EXHIBIT 10.5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 23rd day of June, 2005 (the "Effective Date") by and between
Bridgetech Holdings International, Inc., a Delaware corporation (the "Buyer"),
and the stockholders of Clarity Imaging International, Inc., a Texas corporation
(the "Company"), identified on Schedule 1 hereto (the "Stockholders").
BACKGROUND STATEMENT
WHEREAS, the outstanding capital stock of the Company consists of 1,000
shares of common stock, par value $0.10 per share (the "Company Shares");
WHEREAS, the Stockholders own all of the Company Shares, in the
respective amounts set forth on Schedule 1 hereto;
WHEREAS, the Stockholders are willing to sell to the Buyer and the
Buyer is willing to purchase from the Stockholders all of the Company Shares on
the terms and conditions stated herein; and
WHEREAS, as consideration for the Company Shares, the Buyer will issue
to the Stockholders shares of its common stock (the "Bridgetech Shares") on the
terms and conditions stated herein.
AGREEMENT
NOW THEREFORE, in consideration of the promises and mutual
representations, warranties and covenants herein contained, and intending to be
legally bound, the Buyer and the Stockholders hereby agree as follows:
ARTICLE 1
SALE AND TRANSFER OF COMPANY SHARES
1.1 Sale of the Company Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing and effective as of the
Closing Date, each Stockholder shall sell and transfer the Company Shares owned
by such Stockholder to the Buyer, and the Buyer will purchase the Company Shares
from the Stockholders. The consideration to be paid by the Buyer to the
Stockholders for the Company Shares shall consist of the Closing Shares and the
Earn-Out Shares.
1.2 Closing Shares.
(a) At Closing, Buyer shall issue and deliver to each
Stockholder a number of Bridgetech Shares calculated by multiplying (i) such
Stockholder's Ownership Percentage by (ii) the number of Closing Shares. Any
fractional shares resulting from such calculation shall be allocated among the
Stockholders in any reasonable manner that may be determined by Buyer.
(b) For purposes of this Agreement:
(i) "Closing Shares" shall mean 368,480 Bridgetech Shares.
1
(ii) "Ownership Percentage" shall mean, with respect to each
Stockholder, that percentage calculated by dividing (1) the number of Company
Shares owned by such Stockholder by (2) the aggregate number of Company Shares
outstanding.
1.3 Earn-Out.
(a) Earn-out Criteria. For the period of time commencing on the
Closing Date and terminating three years thereafter (the "Earn-Out Measurement
Period"), the Stockholders shall be entitled to receive as additional
consideration for the Company Shares a number of additional Bridgetech Shares
calculated in accordance with Section 1.3(b) hereof (the "Earn-Out Shares")
depending on the extent to which the Company meets the following performance
criteria:
(i) the Company's EBITDA for the one-year period ending on the
first anniversary of the Closing Date ("Year 1") exceeds $ (1,142,303) (the
"Year 1 Target");
(ii) the Company's EBITDA for the one-year period ending on the
second anniversary of the Closing Date ("Year 2") exceeds $ 455,225 (the "Year 2
Target"); and,
(iii) the Company's EBITDA for the one-year period ending on
the third anniversary of the Closing Date ("Year 3") exceeds $ 5,230,440 (the
"Year 3 Target," together with the Year 1 Target and the Year 2 Target, the
"Aggregate Three-Year EBITDA Target").
For purposes of the foregoing calculations, "EBITDA" shall mean earnings before
interest, taxes, depreciation and amortization, calculated in accordance with
United States generally accepted accounting principles.
(b) Earn-out Calculation. If the sum of the Company's EBITDA
for Year 1, Year 2 and Year 3 (the "Actual Three-Year EBITDA") equals or exceeds
the Aggregate Three-Year EBITDA Target of $4,543,362, then the Stockholders, in
the aggregate, shall be entitled to receive all of the Maximum Bridgetech
Earn-Out Shares. If the Company's Actual Three-Year EBITDA is less than the
Aggregate Three-Year EBITDA Target, then the Stockholders shall not be entitled
to receive any Earn-Out Shares
For purposes of this Agreement, "Maximum Bridgetech Earn-Out
Shares" shall mean 368,480 Bridgetech Shares.
(c) Delivery of the Earn-Out Shares. Subject to Section 8.6 hereof,
if the Stockholders are entitled to receive Earn-Out Shares pursuant to Section
1.3(b), each Stockholder shall be entitled to receive a number of Earn-Out
Shares calculated by multiplying (i) such Stockholder's Ownership Percentage by
(ii) the number of Earn-Out Shares to which the Stockholders, in the aggregate,
are entitled under Section 1.3(b). Any fractional shares resulting from such
calculation shall be allocated among the Stockholders in any reasonable manner
that may be determined by Buyer. Buyer shall deliver such Earn-Out Shares (less
any Earn-Out Shares withheld or canceled pursuant to Section 8.6) to the
Stockholders within 90 days after the last day of the Earn-Out Measurement
Period.
1.4 Stockholders' Representative.
(a) Generally. By executing this Agreement, each Stockholder
designates Xxxxxxx Xxxx (the "Stockholders' Representative") to serve as, and
the Stockholders' Representative accepts such designation as, the representative
of each such Stockholder and as the attorney-in-fact and agent for
2
and on behalf of each such Stockholder with respect to (x) any dispute related
to this Agreement, and (y) the taking by the Stockholders' Representative of any
and all actions and the making of any decisions required or permitted to be
taken by the Stockholders' Representative or any Stockholder under this
Agreement, including the exercise by the Stockholders' Representative of the
power to: (i) initiate, negotiate, enter into resolutions, settlements and
compromises of, demand arbitration of, arbitrate, comply with the orders of
courts and awards of arbitrators with respect to any such disputes; (ii) give
and receive notices and communications, receive service of process, organize or
assume the defense of claims related to this Agreement, agree to, negotiate, or
enter into settlements and compromises of, and demand arbitration and comply
with orders of courts and awards of arbitrators with respect to claims related
to this Agreement; (iii) receive any funds due any Stockholder or the
Stockholders' Representative related to this Agreement; and (iv) take all
actions necessary in the judgment of the Stockholders' Representative for the
accomplishment of any of the foregoing. The Stockholders' Representative will
have authority and power to and shall act on behalf of any Stockholder with
respect to the disposition, settlement or other handling of any dispute and any
other rights or obligations arising under or related to this Agreement. Each
Stockholder shall be bound by all actions taken and all documents executed by
the Stockholders' Representative in connection with any dispute arising under or
related to this Agreement. Each Stockholder acknowledges and agrees that in
performing the functions specified in this Agreement, the Stockholders'
Representative will not be liable to any such Stockholder in the absence of
willful misconduct or fraud on the part of the Stockholders' Representative and
the Stockholders agree to indemnify and hold the Stockholders' Representative
harmless against any and all Losses including reasonable attorneys' fees
incurred by the Stockholders' Representative by reason of it taking any action
or omitting to take any action pursuant to this Agreement other than Losses
incurred as a result of willful misconduct or fraud on the part of the
Stockholders' Representative. Notices or communications to or from the
Stockholders' Representative shall constitute notice to or from any applicable
Stockholder. Any decision, act, consent or instruction of the Stockholders'
Representative shall constitute a decision, act, consent or instruction of all
Stockholders and shall be final, binding, and conclusive upon each such
Stockholder. The Company and the Buyer may rely upon any written decision, act,
consent or instruction of the Stockholders' Representative as being the
decision, act, consent or instruction of each and every Stockholder. Each
Stockholder hereby releases the Buyer and the Company from any liability for any
acts done by either of them in accordance with any written decision, act,
consent or instruction of the Stockholders' Representative.
