EXHIBIT 2.1
AGREEMENT
This Agreement (this "Agreement") is entered into as of December 31, 1999 by and
among (i) EnviroFoam Technologies, Inc., a Utah corporation ("EFT"); Skyhook
Technologies, Inc., a Utah corporation ("Corporation") and Magellan Technology,
Inc., a Utah corporation, which is the sole shareholder of the Corporation (the
"Shareholder"). Certain other capitalized terms used herein are defined in
Article XI and throughout this Agreement.
RECITALS
A. The Corporation is engaged in two businesses; the first involves the
design, manufacture and sale of certain technical equipment known as "Skyhook"
and the second involves operating certain logistical support facilities ("LSF")
(collectively the "Business");
B. The Shareholder is the owner of all of the issued and outstanding
capital stock of the Corporation;
C. EFT and the Corporation have determined that it is in the best
interests of their respective shareholders for EFT to acquire all of the issued
and outstanding capital stock of the Corporation.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE ACQUISITION
1.1 The Acquisition. Subject to the terms and conditions of this
Agreement, EFT will acquire from Shareholder, free of all liens and encumbrances
except as provided for in Section 5.4, all of the issued and outstanding common
stock of the Corporation (the "Shares").
ARTICLE II
PURCHASE PRICE
2.1 Payment of Cash Consideration. EFT shall pay the Shareholder the
sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00) by the
execution and delivery at Closing of a promissory note (the "Note") that
provides for the following payments:
(1) payment of $200,000 on the Closing;
(2) payment of $300,000 on or before December 31,
1999; and
(3) four (4) consecutive monthly payments of $500,000
each, with the first payment due on or before January 31, 2000 and each
successive monthly payment due on or before the last day of each
successive month.
Said Note shall provide that at EFT's option, the payments may be made by EFT
paying them directly to Bank towards reducing the Line of Credit, as such terms
are defined in Section 5.4.
2.2 Accelerated Payment. Provided, however, in the event that EFT
obtains a source of funding that in the sole discretion of EFT's board of
directors provides more than sufficient cash flow to EFT and its subsidiaries to
satisfy the above payments, as well as operating cash needed by EFT and its
subsidiaries, then the above payments shall be accelerated so as to consume such
excess operating capital.
2.3 Security Interest. EFT shall at Closing grant to Shareholder a
security interest in and to the Shares to secure the payment of the Note. In
addition, Corporation shall at Closing guarantee the payment of the Note and
shall grant to Shareholder a security interest in all of its assets to secure
the payment of the Note.
ARTICLE III
CLOSING
3.1 Time and Place. Subject to the terms and conditions of this
Agreement, the closing of the acquisition (the "Closing") shall take place on
the date first above written via express mail service and facsimile or at the
offices of the Corporation's counsel, or such other time and place as the
parties may otherwise agree. The date on which the Closing date occurs (the
"Closing Date").
3.2 Procedure at the Closing. At the Closing, the parties agree that
the following shall occur:
(a) The Shareholder shall execute and give to EFT
stock powers for the Shares and such agreement as EFT deems necessary
to facilitate release of the Shares by the Bank to EFT.
(b) EFT shall deliver to Shareholder the stock powers
described in Section 2.3, above.
(c) EFT shall execute and deliver to Shareholder the
Note.
(d) The Corporation shall execute and deliver the
Security Agreement, UCC-1 Financing Statement and such other
documentation necessary to perfect a security interest in the assets of
the Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EFT
As a material inducement to the Shareholder to enter into this
Agreement and to consummate the transactions contemplated hereby, EFT makes the
following representations and warranties:
4.1 Corporate Status. EFT is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah.
4.2 Corporate Power and Authority. EFT has the corporate power and
authority to execute and deliver this Agreement and all other documents
contemplated hereby, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. EFT has taken all action necessary to
authorize the execution and delivery of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated
hereby.
4.3 Enforceability. This Agreement has been duly executed and delivered
by EFT and constitutes a legal, valid and binding obligation of EFT, enforceable
against EFT in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
4.4 Investment Purpose. EFT (i) is acquiring the Shares solely for the
purpose of investment and now with a view to, or for offer or sale in connection
with, any distribution thereof, (ii) understands that the Shares have not been,
and will not be, registered under the Securities Act of 1933, as amended (the
"Securities Act"), or under any state securities laws and are being offered and
sold in reliance upon federal and state exceptions for transactions not
involving any public offering, (iii) is a sophisticated investor with knowledge
and experiences in financial matters, has received certain information
concerning the Company and has had the opportunity to obtain additional
information concerning the Company and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in purchasing the Shares, (iv) is able to bear the economic risk of the
lack of liquidity inherent in holding the Shares, and (v) is an "accredited
investor" as that term is defined in Regulation D under the securities Act.
