EXHIBIT 2.2
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
DALECO RESOURCES CORPORATION, INC.,
STRATEGIC MINERALS, INC.,
AND
CLEAN AGE MINERALS, INCORPORATED
DATED SEPTEMBER 19, 2000
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT is entered into as of this 19th day of September,
2000 (hereafter "Agreement") by and among Daleco Resources Corporation, a
Delaware corporation (hereafter "DRC"), Strategic Minerals, Inc., a Nevada
corporation (hereafter "SMI") Clean Age Minerals, Incorporated, a Nevada
Corporation (hereafter "CAM") with respect to the following:
RECITALS:
WHEREAS, CAM is a Nevada corporation which owns certain mineral
interests and intellectual property;
WHEREAS, the shareholders of CAM own 20,018,000 shares of the
common stock of CAM which constitutes all of the issued and outstanding shares
of capital stock of CAM;
WHEREAS, SMI is a wholly owned subsidiary of Daleco Resources
Corporation, a Delaware corporation;
WHEREAS, the parties desire and intend for CAM to merge with and
into SMI, with SMI being the surviving corporation in a statutory merger under
the laws of the State of Nevada;
WHEREAS, the parties desire and intend for all of the issued and
outstanding capital stock of CAM to be canceled and for the holders of CAM's
outstanding capital stock to receive Preferred Stock of DRC upon the Effective
Date of the merger;
WHEREAS, certain of the shareholders of CAM had offered to
exchange their shares for cash, but elected to accept DRC's and SMI's offer to
exchange their shares for Preferred Stock; and
WHEREAS, SMI and DRC agreed to increase the number of shares of
Preferred Stock to be exchanged from 1,400,000 to 2,001,800; and
WHEREAS, for Federal Income Tax purposes, the parties intend that
the merger contemplated by this Agreement shall qualify as a reorganization
pursuant to Section 368(a) of the Internal Revenue Code of 1986, as amended, and
the Treasury Regulations promulgated thereunder.
NOW THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound hereby, agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such other Person.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other
day on which commercial banks in Philadelphia, Pennsylvania are authorized or
required by law to close.
"CLEAN AGE MINERALS ("CAM") includes the company and its three
subsidiaries identified in Schedule 6.2.2 attached hereto.
"DIRECTORS" means the directors of Clean Age Minerals,
Incorporated, who have affixed their signatures to this document with respect to
their obligations and benefits set forth in Article XI and signed the
Non-Competition Agreement referred to as Exhibit 9.1 in Article IX hereof.
"EFFECTIVE DATE" means the date when the Articles of Merger
prepared pursuant to this Agreement, have been filed with the Nevada Secretary
of State.
"ENCUMBRANCES" means any and all mortgages, security interests,
liens, claims, pledges, restrictions, leases, title exceptions, rights of
others, charges or other encumbrances.
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"ERISA" means the Employee Retirement Income Security Act of
1974, and the applicable regulations promulgated thereunder."EFFECTIVE DATE"
shall mean the date first set forth above means the date and time when the
Articles of merger, prepared pursuant to this Agreement and Plan of
Reorganization, have been filed with the Nevada Secretary of State.
"GOVERNMENTAL AUTHORITY" means any foreign, Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality.
"IRS" means the United States Internal Revenue Service.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person or
Persons, any change, occurrence or effect that is materially adverse to the
assets, business, results of operations or condition (financial or otherwise) of
such Person.
"MATERIAL ADVERSE EVENT" means, an event the consequences of
which would have a Material Adverse Effect.
"PATENT" means U.S. Patent No. 5,387,738 and any foreign patents,
extensions, continuations issued in connection therewith.
"PERMITTED ENCUMBRANCES" means only the following title
exceptions: (a) taxes either not delinquent or being diligently contested; (b)
mechanics', materialmen's or similar statutory liens being diligently contested;
(c) other exceptions that do not and would not, individually or in the
aggregate, have a Material Adverse Effect with respect to the assets of CAM.
"PERSON" means an individual, corporation, partnership, trust or
unincorporated organization, or other type of legal entity or a government or
any agency or political subdivision thereof.
"PREFERRED STOCK" shall mean 8% cumulative convertible preferred,
as more fully described under Section 7.8 hereof, with a Stated Value of $10.00
per share, which Preferred Stock shall be senior to all other classes of
preferred stock and any other classes of stock currently or subsequently issued
by DRC, but will be subordinated to the 16,000 shares of Class A preferred stock
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currently issued and outstanding; save and except any of such shares which are
subsequently converted or redeemed.
"SEC" means the Securities and Exchange Commission.
"SHAREHOLDER", shall mean the holder of one or more shares of
Stock.
"STOCK" shall mean all of the issued and outstanding capital
Stock of CAM, which consists of 20,018,000 shares of common stock, par value
$0.01.
"SUBSIDIARY" means, with respect to any Person, (i) each
corporation, partnership, joint venture, limited liability company or other
legal entity of which such Person owns, either directly or indirectly, 50% or
more of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or similar governing
body of such corporation, partnership, joint venture or other legal entity, and
(ii) each partnership or limited liability company in which such Person or
another Subsidiary of such Person is the general partner, managing partner or
otherwise controls.
"THIRD PARTY" means a party or parties unaffiliated with any of
DRC, SMI or CAM.
"THREATENED" means a claim, proceeding, dispute, action or other
matter for which a demand or adverse statement has been made in writing or any
written notice of default or nonperformance has been given.
1.2 OTHER TERMS. Other terms may be defined elsewhere in the text
of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 OTHER DEFINITIONAL PROVISIONS.(a) The words "hereof,"
"herein," and "hereunder" and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
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(b) The terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
dollars.
ARTICLE II.
CLOSING
2.1 THE CLOSING. At the closing of the merger contemplated by
this Agreement (the "Closing"), CAM shall merge with and into SMI, with SMI
being the survivor; all of the issued and outstanding stock of CAM will be
canceled, and CAM's Shareholders shall receive the Preferred Stock described in
Sections 3.1 and Section 7.8 of this Agreement.
2.2 CLOSING DATE. The Closing shall take place on the day on
which the Articles of Merger, consummating the transactions contemplated by this
Agreement, are filed with the Nevada Secretary of State, the "Closing Date", on
which date the parties agree to execute and deliver this Agreement as well as
any and all other agreements, instruments, certificates, funds, and/or other
documents required in connection with this transaction.
2.3 PLACE OF CLOSING. The Closing shall take place at the offices
of CAM's Counsel, The Xxxxxxx Law Offices, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000,
Xxxx, Xxxxxx, or such other place as the parties mutually agree.
ARTICLE III.
MERGER CONSIDERATION TO CAM'S STOCKHOLDERS
3.1 As and for the consideration to be paid and delivered to
CAM's Stockholders in connection with the Merger, SMI shall on the Effective
Date promptly and irrevocably instruct its Transfer Agent to issue 2,001,800
shares of DRC Preferred Stock to the respective CAM Shareholders entitled to
receive the same hereunder. Five (5) days before the Closing CAM shall deliver
to DRC a list of the names and number of shares of Preferred Stock, aggregating
2,001,800 shares, to be issued and delivered to holders of CAM's shares. Each
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Shareholder of CAM receiving shares of Preferred Stock pursuant to this
Agreement shall be entitled to receive one share of Preferred Stock with a
Stated Value of Ten Dollars ($10.00) per share for each ten (10) shares of CAM
Stock owned by such stockholder immediately prior to the Effective Date of the
merger.
ARTICLE IV.
THE MERGER
4.1 Effective upon filing the Articles of Merger pursuant
to this Agreement with the Nevada Secretary of State, CAM shall be merged with
and into SMI and the separate existence of CAM shall thereupon cease, in
accordance with the applicable provisions of Chapters 78 and 92A of the Nevada
Revised Statutes. SMI will be the surviving corporation in the Merger and will
continue to be governed by the laws of the State of Nevada, and the separate
corporate existence of SMI and all of its rights, privileges, duties and
obligations as a corporation organized under the laws of the State of Nevada
will continue unaffected by the merger. The merger of CAM with and into SMI
shall have the effects specified under Chapters 78 and 92A of the Nevada Revised
Statutes.
4.2 With regard to SMI as the surviving corporation in the
merger, the Articles of Incorporation and the Bylaws of SMI in effect
immediately prior to Closing shall be the Articles of Incorporation and Bylaws
of SMI as the surviving corporation. Except as otherwise provided in this
Agreement, from and after Closing the Board of Directors of SMI, immediately
prior to Closing, shall constitute the Board of Directors of SMI as the
surviving corporation.