(b) Purchaser's Representative. Each Stockholder who the Buyer
determines is not an "accredited investor," as that term is defined in Rule 501
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
hereby acknowledges that such Stockholder, by completing and executing a
Stockholder Representation Form in the form attached hereto as Exhibit A (the
"Stockholder Representation Form"), has appointed the Stockholders'
Representative to serve as such Stockholder's "purchaser representative," as
that term is defined in Rule 501 promulgated under the Securities Act for
purposes of the Buyer's compliance with Regulation D under the Securities Act or
otherwise. The Stockholders' Representative hereby accepts each such appointment
to serve as the "purchaser's representative" for each Stockholder that is not an
accredited investor.
ARTICLE 2
CLOSING
2.1 The Closing. The purchase and sale provided for in this Agreement
(the "Closing") will take place at the offices of Xxxxxxxxxx Xxxxxx & Xxxxxxx
LLP, the Buyer's counsel, in New York, New
3
York, commencing at 10:00 a.m. (local time) on June ___, 2005 or such other
location, date or time as the Buyer and the Stockholders' Representative agree
(the "Closing Date").
2.2 Closing Deliveries. The following deliveries shall be made on the
Closing Date, none of which shall be deemed delivered until all of them have
been delivered (or waived by the Party entitled to receive any such delivery).
(a) The Buyer's deliveries to the Stockholders' Representative (the
"Buyer Closing Deliveries") shall consist of the following:
(i) Share certificates representing the Closing Shares to be
delivered to the Stockholders.
(ii) A certificate of good standing for Buyer.
(iii) An officer's certificate substantially in the form attached
hereto as Exhibit B and incorporated herein ("Buyer's
Certificate").
(b) The Stockholders' deliveries to the Buyer (the "Stockholders
Closing Deliveries") shall consist of the following:
(i) Each Stockholder shall deliver a share certificate
representing all of the Company Shares held by such
Stockholder, duly endorsed by such Stockholder for transfer
of the Company Shares to the Buyer.
(ii) Each Stockholder shall deliver a completed and executed
Stockholder Representation Form.
(iii) The Stockholders shall deliver a certificate of good standing
for the Company.
(iv) The Stockholders' Representative shall deliver a certificate
substantially in the form attached hereto as Exhibit C
("Stockholders' Representative Certificate").
4
ARTICLE 3
CLOSING CONDITIONS
3.1 Stockholders' Closing Conditions. The obligation of the
Stockholders to proceed with the Closing under this Agreement is subject to the
fulfillment prior to, or at the time of, Closing of the following conditions
(any one or more of which may be waived in whole or in part by the Stockholders
at its option).
(a) Compliance with Agreement. The Buyer shall have performed and
complied with all of its obligations under this Agreement which are to be
performed or complied with by it prior to or on such date.
(b) Representations and Warranties. The representations and
warranties made by the Buyer in this Agreement shall be true and correct in all
respects as of the Closing Date with the same force and effect as if such
representations and warranties had been made on such date.
(c) No Material Adverse Change. There shall be no change in or
development with respect to the Buyer having occurred that has resulted in, or
could be reasonably expected to result in, a material adverse effect in the
operations, financial condition or prospects of the Buyer or could be reasonably
be expected to result in an negative impact on the value of the Bridgetech
Shares.
(d) Buyer Closing Deliveries Tendered. Buyer shall have tendered to
the Stockholders all of the Buyer Closing Deliveries.
3.2 Buyer Closing Conditions. The obligation of the Buyer to proceed
with the Closing under this Agreement is subject to the fulfillment prior to or
at the time of Closing of the following conditions (any one or more of which may
be waived in whole or in part by the Buyer at its option):
(a) Compliance with Agreement. Each Stockholder shall have
performed and complied with all of the obligations under this Agreement which
are to be performed or complied with by it prior to or on such date.
(b) Representations and Warranties. The representations and
warranties made by the Stockholders in this Agreement shall be true and correct
in all respects as of the Closing Date with the same force and effect as if such
representations and warranties had been made on such date.
(c) No Material Adverse Change. There shall be no change in or
development with respect to the Company having occurred that has resulted in, or
could be reasonably expected to result in, a material adverse effect in the
operations, financial condition or prospects of the Company or could be
reasonably be expected to result in an negative impact on the value of the
Company Shares.
(d) Satisfactory Due Diligence Results. Buyer shall have completed
its due diligence investigation, with the results being satisfactory to Buyer in
its sole and absolute discretion. Such due diligence investigation may include
environmental evaluations and testing, review of financial books and records,
physical examination of property, plant and equipment (including vehicles and
machinery) and an assessment of operating conditions and costs of the existing
plant and equipment to ensure that capital replacement program and business
forecasts provided by the Company and/or Stockholders to Buyer are realistic.
(e) Stockholders Closing Deliveries Tendered. The Stockholders
shall have tendered to Buyer all of the Stockholders Closing Deliveries.
5
ARTICLE 4
REPRESENATIONS AND WARRANTIES OF STOCKHOLDERS
The Stockholders hereby represent and warrant, jointly and severally,
to Buyer on and as of the Effective Date and again on and as of the Closing
Date:
4.1 Status and Authorization. Each Stockholder has had at all times the
power and authority to own the Company Shares. The Stockholders have all
requisite power, authority, and capacity to execute and deliver this Agreement
and all other agreements, documents, and instruments contemplated hereby and to
carry out all actions required of it pursuant to the terms of this Agreement.
This Agreement has been duly executed and delivered by the Stockholders and
constitutes the legal, valid, and binding obligation of each Stockholder,
enforceable against each Stockholder in accordance with its terms.
4.2 Noncontravention. Neither the execution and delivery of this
Agreement by the Stockholders nor the consummation by the Stockholders of the
transactions contemplated hereby will constitute a violation of, or be in
conflict with, or constitute or create a default under, or result in the
creation or imposition of any security interest, liens, claims, charges,
options, debts, conditional sales agreements, title retention agreements,
encumbrances of any kind, or restrictions against the transfer or assignment
thereof upon the Company Shares held by the Stockholders pursuant to any
agreement or commitment to which any Stockholder is a party or by which any
Stockholder is bound, or to which any Stockholder is subject, or any applicable
law.
4.3 Company Share Ownership. Each Stockholder is the sole lawful record
and beneficial owner of and has good and valid record and marketable title to
those shares of the Company Shares set forth beside such Stockholder's name on
Schedule 1 hereto and has the right to sell, convey, transfer, assign, and
deliver such Company Shares to the Buyer without any restrictions except as may
be imposed under the Securities Act. Each Stockholder owns all right, title and
interest in and to the Company Shares set forth beside its name on Schedule 1
hereto free and clear of any and all liens, encumbrances, adverse rights and
claims of any kind whatsoever. Neither any act or omission of any Stockholder or
any predecessor in interest, nor the transactions contemplated by this Agreement
or the agreements and actions contemplated hereby, has resulted in, or will
result in, any person having any claim or cause of action whatsoever involving
any Company Shares.
4.4 Stockholder Representation Letters. Each Stockholder hereby
represents and warrants that all information provided by such Stockholder or
acknowledged by such Stockholder in the Stockholder's Representation Form
completed and executed by each Stockholder is true, correct and complete in all
respects.
4.5 Information. The Stockholders have been afforded the opportunity to
ask questions of the officers and other representatives of the Buyer. The
Stockholders have sought such accounting, legal and tax advice as they have
considered necessary to make an informed decision with respect to their
acquisition of the Bridgetech Shares.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
REGARDING THE COMPANY
The Stockholders hereby represent and warrant, jointly and severally, to
Buyer on and as of the Effective Date and again on and as of the Closing Date:
6
5.1 The Company.
(a) Corporate Existence. The Company is a duly incorporated and
organized corporation validly existing and in good standing under Texas law. The
Company is qualified to do business and is in good standing in every
jurisdiction in which the Company is required to qualify to do business. The
Company has had at all times the power and authority to own or lease its
properties and conduct its business.
