representations and warranties of Seller herein.
Notwithstanding anything to the contrary contained herein, Buyer is relying
only upon the representations and warranties set forth in Articles 2 and 3 of
this Agreement.
5.4 CONFIDENTIALITY OF INFORMATION. After the Closing, Seller will
hold in confidence all Intellectual Property Rights, trade secrets and other
confidential or proprietary documents and information related to the Company
or Buyer and will refrain from disclosing any such confidential information
to or for the benefit of any third party. This obligation of confidentiality
and non-use will not apply, or will cease to apply, to such information which
is in the public domain as of the Closing Date or subsequently comes into the
public domain through a source
23
other than Seller, or which is required to be disclosed by order of any court
or governmental agency of competent jurisdiction.
5.5 FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the terms
and conditions herein provided, Seller will use his reasonable best efforts
to take or cause to be taken all actions and do or cause to be done all
things necessary, proper or advisable under applicable Laws to consummate and
make effective, as soon as reasonably practicable, the transactions
contemplated hereby, including, without limitation, obtaining all Consents of
any person or entity, whether private or governmental, required in connection
with the consummation of the transactions contemplated herein. In
furtherance, and not in limitation of the foregoing, it is the intent of the
parties to consummate the transactions contemplated herein at the earliest
practicable time, and they respectively agree to exert their reasonable best
efforts to that end, including, without limitation: (i) the removal or
satisfaction, if possible, of any objections to the validity or legality of
the transactions contemplated herein; and (ii) the satisfaction of the
conditions to consummation of the transactions contemplated hereby.
5.6 FURTHER ASSURANCES. Seller will, before, at and after Closing,
execute and deliver such instruments and take such other actions as Buyer,
may reasonably require in order to carry out the intent of this Agreement.
Without limiting the generality of the foregoing, at any time after the
Closing, at the request of Buyer and without further consideration, the
Company and Seller will execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation and take such action as
Buyer may reasonably deem necessary or desirable in order to more effectively
consummate the transactions contemplated hereby and to vest in the Buyer good
and marketable title to the Shares without further cost or expense to the
Buyer.
5.7 DISCLOSURE OF DEVELOPMENTS. During the period prior to
Closing, Seller will promptly notify Buyer of any event or development which,
if existing or occurring at or prior to the date of this Agreement, would
have been required to be set forth or described in Schedule to this Agreement
or which is necessary to correct any information in any Schedule to this
Agreement or in any representation and warranty of Seller which has been
rendered inaccurate by reason of such event or development. For purposes of
determining the accuracy as of the date hereof of the representations and
warranties of Seller contained in Article 2 hereof in order to determine the
fulfillment of the conditions set forth herein, the Schedules to this
Agreement will be deemed to exclude any information contained in any
supplement or amendment hereto delivered after the initial delivery of this
Agreement and the Schedules hereto.
ARTICLE 6
COVENANTS OF BUYER
6.1 CONDUCT OF BUSINESS OF BUYER. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing
Date, Buyer will conduct its business and operations according to its
ordinary and usual course of business, to preserve substantially intact its
business organizations and to preserve its current relationships with
customers, employees, suppliers and other persons with which it has
significant business relations and in accordance with Buyer's Confidential
Private Placement Memorandum of even date herewith.
6.2 FULL ACCESS TO THE COMPANY. Throughout the period prior to
Closing, Buyer will afford to Seller and his counsel, accountants, investment
advisors and other authorized
24
representatives and agents, access to the facilities, properties, books and
records of Buyer in order that Seller may have full opportunity to make such
investigations as he desires to make of the affairs of Buyer; provided,
however, that Buyer will not make available the list of Buyer's vendors prior
to Closing. Buyer will furnish such additional financial and operating data
and other information in its possession as Seller will, from time to time,
reasonably request, including, without limitation, access to the working
papers of its independent certified public accountants; provided, however,
that any such investigation shall not affect or otherwise diminish or obviate
in any respect any of the representations and warranties of Buyer herein.
Notwithstanding anything to the contrary contained herein, Seller is relying
only upon the representations and warranties set forth in Article 4 of this
Agreement and Buyer's Confidential Private Placement Memoradum of even date
herewith.
6.3 CONFIDENTIALITY OF INFORMATION. Prior to the Closing, Buyer
will hold in confidence all Intellectual Property Rights, trade secrets and
other confidential or proprietary documents and information related to the
Company or Seller and will refrain from disclosing any such confidential
information to or for the benefit of any third party of using such
information for Buyer's benefit. This obligation of confidentiality and
non-use will not apply, or will cease to apply, to such information which is
in the public domain as of the Closing Date or subsequently comes into the
public domain through a source other than Buyer, or which is required to be
disclosed by order of any court or governmental agency of competent
jurisdiction.
6.4 FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the terms
and conditions herein provided, Buyer will use its reasonable best efforts to
take or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated
hereby, including, without limitation, obtaining all Consents of any person
or entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and
not in limitation of the foregoing, it is the intent of the parties to
consummate the transactions contemplated herein at the earliest practicable
time, and they respectively agree to exert their reasonable best efforts to
that end, including, without limitation: (i) the removal or satisfaction, if
possible, of any objections to the validity or legality of the transactions
contemplated herein; and (ii) the satisfaction of the conditions to
consummation of the transactions contemplated hereby.
6.5 FURTHER ASSURANCES. Buyer will, before, at and after Closing,
execute and deliver such instruments and take such other actions as Seller,
may reasonably require in order to carry out the intent of this Agreement.
Without limiting the generality of the foregoing, at any time after the
Closing, at the request of Seller and without further consideration, Buyer
will execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as Seller may reasonably
deem necessary or desirable in order to more effectively consummate the
transactions contemplated hereby and to vest in Seller good and marketable
title to the Buyer Shares without further cost or expense to Seller.
6.6 DISCLOSURE OF DEVELOPMENTS. During the period prior to
Closing, Buyer will promptly notify Seller of any event or development which,
if existing or occurring at or prior to the date of this Agreement, would
have been required to be set forth or described in Schedule to this Agreement
or which is necessary to correct any information in any Schedule to this
Agreement or in any representation and warranty of Buyer which has been
rendered inaccurate by reason of such event or development. For purposes of
determining the accuracy as of the date
25
hereof of the representations and warranties of Buyer contained in Article 4
hereof in order to determine the fulfillment of the conditions set forth
herein, the Schedules to this Agreement will be deemed to exclude any
information contained in any supplement or amendment hereto delivered after
the initial delivery of this Agreement and the Schedules hereto.
ARTICLE 7
CONDITIONS TO THE CLOSING
7.1 BUYER'S CONDITIONS. Buyer's obligation to close the
transactions contemplated by this Agreement shall be subject to satisfaction
of the following conditions, any of which may be waived by Buyer in its sole
discretion, prior to the Closing:
(a) Buyer shall have raised $750,000 from sales of its
common stock pursuant to Buyer's Confidential Private Placement Memorandum of
even date herewith.
(b) The representations and warranties of Seller set forth
in Articles 2 and 3 of this Agreement shall be true and correct as of the
Closing.
(c) The net worth of the Company as of the date of the
Closing demonstrated to the reasonable satisfaction of Buyer shall be in
excess of $160,000.
(d) The Company shall have not received any notice (written
or oral) within six months prior to Closing that any customer of the Company
representing five (5%) of more of the revenues of the Company during the
prior twelve months will terminate its relationship with the Company or, as
the case may be, decrease its business with the Company, as a result of the
transactions contemplated by this Agreement or for any other reason.
(e) Buyer shall have obtained the assurance of Deloitte &
Touche LLP that Deloitte & Touche LLP is able to provide the Company with
audited financial statements including an unqualified opinion for the periods
from and after January 1, 1997.
7.2 SELLER'S CONDITIONS. Seller's obligation to close the
transactions contemplated by this Agreement shall be subject to satisfaction
of the following conditions, any of which may be waived by Seller in his sole
discretion, prior to the Closing:
(a) Buyer shall have raised $750,000 from sales of its
common stock pursuant to Buyer's Confidential Private Placement Memorandum of
even date herewith.
(b) The representations and warranties of Buyer set forth in
Article 4 of this Agreement shall be true and correct as of the Closing.
ARTICLE 8
THE CLOSING
8.1 OBLIGATIONS OF SELLER AND THE COMPANY. The Closing Date shall
be held on the date selected by Buyer which date shall be on or before
September 15, 1999. At the Closing, Seller and the Company shall deliver to
Buyer against delivery of each of the items required to be delivered by
Seller under Section 8.2:
26
(a) Certificates representing the Shares to be purchased and
sold hereunder, registered in the name of Seller and duly and validly
endorsed by Seller for transfer to Buyer free of any encumbrance or
restriction whatsoever (other than restrictions on resale arising under
federal or state securities laws);
(b) Pledge Agreement duly executed by Seller;
(c) Duly executed resignations of all directors and officers
of the Company in form and content satisfactory to Buyer and its counsel, and
effective as of the Closing;
(d) Lease between the Company and Seller for the facility
located at 0000 Xxxxxx Xxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000 in the form
of Exhibit "C" attached hereto ("Lease") duly executed by Seller; and
(e) Equipment lease between the Company and Seller for the
mat cutting matchine in the form of Exhibit "D" attached hereto ("Equipment
Lease") duly executed by Seller; and
(f) Employment agreement between the Company and Seller in
the form attached hereto as Exhibit "E" ("Employment Agreement") duly
executed by Seller.