4.3 If a certificate for Preferred Stock is to be issued
pursuant hereto in a name other than that of a surrendering shareholder, it
shall be a condition of such issuance that the shareholder requesting such
issuance shall bear any and all transfer or other taxes required by reason of
the issuance of such certificates for Preferred Stock in a name other than that
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of the respective shareholder, or shall provide SMI with satisfactory evidence
that no such obligation exists.
4.4 Notwithstanding the foregoing, neither SMI or any
party hereto shall be liable to a Shareholder for any Preferred Stock (or
dividends thereupon) delivered to a public official pursuant to and in
accordance with any applicable abandoned property, escheat or similar law.
4.5 FRACTIONAL SHARES. No certificates representing
fractional shares of Preferred Stock shall be issued by SMI or DRC in the
exchange. Under this Agreement, each ten (10) shares of Stock will be exchanged
for one (1) share of Preferred Stock. Fractional Shares will be rounded down to
the next whole share of Preferred Stock.
ARTICLE V
LOANS
5.1 On or before the first anniversary date of the
Effective Date, SMI shall pay the sum of $514,881 to those persons listed on
Schedule 5.1 in the amounts set forth opposite their names ("Insider Loans") in
addition to the merger consideration being paid and delivered to CAM's
Shareholders pursuant to Article III hereof. The Insider Loans were made by the
parties set forth on Schedule 5.1, in the amounts set forth thereon, for use by
CAM in the ordinary course of business. The obligations of SMI to pay the
Insider Loans shall be evidenced by Notes to each person listed on Schedule 5.1
in form substantially identical to that attached hereto as Exhibit 5.1.1 and
shall be guaranteed by DRC utilizing the form attached hereto as Exhibit 5.1.2.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
6.1. REPRESENTATIONS AND WARRANTIES OF SMI AND DRC. SMI
and DRC hereby Represent and Warrant to CAM and the Shareholders that:
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6.1.1 SMI and DRC are each a corporation duly
ongoing, validly existing and in good standing under the laws of the state of
its incorporation and in each jurisdiction in which such qualification is
necessary for the conduct of their respective businesses.
6.1.2 The execution, delivery and performance of
this Agreement by SMI and DRC and the consummation of the transactions
contemplated hereby by SMI and DRC will not constitute a breach or violation of
or default under their respective Articles of Incorporation or By-Laws or under
any judgment, decree, order, permit or license, or agreement, indenture or
instrument of SMI or DRC, or any of their subsidiaries, or to which SMI, DRC or
any of their respective subsidiaries are subject, other than breaches,
violations or defaults that, individually or in the aggregate, would not prevent
the consummation of the transactions contemplated hereby or have a Material
Adverse Affect on the business, operations or prospects of SMI, DRC, and their
respective subsidiaries taken as a whole. The consummation by SMI and DRC of the
transactions contemplated hereby will not require the consent or approval of any
other party to any of the above or affect the validity or effectiveness of any
of the above, except when failure to obtain such consents or approvals,
individually or in the aggregate, would not prevent consummation of such
transactions and would not have a Material Adverse Affect on the businesses or
properties of the SMI, DRC, and their respective subsidiaries taken as a whole.
6.1.3 Except as disclosed in writing prior to the
date hereof, since June 30, 2000, neither SMI or DRC have suffered any material
change in their respective working capital, financial condition, assets,
liabilities (absolute, accrued, contingent or otherwise), reserves, businesses,
operations or prospects.
6.1.4 The execution of this Agreement and the
consummation of the transactions described herein have been duly authorized by
all necessary corporate action and this Agreement is a legal, valid and binding
obligation of each of SMI and DRC.
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6.1.5 The authorized capital stock of DRC consists
of 20,000,000 shares of common stock, par value $0.01, of which, as of the date
of this Agreement, 3,102,574 shares are issued and outstanding, as well as
10,000,000 shares of Preferred Stock, par value $0.01, of which 16,000 shares
are issued and outstanding. There are outstanding stock options and warrants due
as stated in DRC's 10-Q's dated as of June 20, 2000 and 10-K's dated as of
September 20, 1999, plus an additional 3.5 million options to certain officers,
directors and employees at an exercise price of $0.25. All Preferred Stock
subject to issuance hereunder will be duly authorized, validly issued, fully
paid and non-assessable. Except as set forth above, there are no outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of DRC or any other obligations of DRC to
issue any securities.
6.1.6 Except as disclosed in writing prior to the
date hereof, DRC has no liabilities or obligations of any nature which were not
fully reflected or reserved against in DRC's audited financial statements as of
September 30, 1999 and quarterly statement as of June 30, 2000, including the
notes thereto, except for liabilities and obligations incurred in the ordinary
course of business since the date thereof.
6.1.7 No written statement, certificate, schedule,
list or other written information furnished by SMI or DRC in connection with
this Agreement contains any untrue statements of a material fact or omits to
state any material facts necessary in order to make the statements contained
herein not misleading in light of the circumstances under which they were made.
6.1.8 Neither SMI nor DRC have any "plan" as that
term is defined under ERISA either qualified or pending qualification under
ERISA, and has no pension, profit sharing, stock or other non-qualified plans.
6.1.9. SMI has heretofore delivered to CAM copies
of DRC's reports on Form 10-KSB for the years ending September 30, 1999, 1998,
and 1997 and Form 10-QSB for the periods ending December 31, 1999, March 31,
2000 and June 30, 2000, all its reports on Form 8-K since October 1, 1998 and
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its Proxy Statements for its 1997 and 1998 Annual Meetings of Stockholders, all
as filed with the SEC. The audited and unaudited consolidated financial
statements of DRC included in such reports have been prepared in substantial
conformance with generally accepted accounting principals applied on a
consistent basis (except as otherwise stated in such financial statements) and
fairly present the financial position of DRC and its subsidiaries on a
consolidated basis as of the dates thereof and the results of operations and
changes in financial position for the periods then ended, subject, in the case
of the unaudited financial statements, to normal year-end audit adjustments
which shall not be materially adverse. Such reports did not (as of their
respective filing dates) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. Since June 30, 2000: (a) the business of DRC and its
subsidiaries, taken as a whole, has been conducted only in the ordinary and
usual course consistent with past practices; and (b) there has been no material
adverse change in the financial condition or operations of DRC and its
subsidiaries, taken as a whole. There are no statements contained in
Management's Discussion and Analysis section of such reports that required
clarification, correction, or comment regarding prior statements contained in
the Management, Discussion and Analysis section of such reports.
6.1.10 Except as set forth in DRC's September 30,
1999 Form 10-KSB, its June 30, 2000 10-QSB, and except for landlord's liens,
statutory liens not yet delinquent, minor defects and irregularities in title,
encumbrances which do not materially impair the use thereof for the purpose for
which they are held, DRC and its subsidiaries have good, valid and marketable
title to all the interests in the properties reflected in DRC's Form 10-KSB, and
all such interests are free and clear of all title defects or objections, liens,
claims, changes, security interests or other encumbrances of any kind
whatsoever.
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6.1.11 NEW SUBSIDIARY. SMI was specially created
for the purposes of this transaction and has conducted no business since the
date of its inception other than transactions contemplated by this Agreement.
6.2 REPRESENTATIONS AND WARRANTIES OF CAM. CAM Represents
and Warrants to SMI that:
6.2.1 CAM is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to carry on
its business as now being conducted. CAM is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the current
conduct of its business or the ownership or leasing of its properties makes such
qualifications or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed (individually or in the aggregate)
would not have a Material Adverse Effect. CAM agrees, at Closing, to deliver to
SMI complete and correct copies of the articles of incorporation and bylaws of
CAM, as amended to the date of this Agreement.
6.2.2 At the date of this Agreement, other than as
set forth on Schedule 6.2.2, there are no subsidiaries or affiliates of CAM.
6.2.3 The authorized capital stock of CAM, along
with the issued and outstanding shares of capital stock for CAM and the owners
of such issued and outstanding shares of capital stock and the amount owned by
each Shareholder, are set forth in Schedule 6.2.3. Except as set forth in
Schedule 6.2.3, as of the date of this Agreement, (i) no additional shares of
common stock or other voting or equity securities of CAM were issued, reserved
for issuance or outstanding, and (ii) there are no outstanding stock
appreciation rights and/or other outstanding contractual rights the value of
which is derived from the financial performance of CAM. All outstanding shares
of capital stock of CAM are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights. Except as set forth on
Schedule 6.2.3, (i) there are no bonds, debentures, notes or other indebtedness
of CAM having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which the Shareholders of
CAM may vote, (ii) there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which CAM is a party or by which it is bound, obligating CAM to issue,
deliver or sell or cause to be issued, delivered or sold, additional shares of
capital stock or other voting or equity securities of CAM or obligating CAM to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking, and (iii) there are no
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outstanding contractual obligations of CAM to repurchase, redeem or otherwise
acquire any shares of Stock.
