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EXHIBIT 1
STOCK PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made as of the 30th day of September, 1998, by and
between Xxx Xxxxxxxxx ("Xxxxxxxxx"), Xxx Xxxxxxx ("Xxxxxxx"), Xxxxxx X. Xxxxx
and Xxxxxx X. Xxxxx, Trustees of the Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx
Revocable Trust, dated November 1, 1996 ("Xxxxx Trust"), Xxxxxx Xxxxx
Associates, Inc. Defined Benefit Plan & Trust (Xxxxx Plan"), Xxxxxx Xxxxx
Associates, Inc., a Nevada corporation, ("Xxxxx Inc.") and Xxxxxx X. Xxxxx
("Xxxxxx Xxxxx")(all of the foregoing persons or entities involving Xxxxxx Xxxxx
are referred to herein collectively as "Xxxxx")(all of the foregoing sometimes
hereinafter referred to individually and collectively as "Seller" or "Sellers"),
Futech Interactive Products, Inc., an Arizona corporation ("Buyer"), and Xxxxxxx
X. Xxxxx ("Xxxxx").
R E C I T A L S:
A. Sellers own 5,219,046 shares of common stock, no par value ("Common
Stock"), of Janex International, Inc., a Colorado corporation (said corporation,
and any and all subsidiaries of said corporation, are hereinafter referred to
collectively as the "Corporation"). The shares of Common Stock of the
Corporation owned by the Sellers is sometimes referred to herein as the "Stock."
B. The Corporation owns and operates a business (the "Business")
designing, developing, manufacturing and marketing children's toys, coin and
gumball banks, flashlights, battery-operated toothbrushes and "wet pets," and
activities relating thereto, under the trade name "Janex." The Business is
operated at the following address:
000 Xxxx Xxxx
Building 1, First Floor
Xxxxx Town, New Jersey 07724
X. Xxxxxxx are owed money by the Corporation under the "Sellers'
Receivables" described in Section 1.2 below.
X. Xxxxxxx desire to sell to Buyer, and Buyer desires to purchase from
Sellers, the Stock and Sellers' Receivables, all in accordance with the terms
and conditions set forth below (the "Transaction").
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
T E R M S:
1. PURCHASE AND SALE.
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1.1 Each Seller hereby sells to Buyer, the Stock owned by such Seller
as set forth below and Buyer hereby purchases said Stock, on the terms and
conditions set out herein. The shares of Stock owned by each Seller are as
follows:
Seller Stock
------ -----
Xxxxxxxxx 627,000
Xxxxxxx 528,000
Xxxxx Trust 2,386,184
Xxxxx Plan 718,177
Xxxxx Inc. 959,685
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5,219,046
Immediately after these transfers, the ownership of the Common Stock of
the Corporation will be as follows:
Shareholder Common Shares % of Common Shares
----------- ------------- ------------------
Buyer 5,219,046 52.3890%
Other Shareholders 4,743,059 47.6110%
--------- -------
TOTAL 9,962,105 100.0000%
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Also outstanding are options to purchase 76,250 shares of Common Stock,
held by a former employee of the Corporation named Xxxx Xxxxxxx.
Warrants (at approximately $.64) for 100,000 shares of Common Stock are
owned by Deco Disc. There are 1,725,000 public warrants outstanding,
having an exercise price of $7.50 each. Assuming exercise of the
warrants and options described above, there would be 11,863,355 common
shares outstanding.
The Corporation is authorized to issue 20,000,000 shares of
Common Stock, of which none are held in the Corporation's treasury. The
Corporation is also authorized to issue 5,000,000 preferred shares, no
par value, some of which were previously issued, but were reacquired by
the Corporation in exchange for the issuance of Common Stock. None of
the preferred shares are issued or outstanding and none are held in the
Corporation's treasury.
1.2 The Seller named below, sells to Buyer the debt owing from
the Corporation to such Seller, as follows:
(a) Promissory Note, dated October 6, 1993, payable
by the Corporation to Xxxxxxxxx, in the original principal
amount of $560,000.00. Xxxxxxxxx represents and warrants the
balance of said debt to be $280,000.00 of principal, plus
$79,800.00 of accrued interest as of August 31, 1998. An
additional Promissory Note, dated June 28, 1996, payable by
Janex Corporation to Xxxxxxxxx, in the original principal
amount of $115,000.00. Sellers represent and warrant the
balance of said debt to be $115,000 of principal, plus $32,750
of accrued interest, as of August 31, 1998. The total of said
indebtedness is $507,550.00, principal and interest, as of
August 31, 1998.
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(b) Promissory Note, dated October 6, 1993, payable
by the Corporation to Xxxxxxx, in the original principal
amount of $420,000.00. Sellers represent and warrant the
balance of said debt to be $220,000.00 of principal, plus
$62,700.00 of accrued interest as of August 31, 1998, for a
total owing as of that date of $282,700.00.
(c) Eleven (11) Promissory Notes of various amounts
and dates between April 30, 1996 and June 9, 1997, totaling
$615,000.00 in principal, payable by the Corporation to the
Xxxxx Trust. Sellers represent and warrant the balance of said
debt to be $615,000.00 in principal, plus $104,782.06 of
accrued interest as of August 31, 1998, for a total owing as
of that date of $719,782.06.
This Agreement shall act as a xxxx of sale and assignment of
interest wherein each Seller transfers to Buyer the debt or debts
described above as owing to such Seller, and all security interests,
all rights to collateral, and all other rights associated with said
debts (collectively "Sellers' Receivables"), and Sellers instruct the
Corporation to pay all amounts due under said debts directly to Buyer.
This document shall also act as a transfer of the UCC-1 Financing
Statement filing relating to said debts. Sellers agree to execute and
deliver to Buyer immediately upon request any and all documents
necessary or appropriate to effectuate the transfers described above,
including but not limited to Financing Statement filings transferring
the existing Financing Statements to Buyer.
Each Seller, represents and warrants as to the debt or debts
described above as owing to such Seller, that the debt or debts are
valid debts of the Corporation owing to such Seller, that the Seller
owns the rights relating to said debts, has not transferred or
encumbered those rights, and is transferring those rights free and
clear of any and all liabilities, and that the debts are secured with
perfected financing statements creating a valid first position lien
against all assets of the Corporation pledged as collateral for the
debts.
2. PURCHASE PRICE.
2.1 The purchase price for the Stock and Seller's Receivables,
subject to adjustment as described below, shall be the sum of
$1,500,000.00, payable as follows:
(a) 1,240,965 shares of Preferred Stock (defined
below) of Buyer, to be issued to Xxxxxxxxx as soon as
practicable after the execution of this Agreement, which, when
valued at $.20 per share, have an agreed value of $248,193;
(b) 743,285 shares of Preferred Stock of Buyer, to be
issued to Xxxxxxx as soon as practicable after the execution
of this Agreement, which, when valued at $.20 per share, have
an agreed value of $148,657.00;
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(c) 1,765,750 shares of Preferred Stock of Buyer, to be
issued to Xxxxx (as Xxxxx shall designate) as soon as
practicable after the execution of this Agreement, which, when
valued at $.20 per share, have an agreed value of $353,150.00;
(d) $248,193.00 payable to Xxxxxxxxx, without
interest, in full in cash or cash equivalent, on the later to
occur of ninety (90) days after the date of this Agreement or
30 days after the closing by Buyer of Buyer's reverse merger
into the Corporation. Said obligation shall be evidenced by a
promissory note in the form of Exhibit 2.1(d) attached hereto.