8.2 OBLIGATIONS OF BUYER. At the Closing, and against delivery of
each of the items required to be delivered by Seller under Section 8.1 above,
Buyer shall deliver to Seller.
(a) Cashiers' check representing the cash portion of the
Purchase Price; and
(b) Promissory Note duly executed by Buyer;
(c) Pledge Agreement duly executed by Buyer;
(d) Certificates representing the Buyer Shares;
(e) The Lease duly executed by the Company;
(f) The Equipment Lease duly executed by the Company;
(g) The Employment Agreement duly executed by the Company;
and
(h) Note purchase guaranty between Seller and Xxxxx X.
Xxxxxxxxxx and Xxxx Xxxxx in the form attached hereto as Exhibit "F".
ARTICLE 9
TERMINATION OF AGREEMENT
9.1 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be
terminated at any time upon the mutual agreement of Buyer and Seller.
9.2 OUTSIDE CLOSING DATE. In the event the Closing has not
occurred on or before September 15, 1999, this Agreement shall automatically
terminated without further action on the part of Buyer or Seller unless Buyer
and Seller have entered into a written amendment to this
27
Agreement to extend the outside date on which the transactions contemplated
by this Agreement must close.
ARTICLE 10
INDEMNIFICATION
10.1 SELLER WARRANTY CLAIMS. From and after the Closing, Seller
shall indemnify and hold harmless Buyer, and its successors and assigns, and
their respective officers, directors, employees, stockholders, agents and
affiliates (collectively, "Buyer Indemnitees") against, and in respect of any
out of pocket loss, any and all damages, claims, losses, liabilities and
expenses, including, without limitation, legal, accounting and other
expenses, which may arise out of: (i) any breach or violation of this
Agreement by Seller; or (ii) any breach of any of the representations,
warranties or covenants made in this Agreement by the Seller; or (iii) any
inaccuracy or misrepresentation in the Schedules hereto or in any certificate
or document delivered in accordance with the terms of Agreement by Seller
(collectively, "Seller Warranty Claims").
10.2 BUYER WARRANTY CLAIMS. From and after the Closing, Buyer shall
indemnify and hold harmless Seller, and his successors and assigns, and their
respective officers, directors,
28
employees, stockholders, agents and affiliates (collectively, "Seller
Indemnitees") against, and in respect of any out of pocket loss, any and all
damages, claims, losses, liabilities and expenses, including, without
limitation, legal, accounting and other expenses, which may arise out of: (i)
any breach or violation of this Agreement by Buyer; or (ii) any breach of any
of the representations, warranties or covenants made in this Agreement by the
Buyer; or (iii) any inaccuracy or misrepresentation in the Schedules hereto
or in any certificate or document delivered in accordance with the terms of
Agreement by Buyer (collectively, "Buyer Warranty Claims").
ARTICLE 11
GENERAL PROVISIONS
The respective representations and warranties of the parties contained
herein or in any documents delivered at the Closing shall not be deemed
waived or otherwise affected by any investigation made by any party hereto.
ARTICLE 12
MISCELLANEOUS
12.1 EXPENSES. Buyer and Seller shall bear their own costs and
expenses in connection with the transactions contemplated by this Agreement.
12.2 NOTICES AND LEGAL PROCESS. All notices and other
communications and legal process shall be in writing and shall be personally
delivered, delivered by commercial delivery service, transmitted by
facsimile, or transmitted by registered or certified mail with return receipt
requested, as elected by the party giving such notice, addressed as follows:
(a) If to Buyer:
xxxxxxxXXXXX.xxx
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
(b) If to Seller:
Xxxxx Xxxxxx
000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Notices shall be deemed to have been given upon delivery, or, if delivered
outside of business hours, then on the next business day. "Business hours"
are defined for this purpose to be Monday through Friday, 8:00 a.m. to 5:00
p.m., excluding holidays. Any party hereto may change its address for
purposes hereof by notice to the other parties hereto.
12.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which together
shall constitute but one and the same instrument.
29
12.4 ENTIRE AGREEMENT. Unless otherwise specifically agreed in
writing, this Agreement and the Schedules and Exhibits hereto represent the
entire understanding of the parties with reference to the transactions set
forth herein and supersede all prior representations, warranties,
understandings and agreements heretofore made by the parties, and neither
this Agreement nor any provisions hereof may be amended, waived, modified or
discharged except by an agreement in writing signed by the party against whom
the enforcement of any amendment, waiver, change or discharge is sought.
12.5 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
12.6 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Nevada without regard to principles of conflicts of laws. All actions or
proceedings with respect to this Agreement may be instituted in the courts of
the State of Nevada or the United States District Court in Nevada. Each
party consents to the exclusive jurisdiction of such courts.
12.7 ATTORNEYS' FEES. In any legal action brought to enforce the
provisions of this Agreement, including the breach thereof, the prevailing
party shall be entitled to recover all costs and expenses, including
reasonable attorneys' fees, incurred in enforcing or attempting to enforce
any of the terms, covenants or conditions, including costs incurred prior to
commencement of legal action, and all costs and expenses, including
reasonable attorneys' fees, incurred in any appeal from an action brought to
enforce any of the terms, covenants or conditions.
12.8 CAPTIONS. The captions of the various Sections and subsections
hereof and on the Exhibits and Schedules hereto are for convenience of
reference only, and shall not affect the meaning or construction of any
provision hereof or of any such Exhibits or Schedules.
12.9 SEVERABILITY; CONSTRUCTION. In the event any provision hereof
is determined to be invalid or unenforceable, the remaining provisions hereof
shall be deemed severable therefrom and shall remain in full force and
effect. Words and phrases defined in the plural shall also be used in the
singular and vice versa and be construed in the plural or singular as
appropriate and apparent in the context used.
30
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"SELLER"
/s/ Xxxxx Xxxxxx
XXXXX XXXXXX
"BUYER"
xxxxxxxXXXXX.xxx,
a Nevada corporation
By:/s/ Xxxx Xxxxx
Xxxx Xxxxx, President
31
SPOUSE'S CONCURRENCE
The undersigned, Xxxxxx Xxxxxx, does hereby certify that she is the
wife of Xxxxx Xxxxxx; that she has carefully read the foregoing Stock
Purchase Agreement and understands its meaning and effect; that she is aware
that under the provisions of the foregoing instrument her spouse agrees to
sell the outstanding common stock of Xxxxxx Enterprises, Inc. ("Shares") in
which she may have an interest; that she fully agrees to be bound by the
terms of the foregoing Stock Purchase Agreement to the extent of any interest
that she may now or hereafter have in any Shares, without determining at this
time whether any such interest exists and the extent thereof; and further
that she agrees that her spouse may join in any future amendments or
modifications of the foregoing Stock Purchase Agreement without any further
signature, acknowledgment, agreement, concurrence or consent on her part.
XXXXXX XXXXXX
32
Exhibit "A"
$200,000.00 ____________, 1999
SECURED PROMISSORY NOTE
1. OBLIGATION. For value received, xxxxxxxXXXXX.xxx, a Nevada
corporation ("Maker") promises to pay to XXXXX XXXXXX ("Holder") the
Principal Amount and Interest (both as defined below) in the manner and upon
the terms and conditions set forth herein (the "Obligation").
2. AMOUNT AND PAYMENT. The principal amount ("Principal Amount")
of this Note is Two Hundred Thousand Dollars ($200,000.00). This Note shall
bear interest on the unpaid Principal Amount at the rate of eight percent
(8%) per annum ("Interest"). The entire Principal Amount and Interest shall
be all due and payable on the earlier to occur of (i) March 31, 2000 of (ii)
Maker's completion of a public offering of its securities raising gross
proceeds in excess of $2,000,000. In the event that the Principal and
Interest shall not be paid when due, the Note shall thereafter bear interest
at the rate of thirteen percent (13%) per annum.
3. MANNER AND PLACE OF PAYMENT. Payments of the Principal Amount
and Interest shall be made in lawful money of the United States of America.
Principal and Interest are payable at 000 Xxxx Xxxxxxx Xxxxx, Xxxxxxxxx,
Xxxxxx 00000 or at such place as Holder may designate in writing.
4. PREPAYMENT. Maker shall have the right, at its option, to
prepay this Note, in part or in full, at any time and from time to time,
prior to maturity, without penalty, bonus or charge.
5. EVENTS OF DEFAULT. The following shall each constitute an
"Event of Default" under this Note: (i) default in the payment when due of
Principal Amount and Interest, (ii) default in the payment of any amount due
Maker to Xxxxx Xxxxxx and (iii) any of the following events of bankruptcy or
insolvency: (A) the Maker shall file a voluntary bankruptcy or reorganization
petition under the provisions of the Federal Bankruptcy Act, any other
bankruptcy or insolvency law or any other similar statute applicable to the
Maker ("Bankruptcy Laws"), (B) the Maker shall consent to the filing of any
bankruptcy or reorganization petition against it under any Bankruptcy Law,
(C) the Maker shall make an assignment for the benefit of his creditors, (D)
the Maker shall admit in writing its inability to pay its debts generally as
they become due, (E) the Maker shall consent to the appointment of a
receiver, trustee, or by the order of a court of competent jurisdiction, a
receiver, liquidator or trustee of the Maker or of any substantial part of
its property shall not have been discharged within a period of sixty (60)
days, (F) by decree of such a court, the Maker shall be adjudicated bankrupt
or insolvent or any substantial part of the property of the Maker shall have
been sequestered and such degree shall have continued undischarged and
unstayed for a period of sixty (60) days after the entry thereof, or (G) an
involuntary bankruptcy reorganization petition pursuant to any Bankruptcy Law
shall be filed against the Maker (and, in the case of any such petition filed
pursuant to any provision of a statute which requires the approval of such
petition by a court, shall be approved by such a court) and shall not be
dismissed within sixty (60) days after such filing.