6.2.4 (a) CAM has the requisite power to enter into
this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have been duly authorized by all
necessary organizational or personal action on the part of CAM. This Agreement
has been duly executed and delivered by CAM after a duly called meeting of the
Shareholders at which this transaction was approved in accordance with the
Bylaws of CAM and applicable law, and constitutes the valid and binding
obligation of CAM, enforceable against CAM in accordance with the terms of this
Agreement and the Schedules hereof.
(b) Except as set forth on Schedule 6.2.4(b)
hereof, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or cause loss of a material benefit under, or result in the
creation or maturation of any lien or purchase right upon any of the properties
or assets of CAM under, (i) the organizational documents, Bylaws of CAM, (ii)
except as set forth in Schedule 6.2.4(b) hereof, and subject to the governmental
filings and other matters referred to in Section 6.2.4(c), any loan or credit
agreement, note, bond, mortgage, indenture, real property lease or other
material agreement or instrument applicable to CAM or any of its properties or
assets, or (iii) subject to the governmental filings and other matters referred
to in Section 6.2.4(c), any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to CAM or any of its properties or assets, other
than, in the case of clauses (ii) or (iii), any such conflicts, violations,
defaults, rights or liens that individually or in the aggregate would not have a
Material Adverse Affect, or impair, in any material respect, the ability of CAM
or any of the Shareholders to perform their obligations under this Agreement.
(c) Except as set forth in Schedule 6.2.4 (c)
hereof, no consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required by any of the
Shareholders or CAM in connection with the execution and delivery of this
Agreement or the consummation of the acquisition transactions contemplated by
this Agreement, except (i) for any applicable filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) in connection with any state or local tax which is attributable to
the beneficial ownership of real property of CAM, (iii) those as set forth in
Schedule 6.2.4(c) hereof, and (iv) for such other consents, approvals, orders,
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authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect, or impair, in any material respect, the ability of CAM to
perform their obligations under this Agreement.
6.2.5. (a) Except as set forth in Schedule
6.2.5(a), (i) CAM has in effect all Federal, state and local governmental
approvals, authorizations, certificates, filings, licenses, permits and rights
("Permits"), including all authorizations under Environmental Laws (as
hereinafter defined) necessary for it to own or lease its properties and assets
and to carry on its business as now being conducted other than such Permits the
absence of which would not, individually or in the aggregate, have a Material
Adverse Effect with respect to CAM, and there has occurred no default under any
such Permit other than such defaults which, individually or in the aggregate,
would not have a Material Adverse Effect, and (ii) CAM is in compliance with all
applicable laws, statutes, ordinances, rules, orders and regulations of any
Governmental Authority ("Applicable Laws"), except for such noncompliance which,
individually or in the aggregate, would not have a Material Adverse Effect.
(b) CAM is and has been in compliance with all
applicable Environmental Laws, except as set forth in Schedule 6.2.5(b) hereof,
except for such noncompliance which would not have a Material Adverse Effect.
The term "Environmental Laws" means any applicable Federal, state or local
statute, ordinance, rule, regulation, permit, judgment, order, decree,
injunction or other legally binding authorization relating to: (A) Releases (as
defined in 42 U.S.C. Section 9601(22)) or Threatened Releases of Hazardous
Material (as hereinafter defined) into the environment, or (B) the generation,
treatment, storage, disposal, use, handling, manufacturing, transportation or
shipment of, or exposure to, a Hazardous Material.
6.2.6. (a) CAM has delivered to SMI the audited,
reviewed or unaudited and unreviewed, as the case may be, financial statements
of CAM as of December 31, 1999 and the quarterly statement of CAM as of June 30,
2000, and CAM's annual financial statement for the two prior years, (the "CAM
Financial Statements"). CAM Financial Statements have been prepared from, and
are in accordance with, the books and records of CAM and, present fairly, in all
material respects, the financial position, the results of operations and cash
flows of CAM as of the dates and for the periods indicated, in each case in
substantial conformance with GAAP generally applied throughout the periods
involved, save and except as otherwise stated in any of said financial
statements, schedule 6.2.6(a) hereof, and any Due Diligence documents supplied
to SMI and/or DRC by CAM. Notwithstanding the foregoing, SMI and DRC hereby
acknowledge having conducted any and all desired Due Diligence with respect to
CAM's assets and operations. Each of SMI and DRC have relied solely upon their
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own respective investigations as to the value, nature and extent of the assets
being acquired pursuant to this merger. Each of SMI and DRC further acknowledge
that CAM has not made and is not making any representations or warranties as to
the value of the assets being acquired pursuant to the terms of this Agreement.
(b) Except as set forth in Schedule 6.2.6(b)
hereof, as of June 30, 2000, CAM had no material liabilities of any nature,
whether accrued, absolute, contingent or otherwise (including, without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others), required by GAAP to be reflected or disclosed in the CAM Financial
Statements that were not adequately reflected or disclosed on such balance
sheet.
6.2.7 Except as set forth in this Section 6.2.7 or
Schedule 6.2.7 or any other Schedule hereof or as permitted elsewhere in this
Agreement, since June 30, 2000, CAM has conducted its business only in the
ordinary course, and there has not been (i) any change or occurrence (other than
those which relate to CAM'S industry generally or the economy in general) which
will have a Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend or other distribution with respect to any shares of
capital stock issued by CAM, (iii) any issuance of any additional shares of
capital stock of CAM or any securities convertible into or exchangeable or
exercisable for capital stock of CAM, (iv) any split, combination or
reclassification of any of the capital stock of CAM or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of capital stock of CAM, (v) any granting by CAM
to any director or officer of CAM of any increase in compensation, except in the
ordinary course of business consistent with prior practice, (vi) any granting by
CAM to any such Person of any increase in severance or termination pay, except
as part of a standard employment package to any Person promoted or hired, or
except for employment, severance or termination arrangements in the ordinary
course of business consistent with past practice with employees other than any
executive officer of CAM, any entry by CAM into any employment, severance or
termination agreement with any such Person, (vii) any damage, destruction or
loss not covered by insurance that will have a Material Adverse Effect on CAM,
or (viii) any change in accounting methods, principles or practices of CAM
materially affecting its assets, liabilities or business, except insofar as may
have been required by a change in GAAP.
6.2.8 Except as disclosed in Schedule 6.2.8 hereof,
there are no judicial, administrative, or arbitral actions, suits, proceedings
(public or private) or governmental proceedings (collectively "Legal
Proceedings") pending against CAM or CAM's officers and/or directors, or
Threatened that, individually or in the aggregate, could have a Material Adverse
Effect. Except as disclosed in Schedule 6.2.8, there is no judgment, order,
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injunction or decree of any Governmental Authority outstanding against CAM that,
individually or in the aggregate, could have a Material Adverse Effect.
6.2.9 All material contracts, agreements, leases,
mortgages and commitments ("Contracts"), to which CAM is a party or may be
bound, are listed in Schedule 6.2.9 hereof, except for Contracts (i) relating to
purchase or sales orders in the ordinary course of business, (ii) involving a
payment of less than $5,000, (iii) which can be terminated by CAM within 30 days
after written notice without material penalty or premium, or (iv) where the loss
of which would not result in a Material Adverse Event. Except as set forth in
Schedule 6.2.9 hereof, all Contracts are valid and in full force and effect on
the date hereof and CAM has not violated any provision of, or committed or
failed to perform any act, which with notice, lapse of time or both would
constitute a default under the provisions of any Contract, the termination of
which would have a Material Adverse Effect.
6.2.10. Except as disclosed in Schedule 6.2.10
hereof:
(a) CAM has timely filed (including
extensions) all Federal and state income tax returns required to be so filed
with respect to all years or periods ending on or before the date of this
Agreement. CAM has paid all taxes (including interest, penalties and additions
to tax) shown to be due on such tax returns.
(b) No material deficiencies for any
Federal or state income taxes have been proposed, asserted or assessed against
CAM that have not been fully paid or adequately provided for in the appropriate
financial statements of CAM, and no requests for waivers of the time to assess
any Federal or state income taxes of CAM are pending.
(c) No material liens for taxes exist with
respect to any assets or properties of CAM, except for Permitted Encumbrances or
liens that CAM is contesting in good faith by appropriate proceeding.