The note shall bear interest at the rate of ten percent (10%)
per annum from the date of the note, if not paid when due;
(e) $148,657.00 payable to Xxxxxxx, without interest,
in full in cash or cash equivalent, on the later to occur of
ninety (90) days after the date of this Agreement or 30 days
after the closing by Buyer of Buyer's reverse merger into the
Corporation. Said obligation shall be evidenced by a
promissory note in the form of Exhibit 2.1(d) attached hereto.
The note shall bear interest at the rate of ten percent (10%)
per annum from the date of the note, if not paid when due; and
(f) $353,150.00 payable to Xxxxx (as Xxxxx shall
designate), without interest, in full in cash or cash
equivalent, on the later to occur of ninety (90) days after
the date of this Agreement or 30 days after the closing by
Buyer of Buyer's reverse merger into the Corporation. Said
obligation shall be evidenced by a promissory note in the form
of Exhibit 2.1(d) attached hereto. The note shall bear
interest at the rate of ten percent (10%) per annum from the
date of the note, if not paid when due.
The term "Preferred Stock" as used above means the Series A
Preferred Stock of Buyer, said stock to have the same rights and
restrictions as all other preferred stock of Buyer has at the time the
Preferred Stock is issued to Sellers as called for above.
The $1,500,000.00 purchase price described above is allocated
$200,000.00 to the Stock and $1,300,000.00 to Sellers' Receivables.
2.2 The obligations of Buyer in subsections 2.1 (d), (e) and
(f) above are hereby personally guaranteed by Xxxxx.
2.3 No representation or warranty is made by Buyer as to the
value of the shares of the Preferred Stock of Buyer issued pursuant to
this Section, and Sellers take full risk and responsibility if the
value of said shares is not the value specified above in this Section.
3. LIABILITIES.
3.1 Buyer agrees to obtain, by the later to occur of ninety
(90) days after the date of this Agreement or 30 days after closing by
Buyer of Buyer's reverse merger into the Corporation, the release of
Xxxxxxxxx, Xxxxxxx and Xxxxx from their personal obligation or guaranty
of the
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Corporation's line of credit with Tinton Falls State Bank, but the
liability of Buyer under this subsection shall be limited to the
maximum amount of $300,000.00, excluding interest, costs, attorneys'
fees and other charges (the "Tinton Bank Obligation"). Buyer
irrevocably agrees to defend, indemnify and hold Xxxxxxxxx, Xxxxxxx and
Xxxxx free and harmless from any claim, suit, obligation, liability,
loss, cost and expense (including attorneys' fees) arising out of or
related to the Tinton Bank Obligation, but only as to the first
$300,000.00 of said debt. Sellers guaranty that all proceeds from all
advances on the Tinton Bank Obligation made after September 1, 1998
have been and will be applied to pay normal operating expenses of the
Corporation.
3.2 The parties acknowledge and agree that the Corporation is
to be liable as of the Closing for only the following liabilities (the
"Approved Liabilities"):
(a) The obligations and liabilities as shown in the
Corporation's Financial Statement, Form 10-QSB, for the
quarter ended June 30, 1998 ("June 98 Financial Statement");
(b) Normal trade payables for services and products
received or receivable by the Corporation, incurred in the
ordinary course of the Business, after the date of the June 98
Financial Statement;
(c) The Corporation's obligations under the leases
and other contracts identified on Schedule 3.2(c) attached
hereto and hereby made a part hereof; and
(d) Payroll and payroll tax obligations for employees
for not more than the most recent pay period prior to the
Closing, plus only the employee benefits identified on
Schedule 3.2(d) attached hereto and hereby made a part hereof.
Attached hereto as Schedule 3.2 is a calculation made by the
parties as to net liabilities of the Corporation. The parties agree
that a similar calculation will be done at the later to occur of ninety
(90) days after the date of this Agreement or thirty (30) days after
the closing by Buyer of Buyer's reverse merger into the Corporation,
using figures as of the Closing, with however the Accounts Receivable
number being the dollar amount of said receivables which were
outstanding as of the Closing and actually collected between the
Closing and the date as of which the calculation is being done. If the
result of the calculation is net liabilities exceeding $1,615,000.00,
then that portion in excess of $1,615,000.00 shall proportionately
reduce the principal of the amounts owing to the Sellers under
subsections 2.1(d) through (f) above and proportionately increase the
Preferred Stock to be issued to Sellers under subsections 2.1 (a)
through (c) above. Except as provided for in Section 6 below, the
provisions of the foregoing sentence shall be the sole remedy for a
breach of the provisions of this Section 3.2.
3.3 Specifically, but not in limitation of the foregoing, the
Corporation shall be free from the following liabilities:
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(a) Any federal, state or local income taxes through
the date of Closing, except for those reserved against in the
Corporation's Financial Statements or arising as a consequence
of or related to the transactions contemplated by this
Agreement;
(b) Any labor, discrimination, harassment or similar
claims;
(c) Any environmental liability claims;
(d) Any negligence, conversion, tortious interference
or other tort claims, or claims for infringement of trade
name, patent, or copyright, or other intangible right;
(e) Any liability associated with any litigation or
other proceeding pending or threatened at the time of the
Closing, and not identified on Schedule 6.9 attached hereto
and hereby made a part hereof;
(f) Any contractual liability for contracts not
disclosed to and agreed upon by Buyer, or any liability to or
for employees or employee benefits not expressly agreed upon
by Buyer, other that any such contracts, liabilities and
benefits shown in the Corporation's Financial Statements or
otherwise disclosed to Buyer in writing.
4. CLOSING. The closing of the Transaction (the "Closing") shall occur
simultaneously and automatically with the complete signing of this Agreement,
subject to delivery of the following:
4.1 Sellers shall deliver to Buyer, the certificates for the
Stock duly endorsed or accompanied by duly endorsed Stock Assignments
Separate from Certificate.
4.2 Sellers shall deliver executed UCC Financial Statement
assignments of the UCC-1s on file against the Corporation and held by
one or more of the Sellers.
4.3 Buyer shall deliver to the Sellers, duly executed
Promissory Notes, as required by subsections 2.1 (d) through (f).
4.4 Buyer shall deliver the Preferred Stock as required by
subsections 2.1 (a) through (c).
5. POST-CLOSING TRANSACTIONS. Sellers acknowledge and understand and
agree that Buyer intends immediately after the Closing to convert Sellers'
Receivables to common and preferred stock of the Corporation. That preferred and
common stock will be all of the authorized but unissued shares of stock of the
Corporation, that are not reserved for issuance, which Sellers represent to be
approximately 8,000,000 shares of common stock and 5,000,000 shares of preferred
stock.
Sellers represent and warrant that Xxxxxxxxx, Xxxxxxx and Xxxx Xxxxxx,
are the sole current directors of the Corporation, and Xxxxxxxxx is the current
president of the Corporation. Within 48 hours after the Closing, Sellers
represent, warrant and guaranty that the board of directors of the Corporation,
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will hold a special meeting of the board of directors. At that meeting, the
board will consider and act upon a proposal to convert Sellers' Receivables to
the common and preferred shares of stock of the Corporation as described above
in this Section, and will authorize all actions necessary or appropriate to
accomplish that conversion. Sellers represent and warrant that the directors
have full authority to consider and authorize said conversion, without the aid,
consent, vote or other action of any person or entity, including but not limited
to the shareholders of the Corporation. Buyer acknowledges and understands that
in order for the Corporation to issue new shares of preferred stock, that a
Certificate of Determination of Rights, Preferences, Privileges and Restrictions
(or similar document) may have to be prepared and filed with the Colorado
Secretary of State before any such shares may be issued. Sellers acknowledge and
understand that in order for Buyer to issue new shares of preferred stock, a
Certificate of Determination of Rights, Preferences, Privileges and Restrictions
(or similar document) may have to be prepared and filed with the State of
Arizona before any such shares may be issued.