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6. ACCELERATION UPON EVENT OF DEFAULT. Upon the occurrence of an
Event of Default specified in Section 5 above, all Principal and Interest of
this Note shall, at the option of Holder, become immediately due and payable,
without further presentment, notice or demand for payment.
7. SECURITY. This Note is secured by a Pledge Agreement of even
date herewith between Maker and Holder.
8. EXPENSES OF ENFORCEMENT. Maker agrees to pay all reasonable
costs and expenses, including, without limitation, reasonable attorneys'
fees, as a court of competent jurisdiction shall award, which Holder shall
incur in connection with any legal action or legal proceeding commenced for
the collection of this Note or the exercise, preservation or enforcement of
Holder's rights and remedies thereunder.
9. CUMULATIVE RIGHTS AND REMEDIES. All rights and remedies of
Holder under this Note shall be cumulative and not alternative and shall be
in addition to all rights and remedies available to Holder under applicable
law.
10. GOVERNING LAW. This Note shall be governed by and interpreted
and construed in accordance with the laws of the State of Nevada without
regard to the principals of conflicts of laws. Further, the exclusive forum
for adjudication of any disputes hereunder shall be the state or federal
courts located in Xxxxx County, Nevada.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered at Las Vegas, Nevada as of the day and year first above written.
xxxxxxxXXXXX.xxx, a Nevada corporation
By:____________________________________
Xxxx Xxxxx, President
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Exhibit "B"
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement") is entered into as of
____________, 1999, by and between XXXXX XXXXXX, a Nevada corporation
("Secured Party") and xxxxxxxXXXXX.xxx, a Nevada corporation ("Pledgor").
R E C I T A L S
A. Pledgor has requested that Secured Party loan Pledgor the sum
of $200,000.00 to be evidenced by a Secured Promissory Note of even date
herewith ("Note");
B. As a condition to the loan by Secured Party to Pledgor, Pledgor
has agreed to enter into this Agreement to secure payment of the Note.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged and confessed, the parties do hereby agree as follows:
A G R E E M E N T
1. GRANT OF SECURITY AND PLEDGE. In order to further secure
Pledgor's full and complete performance of all obligations under the Note,
Pledgor hereby pledges, collaterally assigns and grants to Secured Party a
security interest (the "Security Interest") in all of Pledgor's right, title
and interest in and to one thousand (1,000) shares of voting common stock of
Xxxxxx Enterprises, Inc., a Nevada corporation, standing in Pledgor's name
and represented by certificate number _________, together with any additional
securities received with respect thereto (all collectively, the "Pledged
Shares"), and all rights and privileges pertaining thereto as well as all
products, proceeds, profits, interest, dividends, increases and distributions
received therefor, including distributions or payments in partial or complete
liquidation or redemption as the result of a reclassification, readjustment
or reorganization or change in the capital structure of any issuer thereof or
any other profit at any time or from time to time receivable or otherwise
distributed or delivered to Pledgor in connection therewith and all rights
and privileges pertaining thereto, together with all proceeds and
substitutions, including all securities, subscription rights, dividends
(including, without limitation, cash dividends, stock dividends, dividends
paid in stock, liquidated dividends, dividends paid in other property) or
other property or benefits to which Pledgor are entitled to receive on
account of any of the foregoing Pledged Shares, indirectly or directly.
2. PERFECTION OF SECURITY INTEREST. Concurrently with the
execution of this Agreement, Pledgor shall deliver to and deposit with
Secured Party the certificates representing or evidencing the Pledged Shares
along with appropriate stock power(s), duly executed in blank. Pledgor shall,
from time to time, promptly execute and deliver to Secured Party all such
stock powers, assignments, certificates, supplements to this Agreement and
other supplemental writings, financing statements and other items and do all
other acts and things as Secured Party
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may reasonably request in order to more fully evidence and perfect the
security interest of Secured Party in the Pledged Shares.
3. INDEBTEDNESS. The Security Interest is hereby created to secure
the payment and performance of all of the loans, principal, interest, fees,
expenses, obligations and liabilities of Pledgor to Secured Party arising
pursuant to the Note, and all amendments, supplements and modifications
thereto (the "Indebtedness").
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND FURTHER AGREEMENTS.
Pledgor makes the following representations, warranties covenants and further
agreements.
4.1 TITLE. Except for the Security Interest, Pledgor has good
and indefeasible title to all of the Pledged Shares free from any lien,
security interest, encumbrance or claim and Pledgor will, during the term of
this Agreement, at Pledgor's cost, keep the Pledged Shares free from other
liens, security interests, encumbrances or claims, and defend any action
which may affect the Security Interest or Pledgor's title to the Pledged
Shares.
4.2 STATUS. This Agreement, the certificates evidencing the
Pledged Shares, and any instrument, document or writing which is, or shall
be, included in the Pledged Shares are, and shall be, genuine and legally
enforceable and free from any setoff, counterclaim or defense. Pledgor's
transfer of the certificates evidencing the Pledged Shares is effective and
rightful, no such certificate has been (and no such certificate hereafter
transferred to or delivered to the possession of Secured Party will be)
altered and Pledgor knows of no facts which might impair the validity of any
such certificate now or hereafter transferred to Secured Party. No dispute,
right of setoff, counterclaim or defense exists with respect to any part of
the Pledged Shares.
4.3 PERFECTION. So long as the Indebtedness, or any portion
thereof, shall remain outstanding and unpaid or unperformed, the Pledged
Shares shall be held by and in the custody of Secured Party, and neither
Pledgor nor any other person shall have the right to procure the release of
any of the Pledged Shares from the Security Interest except upon and in
compliance with the terms and conditions herein set forth. All stock
certificates, voting trust shares and certificates and other instruments
which may constitute at any time or from time to time a part of the Pledged
Shares shall be endorsed in blank for transfer or be accompanied by proper
instruments of assignment and transfer properly endorsed in blank with
signatures medallion guaranteed by a bank or member firm of the New York
Stock Exchange upon delivery to Secured Party.
4.4 NO ASSIGNMENT. Pledgor hereby covenants that so long as
the Indebtedness remains unpaid, Pledgor will not sell or otherwise dispose
of all or any part of the Pledged Shares without the prior consent of Secured
Party.
4.5 MAINTENANCE. So long as no default shall exist hereunder,
all securities pledged hereunder shall remain registered in the name of, and
any voting rights of such securities may be exercised by, Pledgor; provided,
however, that Pledgor will not exercise, or cause to be exercised any such
voting rights, without the prior written consent of Secured Party, if the
direct or indirect effect of such vote results in a default hereunder.
Pledgor hereby irrevocably appoints Secured Party to be his attorney to
transfer the Pledged Shares on the books of any issuer of the Pledged Shares
into the name of Secured Party. Pledgor will pay promptly when due all taxes
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and assessments on the Pledged Shares. Secured Party may, at his option,
discharge such taxes and assessments, and all sums so expended shall be part
of the Indebtedness.
4.6 ADDITIONAL PROPERTY. If, from time to time, Pledgor shall
be entitled to receive any properties described in Section 1 hereof not
already received by Pledgor and delivered to Secured Party upon execution of
this Agreement, in any such case, said property shall be received by Pledgor
in trust for Secured Party, shall not be commingled with any other funds or
properties of Pledgor, shall be deemed to be pledged to Secured Party as
additional security for the payment and performance of the Indebtedness, and
shall be subject to the terms hereof. Immediately upon receipt thereof,
Pledgor shall deliver to and deposit with Secured Party the property or any
certificates or other written documents evidencing and representing all such
property. In the event that during the term of this Agreement, any share
dividend, reclassification, readjustment or other change is declared or made
in the capital structure of the issuer of the Pledged Shares, all new,
substituted and additional shares, or other securities, issued by reason of
any such change shall be held by Secured Party under the terms of this
Agreement in the same manner as the shares originally pledged hereunder. In
the event that during the term of this Agreement, subscription warrants or
any other rights or options shall be issued in connection with the Pledged
Shares, such warrants, rights and options shall be immediately delivered by
Pledgor to Secured Party, and all new shares or other securities so acquired
shall be immediately delivered to Secured Party, together with such
instruments or powers of transfer as Secured Party may request, to be held
under the terms of this Agreement in the same manner as the shares originally
pledged hereunder. If the property received by Pledgor in the foregoing
events shall be shares of stock or other securities, such shares of stock or
other securities shall be duly endorsed in blank or accompanied by proper
instruments of transfer and assignment duly executed in blank with signatures
medallion guaranteed by a bank or member firm of the New York Stock Exchange.
Secured Party shall be deemed to have possession of any Pledged Shares in
transit t Secured Party. The Pledged Shares also includes all money or
property of Pledgor in Secured Party's possession, held for or owed to
Secured Party, Secured Party being granted herein the right to set off such
money and property against the Indebtedness.