4.5 Investigation by Purchaser. In entering into this Agreement, EFT:
(a) acknowledges that neither the Corporation, Shareholder nor
any of their respective directors, officers, employees, affiliates,
agents, advisors or representatives makes any representation or
warranty, either express or implied, as to the accuracy or completeness
of any of the information provided or made available to EFT or its
agents or representatives except to the specific representations and
warranties set forth in this Agreement, and
(b) agrees, to the fullest extent permitted by law, that
neither the Corporation, Shareholder or any of their respective
directors, officers, employees, shareholders, affiliates, agents,
advisors or representatives shall have any liability or responsibility
whatsoever to EFT on any basis (including, without limitation, in
contract or tort, under federal or state securities laws or otherwise)
based upon any information provided or made available, or statements
made, to EFT, except that the foregoing limitations shall not (a) apply
to the Corporation and Shareholder to the extent the Corporation and/or
Shareholder make the specific representations and warranties set forth
in this Agreement, but always subject to the limitations and
restrictions contained herein, or (b) preclude EFT from seeking any
remedy for fraud.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION AND THE SHAREHOLDER
As a material inducement to EFT to enter into this Agreement and to
consummate the transactions contemplated hereby, the Corporation and the
Shareholder, jointly and severally, make the following representations and
warranties to EFT:
5.1 Corporate Status. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Utah and
has the requisite corporate power and authority to own or lease its properties
and to carry on the Business as now being conducted. The Corporation is duly
authorized and qualified, under all applicable laws, regulations, ordinances and
orders of public authorities, to carry on the Business in the places and in the
manner as now conducted, except where the failure to be so authorized or
qualified would not have a Material Adverse Effect on the Business or on the
operations, properties, assets or condition (financial or otherwise), of the
Corporation.
5.2 Power and Authority. Each of the Corporation and the Shareholder
has the corporate power and authority to execute and deliver this Agreement, to
perform his or its obligations hereunder and to consummate the transactions
contemplated hereby.
5.3 Enforceability. This Agreement has been duly executed and delivered
by the Shareholder, and constitutes the legal, valid and binding obligation of
each of the Corporation and the Shareholder, enforceable against the Corporation
and Shareholder in accordance with its terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
5.4 Capitalization. The Corporation has two classes of stock, preferred
and common stock. There are 3,000,000 shares of preferred stock authorized of
which there are no (0) shares issued and outstanding. There are 10,000,000
shares of common stock authorized of which there are 1,000,000 shares issued and
outstanding. The Shareholder is the record and beneficial owner of all of the
Shares, and owns the Shares free and clear of all Liens, restrictions, and
claims of any kind except as provided below. All of the Shares (a) have been
duly authorized and validly issued and are fully paid and non-assessable, (b)
were issued in compliance with all applicable state and federal securities laws,
(c) were not issued in violation of any preemptive rights or rights of first
refusal, and (d) no preemptive rights or rights of first refusal, other than as
set forth in the Articles of Incorporation, exist, and no such rights arise by
virtue of or in connection with the transactions contemplated hereby. There are
no outstanding or authorized rights, options, warrants, convertible securities,
subscription rights, conversion rights, exchange rights or other agreements or
commitments of any kind that could require the Corporation to issue or sell or
require any Shareholder to sell or transfer any shares of the Corporation's
capital stock (or securities convertible into or exchangeable for shares of its
capital stock). There is no outstanding stock appreciation, phantom stock,
profit participation, or other similar rights with respect to the Corporation.
There are no proxies, voting rights or other agreements or understandings with
respect to the voting, or transfer of the shares of capital stock of the
Corporation. There has been no transaction or action taken with respect to the
equity ownership of the Corporation in contemplation of the transactions
described in this Agreement. The Shareholder has pledged its interest in the
Shares to Bank One, Utah NA ("Bank") to secure Shareholder's obligations under a
line of credit ("Line of Credit"). In addition, the Line of Credit is secured
with all of the assets of Corporation. At Closing there is $2,900,000 owing
pursuant to the Line of Credit. The Line of Credit is not in default and if no
payments were made towards the Line of Credit other than the payments provided
for in Section 2.1 it will not become in default. Shareholder shall make no
further draws on the Line of Credit and will take such action as EFT may request
to freeze the Line of Credit so that no additional draws can be made and to
provide for the transfer of the ownership of the Shares to EFT and the release
of the Bank's security interest in the Shares and the assets of the Corporation
upon payment of the amount provided for in Section 2.1, above. Shareholder shall
also take all action necessary to prevent the Line of Credit from becoming in
default. If the Line of Credit shall need to be renewed prior to being paid in
order to prevent a default, Shareholder shall take what ever action is
reasonably required to achieve said renewal, including, but not limited to
obtaining the consent to the individuals guaranteeing the Line of Credit to such
renewal.
5.5 Subsidiaries. The Corporation has no subsidiaries.
5.6 No Violation. Except with respect to the Line of Credit, the
execution and consummation of this Agreement will not (i) contravene any
provision of the articles or certificate of incorporation and bylaws of the
Corporation (the "Charter Documents"), (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment or
order of any Governmental Authority or of any arbitration award which is either
applicable to, binding upon or enforceable against the Corporation or the
Shareholder, or the assets of the Corporation, (iii) conflict with, result in
any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under, or
give rise to a right to terminate, amend, modify, abandon or accelerate, any
contract which is applicable to, binding upon or enforceable against the
Shareholder or the assets of the Corporation, (iv) result in or require the
creation or imposition of any Lien upon or with respect to any of the assets of
the Corporation, or (v) require the consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person; except with respect to clauses (iii) and (iv) that
would not have a Material Adverse Effect.
5.7 No Commissions. The Shareholder and the Corporation have not
incurred any obligation for any finder's or broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby.