Sellers will cooperate with Buyer in the appointment of a new board of
directors selected and/or approved by Buyer. Provided, that, Buyer understands
and acknowledges that new directors may not participate on the board until there
is compliance with Section 14(f) of the Securities Exchange Act of 1934
("Exchange Act"). Buyer agrees to be responsible for all costs and expenses
involved with the preparation and filing of all reports or documents required to
be filed under the Securities Act of 1933 or the Exchange Act, as a consequence
of the transactions described in this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF SELLERS. In addition to the other
representations and warranties of Sellers appearing in this Agreement, Sellers
each hereby represent and warrant, as follows:
6.1 Due Incorporation. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Colorado. To the knowledge of Sellers, the Corporation is duly
licensed or qualified to do business and is in good standing in each
State where the property owned or held under lease is such as to
require the Corporation to be so licensed or qualified, except those
states where the failure to be so licensed or qualified would not have
a material adverse effect on the financial condition or operations of
the Corporation or the Business. To the knowledge of Sellers, the
Corporation has the corporate power and authority to own and operate
its properties and carry on the Business as now conducted.
True, correct and complete copies of the corporate formation
documents for the Corporation, and all operating minutes, resolutions
and consents, have been delivered to Buyer. To the knowledge of
Sellers, the minute book(s) of the Corporation correctly records all
resolutions of the directors and shareholders of the Corporation, and
the Corporation's stock records correctly reflect the ownership of
stock of the Corporation.
6.2 Authority. Sellers have the power and authority to enter
into and perform their respective obligations under this Agreement, and
the documents herein required to consummate the Transaction. This
Agreement constitutes the legally valid and binding obligation of
Sellers, enforceable against Sellers in accordance with its terms.
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6.3 Capitalization. The authorized capital stock of the
Corporation as of the date of this Agreement is as shown in Section 1.1
above. No other shares of capital stock of the Corporation are
outstanding. Except as set forth in Schedule 6.3, there are no rights,
subscriptions, warrants, options, conversion rights or agreements of
any kind outstanding to purchase or otherwise acquire from the
Corporation any shares of capital stock of the Corporation, or
securities or obligations of any kind of the Corporation convertible
into or exchangeable for any shares of capital stock of the
Corporation. To the knowledge of Sellers, all issued shares have been
duly authorized, and the issued and outstanding shares of stock are
fully paid, non-assessable, and were not issued in violation of the
terms of any agreement or other understanding, and were issued in
compliance with all applicable federal and state securities or "blue
sky" laws and regulations. Sellers own of record and beneficially, and
have good and marketable title to, the Stock. Sellers have provided a
complete and accurate list of the identity of each shareholder of the
Corporation (other than shares held in street name), and the numbers of
shares of each class of stock held by each such shareholder, and such
list is consistent with the capitalization information appearing in
Section 1.1 above. Buyer acknowledges that Sellers own certain warrants
of the Corporation, which unless otherwise agreed in writing with
Buyer, Sellers will cancel as of the Closing.
No legend or other reference to any purported encumbrance
appears on any certificate representing equity shares of the
Corporation, except for shares issued by the Corporation in a private
placement.
Ownership of the Stock purchased in this Transaction shall
permit the owners thereof to control the Corporation for all purposes
except as specifically provided by federal law or by the corporate
statutes of the State of Colorado.
6.4 Subsidiaries. The Corporation does not own and does not
have any agreement, whether written or oral, regarding rights or
contracts to acquire any equity securities or other securities of any
company, or any direct or indirect equity or ownership interest in any
other entity, except as set forth in Schedule 6.4.
6.5 Financial Information. Sellers or the Corporation have
furnished Buyer with true, correct and complete copies of the
Corporation's financial statements and other books and records. To the
knowledge of Sellers, the Corporation's financial statements were
prepared in accordance with the books and records of the Corporation,
have been prepared in accordance with generally accepted accounting
principles consistently applied, and present fairly the financial
condition of the Corporation as of their respective dates and the
results of operations and changes in financial positions for the
periods then ended.
The Corporation's December 31, 1997 Balance Sheet has been
audited by BDO Xxxxxxx, LLP, independent certified public accountants.
To the knowledge of Sellers, all financial statements provided to
Buyer, except for adjustments from matters raised during the audit, do
not contain any material items of special or non-recurring income or
other income not earned in the ordinary course of business, except as
expressly specified therein.
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At the Closing, all of the books and records of the
Corporation will be in the possession of the Corporation.
6.6 Taxes. To the knowledge of Sellers, all federal and state
income, excise, franchise, payroll, property, sales, and other tax
returns required to be filed by or with respect to the Corporation
(except returns not yet due) have been filed, are complete and
accurately reflect in all material respects all matters therein
required to be reflected, and all taxes shown on such returns to be
due, and any assessments received by the Corporation with respect
thereto, have been paid in full.
6.7 Material Changes. To the knowledge of Sellers, from the
date of the most recent financial statements of the Corporation
provided by Sellers to Buyer, and through the date hereof, the Business
has been conducted only in the ordinary course, there have been no
material adverse changes in the financial condition or operations of
the Business except as set forth on Schedule 6.7, and there has been no
damage, destruction or other occurrence (whether or not insured
against) which materially adversely affects the financial condition or
operations of the Business.
6.8 Title to Assets; Liens. To the knowledge of Sellers, the
Corporation owns all assets it purports to own, including all assets
reflected in its financial statements and information. The Corporation
does not own any real property. All assets of the Corporation are free
and clear of all restrictions, claims, liens, encumbrances or rights of
others, other than those imposed under the Articles of Incorporation or
Bylaws of the Corporation, and other than by Sellers' Receivables or
the debts described in Section 3.1 above. The Stock is free and clear
of any and all liens, claims and encumbrances.
6.9 Litigation. To the knowledge of Sellers, and except as
disclosed on Schedule 6.9 attached hereto, there is no litigation,
proceeding, or investigation pending against Sellers or the Business,
and the Sellers have no reasonable grounds to know any basis for such
litigation, proceeding or investigation.
6.10 Compliance with Laws. Sellers are not aware of any
investigation with respect to any violation of any provision of any
federal, state or local law, regulation, ordinance, order or
administrative ruling, relating to the Corporation or the Business.
6.11 Insurance. The Corporation carries insurance against
personal injury and property damage to third persons and in respect of
its products and services, and other insurance, including any and all
workers compensation insurance required by law. To the knowledge of
Sellers, the Corporation has not received any notice that the
Corporation is in default with respect to any provision contained in
any insurance policy, and Sellers are not aware of any such default.
Sellers have delivered to Buyer copies of all insurance policies of the
Corporation.
6.12 Licenses. To the knowledge of Sellers, the Corporation
has any and all licenses, permits, and contracts necessary and/or
appropriate to operate the Business in the manner in which the Business
is currently operated.