4.7 RELEASE OF PLEDGED SHARES. Any of the Pledged Shares may
be released from this Agreement without altering, varying or diminishing in
any way the force, effect, lien, pledge, security interest or charge of this
Agreement as to the Pledged Shares not expressly released or the validity and
effect of any guaranty delivered in connection with the Indebtedness, and
this Agreement shall continue as a first priority lien, security interest,
pledge and charge on all the Pledged Shares not expressly released as long as
any of the Indebtedness remains outstanding. Any future assignment or
attempted assignment or transfer of the interest of any person (other than
Secured Party) in and to any of the Pledged Shares shall not deprive Secured
Party of the right to sell or otherwise dispose of or utilize all the Pledged
Shares as above provided or necessitate the sale or disposition thereof in
parcels or in severalty.
4.8 NOTICE OF CHANGES. Pledgor will immediately notify Secured
Party of any change occurring in or to the Pledged Shares, of a change in
Pledgor's address, or any change in any fact or circumstance warranted or
represented by Pledgor to Secured Party, or if any event of default occurs.
Pledgor shall promptly notify Secured Party of any claim, action or
proceeding affecting title to the Pledged Shares or any part thereof, or the
security interest of Secured Party therein, and, at the request of Secured
Party, appear in and defend at Pledgor's expense, any such action or
proceeding.
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4.9 AUTHORITY. Pledgor has all requisite power and authority
to enter into this Agreement, to pledge the Pledged Shares and create the
Security Interest, and to consummate the transactions contemplated hereby.
Upon the execution and delivery by Pledgor, this Agreement and such documents
as are executed and delivered pursuant to this Agreement will constitute
valid and binding obligations of Pledgor, enforceable against Pledgor in
accordance with their terms.
4.10 NO RESTRICTIONS. The Pledged Shares are not subject to
any purchase rights, shareholder agreements, voting agreements, voting
trusts, trust deeds, irrevocable proxies, or any other similar agreements or
instruments restricting the transfer, pledge or encumbrance of the Pledged
Shares, except for any proxies or encumbrances created in this Agreement and
any requirements under the federal securities laws restricting
transferability of any of the Pledged Shares.
4.11 FEES AND EXPENSES. Pledgor shall, promptly after being
requested by Secured Party pay to Secured Party the amount of all reasonable
expenses, including reasonable attorneys' fees and other legal expense,
incurred by Secured Party in perfecting and enforcing this Agreement and the
security interest hereby created.
5. RIGHTS OF SECURED PARTY. Pledgor hereby irrevocably appoints
Secured Party as Pledgor's attorney-in-fact to do any act which Pledgor is
obligated by this Agreement to do, to exercise all rights, voting (in the
event of default hereunder) and otherwise, of Pledgor in the Pledged Shares,
and to do all things deemed necessary by Secured Party to perfect the
Security Interest and preserve, collect, enforce and protect the Pledged
Shares, all at Pledgor's cost and without any obligation on Secured Party so
to act, including, but not limited to, transferring title into the name of
Secured Party or his nominees, or receipting for, settling, or otherwise
realizing upon the Pledged Shares. Secured Party may, at his sole discretion,
require Pledgor to give possession or control of the Pledged Shares to
Secured Party; endorse as Pledgor's agent any instruments or documents
constituting or relating to the Pledged Shares; take control of the Pledged
Shares or proceeds thereof, including among others, stock or cash dividends
or stock splits, and use cash proceeds to reduce any part of the
Indebtedness; require Pledgor to use his best efforts to cause the issuer of
the Pledged Shares to register any or all of the Pledged Shares under
applicable securities laws, at the expense of Pledgor or such issuer; require
additional Pledged Shares; reject as unsatisfactory any property hereafter
offered by Pledgor as substitute collateral; and designate, at any time and
from time to time, a certain percentage of the Pledged Shares as the loan
value and require Pledgor to maintain the Indebtedness at or below such
figure. Secured Party may, without notice to Pledgor, notify and direct any
issuer of the Pledged Shares or holder of any proceeds, distributions or
dividends therefrom to thereafter make all payments on such Pledged Shares
directly to Secured Party, regardless of the medium in which paid and whether
they are ordinary or extraordinary, and regardless of whether Pledgor was
previously making collections thereon. Each obligor or issuer making payment
to Secured Party hereunder shall be fully protected in relying on the written
statement of Secured Party for such payment and shall not be required to see
to the application of such payment. Secured Party shall not be liable for any
act or omission on the part of his agents or employees, except willful
misconduct, nor shall Secured Party be responsible for depreciation in value
of the Pledged Shares or for preservation of rights against prior parties.
The foregoing rights and powers of Secured Party may be exercised before
(except voting rights) or after default and shall be in
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addition to, and not a limitation upon any rights and powers of Secured Party
given herein or by law, custom or otherwise.
6. EVENTS OF DEFAULT. Pledgor shall be in default under this
Agreement upon the happening of any of the following events or conditions:
6.1 Adverse change in any fact warranted or represented in
this Agreement;
6.2 Levy on, seizure, or attachment of all or part of the
Pledged Shares; or
6.3 The occurrence of any event of default with respect to the
Note.
7. REMEDIES OF SECURED PARTY UPON DEFAULT. Upon the occurrence of
any event of default, and at any time thereafter during the continuance
thereof, Secured Party may proceed to exercise any and all of the rights and
remedies provided by the Uniform Commercial Code then in effect in the State
of Illinois ("Code"), as well as all other rights and remedies possessed by
Secured Party under this Agreement or otherwise at law or in equity, and,
without limiting the foregoing, Secured Party may sell all or any part of the
Pledged Shares at public or private sale. In connection with any such sale, a
question of registration of the Pledged Shares under the Securities Act of
1933, as amended (the "Act") may arise. In that connection, compliance with
the Act may impose limitations on Secured Party if Secured Party was to
attempt to dispose of certain portions of the Pledged Shares. Similarly,
there may be other legal restrictions or limitations affecting Secured Party
in any attempts to dispose of certain portions of the Pledged Shares. For
these reasons, Secured Party is hereby authorized, upon the occurrence of any
event of default, and at any time thereafter during the continuance thereof,
to sell all or any part of the Pledged Shares at private sale, or in any
other manner which will not require the Pledged Shares, or any part thereof,
to be registered in accordance with the Act, or the rules and regulations
promulgated thereunder, at the best price reasonably obtainable by Secured
Party at any such private sale or other disposition in the manner mentioned
above. Additionally, because there may be no available market for the Pledged
Shares and because it may be unlikely that any person will become or be
interested in purchasing the Pledged Shares as a result of the giving of a
notice of public sale, Pledgor agrees that any sale of the Pledged Shares may
be private and without competitive bidding. Pledgor further acknowledges
that, notwithstanding any claim that a higher price might be obtained for the
Pledged Shares at a public sale, a private sale of the Pledged Shares is
hereby consented to and agreed to be reasonable and acceptable to Pledgor.
The parties hereto clearly understand that Secured Party may approach a
restricted number of potential purchasers and that a sale under such
circumstances may yield a lower price for the Pledged Shares, or any part or
parts thereof, than would otherwise be obtainable if same were registered and
sold in the open market. Pledgor agrees that any notice of any action will
have been reasonably given if given at least five (5) days before the action
notified. Expenses of preparing for sale, selling, or the like, shall
include, without limitation, Secured Party's reasonable attorneys' fees and
all such expenses shall be recovered by Secured Party before applying the
proceeds from the disposition of the Pledged Shares and Pledgor will remain
liable for any deficiency remaining after such disposition. The proceeds of
any such disposition or other action by Secured Party shall be applied as
follows:
7.1 First, to the costs and expenses incurred in connection
with the sale or incidental thereto or to the care or safekeeping of any of
the Pledged Shares or in any way
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relating to the rights of Secured Party hereunder, including reasonable
attorneys' fees and legal expenses;
7.2 Second, to the satisfaction of the obligation of Pledgor
with respect to the Note;
7.3 Third, to the payment of any other amounts required by
applicable law; and
7.4 Then, to Pledgor to the extent of any surplus proceeds.
All rights and remedies of Secured Party hereunder are cumulative and may be
exercised singly or concurrently. The exercise of any right or remedy will
not be a waiver of any other.
8. VOTING RIGHTS. In addition to any other remedies herein
provided, upon the occurrence of an event of default hereunder or under the
Note, Secured Party or his nominees shall have, with respect to the Pledged
Shares, the right to exercise all voting rights as to the Pledged Shares, and
all other rights and all conversions, exchange, subscription or other rights
privileges or options pertaining thereto, as if Secured Party was the
absolute owner thereof, including, without limitation, the right to exchange
any or all of the Pledged Shares upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the issuer thereof,
or upon the exercise by such issuer of any right, privilege or option
pertaining to any of the Pledged Shares, and in connection therewith, to
deliver any of the Pledged Shares to any committee, depository, transfer
agent, registrar or other designated agency upon such terms and conditions as
Secured Party may determine, all without liability except to account for
property actually received by Secured Party; but Secured Party shall have no
duty to exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing. Without
limiting the generality of the foregoing, Pledgor, to the extent permitted by
applicable law, hereby appoints and constitutes Secured Party as Pledgor's
true and lawful proxy with respect to exercising all voting or other rights
or executing consents, waivers, releases or objections to consents with
respect to the Pledged Shares at any shareholders' meeting, from and after
the occurrence of an event of default. Such proxy is coupled with an interest
and shall be irrevocable and continue in force and effect until the
Indebtedness has been paid in full.