5.8 Financial Statements. The Shareholder has delivered to EFT the
financial statements of the Corporation for the years ended December 31, 1998
and the monthly financials for September and October, 1999 (collectively, the
"Financial Statements"), copies of which are attached hereto as Schedule 5.8.
The balance sheet dated as of October 31, 1999 of the Corporation included with
the Financial Statements is referred to herein as the "Current Balance Sheet."
The Financial Statements have been prepared in accordance with generally
accepted accounting principles, and fairly present the financial position of the
Corporation at the balance sheet dates and the results of operations for the
periods covered thereby. To the best of Corporation's and Shareholder's
knowledge, the books and records of the Corporation fully and fairly reflect all
transactions, properties, assets, and liabilities of the Corporation. There are
no material special or non-recurring items of income or expense during the
periods covered by the Financial Statements, and the Current Balance Sheet does
not reflect any write-up or revaluation increasing the book value of any assets,
except as specifically disclosed in the notes thereto. The Financial Statements
reflect all adjustments necessary for a fair presentation of the financial
information contained therein.
5.9 Changes Since the Current Balance Sheet. Except as specifically set
forth in this Agreement or Exhibit 5.9, since the date of the Current Balance
Sheet, the Corporation has not (i) issued any capital stock or other securities
or incurred or suffered any change in its authorized capital, or securities
outstanding, or ownership interests, or granted any options, warrants, calls,
conversion rights, or commitments; (ii) made any distribution of or with respect
to its capital stock or other securities or purchased or redeemed, directly or
indirectly, any of its securities; (iii) paid any bonus to or increased the rate
of compensation of any of its officers, directors, or salaried employees, or
amended any other terms of employment of such persons; (iv) sold, leased or
transferred any of its properties or assets other than in the ordinary course of
business consistent with past practice; (v) made or obligated itself to make
capital expenditures other than in the ordinary course of business consistent
with past practice; (vi) made any payment in respect of its liabilities other
than in the ordinary course of business consistent with past practice; (vii)
incurred any obligations or liabilities (including any indebtedness) or entered
into any transaction or series of transactions involving in excess of $5,000 in
the aggregate other than in the ordinary course of business consistent with past
practice, except for this Agreement and the transactions contemplated hereby;
(viii) waived, canceled, compromised or released any rights, indebtedness, or
other obligations owing to it having a value in excess of $5,000 in the
aggregate; (ix) made or adopted any change in its accounting practice or
policies; (x) made any adjustment to its books and records other than in respect
of the conduct of its business activities in the ordinary course consistent with
past practice; (xi) entered into any transaction with any Affiliate other than
inter-company transactions in the ordinary course of business consistent with
past practice; (xii) entered into any employment agreement; (xiii) terminated,
amended or modified agreements in the aggregate involving an amount in excess of
$5,000 in the aggregate; (xiv) imposed any security interest or other Lien on
any of its assets; (xv) delayed paying any account payable which is due and
payable except to the extent being contested in good faith; (xvi) made or
pledged any charitable contribution; (xvii) entered into any plan, agreement, or
arrangement granting any preferential rights to purchase or acquire any
property, rights or assets other than in the ordinary course of business;
(xviii) entered into any other transaction or was subject to any event which had
or may have a Material Adverse Effect on the Corporation or the Business; (xix)
engaged in any transaction other than in the ordinary course of the Business;
(xx) suffered or incurred any work interruptions, labor grievances, or claims
filed, or any similar event which has or would have a Material Adverse Effect on
the Corporation or the Business; or (xxi) agreed to do or authorized any of the
foregoing.
5.10 Litigation. There is no action, suit, or to Corporation's
knowledge other legal or administrative proceeding or governmental investigation
pending, threatened, anticipated or contemplated against, by or affecting the
Shareholder, the Corporation, the Business, or the assets of the Corporation
that would have a Material Adverse Effect, or which questions the validity or
enforceability of this Agreement or the transactions contemplated hereby, and
there is no basis for any of the foregoing. There are no outstanding orders,
decrees or stipulations issued by any Governmental Authority in any proceeding
to which the Shareholder or the Corporation are or were a party which have not
been complied with in full or which continue to impose any material obligations
on the Shareholder, the Corporation or the assets of the Corporation. None of
the actions referred to in Schedule 5.10, individually or taken together will
have a Material Adverse Effect on the Corporation.
5.11 Liabilities, Royalties and Lease. Schedule 5.11 sets forth since
the date of the most current Financial Statements all liabilities or
obligations, whether accrued, absolute, contingent or otherwise, of the
Corporation, including (i) liabilities and obligations reflected on the Current
Balance Sheet and not paid or discharged, and (ii) liabilities incurred in the
ordinary course of business prior to the date of the Current Balance Sheet which
were not required to be recorded thereon (the liabilities and obligations
referenced in (i) and (ii) above are referred to as the "Designated
Liabilities"). Schedule 5.11 also sets forth all royalty or royalty-type payment
obligations of the Corporation of the type that would be incurred in the normal
operation of the Business.
The Corporation has delivered to EFT, in the case of those liabilities
set forth on Schedule 5.11 and the Financial Statements which are contingent, a
reasonable estimate of the maximum amount which may be payable. For each such
contingent liability, the Corporation has provided to EFT the following
information: (A) a summary description of the liability together with the
following: (i) copies of all relevant documentation relating thereto; (ii)
amounts claimed and any other action or relief sought; and (iii) name of
claimant and all other parties to the claim, suit or proceeding; and (B) the
name of each court or agency before which such claim, suit or proceeding is
pending; and (C) the date such claim, suit or proceeding was instituted.