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6.13 Hazardous Materials. To the knowledge of Sellers, the
Business has not dealt in any manner with any hazardous or toxic
materials or waste.
6.14 Judgments Against Corporation and/or Business. To the
knowledge of Sellers, neither the Corporation nor the Business is under
any governmental investigation, no such investigation has been
threatened, and there are no judgments against the Corporation, the
Business or the assets of the Corporation.
6.15 Complete Sale. All assets used by the Corporation in the
operation of the Business are either owned by the Corporation or leased
by the Corporation under the leases described on Schedule 3.2 (c)
attached hereto. The assets of the Corporation include, without
limitation, the assets identified on Schedule 6.15 Attached hereto.
By this Agreement, Sellers sell to Buyer all of the issued and
outstanding shares of capital stock of the Corporation which Sellers
own or have a right to acquire, including but not limited to any and
options to acquire shares of any type, except for Sellers' warrants and
options, which warrants and options Sellers will cancel.
6.16 Amounts Owing to Sellers. No amounts are owing to any of
the Sellers from the Corporation other than Sellers' Receivables,
expenses incurred by such Seller in connection with the Business,
commissions owing and contingent obligations to Sellers related to the
Tinton Bank Obligation and the Xxxxx Letter of Credit.
6.17 Inventory. The inventory held by the Corporation is
useable and in good condition, with not more than 10% thereof being
obsolete, and all of the Inventory is owned by the Corporation, none of
it being held by the Corporation on consignment. To the knowledge of
Sellers, the quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but
are reasonable in the present circumstances of the Corporation.
6.18 Disclosure Materials. The financial condition of the
Business is as presented in the financial information, including tax
returns and financial statements, and books and records provided by
Sellers to Buyer. To the knowledge of Sellers, those materials and the
other materials disclosed to Buyer are true, complete and accurate in
all respects, and fairly represent the information they purport to
provide. To the knowledge of Sellers, all of the information disclosed,
as a whole, does not contain any statement that, as of the date hereof,
is false or misleading, and does not omit to state any material fact
(i) necessary to make the statements made, in light of the
circumstances under which they were made, not false or misleading, or
(ii) necessary to provide Buyer with complete and accurate information
as to the assets and financial standing of the Business. Sellers have
provided Buyer with complete and accurate copies of all organizational
documents of and/or relating to the Corporation, as well as a complete
copy of the existing minute book(s) for the Corporation.
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6.19 Defaults. To the knowledge of Sellers, there are no
defaults or events with which the giving of notice or the passage of
time would constitute defaults under any document under which the
Corporation is obligated, except that the Corporation is in default
under its obligations to keep the prospectus updated relating to the
public warrants and the warrants issued to Deco Disc.
6.20 Vendor Accounts. Sellers shall do nothing to cause the
Corporation to lose any of the Corporation's supplier and other vendor
accounts, or to cause adverse changes in the account terms.
6.21 Material Contracts. Except as disclosed in Schedule
3.2(c) attached hereto, disclosed in the Corporation's Financial
Statements or known to Buyer, to the best of Sellers' knowledge, the
Corporation is not a party to or bound by any agreement not made in the
ordinary course of its business which is material to the financial
condition or operations of the Corporation.
6.22 Outstanding Liabilities. To the knowledge of Sellers,
there are no liabilities of the Corporation other than as are shown on
the June 30, 1998 Financial Statements, and other than liabilities
arising in the normal course of business since the June 30, 1998
Financial Statements.
6.23 Losses. To the knowledge of Sellers, there are no
unrealized or anticipated losses on any commitment or contract of the
Corporation.
6.24 Patents. Except as disclosed on Schedule 6.24 attached
hereto, to the Sellers' knowledge, there is no litigation pending or
threatened with respect to the patents of the Corporation, there is no
outstanding order, judgment, decree or stipulation affecting the
validity or enforceability of said patents, there exits no outstanding
notices of infringement given by the Corporation regarding the patents,
there are no pending interferences or other contested proceedings
pending, or to the knowledge of Sellers that are in the process of
being instituted, in the United States Patent Office or in the courts,
relating to said patents, and, to the best knowledge of Sellers, none
of the Corporation's patents are being presently infringed.
6.25 Receivables. All accounts receivable of the Corporation
arose in the regular course of business, and, to the best knowledge of
Sellers, represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business and
are collectable and subject to no defenses or counterclaims, except as
may be reserved against in the Corporation's financial statements.
6.26 Employees. There are no employee benefits for the
Corporation's employee other than those described in Schedule 3.2(d)
attached hereto. To the knowledge of Sellers, the Corporation is in
compliance with all terms of all employee benefit plans of the
Corporation.
Sellers have provided to Buyer a complete and accurate list of
the following information for each employee of the Corporation,
including each employee on leave of absence or layoff status: name; job
title; current compensation; vacation and sick pay accrued; and
services credited
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for purposes of vesting and eligibility to participate in any of the
Corporation's employee benefit plans.
6.27 No Conflicts. The execution, delivery and performance of
this Agreement and the other documents and instruments to be executed
and delivered by Sellers pursuant hereto, and the consummation by
Sellers of the transactions contemplated herein or therein:
(a) Will not violate or conflict with any applicable
federal, state, foreign, local or other law, ordinance, rule,
regulation, or governmental requirement or restriction of any
kind, including any rules, regulations, and orders promulgated
thereunder, and any final orders, decrees, consents, or
judgments of any regulatory agency or court ("Law");
(b) Except as may be required to comply with the
Securities Act and the Exchange Act, will not require any
authorization, consent, approval, exemption or other action by
or notice to any government entity (including, without
limitation, under any "plant closing" or similar law) (neither
Sellers nor the Corporation are required to give any notice or
to obtain any consent from any person, entity, or governmental
agency in connection with the execution and delivery of this
Agreement or the consummation of the Transaction);
(c) Will not constitute a default or an event that,
with notice, lapse of time, or both, would be a default,
breach, or violation of the Articles of Incorporation or
Bylaws of the Corporation or any lease, license, promissory
note, conditional sales, contract, commitment, indenture,
mortgage, deed of trust, or other agreement, instrument, or
arrangement to which Corporation is a party or by which the
Corporation or its property is bound.
(d) Will not cause the creation or imposition of any
lien, charge, or encumbrance on any of the properties of the
Corporation;
(e) Will not give any governmental body the right to
revoke, withdraw, suspend, cancel, terminate, or modify any
governmental authorization held by the Corporation or that
otherwise relates to the Business, except with respect to
immaterial instances; and
(f) Will not cause Buyer or the Corporation to become
subject to, or to become liable for, the payment of any tax
which relates to time periods prior to the Closing.
6.28 Violations of Law.
(a) To the knowledge of Sellers, none of the present
or past operations of the Business, the products of the
Business, or the Corporation's assets violate or conflict, in
any material respect, with any permits, any law (including
environmental laws), governmental specification,
authorization, or requirement, or any decree, judgment, order,
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or similar restriction. To the knowledge of Sellers, neither
the Corporation nor any supplier of the Corporation is the
subject of an inspection or inquiry regarding violations or
alleged violations of any law by any state, federal, or local
agency.
(b) To the knowledge of Sellers, there are no
proceedings, threatened proceedings, orders, notice of
violations, inspection reports, and other similar occurrences,
if any, relating to the conduct of the Business or the
Corporation's assets.
(c) To the knowledge of Sellers, the Corporation has
not been the subject of an Occupational and Safety Health
Administration inspection or found by any agency to be in
violation of any state or federal occupational safety or
health law in the conduct of the Business.