9. INDEMNITY. Except for matters occurring by reason of Secured
Party's gross negligence or willful misconduct, Pledgor shall indemnify and
hold Secured Party harmless from and against any and all claims, demands,
losses, judgments and liabilities of whatever kind or nature and shall
reimburse Secured Party for all costs and expenses, including reasonable
attorneys' fees, growing out of or resulting from this Agreement or the
exercise by Secured Party of any rights or remedies granted to Secured Party
hereunder. In no event shall Secured Party be liable under this Agreement,
in the absence of gross negligence or willful misconduct on Secured Party's
part, for any matter or thing in connection with this Agreement other than to
account for the Pledged Shares or monies actually received, and applied, by
Secured Party in accordance with the terms of this Agreement.
10. RETURN OF SHARES. Upon payment in full of the Indebtedness,
Secured Party shall return the Pledged Shares to Pledgor.
11. GENERAL PROVISIONS.
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11.1 AMENDMENTS AND WAIVERS. Secured Party and Pledgor may,
subject to the provisions of this Section 11.1, from time to time enter into
written supplemental agreements to this Agreement, for the purpose of adding
or deleting any provisions to or from this Agreement or otherwise changing or
varying in any manner the rights of Secured Party or Pledgor hereunder or the
conditions, provisions or terms hereof or waiving any default hereunder. Any
such supplemental agreements to this Agreement shall be binding upon Pledgor
and Secured Party. No waiver by Secured Party of any right hereunder or of
any default by Pledgor shall be binding upon Secured Party unless in writing
executed by Secured Party. In the case of any waiver, Pledgor and Secured
Party shall be restored to their former position and rights under this
Agreement and any default waived shall be deemed to be cured and not
continuing, but no such waiver shall extend to any subsequent or other
default, or impair any right consequent thereon.
11.2 REMEDIES. No course of dealing among Pledgor and Secured
Party, and no delay or omission of Secured Party to exercise any right under
this Agreement shall impair such right or be construed to be a waiver of any
default or an acquiescence therein, and any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the
exercise of any other right. All remedies contained in this Agreement or by
law afforded shall be cumulative and all shall be available to Secured Party
until the Note has been paid in full. Secured Party may exercise such
remedies in any order of priority.
11.3 SURVIVAL OF REPRESENTATIONS. All representations and
warranties of Pledgor contained in this Agreement shall survive delivery of
the Note and the making of the loan.
11.4 CHOICE OF LAW AND CONSTRUCTION. This Agreement shall be
construed in accordance with the laws of the State of Nevada applicable to
contracts made and performed in Nevada by a Nevada secured party and a
pledgor located in Nevada. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under such applicable law, but, if any provisions of this Agreement shall be
held to be prohibited or invalid under such applicable law, such provisions
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
11.5 ATTORNEYS' FEES. Should any litigation be commenced
between the parties hereto concerning, this Agreement, or the rights and
duties of the parties in relation hereto, the prevailing party in any such
litigation shall be entitled to such reasonable attorneys' fees as the court
may award.
11.6 SEVERABILITY. The unenforceability of any provision of
this Agreement shall not affect the enforceability or validity of any other
provision hereof.
11.7 SECTION HEADINGS AND REFERENCES. Section headings in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement. All references to
sections in this Agreement are to the section of this Agreement in which such
section reference appears.
11.8 NOTICES. All notices, requests and demands to or upon the
parties to this Agreement required or permitted to be given under this
Agreement shall be deemed given: (a) three (3) days following deposit in the
United States mail, postage prepaid; (b) upon delivery to the telegraph
company for transmission, charges prepaid; (c) in the case of telex notice,
when
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sent, answerback received; or (d) when physically delivered by hand to the
addressee of such notice by or on behalf of the person initiating such
notice; in each case addressed to the address of Pledgor or Secured Party, as
the case may be, appearing below their respective signatures to this
Agreement. Pledgor and Secured Party may each change the address for service
of notice upon it or him by a notice in writing to the others.
11.9 LAWFUL MONEY. Each reference in this Agreement to payment
of any amount of money is to lawful money of the United States of America.
11.10 ENTIRE AGREEMENT. The documents referred to herein
embody the entire agreements and understandings among Pledgor and Secured
Party and supersede all prior agreements and understandings among Pledgor and
Secured Party relating to the subject matter thereof, as the case may be.
11.11 FURTHER ASSURANCES. Pledgor hereby further agrees with
Secured Party to execute, acknowledge and deliver any and all such further
assurances and other agreements or instruments, and to take or cause to be
taken all such other actions, as shall be reasonably requested by any Secured
Party from time to time in order to give full effect to this Agreement and to
maintain, preserve, safeguard and continue at all times the rights, remedies,
powers and privileges of Secured Party under this Agreement, all without any
cost or expense to Secured Party.
11.12 COUNTERPARTS. This Agreement may be executed by the
parties hereto and thereto individually or, in any combinations of the
parties hereto, in several separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
agreement.
11.13 WAIVERS BY PLEDGOR. Pledgor hereby waives presentment,
demand, notice of intention to accelerate, notice of acceleration, notice of
dishonor, protest, and notice of protest, and all other notices with respect
to collection, or acceleration of maturity, of the Pledged Shares and
Indebtedness.
IN WITNESS WHEREOF, Pledgor and Secured Party have executed this
Agreement as of the date first above written.
"Pledgor"
xxxxxxxXXXXX.xxx, a Nevada corporation
By:____________________________________
Xxxx Xxxxx, President
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
"Secured Party"
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XXXXX XXXXXX
000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
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Exhibit "C"
LEASE
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Exhibit "D"
EQUIPMENT LEASE
This Equipment Lease ("Lease") is entered into as of _____________,
1999, by and between XXXXX XXXXXX ("Lessor"), and XXXXXX ENTERPRISES, INC., a
Nevada corporation ("Lessee").
1. LEASE. Lessor hereby leases to Lessee, and Lessee hereby leases
and hires from Lessor, all equipment and other property described in Schedule
"A" as executed by the parties concurrently herewith and made a part hereof.
All said equipment and other property described in said Schedule "A" is
hereinafter collectively referred to as the "Equipment."
2. TERM. The term of this Lease shall commence upon the date hereof
and shall continue for a period of one (1) year, unless such period of time
is lengthened or shortened in accordance with the provisions of this Lease.
3. RENTAL. The rent for the Equipment shall be the sum of $3,000.00
per month. Lessee shall pay Lessor said rent in arrears on the last day of
each month.
4. USE. Lessee shall use the Equipment in a careful and proper
manner and shall comply with and conform to all national, state, municipal,
and other laws, ordinances and regulations relating to the possession, use or
maintenance of the Equipment. If at any time during the term hereof Lessor
supplies Lessee with labels, plates or other markings, stating that the
Equipment is owned by Lessor, Lessee shall affix and keep the same upon a
prominent place on the Equipment.
5. LESSEE'S INSPECTION; CONCLUSIVE PRESUMPTIONS. Lessee shall
inspect the Equipment within forty-eight (48) hours after receipt thereof.
Unless Lessee within said period of time gives written notice to Lessor,
specifying any defect in or other objection to the Equipment, Lessee agrees
that it shall be conclusively presumed, as between Lessor and Lessee, that
Lessee has fully inspected and acknowledged that the Equipment is in good
condition and repair, and that Lessee is satisfied with and has accepted the
Equipment in good condition and repair.
6. LESSOR'S INSPECTION. Lessor shall, at any and all times during
Lessee's normal business hours, have the right to enter the premises where
the Equipment is located for the purpose of inspecting the same or observing
the use thereof. Lessee shall not be permitted to remove any item of
Equipment from the location indicated on the Schedule without the prior
written consent of Lessor.
7. REPAIRS. Lessee, at its own cost and expense, shall keep the
Equipment in good repair, condition and working order and shall furnish any
and all parts, supplies, mechanisms and devices required to keep the
Equipment in good mechanical and working order.
8. ALTERATIONS. Without the prior written consent of Lessor, Lessee
shall not make any alterations, additions or improvements to the Equipment.
Any permitted alterations, additions or improvements may, at Lessee's option,
be removed by Lessee upon the expiration or earlier termination of this Lease
if, and only if, such removal may be accomplished without damage to
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the Equipment or otherwise reducing its value below that which it would have
had in the event no such alterations, additions or improvements had been made.
9. LOSS AND DAMAGE. Lessee hereby assumes and shall bear the entire
risk of loss and damage to the Equipment from any and every cause whatsoever.
No loss or damage to the Equipment or any part thereof shall impair any
obligation of Lessee under this Lease which shall continue in full force and
effect in spite of such damage. In the event of loss or damage of any kind
whatever to any item of Equipment Lessee shall: (a) Restore the same to good
repair, condition and working order, or replace the same with like Equipment
in good repair, condition and working order; or (b) If in the reasonable
judgment of Lessor any item of Equipment is determined by Lessor to be lost,
stolen, destroyed or damaged beyond repair, pay Lessor therefor in cash the
fair market value of the affected Equipment. Upon such payment this Lease
shall terminate with respect to such item of Equipment so paid for, Lessee
shall become the owner of such item of Equipment on as-is-where-is basis,
without warranty, express or implied and the rent payable pursuant to
Paragraph 3 hereof shall be equitably adjusted by mutual agreement of the
parties.