(d) CAM is not a party to or bound by any
tax sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to Federal or state income or franchise
taxes (including any advance pricing agreement, closing agreement or other
agreement relating to Federal or state income or franchise taxes with any taxing
authority).
(e) No Federal or state audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Federal or material state income taxes on tax returns of CAM and
CAM has not received a written notice of any material pending audit or
proceeding.
15
(f) CAM has made available to SMI for
inspection complete, correct and amended copies of all Federal and state income
tax returns filed by CAM for each of its taxable years ending after January 1,
1997.
6.2.11 Schedule 6.2.11 hereof sets forth a complete
list of all material real property either owned in full or leased by CAM as of
the date hereof (such owned and leased material real property, including all
improvements, referred to collectively as the "Real Property"). Except as set
forth in Schedule 6.2.11 hereof, CAM has good and marketable title to those
interests in the Real Property held by it. Except as set forth in Schedule
6.2.11 hereof, the Real Property is free of Encumbrances, except for Permitted
Encumbrances, and the consummation of the transactions contemplated by this
Agreement will not create any Encumbrance on any of the Real Property which,
individually or in the aggregate, would have a Material Adverse Effect. CAM
enjoys peaceful and undisturbed possession under all of its Real Property
leases, except for such breaches of the right to peaceful and undisturbed
possession that do not materially interfere with the ability of CAM to conduct
its business. Except as set forth in Schedule 6.2.11 hereof, there is no party
with a prior right, right of first refusal, preferential right to acquire, or
preemptive right to the Real Property, or any part thereof, to include, by way
of example and not limitation, the mineral interest or any part thereof
("Property Rights"). To the extent that such Property Rights exist, the
transaction contemplated hereby will not be an event which would give the holder
of such Property Rights the right to exercise same.
6.2.12 CAM has insurance coverage with insurance
companies or associations in such amounts as set forth in Schedule 6.2.12
hereof.
6.2.13 Schedule 6.2.13 hereof contains a list of
all copyrights, trademarks, trade names, licenses and patents that are
registered in the United States Patent and Trademark Office or with respect to
which registration is currently pending which are owned by CAM, or under which
CAM is licensed, and used or useful in the operation of its businesses, all of
which are valid and in good standing and uncontested. Prior to the Closing CAM
will have delivered to SMI copies of all documents establishing such rights,
licenses or other authority. Except as disclosed in Schedule 6.2.13 hereof, to
the best knowledge of CAM, its officers and directors, (i) CAM is not infringing
upon or otherwise acting adversely to any trademarks, trade names, copyrights,
patents, patent applications, know-how, methods or processes owned by any other
Person, and (ii) there is no claim or action pending or Threatened which alleges
that CAM is infringing upon or otherwise acting adversely to any trademarks,
trade names, copyrights, patents, patent applications, know-how, methods or
processes owned by any other Person.
16
6.2.14 CAM has no "plan" as that term is defined
under ERISA either qualified or pending qualification under ERISA, and has no
pension, profit sharing, stock or other non-qualified plans.
6.2.15 The loans set forth on Schedule 5.1 hereof
were all received by CAM or paid directly to third parties on behalf of CAM and
were used by CAM in the ordinary course of its business.
6.2.16 After due inquiry by the officers and
directors of CAM, to the best of their knowledge, there are no undisclosed
liabilities, the identification of which are reasonably ascertainable through
the conduct of prudent inquiry and investigation.
6.2.17 CAM represents and warrants that it has
relied solely on the advice of its own tax counsel and his tax opinion relating
to this transaction; including the structure and handling of this transaction
for tax purposes. CAM represents and acknowledges that it has received no tax
advice from SMI or DRC; that the structure of this Agreement was requested by
CAM based upon the advice received from its tax counsel; and that, with respect
to such tax matters, it has relied upon DRC and SMI solely for their full and
timely performance of the terms and conditions set forth in Section 7.6 of this
Agreement.
ARTICLE VII.
COVENANTS
7.1 ACCESS AND INFORMATION. CAM, SMI and DRC shall afford the
other and their respective representatives such access during normal business
hours throughout the period prior to the Closing to such information as the
other party shall reasonably request. Subject to the requirements of law, each
of SMI, DRC and CAM shall hold in confidence all such non-public information
regarding the other until such time as such information is otherwise publicly
available.
7.2 EXPENSES. Except as otherwise agreed in writing, all costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such expenses.
7.3 CERTAIN FILINGS, CONSENTS. SMI, DRC and CAM shall cooperate
with one another (i) in promptly determining whether any filings are required to
be made or any consents, approvals, permits or authorizations are required to be
obtained under any federal, state or foreign law or regulation or any consents,
approvals or waivers are required to be obtained from parties to loan agreements
or other contracts material to SMI's, DRC's or CAM's business in connection with
the consummation of the transaction contemplated by this Agreement, and (ii) in
promptly making any such filings, furnishing information required in connection
17
therewith and seeking timely to obtain any such consents, permits,
authorizations, approvals or waivers.
7.4 SECTION INTENTIONALLY OMITTED.
7.5 ELECTION OF DIRECTORS. SMI shall use its best efforts to
cause the election of two of the designees of CAM listed in writing prior to the
date hereof as directors of SMI. It is understood and agreed that CAM shall be
entitled to nominate two (2) persons to sit on DRC's Board of Directors, one of
whom shall be Xxxxxx X. Xxxxxx.
7.6 ADDITIONAL AGREEMENTS. Each of the parties hereto agrees to
use all reasonable efforts to take promptly, or cause to be taken, all actions
and to do promptly, or to cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including using its best
efforts to obtain all necessary waivers, consents and approvals and effecting
all necessary registrations and filings. SMI and DRC each expressly agree to
cooperate fully with CAM, its tax counsel and its Shareholders and to make any
and all information, reports and/or filings and take any and all other actions
necessary and appropriate in order for this transaction to constitute a
reorganization pursuant to Section 368(a) of the Internal Revenue Code such that
this transaction will qualify as a tax free exchange for CAM's Shareholders to
the extent they are receiving Preferred Stock as consideration in connection
with the merger described in this Agreement.
7.7 ISSUANCE OF SHARES. SMI shall, and when required by the
provisions of this Agreement, issue and deliver certificates representing shares
of Preferred Stock to CAM's Shareholders in the amounts sets forth on Schedule
6.2.3.
7.8 PREFERRED STOCK. (i) The Preferred Stock issued pursuant to
Article III shall not have been registered under the Securities Act of 1933 and
shall bear the following restrictive legend.
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("`33
ACT"), OR ANY OTHER SECURITIES AUTHORITY.
THE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE `33 ACT OR
AN OPINION OF COUNSEL SATISFACTORY TO THE
18
ISSUER THAT THE SALE OR TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE ACT.
(b) The Preferred Stock shall: (i) earn
dividends at the rate of 8% per annum computed on the basis of a 365 day year,
which dividends shall be paid semi-annually in arrears on April 1st and October
1st of each calendar year, commencing on April 1st, 2001; (ii) be cumulative;
(iii) have a Stated Value of Ten Dollars ($10.00) per share, which Stated Value
shall be printed on the face of each Preferred Stock Certificate; (iv) have
priority in liquidation to the extent of the Stated Value plus any accrued but
unpaid dividends over any other preferred stock, common stock or any other stock
issued by DRC after the Effective Date; and (v) be convertible, commencing one
year after the Effective Date, into common stock of DRC, par value $0.01 per
share ("Common Stock"), on the basis of its Ten Dollar ($10.00) Stated Value, at
the exchange rate per DRC common share of eighty-five percent (85%) of the
average of the closing price of DRC's Common Stock for the five trading days
immediately preceding the date when shares of DRC Preferred Stock are delivered
to DRC for conversion but in no event shall the conversion price be less than
One Dollar Twenty-five cents ($1.25) per share.
(c) For purposes of conversion of Preferred
Stock into DRC Common Stock, the number of shares of DRC Common Stock and
related rights to be received pursuant to Section 7.8(b) shall be adjusted, as
appropriate, to reflect any stock dividends, stock splits, stock rights or other
benefits issued, conferred or distributed subsequent to the Effective Date and
up to the date of conversion.
(d) No fractional shares will be issued upon
conversion, with any fractions rounded down to the next whole share of Common
Stock.
(e) The Preferred Stock shall be senior to
all other classes of preferred stock or any other shares of stock issued or
subsequently issued by DRC but shall be subordinated to the 16,000 shares of
Series A preferred stock of DRC issued and outstanding as of the Effective Date
hereof.