5.12 Environmental Matters.
(a) To Corporation's and Shareholder's best knowledge the Corporation
has complied and is in compliance with all federal, state, local and foreign
statutes (civil and criminal), laws, ordinances, regulations, rules, notices,
permits, judgments, orders and decrees applicable to any of them or any of their
respective properties, assets, operations and businesses relating to
environmental protection including, without limitation, Environmental Laws
relating to protection of the air, water, or land or to the generation, storage,
use, handling, transportation, treatment or disposal of Wastes or Hazardous
Substances;
(b) The Corporation has obtained and complied with all necessary
permits and other approvals necessary to treat, transport, store, dispose of or
otherwise handle Wastes or Hazardous Substances and have reported, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the Corporation or any of its Subsidiaries where Wastes or Hazardous
Substances have been treated, stored, used, disposed of or otherwise handled;
(c) To Corporation's and Shareholder's best knowledge there have been
no releases at, from, under, in or on any property owned or operated by the
Corporation or any of its subsidiaries except as permitted by Environmental
Laws;
(d) The Corporation and the Shareholder know of no on-site location to
which the Corporation or any of its Subsidiaries has transported or disposed of
Wastes or Hazardous Substances, which site is the subject of any federal, state,
local or foreign enforcement action or any other investigation which could lead
to any claim against the Corporation, any of its subsidiaries or EFT for any
clean-up cost, remedial work, damage to natural resources or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and
(e) To the best of Corporation's and Shareholder's knowledge the
Corporation has no contingent liability in connection with any release of any
Waste or Hazardous Substance into the environment.
As used in this Agreement, "Environmental Laws" means all federal,
state, regional and local statutes, laws, rules, regulations, codes, orders,
plans, injunctions, decrees, rulings, and changes or ordinances or judicial or
administrative interpretations thereof, whether currently in existence or
hereafter enacted or promulgated, any of which govern (or purport to govern) or
relate to pollution, protection of the environment, public health and safety,
air emissions, water discharges, hazardous or toxic substances, solid or
hazardous waste or occupational health and safety, as any of these terms are or
may be defined in such statutes, laws, rules, regulations, codes, orders, plans,
injunctions, decrees, rulings and changes or ordinances, or judicial or
administrative interpretations thereof, including, without limitation, the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of
1976 and subsequent Hazardous and Solid Waste Amendments of 1984 (collectively,
"RCRA"); the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendment and Reauthorization Act
(collectively, "CERCLA"); the Hazardous Materials Transportation Act; the Toxic
Substances Control Act; the Clean Air Act; the Clean Water Act; the Federal
Insecticide, Fungicide and Rodenticide Act, as amended ("FIFRA"); the Emergency
Planning and Community Right-to-Know Act of 1986, as amended ("EPCRA") and the
Occupational Safety and Health Act of 1970, as amended ("OSHA"). For purposes of
this Section, the term "Hazardous Substances" shall be construed broadly to
include any toxic or hazardous substance, material, or waste, and any other
contaminant, pollutant or constituent thereof, whether liquid, solid,
semi-solid, sludge and/or gaseous, including without limitation, chemicals,
compounds, by-products, pesticides, asbestos containing materials, petroleum or
petroleum products, and polychlorinated biphenyls, the presence of which
requires investigation or remediation under any Environmental Laws or which are
or become regulated, listed or controlled by, under or pursuant to any
Environmental Laws. For purposes of this Section, the term "Waste" shall be
construed broadly to include agricultural wastes, biomedical wastes, biological
wastes, bulky wastes, construction and demolition debris, garbage, household
wastes, industrial solid wastes, liquid wastes, recyclable materials, sludge,
solid wastes, special wastes, used oils, white goods, and yard trash.
5.13 Good Title, Adequacy and Condition.
(a) The Corporation has good and marketable title to its assets with
full power to sell, transfer and assign the same, free and clear of any lien,
except as provided in Section 5.4, above.
(b) Such assets constitute, in the aggregate, all of the assets and
properties necessary for the conduct of the Business in the manner in which and
to the extent to which such business is currently being conducted and include,
without limitation, all tangible and intangible assets owned by the Corporation,
including all vehicles, equipment and inventory
5.14 Compliance with Laws. The Corporation is not in violation of any
material law or regulation or any order of any court or federal, state, local or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over the Corporation. The Corporation has
conducted and is conducting the Business in compliance with the requirements,
standards, criteria and conditions set forth in material, applicable federal,
state and local statutes, ordinances, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing.