(b) Articles and Bylaws. Attached to Schedule 5.1(c) are true and
correct copies of the Company's Articles of Incorporation, as amended and
restated, and the Company's currently effective Bylaws.
(c) Capitalization and Shareholders. The authorized capital stock
of the Company consists of 1,000 shares of $0.10 par value common stock, of
which 1,000 shares are issued and outstanding and are owned of record by the
Stockholders in the respective amounts set forth in Schedule 1. The Stockholders
are the only record owners of capital stock or other securities of any kind or
class of the Company. (i) None of the Company's capital stock is held in its
treasury; (ii) all shares or other interests of the Company's capital stock were
legally and validly issued, fully-paid and nonassessable, without violation of
any preemptive or dissenters' or similar rights (and no preemptive or other
subscriptive rights have ever existed with respect to the Company's capital
stock) and in full compliance with federal and state securities laws and other
applicable law; (iii) the Company has complied with the terms of its capital
stock; (iv) all of the Company's capital stock acquired by it was purchased from
funds appropriate for the repurchase of shares of capital stock or other
securities and otherwise in accordance with its articles of incorporation,
bylaws or other governing instruments and applicable laws; (v) no options,
warrants, subscriptions, puts, calls or other rights, commitments, undertakings
or understandings to acquire, dispose of or restrict the transfer of, any of the
Company's capital stock or other securities of any kind or class or rights,
obligations or undertakings convertible into securities of the Company of any
kind or class are authorized or outstanding; and (vi) the Company is not subject
to any obligation to purchase, redeem or otherwise acquire any of its capital
stock or securities (or of any options or rights or obligations described in the
preceding sentence) upon the occurrence of a specified event (and assuming that
specified time periods have passed and appropriate notices have been given) or
otherwise. Neither any act or omission of the Company or the Stockholders or any
predecessor in interest, nor the execution, delivery or performance of this
Agreement, has resulted in, or will result in, any person having any claim or
cause of action whatsoever involving the Company.
(d) No Subsidiaries; Ownership Interests. No part of the Company's
business is conducted in a subsidiary. The Company does not own any capital
stock or other direct or indirect ownership interests in any person.
5.2 Absence of Undisclosed Liabilities. Except for trade payables and
similar ordinary and necessary liabilities (which do not include liabilities
arising from the borrowing of money or secured indebtedness or negligent or
unlawful actions of the Company or the Company's officers, directors,
shareholders, agents or employees) arising in the ordinary course of business,
there is no existing or prior act, omission, fact or circumstance that has
resulted in, or could result in, the Company's having any other liability of any
nature (whether accrued, absolute, contingent, changing, known, unknown,
determinable, indeterminable, liquidated, unliquidated or otherwise and whether
due or to become due and, thus, whether or not such would be considered a
liability for generally accepted accounting principles).
5.3 Taxes.
7
(a) Filing of Returns; Payment of Taxes; Liens. (i) All returns of
every nature of taxes required to be filed by the Company, if any, have been
timely and otherwise properly filed, and no extensions of time in which to file
any such returns are in effect; (ii) the Company has paid and satisfied on or
before their respective due dates all taxes for periods covered by such returns;
and without limiting the foregoing, the Company has made estimated tax payments
sufficient to pay all taxes for the period ended December 31, 2004 and has made
all estimated payments for periods thereafter in accordance with applicable law
and in an amount sufficient to pay the taxes for such period (and not just the
minimum amounts necessary to comply with estimated payment requirements of
applicable law); (iii) all taxes and other amounts that the Company is or was
required by applicable law to withhold or collect have been duly withheld and
collected and have been paid over to the proper governmental authorities in
accordance with applicable law; (iv) there are no liens for taxes on any of the
Company's assets other than any lien imposed by applicable law for property
taxes for the current tax period that are not yet due and payable; and (v) no
material claim has been made in writing against the Company relating to any of
its assets by any governmental authority in any jurisdiction in which the
Company did not file sales, use, value-added or similar tax returns or other
required filings or did not pay any such taxes, that the Company is or may be
subject to any such tax by that jurisdiction.
(b) No Special Tax Status. The Company has no special tax status
granted by any governmental authority or applicable law.
(c) Absence of IRC Section 558 and Subchapter S Elections. The
Company has not filed an election, and has not been deemed to have made an
election, under IRC Section 558 and has not elected to be taxed as a "small
business corporation" under IRC Subchapter S.
5.4 Indebtedness. Each promissory note, instrument or other document or
contract relating to (a) any indebtedness (excluding trade payables and accrued
payroll and taxes) of the Company, (b) any capital lease, lease-purchase
arrangement, guaranty (except endorsements made in the ordinary course of
business in connection with the deposit of items for collection) by the Company,
or (c) any undertaking by the Company on which others rely in extending credit
or conditional sales contracts (the items listed in either (a), (b) or (c) being
collectively, "Indebtedness") is referred to herein as a "Debt Instrument."
5.5 Status. (a) The Company has not assigned any of its rights or
obligations under (and is not otherwise restricted for any reason from enjoying
the full benefits under) any of the material leases, intellectual property
licenses, Indebtedness, Debt Instruments, material contracts or insurance
policies (each a "Subject Agreement"); (b) no act or event has occurred, and the
Company has not received any notice asserting that any act or omission has
occurred, that, with notice or lapse of time or both or other action required to
be taken by the other party as a prerequisite to exercising its rights, would
constitute a breach or default under any Subject Agreement by the Company or any
other party; (c) the Company has not had any notice that any party to any
Subject Agreement is subject to any bankruptcy, insolvency or similar
proceeding; (d) there is no outstanding notice of cancellation or termination in
connection with any Subject Agreement; (e) each Subject Agreement is the valid
and binding agreement of the Company and to the Stockholders' knowledge each
other party to it, in full force and effect and enforceable in accordance with
its terms; (f) neither the execution, delivery or performance of any Subject
Agreement violated, violates or will violate any applicable law; (g) neither the
Company nor, to the Stockholders' knowledge, any other party currently
contemplates any termination, amendment or change to any Subject Agreement; (h)
no Subject Agreement requires the Company to maintain any performance bond,
letter of credit or other security arrangement; and (i) no Subject Agreement
has, or is reasonably expected to have during its term, an adverse effect on the
Company.
5.6 Claims & Litigation. The Company: (i) is not (and since December
31, 1999 has not been) engaged in, a party to, subject to or threatened with any
claim, controversy, legal or equitable action
8
or other proceeding (whether as plaintiff, defendant or otherwise and regardless
of the forum or the nature of the opposing party); (ii) is not (and since
December 31, 1999 has not been) a party to or subject to any judgment, order or
decree against it or any of its assets; and (iii) there has been no reservation
of rights by any insurance carrier, and to the Stockholders' knowledge, no such
reservation is threatened, concerning the coverage of the Company with respect
to any such matter.
5.7 Compliance with Laws.
(a) Generally. The Company is (and has been since December 31,
1999) in compliance in all material respects with all applicable law, including
that involving antitrust, unfair competition, trade regulation, antipollution,
environmental, employment and plant downsizing, relocation, closing or safety.
The Company has not at any time made any illegal payments for political
contributions or any bribes, illegal kickback payments or other illegal payments
and is not disqualified, for any reason, from bidding on any project.
(b) Charges or Violations; Investigations. The Company is not (and
since December 31, 1999 has not been) either charged with, in receipt of any
notice of, or to the Stockholders' knowledge, under investigation with respect
to any material failure or alleged material failure to comply with any provision
of any applicable law.