19
ARTICLE VIII.
CONDITIONS AND CLOSING
8.1 CONDITIONS TO THE OBLIGATIONS OF SMI AND DRC. The obligations
of SMI and DRC to consummate the transactions described in this Agreement are
subject to the occurrence of the following on or before Closing:
8.1.1 Except as set forth in Schedules hereto, the
representations and warranties contained in Section 6.2 hereof and in all
certificates and other documents delivered and to be delivered by the
Shareholders and/or CAM to SMI or its representatives pursuant to this Agreement
shall be true, complete and accurate as of the Closing.
8.1.2 CAM shall have performed and complied in all
material respects with all agreements, obligations and conditions required in
accordance with this Agreement and the Schedules hereof to be performed or
complied with on or prior to the Closing and shall have delivered their
respective lists of CAM Shareholders pursuant to Article III hereof at least
five (5) days prior thereto.
8.1.3 No suit, action, investigation, inquiry or other
proceeding by any governmental body or other person or legal or administrative
proceeding shall have been instituted or threatened which questions the validity
or legality of the transactions contemplated by this Agreement.
8.1.4 The merger contemplated by this Agreement shall not
be precluded by any order or injunction of any court of competent jurisdiction.
8.1.5 SMI shall have received a certificate of the
President or Secretary of CAM indicating that a meeting of the Shareholders had
been properly convened in accordance with its Bylaws, at which this Agreement
and the transaction contemplated hereby were duly approved.
8.1.6 All filings, whether Federal or state, to include
any IRS filings, have been completed and there are no outstanding objections or
administrative filings remaining for the receipt of the approval to proceed
forward with this transaction.
20
8.1.7 To the extent, if any, that one or more directors of
Clean Age hold any rights with respect to any Mineral Properties subject to
leases recorded in the name CAM, SMI shall have received an agreement
satisfactory to its counsel any such rights will not be exercised for a period
of not less than three (3) years after the consummation of the transaction
contemplated hereby.
8.1.8 SMI shall have received from any officer, director
or employee of CAM who holds or is the named holder of a patent or license
utilized by CAM in its business an agreement in form and substance satisfactory
to SMI and its counsel that the holder of such patent or license will not try to
remove or renegotiate the terms under which CAM is utilizing such patent or
license for a period of not less than five (5) years after the consummation of
the transaction contemplated hereby.
8.1.9 SMI shall have received from the officers and
directors of CAM executed Non-Competition Agreements in accordance with Article
IX hereof.
8.2 CONDITIONS TO THE OBLIGATIONS OF CAM. The obligations of CAM
to consummate the transactions described in this Agreement are subject to the
occurrence of the following on or before Closing:
8.2.1 The representations and warranties contained in
Section 6.1 hereof and in all certificates and other documents delivered and to
be delivered by SMI to CAM or its representatives pursuant to this Agreement
shall be true, complete and accurate as of the date when made and at and as of
the Closing as though such representations and warranties were made at and as of
such date, except for changes expressly permitted or contemplated by the terms
of this Agreement.
8.2.2 SMI and DRC shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by SMI and/or DRC on or prior to
the Closing.
8.2.3 No suit, action, investigation, inquiry or other
proceeding by any governmental body or other person or legal or administrative
21
proceeding shall have been instituted or threatened which questions the validity
or legality of the transactions contemplated hereby.
8.2.4 The merger contemplated by this Agreement shall not
have been precluded by any order or injunction of any court of competent
jurisdiction.
8.2.5 All filings, whether Federal or state, to include
any IRS filings, have been completed and there are no outstanding objections or
administrative filings remaining for the receipt of the approval to proceed
forward with this transaction.
ARTICLE IX
NON-COMPETITION
9.1 CAM agrees to cause each of its directors to enter into a
"Non-Competition Agreement" and the Closing in form and content identical to
Exhibit 9.1 hereto.
9.2 All parties to this Agreement and the Directors of CAM agree:
(a) That the Non-competition Agreement constitutes the
binding agreement between the parties and each individual director is bound by
all of its terms;
(b) That for the life of the Patent after the Effective Date,
he will not disclose or utilize the patent or any process or development covered
thereunder.
ARTICLE X
MISCELLANEOUS
10.1 TERMINATION. Notwithstanding anything to the contrary in
this Agreement, this Agreement may be terminated at any time prior to the
Closing:
(a) By mutual written consent of CAM, on the one hand, and
SMI on the other hand;
(b) By SMI, in the event that the closing conditions
precedent set forth in Section 8.1 are not satisfied at the time of Closing;
22
(c) By CAM, in the event that the Closing conditions
precedent set forth in Section 8.2 are not satisfied at the time of Closing; and
(d) By any of CAM, DRC or SMI:
(i) if any Governmental Authority shall have issued an
order, decree or ruling or taken any other action (which order, decree, ruling
or other action the parties shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
has not been reversed or withdrawn within fifteen (15) days;
(ii) in the event of a material breach by the other
party of any representation or warranty contained in this Agreement or any
agreement executed and delivered in connection herewith which cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party of such breach;
(iii) in the event of a material breach by the other
party of any covenant or agreement contained in this Agreement or any agreement
executed and delivered in connection herewith which cannot be or has not been
cured within 30 days after the giving of written notice to the breaching party
of such breach; or
(iv) if the Closing shall not have been consummated on
or before September 30, 2000 (the "Termination Date"), and said Termination Date
has not been extended by the mutual written consent and agreement of both
parties.
10.2 EFFECT OF TERMINATION. In the event of Termination, no party
hereto (or any of its directors, officers or shareholders) shall have any
liability or further obligation to any other party to this Agreement.
10.3 ENTIRE AGREEMENT. This Agreement contains the entire
Agreement between the parties hereto and this Agreement supersedes all prior
agreements among the parties with respect to such matters.
23
10.4 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without giving
effect to conflicts of laws provisions.
10.5 DESCRIPTIVE HEADINGS. The headings are for convenience and
reference only and shall not affect in any way the meaning or interpretation of
the Agreement.
10.6 INVALIDITY OF CERTAIN PROVISIONS. Any term or provisionof
this Agreement which is invalid or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any terms or provisions hereof.
10.7 NOTICE. All notices or other communications hereunder shall
be in writing, shall be effective upon receipt and shall be made by hand
delivery, certified mail return-receipt requested, or by overnight courier,
postage prepaid addressed as follows:
To SMI: Strategic Minerals, Inc.
000 Xxx Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxxxxxx 00000
Attn. Xxxx X. Xxxxxxxxx, Chief Executive Officer
and to: Daleco Resources Corporation
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxx Xxxx, Chairman of the Board and
Chief Executive Officer
To CAM and/or Shareholders:
Clean Age Minerals, Incorporated
00000 Xxxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx, Chairman
24
Either party may change its address for Notice by giving the other party
not less than ten (10) days notice of its new address in accordance with this
Section 10.7.
10.8 MULTIPLE COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed to be an original but all
of which together shall constitute but one Agreement.
10.9 NEITHER PARTY DRAFTER. The parties hereto agree that this
Agreement is the product of negotiation, that each has been represented by
counsel during its negotiation and that neither party shall be deemed the
drafter hereof.
10.10 COSTS. Each party agrees to pay its legal, accounting and
other fees incurred in the negotiation of the transaction contemplated hereby,
the conduct of its due diligence and the preparation of the documents, exhibits
and schedules addressed and referenced herein; provided, however, that SMI
shall, in addition to the cash and Preferred Stock being delivered to CAM's
Shareholders as consideration under this Agreement, pay at Closing up to
Forty-Five Thousand Dollars ($45,000) to cover CAM's costs of legal and
accounting fees directly related to this transaction as more particularly
described on Schedule 10.10 to this Agreement.
10.11 RIGHT TO SEEK RESTITUTION. SMI shall have the right to seek
pro-rata reimbursement and restitution from those parties listed on Schedule
10.11 hereto up to an aggregate amount of $500,000 should any "Undisclosed
Liabilities", as defined in Section 6.2.16 and known to any of the said parties
prior to the Effective Date, be asserted against or come to the attention of DRC
or SMI and be reported in writing to each of the said parties prior to March 31,
2001. To the extent that a Note under Article V has been issued to a party
liable to SMI under this Pargraph 10.11 and/or Paragraph 11.4, SMI may set off
any liability due against said Note. The parties identified on Schedule 10.11
who have executed this Agreement as Directors have joined in this Agreement to
acknowledge their consent hereto and for the provisions and obligations under
25
Section 11.4; without acknowledging any liability or other obligation to DRC,
SMI or CAM, except as set forth in Section 11.4.