6.29 Condition and Sufficiency of Assets. To the knowledge of
Sellers, all tangible assets of the Corporation are in operating
condition and repair, and are adequate for the uses to which they are
being put, and none of such items is in need of maintenance or repairs,
except for ordinary, routine maintenance and repairs that are not
material in nature or cost. To the knowledge of Sellers, the assets are
sufficient for the continued conduct of the Corporation's businesses
after the Closing in substantially the same manner as conducted prior
to the Closing.
6.30 Bank Accounts. Sellers have to the best of their
knowledge, disclosed to Buyer the names and locations of all banks,
trust companies, savings and loan associations and other financial
institutions at which the Corporation maintains a safe deposit box,
lock box or checking, savings, custodial or other account of any
nature, the type and number of each such account and the signatories
therefor, a description of any compensating balance arrangements, and
the names of all individuals authorized to draw thereon, make
withdrawals therefrom or otherwise have access thereto.
6.31 Intentionally Omitted.
6.32 Environmental Matters. For the purposes of this Section:
(i) "Environmental Law" means all federal, state,
local, foreign, and other applicable jurisdiction Laws
relating to the environment or the use, disposal, existence,
or release of any Hazardous Materials, including but not
limited to any and all Laws concerning, affecting,
controlling, or in any way relating to, whether in whole or in
part, noise levels, ground vibrations, air pollutants, water
pollutants, process waste water, or Hazardous Materials;
(ii) "Environmental Release" means any release,
spill, emission, leaking, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property;
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(iii) "Hazardous Materials" means: (A) any waste,
hazardous waste, pollutant, contaminant, or hazardous or toxic
substance regulated by Law; (B) asbestos; (C) formaldehyde;
(D) polychlorinated biphenuls; (E) radioactive materials; (F)
waste oil and other petroleum products; and (G) any other
substance which constitutes a nuisance or hazard to the
environment or to the public health, safety, or welfare;
6.32.1 To the knowledge of Sellers, the Corporation
is, and at all times has been, in full compliance with, and has not
been and is not in violation of or liable under, any Environmental Law.
Sellers have no basis to expect, nor has any of them or any other
person for whose conduct they are or may be held to be responsible
received, any actual or threatened order, notice, or other
communication from (i) any governmental body or private citizen acting
in the public interest, or (ii) the current or prior owner or operator
of any of the Corporation's properties or assets, of any actual or
potential violation or failure to comply with any Environmental Law, or
of any actual or threatened obligation to undertake or bear the cost of
any environmental, health, and safety liabilities with respect to any
of the Corporation's properties or assets (whether real, personal, or
mixed) in which Sellers or the Corporation have had an interest, or
with respect to any of the Corporation's properties at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by Sellers, the Corporation, or any other
person for whose conduct they are or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
6.32.2 Sellers have delivered to Buyer true and
complete copies and results of any reports, studies, analyses, tests,
or monitoring possessed or initiated by Sellers or the Corporation
pertaining to Hazardous Materials or hazardous activities in, on, or
under the Corporation's properties or concerning compliance by Sellers,
the Corporation, or any other person for whose conduct they are or may
be held responsible, with Environmental Laws.
6.33 Intellectual Property.
(a) Sellers have provided Buyer with a true, correct
and complete list of: (i) all patents held by the Corporation
and all re-examinations, re-issues, divisions, continuations,
continuations in part and extensions thereof and all pending
patent applications by the Corporation, including for each
such patent the serial or patent number, country, filing and
expiration date and title, (ii) all registered trademarks of
the Corporation and pending trademark registrations by the
Corporation, including, for each such trademark, the
registration number, country, filing and expiration date, xxxx
and class, (iii) all registered copyrights of the Corporation
and copyright applications by the Corporation, including the
registration number, country and filing and expiration date of
each such copyright, and (iv) all service marks, trade names
and brand names of the Corporation, used in the Business
(whether or not registered) (all of the foregoing collectively
referred to as the "Intellectual Property"). All such patents,
trademarks and copyrights are properly registered, any
applications therefor have been properly made, and all
annuity, maintenance, renewal and other fees in connection
with any of the foregoing are current.
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(b) Sellers have provided Buyer with a list of all
material licenses, contracts, commitments (including, without
limitation, confidentiality agreements) to which to the
knowledge of Sellers, the Corporation is a party or otherwise
subject relating to the Intellectual Property, including,
without limitation, computer software (except for standard
licensing agreements or provisions from the seller or licensor
of such software). During the preceding three (3) fiscal years
and the current fiscal year to date, no claim or allegation of
infringement has been made by or against the Corporation,
whether relating to any item of Intellectual Property or
otherwise, no claim or allegation of misappropriation or
misuse of any item of Intellectual Property has been made by
or against the Corporation, and no claim or allegation has
been asserted against the Corporation with respect to the
ownership or use of any of the Intellectual Property by the
Corporation or challenging or questioning the validity or
effectiveness of any such license, contract or commitment, and
there does not exist to the knowledge of any Seller or of the
Corporation any valid basis for any such claim or allegation.
(c) The Corporation has good and valid title to, or
otherwise possesses rights to use, the Intellectual Property.
6.34 Intentionally omitted.
6.35 Consents and Approvals. No consent, approval or
authorization of, or declaration, filing or registration with, any
governmental person, whether federal, state or local, is required of
Sellers in connection with the execution or delivery by Seller of this
Agreement or the consummation by Sellers of any of the transactions
contemplated hereby, except as may be required to comply with the
Securities Act or the Exchange Act and a filing with the Colorado
Secretary of State pertaining to the preferred stock contemplated to be
issued to the Buyer.
6.36 Customers and Supplier. Sellers have provided Buyer with
a list, which to the knowledge of Sellers, sets forth the ten (10)
largest customers of the Corporation in terms of dollar volume of sales
for the three (3) preceding fiscal years and for the current fiscal
year, showing the approximate total dollar amount of sales to each such
customer during each such fiscal year. Sellers have provided Buyer with
a list, which to the knowledge of Sellers, sets forth the ten (10)
largest suppliers to the Corporation in terms of dollar volume of
purchases for the three (3) preceding fiscal years and for the current
fiscal year showing the approximate total dollar amount of purchases
from each supplier during each such fiscal year. To the knowledge of
Sellers, since January 1, 1994, the Corporation has not received any
notice from and has not otherwise been informed or made aware that any
such ten (10) largest suppliers or customers will be terminating or
curtailing its business with the Corporation in a manner that would
have a material adverse effect on the Corporation, except as may be
indicated in the lists, and by virtue of any decrease in business or
production from such customers or suppliers over the three (3) year
period indicated, to the date of the Closing.
6.37 Changes in the Corporation or its Documents. Except as
set forth in Schedule 6.37, none of the following has occurred within
the last twelve months prior to the date of this
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Agreement: (i) any change in the Articles of Incorporation or Bylaws of
the Corporation; (ii) any change in the number of shares of stock
issued and outstanding; (iii) the merger or consolidation of the
Corporation with or into any other corporation or other entity; (iv)
declaration or payment by the Corporation of any dividend or any
repurchase by the Corporation of any shares of stock of the
Corporation; or (v) except in the ordinary course of business and
consistent with the Corporation's past practice, any increase in the
compensation payable by the Corporation to any director, officer,
employee or agent, or payment of any bonus, severance payment or other
compensation to any director, officer, employee or agent, or the
entering into of any agreement of any type which is not terminable by
the Corporation on no more than 30 days notice.