(c) Permits. Without limiting the foregoing: (i) the Company has
all permits required with respect to assets owned, leased or used by it and its
business (and a copy of all of such permits have been provided to Buyer); (ii)
each such permit is in full force and effect; and (iii) the Company is (and has
been) in compliance in all material respects with each such permit and any
predecessor permit; provided, however, that the foregoing does not require
disclosure of state and local business or similar licenses required of
businesses generally.
5.8 Bank Accounts. The Company has provided Buyer with a list of all of
the Company's bank, money market, savings and similar accounts and safe deposit
boxes, specifying the account numbers and the authorized signatories or persons
having access to them.
5.9 Transactions with Affiliates. No officer or director of the
Company, no Stockholders, no spouse nor any children of any of them, no trust or
other entity for the benefit (in whole or in part) of any of the foregoing and
no person controlled by any combination of any of the foregoing: (a) is a party
to any contract or plan of any kind whatsoever involving any such person and the
Company; (b) owns directly or indirectly, in whole or in part, any property that
the Company uses or otherwise has rights in respect of; or (c) has any cause of
action or other claim whatsoever against, or owes any amount to, the Company.
5.10 No Violations or Conflict from Execution, Delivery or Performance
of this Agreement. The execution, delivery and/or performance of this Agreement
do not and will not with the passage of time or the giving of notice or both:
(a) violate, conflict with, constitute a default or require any consent or
payment under, or permit a termination of: (i) any term or provision of the
Company's articles of incorporation or bylaws; (ii) any loan document, lease or
other contract to which the Company is a party or bound or to which it or any of
its properties is subject or bound (including each Subject Agreement); (iii) any
permit, judgment, decree or order of any governmental authority to which the
Company or any of its properties are subject or bound; or (iv) any applicable
law; or (b) create, or cause the acceleration of the maturity of, any obligation
or liability of the Company; or (c) cause the Company not to have all of the
rights, titles and interests that the Company currently has, unaltered and
unimpaired, in and to any of the Company's assets.
9
5.11 No Expected Material Adverse Change. No Stockholder, at the time
of the execution and delivery of this Agreement, has formed a conclusion that,
as a result of factors not generally known to the public or generally applicable
to the Company's business or similar businesses, any material adverse effect on
the Company's business or any of its assets will occur prior to December 31,
2006.
5.12 No Governmental Consents Required. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority on the Company's or the Stockholders' part is required in connection
with the Stockholders' execution, delivery or performance of this Agreement.
5.13 Brokers or Finders. The Stockholders and its agents have incurred
no liability or obligation, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with the
execution, delivery or performance of this Agreement.
5.14 Other. No representation or warranty by the Stockholders and no
statement in any schedule or exhibit contains or will contain any untrue
statement of a material fact, or omits or will omit a material fact, necessary
to make a statement in any of them not misleading. The foregoing representation
and warranty is in addition to, and does not limit in any way whatsoever, any
other representation or warranty in this Article 5.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Stockholders on and as
of the Effective Date and again on and as of the Closing Date:
6.1 Corporate Status and Authorization. The Buyer is a corporation duly
incorporated, organized, and validly existing in good standing under the
corporation laws of the State of Delaware. The Buyer is qualified to do business
and is in good standing in every jurisdiction in which the Buyer is required to
qualify to do business. The Buyer has all requisite power, authority, and
capacity to execute and deliver this Agreement and all other agreements,
documents, and instruments contemplated hereby and to carry out all actions
required of it pursuant to the terms of this Agreement. The execution, delivery
and performance of this Agreement and the other agreements, documents and
instruments have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by the Buyer and constitutes the
legal, valid, and binding obligation of the Buyer, enforceable against the Buyer
in accordance with its terms.
6.2 Noncontravention. Neither the execution and delivery of this
Agreement by the Buyer nor the consummation by the Buyer of the transactions
contemplated hereby will constitute a violation of, or be in conflict with, or
constitute or create a default under, or result in the creation or imposition of
any security interest, liens, claims, charges, options, debts, conditional sales
agreements, title retention agreements, encumbrances of any kind, or
restrictions against the transfer or assignment thereof upon any assets of the
Buyer or upon the Bridgetech Shares pursuant to (a) the charter documents or
Bylaws of the Buyer, each as amended to date; (b) any agreement or commitment to
which the Buyer is a party or by which the Buyer is bound, or to which the Buyer
is subject; or (c) any applicable law.
6.3 Litigation. There are no material actions, suits, proceedings or
orders pending or, to Buyer's knowledge, threatened against Buyer at law or in
equity, before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
10
foreign that could materially impair Buyer's ability to consummate the
transactions contemplated hereby on or prior to the Closing Date.
6.4 Brokers or Finders. Buyer and its agents have incurred no liability
or obligation, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with the execution,
delivery or performance of this Agreement.
ARTICLE 7
OTHER AGREEMENTS
7.1 Termination of Related Agreements. Effective as of the Closing
Date, the Stockholders shall terminate all existing agreements between the
Stockholders and the Company, except as otherwise directed by Buyer.
7.2 Confidentiality; Press Releases and Announcements.
(a) Generally. Prior to Closing, the Buyer will, and prior to and
following Closing, each of the Stockholders will, (and each of them will cause
their respective affiliates, officers, directors, employees, agents and
representatives to) keep confidential and not disclose the existence or terms of
this Agreement; provided, however, that disclosures of such information is
permitted: (i) with the prior written consent of the other Party (which may not
be unreasonably withheld or delayed), (ii) to professional advisers on a
need-to-know basis and subject to their agreement to keep this Agreement
confidential (and each party will be responsible for breaches of such
obligations by its professional advisors), (iii) to the extent that enforcement
of this Agreement's terms, applicable law, legal process or applicable stock
exchange rules requires public disclosure, or (iv) in connection with a claim by
a person that could give rise to a claim against a party. Each of Stockholders
and the Buyer will be responsible for violations of the obligations of this
Section by its affiliates and its and its affiliates officers, directors,
employees, agents and affiliates.
(b) Buyer Confidential Information. Each Stockholder covenants and
agrees that it will not, directly or indirectly, from the date hereof through
and including the fifth anniversary of said date disclose to any person, or use
or otherwise exploit for the benefit of such Stockholder or any other Person,
any Buyer Confidential Information, provided that a Stockholder may disclose
such Buyer Confidential Information to any employee, officer, director, agent or
attorney of such Stockholder who has a need to know such Buyer Confidential
Information for the purposes of evaluating the transactions contemplated by this
Agreement, but only upon a clear understanding by such employee, officer,
director, agent or attorney of the Stockholder's obligations pursuant to this
Section 7.2; provided, however, that each Stockholder's obligations pursuant to
this Section 7.2(b) with respect to any item of Buyer Confidential Information
constituting a Trade Secret shall remain in effect for a period ending on the
later of (A) five years from the date hereof, or (B) the last day of the period
that applicable law shall protect such Buyer Confidential Information as a trade
secret. "Buyer Confidential Information" shall mean any information (whether a
trade secret or not; whether proprietary or not) relating to the Buyer or to the
business of the Buyer which is of value to the Buyer, including, without
limitation, manufacturing processes, know-how, designs, software, business
plans, negotiations and contracts (including leases, notes and loan documents)
with other companies, financial statements, cost and expense data, marketing
strategies, customer lists, personnel matters, licenses, licensees, and
licensors; provided, however, that Buyer Confidential Information shall not
include information which (A) is known to the Stockholders prior to receipt from
Buyer, which knowledge shall be evidenced by written records, (B) is or becomes
in the public domain through no breach of this Agreement by the Stockholders,
(C) is received from a third party without breach of any obligation of
confidentiality, (D) is independently developed by the
11
Stockholders without the use of any information obtained from the Buyer, or (E)
is disclosed pursuant to an order of a court of competent jurisdiction.