ARTICLE XI
RELEASES AND SURVIVAL OF REPRESENTATIONS,
COVENANTS AND CLAIMS
11.1 All representations, covenants and claims with respect to
this Agreement shall expire on the Closing, save and except the performance
obligations set forth in Sections 3.1, 5.1, 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7,
7.8, 8.1, 8.2, 9.1, 9.2 and 10.11 and the performance obligations, duties,
agreements and releases set forth in this Article XI hereof.
11.2 CAM, its shareholders, officers and directors agree to and
do hereby release SMI and their respective officers and directors from any and
all claims with respect to the tax-free nature of this transaction for Federal
Income Tax purposes, pursuant to Section 368(a); subject only to DRC's and SMI's
compliance with their performance obligations pursuant to Section 7.6 hereof.
11.3 CAM and its officers and directors agree to warrant and do
hereby warrant that they will not seek or entertain any alternative merger or
financing offers (other than minor funding to maintain operations or properties)
prior to the termination or Closing of this Agreement, as the case may be.
11.4 DRC and SMI agree to release and do hereby release CAM, its
shareholders, officers and directors, and their heirs and assigns from any and
all claims whatsoever, including but not limited to claims and obligations
arising out of this Agreement and any transactions contemplated thereby or
incident or related thereto, save and except:
(a) The release with regard to tax-free status granted to DRC
and SMI in Section 11.2 hereof;
(b) The obligation of CAM and its officers and directors not
to seek or entertain alternative financing (other than any
26
necessary minor funding for operation purposes) prior to
termination or Closing of this Agreement;
(c) If the number of shares of CAM Stock issued to those
Shareholders identified on Schedule 6.2.3 hereof
outstanding at the Closing plus any valid claims of rights
for additional CAM shares at said time by way of options,
conversions or otherwise exceeds the total of 20,018,000
CAM shares, or if third parties contest the right to those
shares identified as belonging to a CAM Shareholder
identified on Schedule 6.2.3, the Directors of CAM agree
to rebut any such claim and/or provide DRC or SMI, as the
case may be, with a sufficient number of DRC Preferred
Shares to offset any such valid claims; and
(d) If, pursuant to Section 10.11 hereof, any Undisclosed
Liabilities of CAM known to any Director at or prior to
the Effective Date come to light and are reported in
writing to the Directors prior to March 31, 2000, the
Directors shall be liable, pro-rata to the extent provided
in Section 10.11.
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to
be executed as of the Effective Date.
Strategic Minerals, Inc., a Nevada
corporation
By:
--------------------------------------------
Xxxx X. Xxxxxxxxx, Chief
Executive Officer
Daleco Resources Corporation, a
Delaware corporation,
By:
--------------------------------------------
Xxx Xxxx, Chairman of
the Board and Chief
Executive Officer
27
Clean Age Minerals, Incorporated,
a Nevada corporation,
By:
--------------------------------------------
Xxxx X. Xxxxxxxx, Chairman of the Board
DIRECTORS: (SOLELY WITH RESPECT TO SECTION 10.11 AND ARTICLE XI HEREOF.)
----------------------------------- ------------------------------------
Xxxxxxx X. Xxxxx Xxxx X. Xxxxxxxx
----------------------------------- ------------------------------------
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx
----------------------------------- ------------------------------------
Xxxxx Xxxxxx Xxxxxxxx Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxxx
28
SMI/DRC/CMA Agreement dated September 19, 2000
SCHEDULE 5.1
Loans made to Corporation:
1. Xxxx Xxxxxxxx $ 58,938
2. Xxxxxx X. Xxxxxx $ 49,124
3. Xxxxx X. Xxxxxxxx $ 20,000
4. Xxx Xxxxx $ 10,000
5. Xxxx X. Xxxxxxxx $ 83,478
6. Xxxxxxx X. Xxxxx $ 153,530
7. Xxxxxx X. Xxxxxx $ 134,811
8. Xxxxxx X. Xxxxxxx $ 5,000
=========
Total Loans $ 514,881
SMI/DRC/CMA Agreement dated September 19, 2000
SCHEDULE 6.2.2
The subsidiaries of Clean Age Minerals, Incorporated are:
C.A. Properties, Inc, incorporated under the laws of the State of Nevada.
Lone Star Minerals, Inc., incorporated under the laws of the State of Nevada.
Matrix-Loc, Inc., incorporated under the laws of the State of Texas.
SMI/DRC/CMA Agreement dated September 19, 2000
SCHEDULE 6.2.3
Capitalization and Share Ownership
1. AUTHORIZED CAPITAL. The authorized capital of CAM consists of 50,000,000
shares of common stock, par value $.01 per share.
2. OUTSTANDING SHARES. The number of shares of CAM common stock outstanding is
20,018,000.
3. ADDITIONAL SHARES. No additional equity securities of CAM are reserved, or
outstanding.
4. OUTSTANDING STOCK. No outstanding stock appreciation rights, warrants, or
options to acquire equity.
5. DEBT SECURITIES. No debt securities with conversion rights or other rights to
obtain equity.
6. SHARE OWNERSHIP INFORMATION.
SHAREHOLDER NAME AND ADDRESS NO. OF SHARES OWNED
---------------------------- -------------------
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.4 (b)
Oro Grande Lease - The lease agreement dated August 4, 1993 by and
between NEW MEXICO AND ARIZONA LAND COMPANY, lessor and C.A.
PROPERTIES,INC., lessee, prohibits assignment of the lease by lessee without
consent of lessor, "which consent shall not be unreasonably withheld."
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.4 (c) - Government Approvals
No consent is required with regard to transfer of ownership of federal
leases of mineral properties, but a filing should be made giving notice of
change of ownership, when applicable. In the present instance, all of the
federally leased mineral properties are held in the name of C.A. Properties,
Inc., a subsidiary of CAM.
The Marfa lease is held by Lone Star Minerals, Inc., a subsidiary of CAM
and will continue to be held by Lone Star. A portion of the Marfa lease is owned
in fee by the Lessor, the balance is on state land. No filing should be required
unless and until any of such property is transferred out of Lone Star..
No filings will be required with respect to the Oro Grande lease as long
as it continues to be held and operated by C.A. Properties, Inc.
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.5 (a)
Government Approvals, Permits, Licenses
All information regarding filings with appropriate authorities, whether
historical, current or prospective have been provided to SMI.
See Schedule 6.2.5 (b) with respect to environmental compliance.
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.5 (b)
Environmental Compliance
CAM's mining operations during the current year have consisted of
digging and removal of zeolite from its major lease near Marfa, TX. No permit is
required from the Air Quality Board for such digging and removal. A filing and a
permit will be required if and when grinding and/or other advanced mining
operations are conducted on the premises.
Additional environmental applications, compliance and permits will be
required on CAM's respective mineral properties as they are put into production.
In some instances the permitting process requires months of application and
verification before such permits can be granted.
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.6 (a)
Financial Statements - Explanations and Exceptions with regard to GAAP
Compliance and Valuations
PATENTS & TECHNOLOGIES
During 1995, CAM negotiated an agreement to acquire by exchange 100% of
the outstanding stock of Matrix-Loc, Inc., a Texas corporation which held the
Patent and related technologies in exchange for 6,900,000 shares of Clean Age
common stock valued at a price of $1.00 per share which was the market price
paid in cash for other Clean Age shares sold at times reasonably contemporaneous
with the acquisition. The Matrix-Loc owners acquired approximately 30% of the
outstanding stock of Clean Age.
In determining the economic valuation of the patent and technology, CAM
relied upon competitive offers which the owners of Matrix-Loc had received from
knowledgeable, financially responsible, independent third parties, and
completion of certain tests and evaluations of the processes and technology.
The Patent and related technologies have been and are being carried on
the CAM's books at the acquisition price. The Patent was issued in 1994 for a
presumed life of seventeen years plus any future extensions thereof permitted by
Congress as the case may be. CAM has carried the Patent and technology at the
acquisition price on the theory that their economic usefulness and value are
primarily dependent upon their effective utilization in marketing and conducting
remediation operations, which is more a matter of prospective business activity
and marketing efforts than annual depreciation.