10. SURRENDER. Upon the expiration or earlier termination of this
Lease, with respect to any item of Equipment, Lessee shall (unless Lessee has
paid Lessor in cash the fair market value of such item of Equipment pursuant
to paragraph 9 hereof) return the same to Lessor in good repair, condition
and working order, ordinary wear and tear resulting from proper use thereof
alone excepted, in the manner specified by Lessor as follows: (a) By
delivering such item of Equipment at Lessee's cost and expense to such place
as Lessor shall specify within the city or county in which the same was
delivered to Lessee or to which same was moved with the written consent of
Lessor; or (b) By loading such item of Equipment at Lessee's cost and expense
on board such carrier as Lessor shall specify and shipping the same, freight
collect, to the destination designated by Lessor.
11. INSURANCE. Lessee shall keep the Equipment insured against all
risks of loss or damage by fire and such other risks as are covered by
endorsement commonly known as supplemental or extended coverage for not less
than the replacement value thereof. Such insurance shall name both Lessor
and Lessee as insureds. Lessee may effect such coverage under its blanket
policies. All such policies shall be written by companies presently insuring
the Lessee or other companies reasonably satisfactorily to the Lessor and
certificates showing such coverage to be in effect shall be furnished to the
Lessor upon request.
12. TAXES. Lessee shall keep the Equipment free and clear of all
levies, liens and encumbrances and shall pay when due all fees, assessments,
charges and taxes (municipal, state and federal) which may now or hereafter
be imposed upon the ownership, leasing, renting, sale possession or use of
the Equipment, excluding, however, all taxes on or measured by Lessor's
income.
13. LESSOR'S PAYMENT. In case of failure of Lessee to comply with
the provisions of Paragraphs 11 or 12, Lessor shall have the right but shall
not be obligated, to purchase such insurance, or pay said fees, assessments,
charges and taxes, as the case may be. In that event, the cost thereof shall
be repayable to Lessor with the next installment of rent, and failure to
repay the same shall carry with it the same consequence, including interest
at ten percent (10%) per annum, as a failure to pay any installment of rent
when due.
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14. WARRANTIES. LESSOR MAKES NO WARRANTIES, EITHER EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, EXCEPT THAT LESSOR WARRANTS THAT THE
EQUIPMENT IS IN GOOD WORKING ORDER AND THAT LESSOR HAS NO KNOWLEDGE OF ANY
DEFECTS IN THE EQUIPMENT.
15. INDEMNITY. Lessee shall indemnify Lessor against, and hold
Lessor harmless from, any and all claims, actions, suits, proceedings, costs,
expenses, damages and liabilities, including reasonable attorneys' fees,
arising out of, connected with, or resulting from the use and operation of
the Equipment, including without limitation its manufacture, selection,
delivery, possession, use, operation or return. Each party agrees that it
will give the other prompt notice of the assertion of any such claim or the
institution of any such action, suit or proceeding respecting the Equipment.
16. DEFAULT. If Lessee with regard to any item or items of Equipment
fails to pay any amount herein provided within ten (10) days after the same
is due and payable, or if Lessee with regard to any item or items of
Equipment fails to observe, keep or perform any other provision of this
Lease, required to be observed, kept or performed by Lessee, and if Lessee
fails to remedy, cure or remove such failure in payment of such other failure
in observing, keeping or performing the provisions of this Lease within ten
(10) days after receipt of written notice thereof from Lessor, Lessor shall
have the right to exercise any one or more of the following remedies: (a) To
declare the entire amount of rent hereunder immediately due and payable as to
any or all items of Equipment, without notice or demand to Lessee; (b) To xxx
for and recover all rents, and other payments, then accrued or thereafter
accruing with respect to any or all items of Equipment; (c) To take
possession of any or all items of Equipment, without demand or notice,
wherever same may be located, without any court order or other process of
law; (d) To terminate this Lease as to any or all items of Equipment; or (e)
To pursue any other remedy available to Lessor at law or in equity. Lessee
hereby waives any and all damages occasioned by such taking of possession
unless caused by Lessor's gross negligence or willful misconduct. Any such
taking of possession shall not constitute a termination of this Lease as to
any or all items of Equipment unless Lessor expressly so notifies Lessee in
writing. Notwithstanding any said repossession, or any other action which
Lessor may take, Lessee shall be and remain liable for the full performance
of all obligations on the part of Lessee to be performed under this Lease.
All such remedies are cumulative, and may be exercised concurrently or
separately. In no event, however, shall these remedies be exercised in such a
manner that the Lessor recovers more than the balance of rent and any other
amounts payable by Lessee to Lessor hereunder, plus the fair market value
which the Equipment would have at the end of the initial term of this Lease,
discounted from the date of the default to the end of the initial term of
this Lease at a rate of nine percent (9%) per annum.
17. BANKRUPTCY. Neither this Lease nor any interest herein is
assignable or transferable by operation of law. If any proceeding under the
Bankruptcy Act, as amended, is commenced by Lessee, or such an action is
commenced against Lessee and is not dismissed within sixty (60) days after
the commencement thereof, or if the Lessee is adjudged insolvent, or if the
Lessee makes any assignment for the benefit of its creditors, or if a writ of
attachment or execution is levied on any item or items of the Equipment and
is not released or satisfied within ten (10) days thereafter, or if a
receiver is appointed in any proceeding or action to which the Lessee is a
party with authority to take possession or control of any item or items of
the Equipment, Lessor shall have and may exercise any one or more of the
remedies set forth in Paragraph 16 hereof; and this
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Lease shall, at the option of Lessor on notice to Lessee, immediately
terminate and shall not be treated as an asset of Lessee after the exercise
of said option.
18. CONCURRENT REMEDIES. No right or remedy herein conferred upon or
reserved to Lessor is exclusive of any other right or remedy provided herein
or provided or permitted at law or in equity but each shall be cumulative of
every other right or remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise, and may be enforced concurrently
therewith or from time to time.
19. LESSOR'S EXPENSES. Lessee shall pay Lessor all costs and
expenses, including reasonable attorneys' fees, incurred by Lessor in
exercising any of its rights or remedies hereunder or enforcing any of the
terms, conditions, or provisions hereof.
20. ASSIGNMENT. Without the prior written consent of Lessor, Lessee
shall not (a) assign, transfer, pledge or hypothecate this Lease, the
Equipment or any part thereof, or any interest therein or (b) sublet or lend
the Equipment or any part thereof, or permit the Equipment or any part
thereof to be used by anyone other than Lessee or Lessee's employees.
Consent to any of the foregoing prohibited acts applies only in the given
instance; and shall not be a consent to any subsequent like act by Lessee or
any other person; provided, however, that without such prior written consent
but with notice to Lessor, Lessee may assign this Lease to any corporation
into which Lessee may merge or consolidate or which may acquire all or
substantially all of Lessee's assets, and may sublease any of the Equipment
subject to this Lease to any subsidiary of Lessee or to Lessee's parent or
any subsidiary of Lessee's parent. No such permitted sublease shall operate
to relieve the Lessee of its obligations hereunder which shall remain those
of a principal and not a guarantor. Subject always to the foregoing, this
Lease inures to the benefit of, and is binding upon, the heirs, legatees,
personal representatives, successors and assigns of the parties hereto.
21. PURCHASE OPTION. Upon the expiration of the original term
hereof, provided that Lessee has paid in full all amounts owing hereunder and
is not otherwise in default hereunder, Lessee shall have the option to
purchase said Equipment at the price of $75,000. Lessee shall exercise such
option by giving written notice to Lessor not less than thirty (30) days
prior to expiration of the original term hereof.
22. OWNERSHIP. The Equipment is, and shall at all times be and
remain, the sole and exclusive property of Lessor; and the Lessee shall have
no right, title or interest therein or thereto except as expressly set forth
in this Lease.
23. PERSONAL PROPERTY. The Equipment is, and shall at all times be
and remain, personal property notwithstanding that the Equipment or any part
thereof may now be, or hereafter become, in any manner affixed or attached
to, or imbedded in, or permanently resting upon, real property or any
building thereon, or attached in any manner to what is permanent as by means
of cement, plaster, nails, bolts, screws or otherwise.
24. INTEREST. Should Lessee fail to pay any part of the rent herein
reserved or any other sum required by Lessee to be paid to Lessor, within ten
(10) days after the due date thereof, Lessee shall pay unto the Lessor
interest on such delinquent payment from the expiration of said ten (10) days
until paid at the rate of ten percent (10%) per annum.
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25. OFFSET. Lessee hereby waives any and all existing and future
claims, and offsets, against any rent or other payment due hereunder and
agrees to pay the amounts hereunder regardless of any offset or claim which
may be asserted by Lessee or on its behalf.
26. NON WAIVER. No covenant or condition of this Lease can be waived
except by the written consent of Lessor. Forbearance or indulgence by Lessor
in any regard whatsoever shall not constitute a waiver of the covenant or
condition to be performed by Lessee to which the same may apply, and, until
complete performance by Lessee of said covenant or condition, Lessor shall be
entitled to invoke any remedy available to Lessor under this Lease or by law
or in equity despite said forbearance or indulgence.