5.15 Employee Benefit Plans.
(a) Schedule 5.15 contains a list setting forth each employee benefit
plan or arrangement of the Corporation, including but not limited to employee
profit sharing plans, as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), multiemployer plans, as
defined in Section 3(37) of ERISA, employee welfare benefit plans, as defined in
Section 3(1) of ERISA, deferred compensation plans, stock option plans, bonus
plans, stock purchase plans, hospitalization, disability and other insurance
plans, severance or termination pay plans and policies, whether or not described
in Section 3(3) of ERISA, in which employees, their spouses or dependents, of
the Corporation participate ("Employee Benefit Plans") (true and accurate copies
of which, together with the most recent annual reports on Form 5500 and summary
plan descriptions with respect thereto, were furnished to EFT). With respect to
each Employee Benefit Plan (i) each has been administered in all material
respects in compliance with its terms and with all applicable laws, including,
but not limited to, ERISA and the Code; (ii) no actions, suits, claims or
disputes are pending, or to the best knowledge of the Corporation or
Shareholder, threatened; (iii) no audits, inquiries, reviews, proceedings,
claims, or demands are pending with any governmental or regulatory agency; (iv)
there are no facts which could give rise to any material liability in the event
of any investigation, claim, action, suit, audit, review, or other proceeding;
(v) all material reports, returns, and similar documents required to be filed
with any governmental agency or distributed to any plan participant have been
duly and timely filed or distributed; and (vi) no "prohibited transaction" has
occurred within the meaning of the applicable provisions of ERISA or the Code.
(b) The Corporation has no Employee Benefit Plan that qualifies or is
intended to qualify under Code Section 401(a) or 403(a).
(c) None of the Employee Benefit Plans obligates the Corporation to pay
separation, severance, termination or similar benefits solely as a result of any
transaction contemplated by this Agreement or solely as a result of a "change of
control" (as such term is defined in Section 280G of the Code), and all required
or discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements, or accruals for all periods ending prior to or as
of the Closing shall have been made or properly accrued on the Current Balance
Sheet of the Corporation as of the Closing, and none of the Employee Benefit
Plans has any unfunded liabilities which are not reflected on the Current
Balance Sheet of the Corporation.
5.16 Tax Returns and Examinations. All Tax Returns required to have
been filed by or with respect to the Corporation have been filed. It is
Shareholder's current belief and understanding that immediately prior to the
Closing, the Corporation will have a net operating loss carry forward of at
least $2.5 million.
5.17 Insurance. The Corporation and the Business are covered by valid,
outstanding and enforceable policies of insurance issued to the Corporation by
reputable insurers covering its properties, assets and the Business (the
"Insurance Policies"). Schedule 5.17 accurately sets forth all the Insurance
Policies, contains an accurate insurance loss run or worker's compensation
claims received for the past three (3) years, and describes any instance where
any insurance coverage has ever been cancelled and where the Corporation has
ever been denied coverage. The Insurance Policies are in full force and effect,
and all premiums due thereon have been paid. The Corporation has complied with
the provisions of the Insurance Policies. To the best knowledge, the Corporation
and the Shareholder, the Corporation has not failed to give, in a timely manner,
any notice required under any of the Insurance Policies to preserve its rights
thereunder.
5.18 Receivables. The Corporation and the Shareholder have delivered to
EFT an accurate list of the accounts and notes receivables of the Corporation as
of the date of the Current Balance Sheet, including any amounts not reflected on
the Current Balance Sheet and receivables from and advances to employees and the
Shareholder. All of the receivables of the Corporation are valid and legally
binding, represent bona fide transactions, and arose in the ordinary course of
business of the Corporation. All of such receivables are good and collectible
receivables and should be collectible in full in accordance with the terms of
such receivables (and in any event within six months following the Closing),
without setoff or counterclaim. Shareholder has no knowledge of any setoff or
counterclaim with respect to any such receivable.
5.19 Licenses and Permits. Schedule 5.19 lists and describes all of the
Corporation's licenses and required governmental or official approvals, permits
or authorizations (collectively, the "Permits") for the Corporation's Business
and operations. All Permits are valid and in full force and effect, the
Corporation is in compliance in all material respects with their requirements,
standards, criteria, and conditions set forth in the Permits, and no proceeding
is pending or threatened to revoke or amend any of the Permits. None of the
Permits is or will be impaired or in any way affected by the execution and
delivery of this Agreement or the transactions contemplated hereby except as
would not have a Material Adverse Effect.
5.20 Officers, Directors and Key Employees; Employment Agreements;
Compensation. Schedule 5.20 sets forth all employment agreements with officers,
directors and key employees of the Corporation (and any other employees having
employment agreements with the Corporation) and the rate of compensation (and
the portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons.
ARTICLE VI
SERVICES
6.1 Payment for Services. EFT shall pay to Shareholder the $500,000
management fee EFT owes to Corporation for services provided on or before May
31, 2000. Payment is being made to Shareholder as a result of Corporation's
assignment to Shareholder of the right to receive this amount. The Corporation
agrees to guaranty to Shareholder EFT's payment of this amount and to grant to
Shareholder a security interest in all of its assets to secure payment of this
amount.
ARTICLE VII
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
7.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby and to
satisfy the conditions set forth in Articles VIII and IX. The Shareholder shall
cause the Corporation to comply with all of the covenants of the Corporation
under this Agreement.
7.2 No Other Discussions. The Shareholder, the Corporation and their
respective Affiliates, employees, agents and representatives will not (i)
initiate or encourage the initiation by others of discussions or negotiations
with third parties or respond to solicitations by third persons relating to any
merger, sale or other disposition of any substantial part of the assets, the
Business or the properties of the Corporation (whether by merger, consolidation,
sale of stock, sale of assets, or otherwise), or (ii) enter into any agreement
or commitment (whether or not binding) with respect to any of the foregoing
transactions. The Shareholder will immediately notify EFT if any third party
attempts to initiate any solicitation, discussion, or negotiation with respect
to any of the foregoing transactions.