MINERALS
Mineral properties were placed upon CAM's books at the cost basis of the
shareholder owners of C.A. Properties, Inc. plus amounts paid by them for
property improvements (as distinguished from annual costs for maintenance and
filing fees). These acquisition valuations were based upon information provided
and/or determined by Brig. Gen. Xxxxxx X. Xxxxxx in his capacity as President of
C.A. Properties, Inc. In December, 1995, CAM acquired the Marfa property through
an exchange of shares with Lone Star Minerals, Inc. In the case of the Lone Star
acquisition, the property was valued on the basis of an independent professional
valuation and Clean Age shares were issued at a price of $1.25 per share, which
was the price Clean Age shares were currently being sold for cash to other
independent parties.
There has been no depletion charged against the mineral deposits. Mining
and removal have been negligible to date in proportion to the large amount of
minerals on the respective properties. From time to time the company has
obtained valuation estimates with regard to various mineral properties from
independent professionals. Valuations of properties are subject to continuing
fluctuations depending upon the immediacies of market supply and demand.
Management believes that, in general, the recognition and value of nonmetallic
minerals are increasing, but management does not have sufficient information to
support this conclusion or other conclusions relating to current valuations. The
economic value and utilization of the specific mineral deposits will depend upon
the extent of future market prices and the company's marketing, shipping and
extraction activities.
EQUIPMENT
An equipment list identifying, describing and locating the equipment
carried on the company's books is attached to this schedule. The company's
equipment is customarily depreciated over respective useful lives which are
generally five years or ten years, commencing when the equipment is put into
use. Certain equipment and equipment rights resulted from a negotiated
arrangement to accept equipment and rights of use of equipment as an offset to
cash payments claimed by Clean Age for certain materials and services provided
by the company in conjunction with remediation contracts performed by a
licensee. The licensing agreement was terminated by the company in July, 1999.
As a consequence of this termination, the value of certain equipment and
equipment rights was significantly written down on the company's financial
statements for the nine month period ending September 30, 1999.
Certain equipment owned by the company consisted of or included custom
items or standard items with custom additions so that standard items of
equipment were not necessarily available for a proper basis of comparison. In
such instances, the company obtained and utilized appraisals from independent
machinery and equipment dealers in determining its computations less appropriate
depreciation. These computations represent the best estimates by management on a
going concern basis. In the event of liquidation or sale, prices received may be
considerably lower or higher depending upon seasonal considerations and other
factors which significantly influence supply and demand at any given time.
CLEAN AGE MINERALS, INCORPORATED
September 30, 1999 Equipment List
Year in Value
Equipment Location Service Decpreciated
1. Condensing Xxxx Xxxx xx Xxxxxx Xxxxxxx 0000 $255,426 159,641
2. Mixing Xxxx Xxxx xx Xxxxxx Xxxxxxx 0000 96,575 60,360
3. Pneumatic Trailers (3) Yard at Corpus Christi 1996 145,812 91,132
4. SIMCO Dust Collector Port of Corpus Christi New 60,000 60,000
5. 40' x 8' x 8' Storage Container Port of Corpus Christi 1996 6,300 3,938
6. Lister Truck Loading Blower Port of Corpus Christi New 20,000 20,000
7. Chevrolet C-6000 Truck & Trailer Port of Corpus Christi 1996 30,000 2,000
8. Office Equipment Port of Corpus Christi 1996 1,000 250
------------- ------------
TOTAL: $615,113 397,321
Notes:
i) New in Year In Service means the equipment has never been placed in service.
ii) The useful lives of 1) through 6) is ten years. Depreciation is taken
straight line.
iii) 7) is appraised at salvage value.
iv) The useful life of 8) is 5 years. Depreciation is taken straight line
EQUIPMENT LOCATION:
All equipment except the Pneumatic Trailers is located at the Port of Corpus
Christi. The Port's address is:
Port of Corpus Christi
0000 Xxxxxx Xxxxxxxxxx Xxxx
Xxxxxx Xxxxxxx, XX 00000
The Pneumatic trailers are located at:
Inland Transportation
XXXX Xxxxxxx Xx.
Xxxxxx Xxxxxxx, XX 00000
Ph: 361-887-8550
DESCRIPTION OF EQUIPMENT:
A) Condensing Unit
The Condensing Unit is a custom manufactured vapor recovery unit that
traps light gases and changes them into liquids. Its basic components consist of
two 230 horsepower compressors, each with four 4 foot by 4 foot condensing units
per side (total of 8). Finally, at the top of the unit each compressor has an 8"
Heat exchanger (total of 2).
B) Mixing Unit
The Mixing Unit is also custom manufactured. It was designed to mix the
components of matrix CA-6. It can blend and prepare 10 tons of CA-6 at one time
for industrial use. The time required for each batch is approximately 15
minutes. The unit is hydraulically driven by a 100 horsepower 480 volt 3 phase
motor. The entire mixing unit is mounted on a skidded unit, allowing easier
portability of the mixing unit.
C) Pneumatic Trailers
Each trailer is designed for pneumatic handling of high density dry
flowable powders and granules at an operating pressure of 14.6 PSI. Each trailer
has a capacity of 1,000 cubic feet. They are constructed with an internal top
shell stiffener surrounded by a smooth exterior. The ends consist of a high
tensile steel front and rear frames with tubular steel struts. Accessories
include contoured aluminum fenders with rubber mudflaps; a 21 foot aluminum tube
hose carrier mounted flush with the rear of the trailer; an aluminum ladder and
walkway to the center manhole; and a complete 12 volt light and wiring system
for stop, taillight and clearance signals.
D) SIMCO Dust Collector
This piece of equipment is designed to trap dust during the moving and blending
process. It is 15 feet high and 4.5 feet in diameter. Attached to it are bags to
collect and trap dust. There are 24 sox (bags); each one is 12 feet long.
E) Storage Container
The storage container is 40 feet by 8 feet by 8 feet, for a total of
2,560 cubic feet. It is lockable and watertight. The container holds the office
furniture, including desks, tables and chairs.
F) Lister Truck Loading Blower
The blower is a four cylinder, 65 horsepower air cooled Lister engine w/
Xxxxxx-type blower. It is designed to handle pneumatic discharge and intake
during loading and unloading of trucks. The entire blowing unit is mounted on a
skidded unit, allowing easier portability of the blower. To further facilitate
portability, it has a self-contained starter and its own fuel tank.
G) Chevrolet C-6000 Truck & Trailer
H) Office Equipment
This consists of desks, tables, chairs and other minor equipment. They
are located in the container listed as E) above.
SMI/DRC/CMA Agreement dated September 19, 2000
SCHEDULE 6.2.6 (b)
CAM has no knowledge of any material liabilities as described in Section
6.2.6(b) of the Agreement or any knowledge of any business events or other
occurrences which could give rise to such liabilities.
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.7
Changes or Events subsequent to June 30, 1999
There has been no change in CAM's business of the sort described in
Section 6.2.7 of the Agreement.
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.8
Litigation
CAM, and its officers and directors have no knowledge of any litigation
threatened against CAM or which involves CAM.
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.9
Contracts and Material Adverse Events
Federal mineral leases - Requiring annual maintenance services and
renewal payments, (all of which are current) which are subject to compliance
with environmental and other obligations with any future operations thereof.
Oro Grande Lease - New Mexico Arizona Land Company
Marfa Lease - Xxx & Xxxxxxx Xxxxxx
Xxxxxxxx Environmental Contract - contract with Xxxxxxxx Environmental,
Inc. under which the company is obligated to provide mining and delivery of
zeolite from its Marfa property against contemporaneous receipt of payments
therefor.
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.10
Tax Filings
CAM has filed all required Federal and state income tax returns with respect to
all periods ending on or before the date of this Agreement. However, the company
filed consolidated returns which included two of its subsidiaries (C.A.
Properties, Inc. Matrix-Loc and Lone Star Minerals, Inc.) but did not disclose
the existence of the two subsidiaries on the tax returns. CAM has consulted with
a certified public accountant, and on his professional advice, has filed Form
851 apprising the Internal Revenue Service of the inclusion of the two named
subsidiaries in the returns.
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.2.11
Titles to Properties
All federal leases are current in their filings and payments.
Attached as Exhibit "A" hereto is a First American Title Insurance
Commitment No. 020268 regarding the Oro Grande Lease. The parties incorporate
that Policy herein for all purposes.
Attached as Exhibit "B" hereto are various Title Reports from the Law
Firm of Xxxxx & Kultgen, Waco, Texas, Dated April 21, 1995, October 9, 1995,
December 6, 1995, January 18, 2000 and July 17, 2000, which opinions
incorporated herein for all purposes.