6.38 Shareholders Agreements and Other Agreements. Except as
set forth in Schedule 6.38, there are no shareholders agreements of any
type, including but not limited to any voting trust agreements, voting
agreements or similar arrangements restricting voting rights or the
transferability of any interest in the Corporation relating to the
capital stock of the Corporation, or otherwise relating to the
Corporation. Furthermore, there are no employment agreements,
consulting agreements or similar type agreements relating to the
Corporation, other than one independent contractor agreement which is
terminable by the Corporation on not more than 30 days notice. There
are no leases affecting the Corporation other than one lease of real
property in California, where the leased property has been subleased to
third parties.
6.39 Certain payments. To the knowledge of Sellers, neither
the Corporation nor any director, officer, agent or employee of the
Corporation, or any other person associated with or acting for or on
behalf of the Corporation, has directly or indirectly: (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback,
or other payment to any person, private or public, regardless of form,
whether in money, property, or services: (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for
business secured, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Corporation, or
(iv) in violation of any law; or (b) established or maintained any fund
or asset that has not been recorded in the books and records of the
Corporation.
6.40 SEC Filings Complete. To Sellers' knowledge, the
Corporation's most recent Form 10-K for the fiscal year ended December
31, 1997 and all intervening Form 8-Ks and Form 10-Qs, and the
Corporation's most recent annual meeting proxy statement and most
recent registration statement filed under the Securities Act, all as
filed with the SEC, do not contain a misstatement of a material fact or
an omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading as of the time
such document was filed or became effective. Since the filing of the
most recent Form 10-K, no other document has been required to be filed
by the Corporation with the SEC which has not been filed, and no event
or transaction has occurred which will thereafter be required to be
disclosed by the Corporation in an Form 10-Q, Form 8-K or similar
filing except as expressly disclosed in this Agreement.
Sellers will cooperate with Buyer with respect to all filings
that Buyer or the Corporation make in connection with this Transaction.
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6.41 Products. To the knowledge of Sellers, the products
offered currently or in the past by the Corporation for sale meet all
product and/or process specifications which they purport or are
required to meet, and satisfy in all material respects all applicable
laws.
An individual will be deemed to have knowledge of a particular fact or
other matter if such individual is actually aware of such fact or other matter
without inquiring.
The representations and warranties in this Section, and elsewhere in
this Agreement shall survive the Closing of the Transaction for a period of two
(2) years.
Sellers will indemnify and defend and hold Buyer free and harmless from
and against any liability, obligation, loss, cost and expense, including
attorneys' fees incurred by Buyer, in connection with any material breach by
Sellers of any their representations, warranties or covenants, contained in this
Agreement. Provided, however, that each Seller's maximum liability under this
paragraph and this Agreement, shall be limited to the aggregate value of the
consideration received by such Seller from Buyer under this Agreement.
7. REPRESENTATIONS AND WARRANTIES OF BUYER. In addition to the other
representations and warranties of Buyer appearing in this Agreement, Buyer
hereby represents and warrants, as follows:
7.1 Due Incorporation. Buyer is duly organized, validly
existing and in good standing under the laws of the State of Arizona.
To the knowledge of Buyer, Buyer is duly licensed or qualified to do
business and is in good standing in each State where the property owned
or held under lease is such as to require the Buyer to be so licensed
or qualified, except those states where the failure to be so licensed
or qualified would not have a material adverse effect on the financial
condition or operations of Buyer or its business. To the knowledge of
Buyer, Buyer has the corporate power and authority to own and operate
its properties and carry on its business as now conducted.
7.2 Authority. Buyer has full power and authority to enter
into and perform its obligations under this Agreement, and the
documents herein required to consummate the Transaction. This Agreement
has been approved by all required action of the Board of Directors and
shareholders of Buyer. This Agreement constitutes the legally valid and
binding obligation of Buyer, enforceable against Buyer in accordance
with its terms.
7.3 Capitalization. The authorized capital stock of the Buyer
as of the date of this Agreement is 235,000,000 shares of common stock,
no par value, of which there are 106,942,457 shares issued and
outstanding, and 100,000,000 shares of Series A preferred stock, no par
value, of which there are no shares issued and outstanding. No other
shares of capital stock of the Buyer are outstanding. To the knowledge
of Buyer, all issued shares and the shares of Preferred Stock to be
issued to Sellers, have been duly authorized, and the issued and
outstanding shares of stock, and the shares of Preferred Stock to be
issued to Sellers, are fully paid, non-assessable, and were and will
not be issued in violation of the terms of any agreement or other
understanding, and were and
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will be issued in compliance with all applicable federal and state
securities or "blue sky" laws and regulations.
7.4 Financial Information. Buyer has furnished to Sellers,
true, correct and complete copies of Buyer's financial statement,
including a balance sheet, profit and loss statement and notes thereto,
for the fiscal year ended December 31, 1997, and interim financial
statements for June 30, 1998 ("Buyer's Financial Statements"). To the
knowledge of Buyer, Buyer's Financial Statements were prepared in
accordance with the books and records of the Buyer, have been prepared
in accordance with generally accepted accounting principles
consistently applied, and present fairly the financial condition of the
Buyer as of their respective dates and the results of operations and
changes in financial positions for the periods then ended.
Buyer's Financial Statement for the fiscal year ended December
31, 1997 has been audited by Ernst and Young, independent certified
public accountants. To the knowledge of Buyer, all financial statements
provided by Buyer, except for adjustments from matters raised during
the audit, do not contain any material items of special or
non-recurring income or other income not earned in the ordinary course
of business, except as expressly specified therein.
7.5 Taxes. To the knowledge of Buyer, all federal and state
income, excise, franchise, payroll, property, sales, and other tax
returns required to be filed by or with respect to the Buyer (except
returns not yet due) have been filed, are complete and accurately
reflect in all material respects all matters therein required to be
reflected, and all taxes shown on such returns to be due, and any
assessments received by the Buyer with respect thereto, have been paid
in full.
7.6 Material Changes. To the knowledge of Buyer, from the date
of Buyer's Financial Statements, through the date hereof, Buyer's
business has been conducted only in the ordinary course, there have
been no material adverse changes in the financial condition or
operations of its business except as set forth on Schedule 7.6 and
there has been no damage, destruction or other occurrence (whether or
not insured against) which materially adversely affects the financial
condition or operations of Buyer's business.
7.7 Title to Assets; Liens. To the knowledge of Buyer, Buyer
owns all assets it purports to own, including all assets reflected in
Buyer's Financial Statements. All assets of the Buyer are free and
clear of all restrictions, claims, liens, encumbrances or rights of
others, other than those imposed under the Articles of Incorporation or
Bylaws of the Buyer, and other than as set forth in Buyer's Financial
Statements, and other than for debts incurred or amended since the date
of Buyer's Financial Statements.
7.8 Litigation. To the knowledge of Buyer, and except as
disclosed on Schedule 7.8 attached hereto, there is no litigation,
proceeding, or investigation pending against Buyer or its business, and
Buyer has no reasonable grounds to know any basis for such litigation,
proceeding or investigation.
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7.9 Compliance with Laws. Buyer is not aware of any
investigation with respect to any violation of any provision of any
federal, state or local law, regulation, ordinance, order or
administrative ruling, relating to Buyer or its business.