27. ENTIRE AGREEMENT. This instrument constitutes the entire
agreement between Lessor and Lessee; and it shall not be amended, altered or
changed except by a writing signed by the parties hereto.
28. NOTICES. Service of all notices under this agreement shall be
sufficient if given personally or mailed via registered mail to the party
involved at its respective address set forth herein, or at such address as
such party may provide in writing from time to time. Any such notice mailed
to such address shall be effective when deposited in the United States mail,
duly addressed and with postage prepaid.
29. TITLES. The titles to the paragraphs of this Lease are solely
for the convenience of the parties, and are not intended as an aid in the
interpretation of the instrument.
30. TIME. Time is of the essence to this Lease and each and all of
its provisions.
31. LESSOR'S CONSENT. Whenever the consent or approval of Lessor is
required hereunder, Lessor agrees that same will not be unreasonably withheld.
32. CLAIMS. The Lessor hereby appoints and constitutes Lessee as its
agent and attorney-in-fact during the term of this Lease to assert and
enforce, at the sole cost and expense of the Lessee, whatever claims and
rights the Lessor may have as owner of the Equipment against any vendors,
manufacturers, suppliers or contractors in respect thereof.
33. GOVERNING LAW. The validity of this Lease and of any of its
terms or provisions, as well as the rights and duties of the parties
hereunder, shall be governed by the laws of the State of Nevada.
The parties have executed this Lease on the day and year first above written.
"LESSOR"
_______________________________________
XXXXX XXXXXX
"LESSEE"
XXXXXXXXXXXX.xxx,
a Nevada corporation
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By:_______________________________________
Xxxx Xxxxx, President
X-0
XXXXXXXX "X"
X-0
Exhibit "E"
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made this ____ day of August, 1999, by
and between XXXXXX ENTERPRISES, INC., a Nevada corporation (the
"Corporation") and XXXXX XXXXXX ("Employee"). In consideration of the mutual
covenants and promises contained herein, the parties agree as follows:
1. EMPLOYMENT. The Corporation hereby employs Employee as its
President and Chief Executive Officer. Employee shall report directly to the
President of XXXXXXXXXXXX.xxx, the parent corporation of the Corporation.
Employee shall be responsible for overall supervision of the day to day
operations of the Corporation's business including product development and
implementation of sales and marketing direction and strategy. Employee
hereby accepts such employment and agrees to perform the foregoing and such
other duties as are customarily performed by one holding such position in
other, same or similar businesses as that engaged in by the Corporation and
to render any such other services and duties as may be assigned from time to
time by the President of XXXXXXXXXXXX.xxx or the Board of Directors of the
Corporation.
2. PERFORMANCE OF EMPLOYEE'S DUTIES. The Employee agrees to
devote his full time attention and efforts to the faithful and loyal
performance of his duties for the Corporation and to render service to the
Corporation to the best of his ability, experience and talent to the
reasonable satisfaction of the Corporation. Such duties shall be rendered at
such place or places as the Corporation shall require in accordance with the
best interests, needs, business and opportunities of the Corporation.
3. TERM OF EMPLOYMENT. The term of employment shall be for a
period of five (5) years, commencing on August ___, 1999, and terminating on
August ___, 2004, unless earlier terminated as provided herein.
Notwithstanding the foregoing, Employee shall have the option to terminate
this Agreement in the event the Corporation or its business are sold.
4. LIMITATIONS ON OTHER EMPLOYMENT. During the term hereof,
Employee shall not enter into the services of or be employed in any capacity
or for any purposes whatsoever, whether directly or indirectly, by any
person, firm, corporation or entity other than the Corporation, and will not,
during said period of time, be engaged in any business, enterprise or
undertaking other than employment by the Corporation except as approved in
writing by the Chief Executive Officer of the Corporation. Employee may
engage in personal recreation and community or civic service so long as these
activities do not detract from the full discharge of Employee's duties
hereunder.
5. COMPENSATION. Provided Employee continues to be employed by
the Corporation pursuant to the terms of this Agreement, the Corporation
agrees to pay Employee and Employee agrees to accept from the Corporation, in
payment for Employee's services hereunder, base compensation at the rate of
Six Thousand Five Hundred and 00/100 Dollars ($6,500.00) per month payable in
accordance with the Corporation's normal pay practices. The amount of
Employee's compensation shall be reviewed at each one year anniversary date
of this Agreement
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and may be increased by the Board of Directors in its sole discretion. The
compensation has been expressed in terms of a gross amount, and the Company
is required to withhold from such gross amount deductions in respect of
federal, state or local income taxes, FICA and the like.
6. BUSINESS EXPENSES. The Corporation shall reimburse Employee or
otherwise provide for or pay for all reasonable expenses incurred by employee
in furtherance or in connection with the business of the Corporation,
including, but not by way of limitation, traveling expenses, and reasonable
entertainment expenses (whether incurred while traveling, or otherwise) in a
manner consistent with the Corporation's policy regarding such expenses. If
such expenses are paid in the first instance by employee, the Corporation
will reimburse him therefor. Expenses shall be reported and documented as
required by the Corporation and the United States Treasury Department for
deductible business expenses.
7. OTHER BENEFITS. The Corporation shall provide Employee with
medical insurance and such other fringe benefits which are at least equal to
the medical insurance and other fringe benefits being provided by the
Corporation to Employee as of July 1999.
8. VACATION. Employee shall be entitled to vacation time in
accordance with the vacation policies of the Corporation. Scheduled vacation
time must be approved in advance by the President of XXXXXXXXXXXX.xxx.
9. TERMINATION BY COMPANY FOR CAUSE. Employee's employment under
this Agreement may be terminated immediately by Company upon the occurrence
of one or more of the following causes:
(a) Employee's conviction of any criminal act involving
moral turpitude or which otherwise tends to bring disrepute upon Company;
(b) The commission by Employee of any act of dishonesty in
connection with the performance of any of Employee's duties hereunder
(including, but not limited to falsification of Company records, making false
statements of material facts to third parties regarding Company's business,
fraud, and misappropriation or embezzlement against Company or any of its
customers or suppliers);
(c) Any willful material breach by Employee of any of the
covenants, conditions or restrictions pertaining to disclosure or use of
confidential information, proprietary rights and materials of the Corporation
or unfair competition as set forth in Sections 10, 11 or 12 of this Agreement;
(d) The material failure to perform Employee's duties,
and/or to observe the written rules, regulations, policies, directions or
restrictions adopted by the Company from time to time to the extent such
rules, regulations, policies, directions or restrictions are not inconsistent
with the terms of this Agreement, provided that such failure shall not have
been cured within ten (10) days after Employee is given specific notice and
an opportunity to cure such failure;
(e) If Employee dies or becomes disabled (Employee shall be
deemed "disabled" for purposes of this Agreement if he is unable, by reason
of illness, accident, or other
E-2
physical or mental incapacity, to perform substantially all of his regular
duties for a continuous period of one hundred eighty (180) days); and
(f) Repeated abuse of alcohol or illegal narcotics confirmed
by testing which results in the failure of Employee to perform his duties
hereunder. Employee agrees to submit to drug and alcohol testing as deemed
necessary by Employer in its reasonable discretion.
Upon termination of Employee's employment by Company for cause, Employee
shall be entitled to all compensation accrued but unpaid to the date of
termination, but Employee shall have no further rights to any salary,
benefits or other compensation of any kind or nature.
10. DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION.
(a) DEFINITION OF CONFIDENTIAL INFORMATION. As used herein,
the term "Confidential Information" means any and all trade secrets or other
confidential information of any kind, nature or description concerning any
matters affecting or relating to the business of the Corporation which
derives economic value, actual or potential, from not being generally known
to the public or to other persons who can obtain economic value from its
disclosure or use and which is subject to efforts by the Corporation that are
reasonable under the circumstances to maintain its secrecy. Confidential
Information shall include information (not readily compiled from publicly
available sources) which is made available to Employee during the course of
his employment including, but not limited to, operations and financial
information concerning the Corporation's business; customer names, addresses,
buying habits, needs and the methods of fulfilling those needs; supplier
names, addresses and pricing policies; and the Corporation's pricing
policies. Employee agrees to cooperate with the Corporation to maintain the
secrecy of and limit the use of such Confidential Information.
Employee further agrees that he is under no obligation to any
former employer which is in any way inconsistent with this Agreement or which
imposes any restriction on the Corporation. Employee also acknowledges that
he has been instructed that during the term of employment by the Corporation,
he is not to divulge to the Corporation, its employees or its consultants any
confidential information or trade secrets obtained from any previous
employers or any other person.
(b) FIDUCIARY DUTY; APPROPRIATION OF CONFIDENTIAL
INFORMATION. Employee agrees to perform his duties pursuant to this Agreement
in good faith and in a manner which he honestly believes to be in the best
interests of the Corporation, and with such care, including reasonable
inquiry, as an ordinary prudent person in a like position would use under
similar circumstances. Employee agrees to observe a duty of loyalty to the
Corporation placing the interests of the Corporation ahead of his own.
Employee will keep confidential and will not directly or indirectly divulge
to anyone (except as required by applicable law or in connection with the
performance of his duties and responsibilities as an employee hereunder) nor
use or otherwise appropriate for Employee's own benefit, or on behalf of any
other person, firm, partnership or corporation by whom Employee might
subsequently be employed or otherwise associated or affiliated with, any
Confidential Information. Employee agrees that he will not at any time
during or after the termination or expiration of his employment, except as
authorized or directed in writing by the Corporation, use the Confidential
Information for Employee's own benefit or copy, reveal, divulge or make known
in any manner to any person, firm or corporation the Confidential Information.