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 6.12.13
Patents and Trademarks
United States Patent # 5-387738, Dated February 7, 1995
Titled: Reagent for Treating a Contaminated Waste Material and Method for Same
Trademark Reg. No. 2,165,085, Dated June 16, 1998
For Business Marketing Consulting Services for others in the field of
Non-Metallic Mineral Compounds for use in the treatment of wastes and waste
by-products, in class 35 (U.S. Cls. 100, 101 and 102)
Trademark Reg. No. 2,165,084, Dated June 16, 1998
For Non-Metallic Mineral Compounds for use in the treatment of wastes and waste
by products in class 1 (U.S. Cls. 1,5,6,10,26 and 46)
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 10.10
Schedule of CAM's Legal and Accounting Fees to be Paid
by SMI at Closing
The Xxxxxxx Law Offices $25,000.00
Xxxx X. Xxxxxxxx $20,000.00
===============
TOTAL $45,00.000
SMI/DRC/CMA Agreement dated September 19, 2000
Schedule 10.11
CAM Directors Responsible for Reimbursement and Restitution
for Undisclosed Liabilities
Xxxxxxx X. Xxxxx
Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Xxxxx Xxxxxx Xxxxxxxx
Xxxx Xxxxxxx
Xxxx X. Xxxxxxxx
SMI/DRC/CMA Agreement dated September 19, 2000
Exhibit 5.1.1
ONE YEAR NOTE
Principal Amount $_________ Date September 19, 2000
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the order
of ________________, the sum of ___________________________ ($________) plus
accrued interest at the rate of 8% per annum. Said payment shall be paid in the
following manner:
Maturity Date: September 18, 2001
All payments shall be applied first to accrued but unpaid interest and
then to outstanding principal. This note may be prepaid, at any time, in whole
or in part, without penalty. If the Maker prepays said note, it will pay a 8%
interest rate per year on the face amount of the $________ note for the time the
note was in force. This note shall be immediately due and payable upon the
occurrence of any of the following:
Dissolution or liquidation of any of the undersigned, or any endorser,
guarantor to surety hereto.
Upon the filing by any of the undersigned of an assignment for the
benefit of creditors, bankruptcy or other form of insolvency or by suffering an
involuntary petition in bankruptcy or receivership not vacated within thirty
(30) days.
Maker shall have no right of offset under this Note.
In the event this note shall be in default and placed for collection,
then the undersigned agree to pay all reasonable attorney fees and costs of
collection. Payments not made within five (5) days of due date shall be subject
to a late charge of 5% of said payment. All payments hereunder shall be made to
such address as may from time to time be designated by any holder.
All interest accruing and payable under this note shall be computed on
the basis of a 360 day year.
The undersigned and all other parties to this Note, whether as
endorsers, guarantors or sureties, agree to remain fully bound until this Note
and all interest accrued and unpaid shall be fully paid, and hereby waive
demand, presentment and protest and all notices hereto and further agree to
remain bound, notwithstanding any extension, modification, waiver, or other
indulgence or discharge or release of any obligor hereunder or exchange,
substitution, or release of any collateral granted as security for this note. No
modification or indulgence by and holder hereof shall be binding unless in
writing; and any indulgence on any one occasion shall not be an indulgence for
another or future occasion. The rights of any holder hereof shall be cumulative
and not necessarily successive. This note shall take effect as a sealed
instrument and shall be construed, governed and enforced in accordance with the
laws of the State of Nevada.
This Note may be assigned, transferred and conveyed by the holder hereof
and any subsequent holder. Notice of such transfer must be given Maker. Any
notice given hereunder must be in writing and may be hand delivered or shall be
effective upon receipt and shall be sent by Certified Mail, return receipt
requested or by Overnight Carrier and addressed to Maker at the address set
forth under its name below or at such other address as Maker may give the Note
Holder. Any holder of this Note, whether the original payee or subsequent holder
shall have and be entitled to all rights and remedies, whether at law or in
equity, to enforce and collect upon this Note. Maker hereby waives any and all
deference of lack of Notice, validity of assignment or claim that the holder
hereof is not a holder in due course. Maker acknowledges that this Note shall be
deemed for all purposes as a "Bearer" instrument, and that the holder at the
time of Maturity shall have all rights of collection to include, without
limitation, that certain Guraranty of Daleco Resources Corporation of even date
herewith presented to the Payee simultaneously with the delivery of this Note.
EXECUTED THIS 19th Day of September, 2000.
MAKER
STRATEGIC MINERALS, INC.
Attest:
By:
---------------------------- ------------------------------------
Xxxx X. Xxxxxxxxx, President
----------------------------
Maker's Address:
000 Xxx Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxxxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
SMI/DRC/CMA Agreement dated September 19, 2000
Exhibit 5.1.2
UNCONDITIONAL GUARANTY
As an inducement for ____________________ ("Lender"), to accept a note
("Note") for and defer payment of Strategic Minerals, Inc. ("SMI") as successor
by way of merger with Clean Age Mineral, Inc.'s obligation to LENDER in the
amount of ________________________________ ($____________) ("Debt"), Daleco
Resources Corporation, a Delaware corporation ("Company"), the parent of SMI and
who is materially benefitted by LENDER's forbearance and agreement as noted
above, hereby irrevocably and unconditionally:
) Guarantees to LENDER that SMI will promptly and fully perform all
SMI's obligations to LENDER, whether now existing or hereafter arising,
including without limitation obligations to make prompt, timely, and full
payment of any and all amounts now or at any times hereafter to be paid by SMI
on that certain Note of even date herewith by and between Lender and SMI
("Note"); and
) Agrees to indemnify and save harmless LENDER against and from (a) any
and all losses, damages, liabilities, and claims now or at any time hereafter
arising directly or indirectly out of any failure by SMI to pay to LENDER all of
SMI's obligations to LENDER under the Note, and (b) all costs and expenses
arising therefrom or relating thereto, including reasonable legal fees (whether
litigated or un-litigated), interest computed as set forth in the Note, and any
such other costs, expenses, losses, damages, liabilities, or claims actually
incurred, as the case may be (whether liquidated or unliquidated in amount), to
which LENDER is entitled under the Note.
The Company hereby agrees with LENDER as follows:
) This guaranty is absolute and unconditional. Each and every
representation, warranty, covenant, and condition now or hereafter made or to be
performed or observed by SMI shall be binding upon the Company with the same
force and effect as though the same had been made or was to have been performed
or observed the Company individually. No act or omission of any nature
whatsoever by SMI shall release or otherwise affect the obligations of the
Company under this guaranty, except an act or omission which constitutes a full
release of SMI, and no defense shall be available to the Company except a
defense which is available to SMI. This is a continuing guaranty, and it shall
not be subject to revocation by the Company for any reason whatsoever, other
than the satisfaction of the Note by SMI.
) The Company hereby waives notice of any and all defaults by SMI.
Without the consent of or notice to the Company: (i) extensions, forbearance,
leniencies, and indulgences of any nature whatsoever may be granted to SMI; (ii)
any contracts, agreements, leases, or other documents may be amended or modified
in any way whatsoever; (iii) additional collateral or security may be accepted
from SMI from time to time; and (iv) any collateral or security for SMI's
obligations to LENDER may be amended or released in whole or part with or
without consideration. None of the foregoing shall in any way affect the
obligations of the Company under this guaranty.
) This guaranty shall in no way whatsoever preclude or otherwise affect
any of LENDER's rights or remedies against SMI, but LENDER shall have no
obligation whatsoever to enforce its rights or pursue its remedies against SMI
or any other guarantor in the event of any default. Any attempt to enforce such
rights or pursue such remedies against SMI or any other guarantor shall in no
way whatsoever constitute a waiver of any rights or remedies against the Company
under this guaranty.
) This guaranty shall inure to the benefit of and be enforceable by
LENDER and its successors and assigns and shall be binding upon and enforceable
against the Company and its successors, and assigns.
The Company hereby irrevocably authorizes any attorney at law to appear
for the Company in any court in any county where the Company resides, with or
without process, at any time after any amounts become due under this guaranty;
to waive the issuance and service of process and confess judgment against the
Company, in favor of LENDER for the amount then appearing due, together with
costs of suit and interest; and thereupon to release all errors and waive all
rights of second trial, appeal, and stay of execution; but no judgment entered
pursuant to the authority conferred under this paragraph for less than the full
amount due or to become due under this guaranty or against the Company shall not
limit or otherwise affect any rights or remedies of LENDER under this guaranty.
This guaranty is being executed and delivered by the Company to LENDER
in Washoe County, Nevada, this 19th day of September, 2000
Attest: Daleco Resources Corporation
----------------------------- ---------------------------------------
By: Xxx Xxxx,
Chairman of the Board and Chief
Executive Officer
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR FOR
ANY OTHER CAUSE.