7.10 Licenses. To the knowledge of Buyer, Buyer has any and
all licenses, permits, and contracts necessary and/or appropriate to
operate its business in the manner in which the business is currently
operated.
7.11 Hazardous Materials. To the knowledge of Buyer, Buyer has
not dealt in any manner with any hazardous or toxic materials or waste,
as defined under any federal, state or local law.
7.12 Judgments Against Buyer and/or its Business. To the
knowledge of Buyer, neither the Buyer nor its business is under any
governmental investigation, no such investigation has been threatened,
and there are no judgments against the Buyer, its business or the
assets of Buyer.
7.13 Defaults. To the knowledge of Buyer, there are no
defaults or events with which the giving of notice or the passage of
time would constitute defaults under any document under which the Buyer
is obligated.
7.14 No Conflicts. The execution, delivery and performance of
this Agreement and the other documents and instruments to be executed
and delivered by Buyer pursuant hereto, and the consummation by Buyer
of the transactions contemplated herein or therein:
(a) Will not violate or conflict with any applicable
federal, state, foreign, local or other law, ordinance, rule,
regulation, or governmental requirement or restriction of any kind,
including any rules, regulations, and orders promulgated thereunder,
and any final orders, decrees, consents, or judgments of any regulatory
agency or court ("Law");
(b) Will not require any authorization, consent,
approval, exemption or other action by or notice to any government
entity (including, without limitation, under any "plant closing" or
similar law) (neither Sellers nor the Buyer are required to give any
notice or to obtain any consent from any person, entity, or
governmental agency in connection with the execution and delivery of
this Agreement or the consummation of the Transaction);
(c) Will not constitute a default or an event that,
with notice, lapse of time, or both, would be a default, breach, or
violation of the Articles of Incorporation or Bylaws of Buyer or any
lease, license, promissory note, conditional sales, contract,
commitment, indenture, mortgage, deed of trust, or other agreement,
instrument, or arrangement to which Buyer is a party or by which Buyer
or its property it bound.
(d) Will not cause the creation or imposition of any
lien, charge, or encumbrance on any of the properties of Buyer.
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(e) Will not give any governmental body the right to
revoke, withdraw, suspend, cancel, terminate, or modify any
governmental authorization held by the Buyer or that otherwise relates
to Buyer's business, except with respect to immaterial instances; and
(f) Will not cause Buyer to become subject to, or to
become liable for, the payment of any tax which relates to time periods
prior to the Closing.
7.15 Violations of Law.
(a) To the knowledge of Buyer, none of the present or
past operations of its business, the products of the Business,
or the Buyer's assets violate or conflict, in any material
respect, with any permits, any law (including environmental
laws), governmental specification, authorization, or
requirement, or any decree, judgment, order, or similar
restriction. To the knowledge of Buyer, neither the Buyer nor
any supplier of the Buyer is the subject of an inspection or
inquiry regarding violations or alleged violations of any law
by any state, federal, or local agency.
(b) To the knowledge of Buyer, there are no
proceedings, threatened proceedings, orders, notice of
violations, inspection reports, and other similar occurrences,
if any, relating to the conduct of its business or the Buyer's
assets.
(c) To the knowledge of Buyer, Buyer has not been the
subject of an Occupational and Safety Health Administration
inspection or found by any agency to be in violation of any
state or federal occupational safety or health law in the
conduct of its business.
7.16 Environmental Matters. For the purposes of this Section:
(i) "Environmental Law" means all federal, state,
local, foreign, and other applicable jurisdiction Laws
relating to the environment or the use, disposal, existence,
or release of any Hazardous Materials, including but not
limited to any and all Laws concerning, affecting,
controlling, or in any way relating to, whether in whole or in
part, noise levels, ground vibrations, air pollutants, water
pollutants, process waste water, or Hazardous Materials;
(ii) "Environmental Release" means any release,
spill, emission, leaking, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property;
(iii) "Hazardous Materials" means: (A) any waste,
hazardous waste, pollutant, contaminant, or hazardous or toxic
substance regulated by Law; (B) asbestos; (C) formaldehyde;
(D) polychlorinated biphenuls; (E) radioactive materials; (F)
waste oil and other petroleum products; and (G) any other
substance which constitutes a nuisance or hazard to the
environment or to the public health, safety, or welfare;
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7.16.1 To the knowledge of Buyer, the Buyer is, and
at all times has been, in full compliance with, and has not
been and is not in violation of or liable under, any
Environmental Law. Buyer has no basis to expect, nor has any
Buyer or any other person for whose conduct Buyer is or may be
held to be responsible received, any actual or threatened
order, notice, or other communication from (i) any
governmental body or private citizen acting in the public
interest, or (ii) the current or prior owner or operator of
any of the Buyer's properties or assets, of any actual or
potential violation or failure to comply with any
Environmental Law, or of any actual or threatened obligation
to undertake or bear the cost of any environmental, health,
and safety liabilities with respect to any of the Buyer's
properties or assets (whether real, personal, or mixed) in
which the Buyer had an interest, or with respect to any of the
Buyer's properties at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used,
or processed by Buyer, the Buyer, or any other person for
whose conduct they are or may be held responsible, or from
which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
7.16.2 Buyer has delivered to Sellers true and
complete copies and results of any reports, studies, analyses,
tests, or monitoring possessed or initiated by Buyer
pertaining to Hazardous Materials or hazardous activities in,
on, or under the Buyer's properties or concerning compliance
by Buyer, or any other person for whose conduct Buyer is or
may be held responsible, with Environmental Laws.
7.17 Consents and Approvals. No consent, approval or
authorization of, or declaration, filing or registration with, any
governmental person, whether federal, state or local, is required of
Buyer in connection with the execution or delivery by Buyer of this
Agreement or the consummation by Buyer of any of the transactions
contemplated hereby, except as may be required to comply with the
Securities Act or the Exchange Act and a filing with the Colorado
Secretary of State pertaining to the preferred stock contemplated to be
issued to Buyer.
7.18 Buyer's Intent. In order to induce Sellers to sell the
Stock and the Sellers' Receivables to Buyer, Buyer represents and
warrants to Sellers that Buyer is acquiring the Stock and any
securities that Buyer may obtain upon conversion of the Sellers'
Receivables into securities, for investment, for its own account and
not with a view to further distribution thereof, and Buyer further
represents and warrants that neither it nor any affiliate of Buyer has
any present intent to dissolve or liquidate the Corporation, or to
dissipate its assets or to take any actions which are not commercially
reasonable and might be viewed as materially detrimental to the
shareholders of the Corporation; provided, however, that Buyer does
intent to convert Sellers' Receivables to stock, and consummate a
reverse merger, as described herein.
7.19 Buyer's Due Diligence. Buyer acknowledges that it has
completed its own due diligence investigation of the Corporation,
including but not limited to reviewing the books and records of the
Corporation. Buyer further acknowledges that it has reviewed internal
financial statements for the Corporation as at June 30, 1998. Buyer
further acknowledges and understands that the Corporation has been
losing money every month in the recent past and that such losses
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shall not be considered in determining whether or not an adverse
material affect on the financial condition of the Corporation has
occurred.
An individual will be deemed to have knowledge of a particular fact or
other matter if such individual is actually aware of such fact or other matter
without inquiring.
The representations and warranties of Buyer in this Section, and
elsewhere in this Agreement shall survive the Closing of the Transaction for a
period of two (2) years.