(c) Press Releases and Announcements. The Stockholders shall not
issue any press release, announcement or notice, either to the public or to the
Company's employees, customers or suppliers, concerning this Agreement or the
transactions contemplated hereby without the prior written consent of Buyer.
ARTICLE 8
INDEMNIFICATION
8.1 Survival. The representations and warranties of the Parties set
forth in this Agreement, and all claims and causes of action in connection
therewith, shall survive the Closing solely for purposes of this Article 8 and
shall terminate on the close of business on that date that is sixty days after
the expiration of the statute of limitations applicable to the matter addressed
by the particular representation or warranty. The covenants of any party set
forth in this Agreement that require performance by such party prior to the
Closing Date, and all claims and causes of action with respect thereto, shall
survive Closing solely for purposes of this Article 8 and shall terminate on the
close of business on that date which is twelve months after the Closing Date.
The covenants of any party set forth in this Agreement that require performance
by such party at or after the Closing, and claims and causes of action with
respect thereto, shall survive the Closing indefinitely with respect thereto
unless otherwise provided herein.
8.2 Indemnification Obligations by the Stockholders. If the Closing
occurs, then the Stockholders will indemnify, defend and hold the Buyer harmless
as provided in this Article 8, as to any Loss involving any of the following:
(a) Corporate Indemnification. Any acts and omissions occurring, or
fact or circumstance existing, on or before the Closing Date that entitle any
officer, director, agent or other person to indemnification pursuant to the
articles of incorporation, bylaws or other corporate authorization of the
Company in effect on or before the Closing Date with respect to any act or
omission prior to the Closing Date;
(b) Fees and Expenses. Any obligation imposed on the Stockholders
or the Company pursuant to this Agreement, including any fees and expenses
incurred by the Stockholders or the Company in the course of negotiating and/or
executing this Agreement, the agreements and documents contemplated herein or
carrying out the actions required by the Stockholders or the Company by this
Agreement or the agreements and documents contemplated hereby; and
(c) Breaches. Without limiting or being in any manner limited by
the foregoing, any breach of any representation, warranty, covenant or agreement
made by the Stockholders in this Agreement or the agreements and documents
contemplated herein;
provided, however, that the Stockholders shall have no obligation
to indemnify Buyer for any Losses until the aggregate amount of Losses suffered
by Buyer exceeds $50,000, in which case Stockholders shall indemnify Buyer for
all Losses.
8.3 Indemnification Obligations by the Buyer. If the Closing occurs,
then the Buyer will indemnify, defend and hold the Stockholders harmless as
provided in this Article 8, as to any Loss arising out of any breach of any
representation, warranty, covenant or agreement made by the Buyer in this
Agreement or the agreements and documents contemplated herein; provided,
however, that (i) Buyer shall
12
have no obligation to indemnify the Stockholders for any Losses until the
aggregate amount of Losses suffered by the Stockholders exceeds $50,000, in
which case Buyer shall indemnify the Stockholders for all Losses, and (ii) the
aggregate liability of Buyer shall not exceed the value of the Closing Shares
and Earn-Out Shares delivered to the Stockholders hereunder, based upon a value
per share of $3.00.
8.4 Right to Contest. The party seeking indemnification (the
"indemnified party") as to any matter that is based upon a claim by a person not
a party to this Agreement ("Third Party Claim") will undertake in good faith to
give prompt written notice of any such claim to the other party (the
"indemnifying party"); provided, however, that a failure to provide such prompt
written notice pursuant to the foregoing sentence will not prejudice any right
to indemnification under this Agreement for a claim otherwise made in accordance
with this Section except to the extent that the indemnifying party is prejudiced
by such failure. The indemnifying party will have, at its election and with
counsel chosen and paid by it (such counsel shall be subject to the reasonable
approval of the indemnified party), the right to defend any Third Party Claim;
provided, however, that the Buyer may elect to defend any claim in which the
Buyer is the indemnified party at the Stockholders' expense. Neither party may
settle a Third Party Claim or any related action (even if the indemnifying party
has elected not to defend such action) without the consent of the other party,
which consent will not be unreasonably withheld or delayed. The party not
defending (whether by election or otherwise) a Third Party Claim will have the
right at its own expense to attend, but not otherwise participate in,
proceedings involving Third Party Claims.
8.5 Certain Rules. The indemnification obligations in this Article 8,
although stated in terms of the parties, will be for the benefit of the parties,
their permitted successors and assigns and their officers, directors, employees,
agents and affiliates. The phrase "breach of a representation" includes a
misrepresentation. "Loss" means any loss, cost, damage, expense, payment,
liability or obligation incurred with respect to the facts or circumstances with
respect to which such term is used, including: (a) related attorneys',
accountants' and other professional advisors' fees and expenses; (b) amounts
paid in settlement of a dispute with a person not a party that if resolved in
favor of such third party would constitute a matter to which a party is
indemnified pursuant to this Agreement, even though such settlement does not
acknowledge that the underlying facts or circumstances constitute a breach of a
representation and warranty or other indemnified matter; (c) reasonable costs
and expenses necessary to avoid having a claim for indemnification against
another party pursuant to this Agreement or to mitigate any such claim; (d) any
taxes of the recipient on indemnification payments made to it; and (e) interest
on each of the foregoing at the Prime Rate from the date the Loss was incurred
until paid. "Prime Rate" means the prime rate as published in the "Money Rates"
table of The Wall Street Journal on the first day of the calendar quarter on
which The Wall Street Journal was published in which the Loss was incurred and
on the first such day of each subsequent calendar quarter in which the Loss is
unpaid.
8.6 Buyer Right of Offset. In the event that the Stockholders are
entitled to receive Earn-Out Shares pursuant to Section 1.3 hereof:
(i) if Buyer has suffered Losses that have not been indemnified as
of the date on which Buyer is obligated to deliver the Earn-Out Shares to the
Stockholders pursuant to Section 1.3 hereof, then Buyer shall be entitled to
withhold a number of Earn-Out Shares equal in value to the amount of such
Losses, based on a price per Earn-Out Share of $3.00, and Buyer shall be
entitled to cancel such Earn-Out Shares.
(ii) if Buyer has a reasonable basis on which to expect to suffer
Losses following the date on which Buyer is obligated to deliver the Earn-Out
Shares to the Stockholders pursuant to Section 1.3 hereof, then Buyer shall be
entitled to withhold a number of Earn-Out Shares equal in value to the
anticipated amount of such Losses, based on a price per Earn-Out Share of $3.00,
until such time as the amount of such Losses is determined. At such time, Buyer
shall be entitled to cancel a number of Earn-
13
Out Shares equal to the amount of such Loss, and Buyer shall then deliver the
balance of the Earn-Out Shares to the Shareholders.
If Buyer cancels Earn-Out Shares pursuant to clause (i) or clause (ii) above,
each Stockholder hereby waives any claim with respect to such Earn-Out Shares,
including any claim that such Stockholder is entitled to receive such Earn-Out
Shares. The rights granted to Buyer pursuant to this Section 8.6 shall be in
addition to, and shall not limit, any other rights of Buyer under this
Agreement.
8.7 Agreed Disclaimer of Effect of Knowledge. Each party, acknowledging
that the other is entitled to rely on its representations and warranties (except
as may be qualified herein) and covenants and agreements in this Agreement in
order to preserve the benefit of the bargain otherwise represented by this
Agreement, agrees that neither the survival of such representations, warranties,
covenants and agreements, nor their enforceability nor any remedies for breaches
of them will be affected by any knowledge of a party regardless of when or how
such party acquired such knowledge.