7.3 Covenant not to Compete. The Shareholder hereby agrees that for a
period of five (5) years (or for such different period hereinafter provided)
following the Closing (this covenant will terminate and not be effective in the
event Shareholder forecloses the Shares pursuant to Section 2.3, above), that
neither it nor its officers, directors or shareholders will:
(a) directly or indirectly, alone or as a partner, joint
venturer, officer, director, employee, consultant, agent, independent
contractor, lender or security holder, of any company or business,
engage in, or finance or provide financial assistance with respect to,
any business activity similar to Skyhook or the LSF anywhere within
one-hundred (100) miles of where the Corporation (and its subsidiaries)
conducted the Business prior to the Closing Date (the "Restricted
Territory"); provided, however, that the beneficial ownership of less
than five percent (5%) of any class of securities of any entity having
a class of equity securities actively traded on a national securities
exchange or over-the-counter market shall not be deemed, in and of
itself, to violate the prohibitions of this Section;
(b) for a period of one (1) year actively seek to induce any
employee of Corporation or EFT to leave his or her employment; or
(c) at any time following the Closing Date, directly or
indirectly, in any way utilize, disclose, copy, reproduce or retain in
his possession any of the Corporation's proprietary rights or records
acquired hereunder, including, but not limited to, any customer lists.
The Shareholder agrees and acknowledges that the restrictions contained
in this Section 7.3 are reasonable in scope and duration, and are necessary to
protect EFT. If any provision of this Section is adjudged by a court of
competent jurisdiction to be invalid or unenforceable, the same will in no way
affect the validity or enforceability of the remainder of this Agreement. If any
such provision, or any part thereof, is held to be unenforceable because of the
duration of such provision, the area covered thereby or otherwise, then the
parties agree that the court making such determination shall have the power to
reduce the duration, area or scope of such provision, and/or to delete specific
words or phrases, and in its reduced or modified form, such provision shall then
be enforceable and shall be enforced. The Shareholder agrees and acknowledges
that any breach of this Section will cause irreparable injury to EFT and upon
any breach or threatened breach of any provision of this Section, EFT shall be
entitled to injunctive relief, specific performance or other equitable relief,
without the necessity of posting bond; provided, however, that this shall in no
way limit any other remedies which EFT may have as a result of such breach,
including the right to seek monetary damages. The Shareholder hereby agrees that
EFT may assign, without limitation, the foregoing restrictive covenants to any
successor to EFT's vehicle towing and storage business.
7.4 Termination of Related Party Agreements. All existing agreements
between the Corporation and the Shareholder or its Affiliates shall have been
cancelled prior to the Closing except for the indebtedness provided for in
Section 7.5, below.
7.5 Limitation of Related Party Indebtedness. Immediately prior to the
Closing, Shareholder shall cause a reduction in the aggregate and total amount
of indebtedness owed by the Corporation to the Shareholder, shareholders of the
Shareholder and/or to any person related to the Shareholder or shareholders of
the Shareholder to be equal to $250,000.00. Said reduction in indebtedness shall
be accomplished by Shareholder contributing the reduction of indebtedness to the
capital of Corporation without the issuance of any additional shares of stock.
Said reduction shall not cause any increase in the purchase price provided in
Section 2.1, above. Repayment of said indebtedness by the Corporation is due and
payable, six (6) months after the Closing Date. No interest shall accrue if said
indebtedness is timely paid and if said indebtedness is not timely paid, then
interest on said amount shall accrue from the Closing Date until paid at the
rate of 8% per annum.
7.6 Tax Matters.
(a) Section 338 Election. With respect to EFT's acquisition of the
Corporation Shares, EFT may give written notice to Shareholder within 90 days
after the Closing Date of its intention to require the making of an election
under Section 338 ("Section 338 Election") of the Internal Revenue Code of 1986,
as amended (the "Code"), with respect to the Corporation. In that event,
Shareholder and Purchaser will report the transfers under this Agreement
consistent with any Section 338 Elections (and shall make any such available
election under any substantially similar state or local law), and shall take no
position contrary thereto unless required to do so by a "determination" (as
defined in Section 1313 of the Code, or similar provision of state and local
laws).
(i) EFT shall be responsible for the preparation and filing of
all forms related to or required by any Section 338 Elections (or similar state
or local elections) ("Section 338 Forms"), and, to the extent necessary, EFT
shall deliver such Section 338 Forms to Shareholder together with the notice of
its intent to require the making of a Section 338 Election. Shareholder shall
execute and deliver to EFT the information required to complete such forms upon
receipt thereof.
(ii) If EFT makes an election under Section 338(h)(10) of the
Code pursuant to this section 7.6(a), EFT shall submit to Shareholder for its
approval, which approval shall not be unreasonably withheld, an allocation
proposal (the "Allocation Proposal") prior to the making of such Section
338(h)(10) election, concerning the computation of Modified Aggregate Deemed
Sale Price ("MADSP"), as defined under the regulations applicable to the Section
338(h)(10) election, of the assets subject to a Section 338(h)(10) election, and
the allocation of such MADSP among such assets as of the Closing Date. EFT and
Shareholder agree, and will cause their subsidiaries, to act in accordance with
the approved Allocation Proposal, including with respect to the Section
338(h)(10) forms.