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00. PROPRIETARY RIGHTS AND MATERIALS. All documents, memoranda,
reports, notebooks, correspondence, files, lists and other records, and the
like, designs, drawings, specifications, computer software and computer
equipment, computer printouts, computer disks, and all photocopies or other
reproductions thereof, affecting or relating to the business of the
Corporation, which Employee shall prepare, use, construct, observe, possess
or control ("the Corporation Materials"), shall be and remain the sole
property of the Corporation. Upon termination of this Agreement, Employee
shall deliver promptly to the Corporation all such the Corporation Materials.
12. COVENANT AGAINST UNFAIR COMPETITION. During the term of this
Agreement, Employee agrees (i) he will not, directly or indirectly, own an
interest in, operate, join, control or participate in, or be connected as an
officer, employee, agent, independent contractor, partner, shareholder or
principal of any corporation, partnership, proprietorship, firm,
association, person or other entity providing services which directly or
indirectly compete with the Corporation's business; (ii) he will not
undertake planning for or organization of any business activity competitive
with the Corporation's business or combine or conspire with other employees
or representatives of the Corporation's business for the purpose of
organizing any such competitive business activity; (iii) he will not,
directly or indirectly, either for Employee or for any other person, firm or
corporation, divert or take away or attempt to divert or take away of the
Corporation's customers, including but not limited to those upon whom
Employee called or whom Employee solicited or serviced or with whom Employee
became acquainted while engaged as an employee in the Corporation's business;
and (iv) he will not, directly or indirectly or by action in concert with
others, induce or influence (or seek to induce or influence) any person who
is engaged (as an employee, agent, independent contractor or otherwise) by
the Corporation to terminate his or her employment or engagement.
13. TERM CORPORATION AS INCLUDING CORPORATE AFFILIATES. For
purposes of this Agreement, the term "Corporation" shall be deemed to include
any corporation which is in control of, controlled by, or under common
control with the Corporation, whether or not Employee is directly employed by
such other corporation or corporations.
14. ATTORNEYS' FEES. If any legal action arises under this
Agreement or by reason of any asserted breach of it, the prevailing party
shall be entitled to recover all costs and expenses, including reasonable
attorneys' fees, incurred in enforcing or attempting to enforce any of the
terms, covenants or conditions, including costs incurred prior to
commencement of legal action, and all costs and expenses, including
reasonable attorneys' fees, incurred in any appeal from an action brought to
enforce any of the terms, covenants or conditions.
15. ENFORCEMENT; SEVERABILITY. The Corporation and Employee
recognize and acknowledge that Employee is employed under this Agreement as
an employee in a position where Employee will be rendering personal services
of a special, unique, unusual and extraordinary character requiring
extraordinary ingenuity and effort by Employee. Employee agrees that the
breach by him of this Agreement, including its covenants, could not
reasonably or adequately be compensated in damages in an action at law and
that the Corporation shall be entitled to injunctive relief, which may
include but shall not be limited to restraining Employee from rendering any
service that would breach this Agreement. However, no remedy conferred by
any of the specific provisions of this Agreement is intended to be exclusive
of any other remedy, and each and every remedy shall be cumulative and shall
be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or
E-4
otherwise. The election of any one or more remedies by the Corporation shall
not constitute a waiver of the right to pursue other available remedies. If
in any proceeding, an arbiter shall refuse to enforce this Agreement, whether
because the restrictions contained herein are more extensive than is
necessary to protect the business of the Corporation, it is expressly
understood and agreed between the parties hereto that this Agreement is
deemed modified to the extent necessary to permit this Agreement to be
enforced in any such proceedings. The validity and enforceability of the
remaining provisions or portions thereof shall not be affected thereby and
shall remain valid and enforceable to the fullest extent permitted under
applicable laws.
16. CONTINUING OBLIGATIONS. Employee's obligations pursuant to
Paragraphs 10 and 11 of this Agreement and the rights and remedies of the
Corporation hereunder shall continue in effect beyond the term of this
Agreement and such obligations shall be binding on Employee's assigns, heirs,
executors, administrators and other legal representatives.
17. ACCOUNTING FOR PROFITS. Employee covenants and agrees that if
he violates the provisions of Paragraphs 10, 11 or 12, the Corporation shall
be entitled to an accounting and repayment of all profits, compensation,
commissions, remuneration or other benefits that Employee has realized and/or
may realize as a result of or in connection with any such violation. These
remedies shall be in addition and not in limitation of any injunctive relief
or other rights or remedies to which the Corporation is or may be entitled
at law, in equity or under this Agreement.
18. ARBITRATION. Any controversy or dispute between the parties to
this Agreement involving the construction, interpretation, application or
performance of the terms, covenants or conditions of this Agreement, or in
any way arising under this Agreement shall, be decided by neutral binding
arbitration in accordance with the rules of the American Arbitration
Association, and not by court action except as provided by Nevada law for
judicial review of arbitration proceedings. Judgment upon the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction thereof.
The parties shall have the right to discovery. The filing of a judicial
action to enable the recording of a notice of pending action, for order of
attachment, receivership, injunction, or other provisional remedies, shall
not constitute a waiver of the right to arbitrate under this provision.
19. WAIVER OR MODIFICATION. No waiver or modification of this
Agreement or of any covenant, condition, or limitation herein contained shall
be valid unless in writing and duly executed by the party to be charged
therewith. Furthermore, no evidence of any modification or waiver shall be
offered or received as evidence in any arbitration between the parties
arising out of or affecting this Agreement or the rights or obligations of
any party hereunder, unless such waiver or modification is in writing, duly
executed as aforesaid. The provisions of this Paragraph may not be waived
except as herein set forth.
20. ENTIRE AGREEMENT. This Agreement contains the sole and entire
agreement between the parties as to the matters contained herein, and
supersedes any and all other agreements between them. The parties
acknowledge and agree that neither of them has made any representation with
respect to such matters of this Agreement or any representations except as
are specifically set forth herein, and each party acknowledges that he or it
has relied on his or its own judgment in entering into this Agreement. The
parties further acknowledge that statements or representations that may have
been heretofore made by either of them to the other
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are void and of no effect and that neither of them has relied thereon in
connection with his or its dealing with the other.
21. CHOICE OF LAW. This Agreement and the performance hereunder
and all suits and special proceedings hereunder shall be construed in
accordance with the laws of the State of Nevada.
22. BINDING EFFECT OF AGREEMENT; ASSIGNMENT; MERGER; DISSOLUTION.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their heirs, successors, assigns and legal representatives. This
Agreement shall be construed as a contract for personal services by Employee
to the Corporation and shall not be assignable by Employee. In the event of
the sale, merger or consolidation of the Corporation and subject to
Employee's right to terminate this Agreement as herein provided, Employee
agrees that the Corporation may assign its rights and obligations hereunder
to its successor or purchaser.
23. 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 when delivered by hand or when mailed by
certified registered mail, return receipt requested, with postage prepaid to
their current address or to such other address as they request in writing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first written above.
"Corporation"
XXXXXXXXXXXX.xxx
By:_____________________________
Xxxx Xxxxx, President
"Employee"
_______________________________
XXXXX XXXXXX
E-6
Exhibit "F"
NOTE PURCHASE GUARANTY
As an inducement to Xxxxx Xxxxxx to sell the outstanding common stock
of Xxxxxx Enterprises, Inc. to XXXXXXXXXXXX.xxx, a Nevada corporation (the
"Company"), pursuant to the Stock Purchase Agreement dated July 23, 1999 and
to accept as partial consideration the Promissory Note ("Note") of the
Company in the principal amount of $200,000, the undersigned hereby, jointly
and severally, absolutely and unconditionally, guarantee that in the event
that the Note has not been paid in full on or before November 15, 1999, the
undersigned will purchase the Note (including any security for the Note)
from Xxxxx Xxxxxx for an amount equal to the unpaid principal balance and any
accrued and unpaid interest on the Note (the "Note Balance").
In the event the undersigned become obligated to purchase the Note
hereunder, the undersigned shall deliver to Xxxxx Xxxxxx a cashiers' check in
the amount of the Note Balance against delivery by Xxxxx Xxxxxx to the
undersigned of the original Note endorsed in favor of the undersigned and the
assignment of the rights of Xxxxx Xxxxxx in any security for the Note.
The undersigned's obligation to purchase the Note on the terms set
forth herein shall be primary, direct, immediate, absolute, continuing,
unconditional, and unlimited. The undersigned further promise to pay to
Xxxxx Xxxxxx the expenses, including reasonable attorneys' fees, incurred in
the collection or attempted collection of this Note Purchase Guaranty.
This Note Purchase Guaranty shall inure to the benefit of and be
enforceable by Xxxxx Xxxxxx, his successors and assigns, and shall bind the
heirs, executors, administrators, successors and assigns of the undersigned.
The validity, construction and performance of this Note Purchase Guaranty
shall be governed by the laws of the State of Nevada.
This Note Purchase Guaranty is executed as of __________________, 1999.
XXXXX X. XXXXXXXXXX
XXXX XXXXX
F-1