ARTICLE 9
TERMINATION
9.1 Termination. Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time:
(a) by the mutual written consent of the Buyer and the
Stockholders' Representative;
(b) by the Buyer, if there has been a material violation or breach
by any Stockholder of any covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligations of the Buyer at the Closing and such violation or breach has not
been waived by the Buyer or cured by the Stockholders within ten days after
written notice thereof from the Buyer;
(c) by the Stockholders, if there has been a material violation or
breach by the Buyer of any covenant, representation or warranty contained in
this Agreement which has prevented the satisfaction of any condition to the
obligations of the Stockholders at the Closing and such violation or breach has
not been waived by the Stockholders or, in the case of a covenant breach, cured
by the Buyer within ten days after written notice thereof by the Stockholders;
or
9.2 Effect of Termination. In the event of any termination of this
Agreement by the Buyer or the Stockholders as provided above, the Buyer and the
Stockholders shall retain all rights and remedies arising under law or contract
in respect of any breach arising prior to such termination. In the event of a
termination of this Agreement for any reason, this Agreement shall forthwith
become void and of no further force or effect (other than this Article 9,
Section 7.4 (Confidentiality) and Article 10 (General Provisions), which shall
survive the termination of this Agreement and shall be enforceable by the
parties hereto).
ARTICLE 10
GENERAL PROVISIONS
10.1 Waiver. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right to enforce the same; and no waiver by any
14
party of any provision (or of a breach of any provision) hereof, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
either as a further or continuing waiver of any such provision or breach or as a
waiver of any other provision (or a breach of any other provision) hereof.
10.2 Remedies Cumulative. The remedies of a party provided for herein
are cumulative and shall not exclude any other remedies to which any party may
be lawfully entitled under this Agreement or applicable law, and the exercise of
a remedy shall not be deemed an election excluding any other remedy (any such
claim by the other party being hereby waived).
10.3 Expenses. All expenses of the preparation, execution, and
consummation of this Agreement and of the transactions contemplated hereby,
including, without limitation, attorneys', accountants' and outside advisors'
fees and disbursements, shall be borne by the party incurring such expenses. All
such expenses of the Company shall be borne by the Stockholders.
10.4 Notices. All notices, demands and other communications under this
Agreement shall be in writing and shall be effective upon actual receipt whether
delivered by personal delivery, legible facsimile or recognized overnight
courier or sent by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective parties as follows:
If to the Stockholders, to:
Xxxx Relic
000 X Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
If to the Buyer, to:
Bridgetech Holdings International, Inc.
000 X. Xxxxxxx 000, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxx, III
Phone: 000-000-0000
Fax: 000-000-0000
with a copy sent contemporaneously to:
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxx, Xxxxxxx 00000
Attn: X. Xxxx Xxxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
10.5 Entire Agreement. This Agreement, together with its exhibits and
schedules (including all executed Stockholder Representation Forms), contains
the entire understanding of the parties relating to the subject matter hereof,
supersedes all prior agreements and understandings relating to the subject
matter hereof, and shall not be amended except by a written instrument hereafter
signed by the Stockholders and the Buyer.
15
10.6 Governing Law. The validity and construction of this Agreement
shall be governed by the laws of the State of New York.
10.7 Sections and Section Headings. All enumerated divisions and
subdivisions of this Agreement are herein referred to as "Article" or "Section."
The headings of Articles and Sections are for reference only and shall not limit
or control the meaning thereof.
10.8 Assigns. This Agreement shall be binding upon the parties hereto
and their respective successors and assigns and shall inure to the benefit of
the parties hereto and their respective permitted successors and assigns.
Neither this Agreement nor the obligations of any party hereunder shall be
assignable or transferable by such party without the prior written consent of
the other party hereto; provided, however, that nothing contained in this
Section 10.8 shall prevent the Buyer, without the consent of the Stockholders,
from transferring or assigning prior to Closing, its rights to receive the
Company Shares to another entity controlling, under the control of, or under
common control with the Buyer, and after the Closing, to any person or entity of
its choosing.
10.9 Further Assurances. From time to time, at the request of the Buyer
and without further consideration, the Stockholders shall execute and deliver
such further instruments of conveyance and transfer and take such other actions
as the Buyer may reasonably require more effectively to convey and transfer the
Company Shares to the Buyer. The Stockholders and the Buyer shall also execute
and deliver to the appropriate other party such other instruments as may be
reasonably required in connection with the performance of this Agreement, and
each shall take all such further actions as may be reasonably required to carry
out the transactions contemplated by this Agreement.
10.10 Certain Definitions; Etc. Whenever the context so requires, the
singular number shall include the plural, the plural shall include the singular,
and the gender of any pronoun shall include the other genders. The parties agree
that (i) "applicable law" means all provisions of any constitution, statute,
law, rule, regulation, decision, order, decree, judgment, release, license,
permit, stipulation or other official pronouncement enacted, promulgated or
issued by any governmental authority; (ii) "governmental authority" means any
legislative, executive, judicial, quasi-judicial or other public authority,
agency, department, bureau, division, unit, court or other public body, person
or entity; (iii) "taxes" means all taxes, assessments, charges, duties, fees,
levies or other governmental charges, including all federal, commonwealth,
state, local, foreign or other income, profits, unitary, business, franchise,
capital stock, real property, personal property, intangible taxes, withholding,
unemployment compensation, disability, transfer, sales, use, excise and other
taxes, assessments, charges, duties, fees, or levies of any kind whatsoever
(whether or not requiring the filing of returns) and all deficiency assessments,
additions to tax, penalties and interest; (iv) "including" and other words or
phrases of inclusion, if any, shall not be construed as terms of limitation, so
that references to "included" matters shall be regarded as non-exclusive,
non-characterizing illustrations; (v) "will" shall have the same meaning as
"shall" and means and obligation and an imperative and (vi) "knowledge" means
(A) the actual knowledge of the referenced person and (B) the knowledge that
such person should have obtained upon reasonable inquiry regarding the
referenced matter.
10.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. A fax copy of the
signature page of this Agreement shall be deemed an original for all purposes.
(Signatures on following page.)
16
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first written above.
THE STOCKHOLDERS: /s/ Xxxx Relic
-----------------------------------------------
Print Name: Xxxx Relic
/s/ Xxxxxxx Xxxxxxxx
-----------------------------------------------
Print Name: Xxxxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxx
-----------------------------------------------
Print Name: Xxxxxxx Xxxx
THE STOCKHOLDERS'
REPRESENTATIVE: /s/ Xxxxxxx Xxxx
----------------------------------------------
Print Name: Xxxxxxx Xxxx
THE BUYER: BRIDGETECH HOLDINGS INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxx III
---------------------------------------
Name: Xxxxxx X. Xxxx III
Title: EVP & CFO
17
SCHEDULE 1
LIST OF STOCKHOLDERS
NUMBER
OF
NAME COMPANY SHARES
---- --------------
Xxxx Relic 550
Xxxxxxx Xxxx 200
Xxxxxxx Xxxxxxxx 250
-----
TOTAL 1,000
18
SCHEDULE 5.1(c)
ARTICLES AND BYLAWS OF THE COMPANY
Provided separately.
19
EXHIBIT A
STOCKHOLDER REPRESENTATION FORM
See attached.
20
BRIDGETECH HOLDINGS INTERNATIONAL, INC.:
STOCKHOLDER REPRESENTATION FORM
THIS STOCKHOLDER REPRESENTATION FORM (the "FORM") made by the
undersigned (the "STOCKHOLDER") as of the date set forth below, is given in
favor of Bridgetech Holdings International, Inc., a Delaware corporation
("BRIDGETECH").