(iii) EFT agrees to bear the administration cost and
out-of-pocket expenses, including reasonable attorneys' fees, of preparing any
Section 338 Election made pursuant to this Agreement.
(b) Shareholder Indemnification. Subject to the $3,000,000 maximum set
forth in Article VIII of this Agreement, Shareholder shall be liable for, and
shall indemnify and hold EFT and the Corporation harmless against, all Taxes of
the Corporation payable for any taxable year or taxable period ending on or
before the Closing Date, and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such period
ending on and including the Closing Date, including, except as set forth herein,
all Taxes imposed by any taxing jurisdiction with respect to a Section
338(h)(10) election to the extent such Taxes are imposed as a result of such
Section 338(h)(10) election ("Section 338(h)(10) taxes").
(c) Corporation's and EFT's Indemnification. EFT and the Corporation
shall be liable for, and shall indemnify and hold Shareholder or any of its
affiliates harmless against (x) all Taxes imposed on the Corporation, or for
which the Corporation may otherwise be liable, for any taxable year or period
that begins after the Closing Date and, with respect to any taxable period
beginning prior to the Closing Date, the portion of such period beginning after
the Closing Date, and (y) Excluded Taxes).
(d) Apportionment of Taxes and Short Year Tax Return. In order to
appropriately apportion any Taxes relating to any taxable year beginning before
and ending after the Closing Date, the parties hereto shall apportion the
portion of such Taxes relating to the taxable period ending on or before the
Closing Date to such period by a closing of the Corporation's books consistent
with past practice for reporting items, except that exemptions, allowances or
deductions that are calculated on a time basis, such as the deduction for
depreciation, shall be apportioned on a time basis. Shareholder expressly
reserves the right to file a consolidated return with the Corporation and to
make any tax election available to it in connection therewith, for any taxable
period ending on or before the Closing date to the extent permitted under the
Code, and, to the extent necessary, EFT and the Corporation shall cooperate with
respect to such filings.
(e) Refunds or Credits. EFT or the Corporation shall promptly pay to
Shareholder any refunds or credits of Taxes for which Shareholder may be liable
under Section 7.6(d), the term "refund" shall include a reduction in Taxes and
the use of an overpayment of Taxes as an audit or other Tax offset and receipt
of a refund shall occur upon the filing of a return or an adjustment thereto
using such reduction, overpayment or offset, or upon the receipt of cash. Upon
the reasonable request of Shareholder, EFT shall prepare and file, or cause to
be prepared and filed, all claims for refunds relating to such Taxes; provided,
however, that EFT shall not be required to file such claims for refund to the
extent such claims for refund would have a Material Adverse Effect on the
Corporation in future periods or to the extent the claims for refund relate to a
carryback on an item. EFT shall be entitled to all other refunds and credits of
Taxes; provided, however, it will not allow the amendment of any Tax Return
relating to any Taxes for a period, or any portion thereof, ending on or prior
to the Closing Date, or the carryback of an item to a period ending prior to the
Closing Date without Shareholder's written consent, which consent will not be
unreasonably withheld.
(f) Mutual Cooperation. As soon as practicable, but in any event within
thirty (30) days after Shareholder's or EFT's request, as the case may be, EFT
shall deliver to Shareholder or Shareholder shall deliver to EFT, as the case
may be, such information and other data relating to the Tax Returns and Taxes of
the Corporation and shall provide such other assistance as may reasonably be
requested, to cause the completion and filing of all Tax Returns or to respond
to audits by any taxing authorities with respect to any Tax Returns or taxable
periods or to otherwise enable Shareholder, EFT or the Corporation to satisfy
their accounting or Tax requirements. For a period of five years from and after
the Closing, EFT and Shareholder shall, and shall cause their affiliates to,
maintain and make available to the other party, on such other party's reasonable
request, copies of any and all information, books and records referred to in
this Section 7.6(e). After such five-year period, EFT or Shareholder may dispose
of such information, books and records, provided that prior to such disposition,
EFT or Shareholder shall give the other party the opportunity to take possession
of such information, books and records.
(g) Contests. Whenever any taxing authority asserts a claim, makes an
assessment, or otherwise disputes the amount of Taxes for which Shareholder is
or may be liable under this Agreement, EFT shall, if informed of such an
assertion, promptly inform Shareholder, and Shareholder shall have the right to
control any resulting proceedings and to determine whether and when to settle
any such claim, assessment, or dispute, to the extent such proceedings affect
the amount of Taxes for which Shareholder is liable under the Agreement.
Whenever any taxing authority asserts a claim, makes an assessment or otherwise
disputes the amount of Taxes for which EFT is liable under this Agreement, EFT
shall have the right to control any resulting proceedings and to determine
whether and when to settle any such claim, assessment, or dispute, except to the
extent such proceedings affect the amount of Taxes for which the Shareholder is
liable under this Agreement.
(h) Survival of Obligations. The obligations of the parties set forth
in this Section 7.6 shall be unconditional and absolute, and shall remain in
effect without limitation as to time or amount of recovery.