Buyer will indemnify and defend and hold Sellers, and each of them,
free and harmless from and against any liability, obligation, loss, cost and
expense, including attorneys' fees incurred by Sellers or any of them, in
connection with any material breach by Buyer of any its representations,
warranties or covenants, contained in this Agreement; provided, however, that
Buyer's maximum liability for indemnification under this paragraph and elsewhere
in this Agreement shall be limited to $1,500,000.00.
8. EXPENSES. Each party shall bear its own expenses in completing the
Transaction. "Expenses" shall mean any expense of any nature incurred in
connection with the Transaction, including without limitation attorneys' fees,
accounting fees, filing fees and other costs.
9. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Arizona,
without giving effect to the conflicts of laws rules thereof. The courts of the
State of Arizona shall have the sole and exclusive jurisdiction and venue in any
case or controversy arising under this Agreement or by reason of this Agreement.
The parties agree that any litigation or arbitration arising from the
interpretation or enforcement of this Agreement shall be only in either Maricopa
County Superior Court or in the United States Federal District Court for the
District of Arizona, and for this purpose each party to this Agreement (and each
person who shall become a party) hereby expressly and irrevocably consents to
the jurisdiction and venue of such courts.
10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. No Sellers may assign any rights of the
Sellers under this Agreement without the prior written consent of Buyer and the
remaining Sellers.
11. ENTIRE AGREEMENT. Except as otherwise set forth herein, this
Agreement constitutes the entire agreement between the parties which respect to
the subject matter hereof, and supersedes all prior understandings, if any, with
respect thereto.
12. FURTHER ASSURANCES. The parties agree to do such further acts and
things and to execute and deliver such additional agreements and instruments as
any party may reasonably require to consummate, evidence, or confirm any
agreement contained herein in the manner contemplated hereby.
13. MODIFICATION. Any modification or waiver of any term of this
Agreement, including a modification or waiver of this term, must be in writing
and signed by the parties to be bound by the modification or waiver.
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14. SEVERABILITY. In the event any portion of this Agreement shall be
declared by any court of competent jurisdiction to be invalid, illegal, or
unenforceable, such portion shall be deemed severed from this Agreement, and the
remaining parts hereof shall remain in full force and effect as fully as though
such invalid, illegal or unenforceable portion had never been a part of this
Agreement.
15. COUNTERPARTS, FACSIMILE SIGNATURES. This Agreement may be executed
by the parties in one or more counterparts, and any number of counterparts
signed in the aggregate by the parties shall constitute a single instrument. The
parties authorize and agree to accept facsimile signatures in counterparts to
this Agreement, and that said facsimile signatures shall for all purposes be
binding upon the parties as if the same were original signatures.
16. ATTORNEY'S FEES. Should any party institute any action or
proceeding to enforce this Agreement or any provision hereof, or for damages by
reason of any alleged breach of this Agreement, or of any provision hereof, or
for a declaration of rights hereunder, the prevailing party(s) of such action or
proceeding shall be entitled to receive from the other involved party or parties
all costs and expenses, including reasonable attorneys' fees and expert witness
fees incurred by the prevailing party(s) in connection with such action or
proceeding.
17. NOTICES. Any notice or communication given under the terms of this
Agreement ("Notice") shall be in writing and shall be delivered in person or
mailed by certified mail, return receipt requested, in the United States Mail,
postage pre-paid, addressed as follows:
If to Xxxxxxxxx: Xxx Xxxxxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
If to Xxxxxxx: Xxx Xxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
If to Xxxxx: Xxxxxx X. Xxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxx 00000
If to Buyer: Futech Interactive Products, Inc.
Attention: Xxxxxxx X. Xxxxx
0000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000-0000
or at such other address as a person may from time to time designate by Notice
hereunder. Notice shall be effective upon delivery in person, or if mailed, at
midnight on the third business day after the date of mailing.
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18. PARAGRAPH TITLES AND HEADINGS. The titles and headings of sections
of this Agreement are for the convenience of reference only, and are not
intended to define, limit, or describe the scope or intent of any provision of
this Agreement, and shall not affect the construction of any provision of this
Agreement.
19. PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as Buyer determines. Unless
consented to by Buyer in advance or required by legal requirements, Sellers
shall keep this Agreement strictly confidential and may not make any disclosure
of this Agreement to any person. Sellers and Buyer will consult with each other
concerning the means by which the Corporation's employees, customers, and
suppliers and others having dealings with the Corporation will be informed of
this Agreement and the Transactions, and Buyer will have the right to be present
for any such communication.
20. MISCELLANEOUS. The parties agree that each party and its counsel
have reviewed and revised this Agreement, or had an opportunity to review and
revise this Agreement, and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not apply to the
interpretation of this Agreement or any amendments or exhibits hereto. In the
event of default by Sellers hereunder, Buyer shall, in addition to its other
remedies under this Agreement and in law or equity, be entitled to specific
performance of Sellers' obligations under this Agreement. The parties do not
intend to confer any benefit upon any person, firm, or corporation other than
the parties hereto. No representation or warranty herein may be relied upon by
any person not a party to this Agreement. No waiver of any provision of this
Agreement shall be effective unless made in writing.
21 GUARANTY REGARDING SELLERS' SPOUSES. Each Seller who is married
hereby represents, warrants, and guaranties that he has the authority to enter
into and consummate the Transaction, including the transfer of the Stock,
without the signature or consent of his spouse, and agrees to defend and hold
Buyer harmless from and against any and all loss and expense, including
attorneys' fees and costs, incurred by Buyer as a result of said representation
not being accurate.
22. BROKERS. Each party to this Agreement represents and warrants that
he/she/it has not dealt with a broker regarding this transaction, and agrees to
indemnify, defend and hold the other parties to this Agreement harmless from and
against any and all expenses or other obligations, including attorneys' fees and
costs, claimed by any broker or finder as a result of dealings with the
indemnifying party.
23. AUTHORITY. Any individual executing this Agreement on behalf of an
entity represents and warrants that such individual has the right and authority
to execute this Agreement on behalf of such entity and that the entity will be
bound by this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SELLERS: /s/ Xxx Xxxxxxxxx
----------------------------------------
Xxx Xxxxxxxxx
/s/ Xxx Xxxxxxx
----------------------------------------
Xxx Xxxxxxx
/s/ Xxxxxx X. Xxxxx
----------------------------------------
Xxxxxx X. Xxxxx
XXXXXX X. XXXXX and XXXXXX XXXXX
REVOCABLE TRUST DATED NOVEMBER 1, 1996
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxx, Trustee
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxx, Trustee
XXXXXX XXXXX & ASSOCIATES, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxx, President
XXXXXX XXXXX & ASSOCIATES DEFINED
BENEFIT PLAN AND TRUST
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxx, Trustee
BUYER: Futech Interactive Products, Inc.,
an Arizona corporation
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx, CEO
XXXXX: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx
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LIST OF SCHEDULES
Schedules Subject Matter
2.1(d) Promissory Note Form
3.2 Net Liabilities Calculation
3.2 (c) Leases and Contracts
3.2 (d) Approved Employee Benefits
6.3 Exceptions to Capitalization
6.4 Subsidiaries
6.7 Material Changes of Corporation
6.9 Litigation involving Corporation
6.15 Certain Assets of Corporation
6.24 Patent Exceptions
6.37 Changes in Corporation and Documents
6.38 Shareholders and Related Agreements
7.6 Material Changes of Buyer
7.7 Litigation involving Buyer
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