Stockholder is a stockholder of Clarity Imaging International, Inc., a
Texas corporation ("CLARITY"). Pursuant to that certain Stock Purchase Agreement
(the "STOCK PURCHASE AGREEMENT"), dated June 23, 2005, by and among Bridgetech
and the stockholders of Clarity (the "CLARITY STOCKHOLDERS"), Bridgetech will
acquire all of the outstanding shares of capital stock of Clarity (the "CLARITY
STOCK") from the Clarity Stockholders (the "TRANSACTION"). As consideration for
the Clarity Stock, Bridgetech will issue shares of its common stock, par value
$.001 per share (the "BRIDGETECH STOCK"), to the Clarity Stockholders.
NOW, THEREFORE, the Stockholder makes the following representations,
warranties, and acknowledgements to Bridgetech:
1. REPRESENTATIONS AND WARRANTIES.
(a) The Stockholder owns those shares of Clarity Stock set
forth beside the Stockholders' name on Schedule 1 to the Stock Purchase
Agreement.
(b) This Form has been duly authorized, executed and delivered
by the Stockholder and this Form is the Stockholder's valid and binding
obligation, enforceable against the Stockholder in accordance with its terms.
(c) Stockholder and its advisors have had a reasonable
opportunity to ask questions of and receive answers from the officers of
Bridgetech, or a person or persons acting on their behalf, concerning Bridgetech
and to obtain additional information necessary to verify the accuracy of the
information provided by, or on behalf of, Bridgetech. All such questions have
been answered to the full satisfaction of Stockholder. Stockholder represents
and warrants that, in making the decision to acquire the Bridgetech Stock,
Stockholder has relied and is relying solely on its review of the materials
provided and its own independent investigation of Bridgetech.
(d) Stockholder has such knowledge and experience in financial
and business matters as to enable it (i) to utilize the information made
available to it in connection with the Transaction, (ii) to evaluate the merits
and risks associated with the acquisition of the Bridgetech Stock, and (iii) to
make an informed decision with respect thereto.
(e) Stockholder (i) has adequate means of providing for its
current liabilities and possible contingencies, (ii) has no need for liquidity
in connection with the acquisition of Bridgetech Stock, (iii) is able to bear
the economic risks associated with the Bridgetech Stock for an indefinite period
and has the capacity to protect its own interests in connection with the
Transaction and the acquisition of Bridgetech Stock, and (iv) can afford the
complete loss of its entire investment in the Bridgetech Stock.
(f) Stockholder recognizes that the Acquisition of Bridgetech
Stock involves significant risks, including, without limitation, those described
on Exhibit B hereto. Stockholder
21
acknowledges that an investment in Bridgetech is speculative and may result in
the loss of Stockholder's entire investment.
(g) Stockholder understands that (i) neither the offer nor the
sale of the Bridgetech Stock nor the Transaction have been registered under the
Act in reliance upon exemptions from the registration provisions of the Act,
(ii) the shares of Bridgetech Stock must be held by Stockholder indefinitely
unless the sale or transfer thereof (A) is subsequently registered under the
Act, or (B) an exemption from such registration is available, (iii) the
certificates representing all shares of Bridgetech Stock will be legended to
reflect such restrictions, (iv) Bridgetech is under no obligation to register
any shares of Bridgetech Stock on Stockholder's behalf or to assist Stockholder
in complying with any exemption from registration, and (v) the officers of
Bridgetech will rely upon the representations and warranties made by Stockholder
in this Form in order to establish such exemption from the registration
provisions of the Act.
(h) Stockholder understands that neither the offer nor the sale
of the Bridgetech Stock has been registered under the securities laws of any
state due to exemptions from registration based upon the private or limited
nature of the offering and/or exemptions available for transactions involving
purchasers such as Stockholder, and that the officers of Bridgetech will rely
upon the representations and warranties made by Stockholder in this Form
(including the Confidential Questionnaire) in order to establish such exemptions
from registration under state securities laws.
(i) Stockholder acknowledges and agrees that it will not sell,
assign, pledge, hypothecate, transfer, or otherwise dispose of the Bridgetech
Stock unless (i) such disposition is subsequently registered under the
Securities Act, which is not contemplated, and registered under all applicable
state laws and regulations, which is not contemplated or (ii) Stockholder
provides Bridgetech with a legal opinion acceptable in form and substance (as to
both such opinion and the counsel providing such opinion) to Bridgetech and
Bridgetech's legal counsel stating that such disposition may be made without
registration under the Securities Act and without registration under any
applicable state laws and regulations. Stockholder understands that transfer
instructions have been or will be placed on certificate(s) with respect to the
Bridgetech Stock so as to restrict any such disposition thereof. Further,
Stockholder acknowledges that Bridgetech is under no obligation to register the
Bridgetech Stock on its behalf or to assist it in complying with any exemption
from registration.
(j) The Bridgetech Stock is being acquired solely for
Stockholder's own account and not for the account of any other person. The
Bridgetech Stock is being acquired for investment purposes only, and not for
distribution, assignment or resale to others.
(k) Stockholder realizes that it may not be able to sell or
dispose of its shares of Bridgetech Stock, even in the case of an emergency, as
there is no public market for such shares. Stockholder acknowledges that it will
bear the economic risk associated with the Bridgetech Stock for an indefinite
period of time.
(l) Stockholder understands that no federal or state agency or
securities exchange has recommended or endorsed the purchase of shares of
Bridgetech Stock.
(m) Stockholder acknowledges that neither Bridgetech, nor any
person acting on Bridgetech's behalf, has offered to sell shares of Bridgetech
Stock by means of any form of advertising. At no time was Stockholder presented
with or solicited by any leaflet, promotional meeting, newspaper, magazine,
radio or television program, article or advertisement, or any other form of
general advertising or general solicitation.
22
(n) The Stockholder has consulted with Stockholder's own legal,
accounting, tax, investment and other advisors with respect to the tax treatment
of an investment by Stockholder in the Bridgetech Stock and in Bridgetech and
the merits and risks of an investment in the Bridgetech Stock and in Bridgetech.
(o) Stockholder has kept and will continue to keep all
information disclosed in connection with the Transaction in strict confidence,
and Stockholder agrees only to disclose such information to its accountants,
attorneys or other professional advisors to the extent necessary to evaluate the
Transaction and an investment in the Bridgetech Stock. The same standard of
confidentiality is expected from all such accountants, attorneys and other
professional advisors who have received such information.
(p) Stockholder is either: (i) an individual over the age of 21
(or the age of majority in the Stockholder's jurisdiction) and a resident at the
address set forth on the signature page to this Agreement, and has no present
intent of changing such residency, or (ii) an entity not formed for the specific
purpose of acquiring or holding the Bridgetech Stock, with its principal place
of business at the address set forth on the signature page to this Agreement. In
the event that Stockholder's residence or principal place of business changes
before Stockholder acquires said Bridgetech Stock and before the Bridgetech
Stock is delivered to Stockholder, Stockholder covenants and agrees to promptly
notify Bridgetech.
(q) When executed by Stockholder, this Form (including these
representations and warranties) will constitute a valid and binding obligation
of Stockholder, enforceable in accordance with its terms. Stockholder, if not an
individual, is empowered and duly authorized to enter into this Form under any
governing documents, partnership agreements, operating agreements, trust
instruments, pension plans, charter, certificate of incorporation, bylaw
provisions or the like. The person, if any, signing this Form on behalf of
Stockholder is empowered and duly authorized to do so by Stockholder's governing
document or trust instrument, charter, certificate of incorporation, bylaw
provision, board of directors or shareholder resolution, or the like.
(r) Stockholder understands and agrees that the subscription
set forth herein will not be binding upon Bridgetech until it is accepted by
Bridgetech in writing, that acceptance of any or all subscriptions is within the
sole discretion of Bridgetech, and that Bridgetech may choose to accept or
reject any or all subscriptions, in whole or in part, including this
subscription, for any reason or no reason, in its sole discretion.