ARTICLE VIII
INDEMNIFICATION
8.1 Agreement by Shareholder to Indemnify. Subject to the limitation of
Section 8.2, below, the Shareholder agrees to indemnify and hold EFT, the
Corporation and their Affiliates, officers, directors, and agents thereof
(collectively, the "Indemnified Party") harmless from and against the aggregate
of all expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and expenses)
incurred or suffered by the Indemnified Party (collectively, "Indemnifiable
Damages") resulting from or arising out of (i) any breach of a representation or
warranty made by the Shareholder or the Corporation in or pursuant to this
Agreement, (ii) any breach of the covenants or agreements made by the
Shareholder or the Corporation in this Agreement, (iii) any inaccuracy in any
certificate delivered by the Shareholder or the Corporation pursuant to this
Agreement, or (iv) _any liabilities of the Corporation other than the Designated
Liabilities. By way of explanation and not in limitation of the foregoing,
Shareholder agrees to indemnify and hold the Indemnified Party harmless from any
and all costs incurred by EFT to remediate the environmental conditions and all
damages suffered by EFT as a result of such environmental conditions and any
such costs incurred or damages suffered by such Indemnified Party shall
constitute Indemnifiable Damages.
8.2 The above indemnity provision, as well as any recovery by EFT for
breach of any of the warranties or representations of Corporation and/or
Shareholder contained herein, shall be limited as follows. Shareholder shall
only be liable to EFT if the total of the damages from all such breach exceeds
$25,000, in which case, Shareholder shall be liable for all damages, but in no
event shall Shareholder be liable for more than $3,000,000. In addition, all
claims for indemnity or recovery for breach of a warranty or representation must
be made by EFT within eighteen (18) months of the date hereof. Such claims made
after such period are hereby released.
8.3 Survival of Representations and Warranties. Each of the
representations and warranties made by the Corporation and the Shareholder in
this Agreement or pursuant hereto shall survive the Closing of the transactions
contemplated hereby for the period provided in Section 8.2, above.
Notwithstanding any knowledge of facts determined or determinable by any party
by investigation, each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement or in any other documents or papers delivered in
connection herewith. Each representation, warranty, covenant, and agreement of
the parties contained in this Agreement is independent of each other
representation, warranty, covenant, and agreement.
ARTICLE IX
DEFINITIONS
9.1 Defined Terms. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall mean any substantially related trust, entity, or
person.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Lien" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind (including, but not limited to, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code or comparable law or any jurisdiction in connection
with such mortgage, pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities, rights,
obligations, operations, business or prospects of the Corporation which change
(or effect) individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations, operations,
business or prospects (an individual incident causing or which would be expected
to cause damages greater than $7,500 shall deem to be material).
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, estate, trust,
unincorporated association, joint venture, Governmental Authority or other
entity, of whatever nature.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, franchise, intangible, withholding,
social security and unemployment taxes imposed by any federal, state, local or
foreign governmental agency, and any interest or penalties related thereto.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered (and shall
be deemed delivered) by certified or registered mail (first class postage
pre-paid), guaranteed overnight delivery, or facsimile transmission if such
transmission is confirmed by delivery by certified or registered mail (first
class postage pre-paid) or guaranteed overnight delivery, to the following
addresses and telecopy numbers (or to such other addresses or telecopy numbers
which such party shall designate in writing to the other party):
(a) if to EFT:
Xxx X. Xxxx
12th Floor
000 Xxxxx Xxxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
(b) if to the Corporation or Shareholder:
Megellan Technology, Inc.
00000 Xxxxx 000 Xxxx
Xxxxxx, Xxxx 00000
Attn: President
10.2 Entire Agreement. This Agreement (including the Exhibits and
Schedules attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matter and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter. The
Exhibits and Schedules constitute a part hereof as though set forth in full
above.
10.3 Expenses. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby. The
Shareholder hereby agrees to pay any and all sales and/or use taxes that may
become due and owing as a result of the completion of the transactions
contemplated hereby.
10.4 Amendment; Binding Effect; Assignment. This Agreement may not be
modified, amended, supplemented, canceled, or discharged, except by written
instrument executed by all parties. The rights and obligations of this Agreement
shall bind and inure to the benefit of the parties and their respective
successors and assigns. Except as expressly provided herein, the rights and
obligations of this Agreement may not be assigned by the Shareholder without the
prior written consent of EFT.
10.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
10.6 Governing Law; Interpretation. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Utah applicable to contracts executed and to be wholly performed within such
State. Any suit, action or proceeding arising out of, or with respect to, this
Agreement or any judgment entered by any court in respect thereof shall be
brought in the courts of Salt Lake County, Utah or in the U.S. District Court
for the District of Utah and each party hereby irrevocably accepts and consents
to the exclusive personal jurisdiction of those courts for the purpose of any
suit, action or proceeding.
10.7 Representation by Counsel. Each party hereto represents and agrees
with the other that it has been represented by independent counsel of its own
choosing; it has had the full right and opportunity to consult with its
respective attorneys and other advisors and has availed itself of this right and
opportunity; its authorized officers have carefully read and fully understand
this Agreement in its entirety and have had it fully explained to them by such
party's counsel; it is fully aware of the contents hereof and the meaning,
intent and legal effect thereof; and its authorized officer is competent to
execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence. The provisions of this Agreement shall be interpreted
in a reasonable manner to effect the intentions of the parties and this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
ENVIROFOAM TECHNOLOGIES, INC.
By ________________________________
Its ________________________________
SKYHOOK TECHNOLOGIES, INC.
By ________________________________
Its ________________________________
MEGELLAN TECHNOLOGY, INC.
By ________________________________
Its ________________________________