(s) The foregoing representations and warranties and all other
information which Stockholder has provided concerning Stockholder and
Stockholder's financial condition are true and accurate as of the date hereof.
If in any respect such information, representations, warranties, and covenants
are not true and accurate as of the closing of the Transaction, Stockholder will
give written notice of such fact to the officers of Company specifying which
information, representations, warranties, or covenants are not true and accurate
and the reasons therefor.
2. CONFIDENTIAL STOCKHOLDER QUESTIONNAIRE. In order to permit
Bridgetech to determine whether the Stockholder is eligible to receive shares of
Bridgetech Stock in the Transaction, the Stockholder has completed and executed
the Confidential Stockholder Questionnaire attached as Exhibit A to this Form.
3. LEGEND. The Stockholder acknowledges that stop transfer instructions
with respect to the Bridgetech Stock received by the Stockholder will be given
to Bridgetech's transfer agent and that there will be placed on the certificates
for such shares a legend stating in substance as follows:
23
The sale of shares represented by this certificate has not
been registered under the Securities Act of 1933 (the "Act")
or any applicable state securities laws (the "State Acts") and
such shares may not be sold, transferred or otherwise disposed
of unless a registration statement under the Act and the State
Acts with respect to such shares is effective at such time or
unless the Company determines that such shares may be sold
without registration under the Act and the State Acts.
[Signature(s) on Following Page]
24
IN WITNESS WHEREOF, the Stockholder has caused this Form to be duly executed as
of the date indicated. NOTE: PLEASE REMEMBER TO COMPLETE THE CONFIDENTIAL
STOCKHOLDER QUESTIONNAIRE ATTACHED AS EXHIBIT A. THE STOCKHOLDER WILL NOT BE
PERMITTED TO RECEIVE ANY BRIDGETECH STOCK UNLESS THE CONFIDENTIAL STOCKHOLDER
QUESTIONNAIRE IS PROPERLY COMPLETED, EXECUTED AND RETURNED.
STOCKHOLDER
If Stockholder is an individual:
______________________________________
Name: ________________________________
Address: ____________________________
____________________________
____________________________
Date: June 23, 2005
If Stockholder is an entity:
___________________________________
[Print Entity Name]
By: _______________________________
Name: _____________________________
Title: ______________________________
Address: ____________________________
____________________________
____________________________
Date: ____________ ___, 2005
[Signature page to Stockholder Representation Form]
25
EXHIBIT A
CONFIDENTIAL STOCKHOLDER QUESTIONNAIRE
Please see attached.
26
BRIDGETECH HOLDINGS INTERNATIONAL, INC.:
CONFIDENTIAL STOCKHOLDER QUESTIONNAIRE
The information contained in this Confidential Stockholder
Questionnaire (the "Questionnaire") is being furnished to Bridgetech Holdings
International, Inc., a Delaware corporation ("Bridgetech"), in connection with
the transactions contemplated by that certain Stock Purchase Agreement, dated as
of June 23, 2005, by and among Bridgetech and the stockholders of Clarity
Imaging International, Inc., a Texas corporation ("Clarity"), to enable
Bridgetech to determine whether shares of the $0.001 par value Common Stock of
Bridgetech (the "Bridgetech Stock"), may be issued to the undersigned pursuant
to applicable exemptions from the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable state securities laws. The information
provided in response to this Questionnaire will be relied on by Bridgetech to
determine whether such exemptions are available.
All information contained herein is for Bridgetech's and its counsel's
use and will at all times be kept strictly confidential; however, the
undersigned agrees that Bridgetech may present this Questionnaire to such
parties as it may deem appropriate, if called upon to establish the availability
of the exemptions under the Securities Act and applicable state securities laws.
Furthermore, the undersigned agrees that Bridgetech may disclose certain
information contained herein to any state or federal securities agency or
regulatory authority as may be necessary or appropriate to comply with the
Securities Act or any state securities laws, and any rules or regulations
promulgated thereunder.
COMPLETION OF THIS QUESTIONNAIRE IS REQUIRED BEFORE ANY ISSUANCE OF
SHARES OF BRIDGETECH STOCK MAY BE MADE TO YOU.
If you have any questions regarding the completion of this
Questionnaire, please call Bridgetech's Executive Vice President and Chief
Financial Officer, Xxxxxx X. Xxxx III at (000) 000-0000.
27
CONFIDENTIAL STOCKHOLDER QUESTIONNAIRE
PLEASE TYPE OR PRINT LEGIBLY (EXCEPT FOR SIGNATURE)
DO NOT LEAVE BLANK SPACES - IF A QUESTION IS "NOT APPLICABLE"
OR THE ANSWER IS "NONE," SO STATE.
(Attach additional pages if necessary)
1. Name of undersigned (as applicable):
(a) Individual: _________________________________________________________
First Name Middle Name Last Name
(b)Joint Stockholder: ___________________________________________________
First Name Middle Name Last Name
(c) Entity: _____________________________________________________________
Street Address:__________________________________________________________
City: ________________________
State: _______________________
Zip Code: ____________________ Telephone: ____________________________
Social Security, Federal Employer I.D. No. or Taxpayer I.D. No.: ________
2. State of residence or entity organization:
_________________________________________________________________________
3. The following information is required to ascertain whether the undersigned
will be deemed an "accredited investor" as defined in Rule 501 of Regulation D
under the Securities Act. The undersigned is: (PLEASE XXXX ALL THAT APPLY):
(a) A bank as defined in Section 3(a)(2) of the Securities Act or any savings
and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934, as amended; an insurance
company as defined in Section 2(13) of the Securities Act; an investment
company registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of such act; a Small
Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or
its political subdivisions for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; or an employee benefit plan
within the meaning of the Employee Retirement Income Security Act of 1974
("ERISA") if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings and
loan association, insurance company, or registered investment adviser, or
if the employee benefit plan has total assets in excess of $5,000,000 or,
if the employee benefit plan is a self-directed
28
plan, including a SEP/XXX, with investment decisions made solely by
persons that are accredited investors;
Yes _______ No _______
(b) A private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940;
Yes _______ No _______
(c) An organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, or a
partnership, in each case not formed for the specific purpose of
acquiring the Bridgetech Stock and with total assets in excess of
$5,000,000;
Yes _______ No _______
(d) A director or executive officer of Bridgetech;
Yes _______ No _______
(e) A natural person whose individual net worth(1), or joint net worth with
such person's spouse, exceeds $1,000,000;
Yes _______ No _______
-------------
(1) For purposes of determining "net worth," the principal residence owned by
an individual must be valued either at (a) cost, including the cost of
improvements, net of current encumbrances upon the property, or (b) the
appraised value of the property as determined by a written appraisal used
by an institutional lender making a loan to the individual secured by the
property, including the cost of subsequent improvements, net of current
encumbrances upon the property. "Institutional lender" means a bank,
savings and loan company, industrial loan company, credit union or
personal property broker or a company whose principal business is as a
lender of loans secured by real property and that has such loans
receivable in the amount of $2,000,000 or more.
29
(f) A natural person who had an individual income(2) in excess of $200,000 in
each of the two most recent years or joint income with the undersigned's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
Yes _______ No _______
(g) A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Bridgetech Stock, whose purchase is
directed by a sophisticated person;
Yes _______ No _______
(i) If the undersigned is a trust, but answered NO to (g), is the
trust revocable?
Yes _______ No _______
(A) If YES, are all the GRANTORS (NOT beneficiaries)
individuals who meet the requirements of section 3(d),
3(e) or 3(f) above?
Yes _______ No _______
If the undersigned answered YES to (g) and to (g)(i), each
grantor must furnish Bridgetech a letter confirming that
such grantor is an accredited investor.
(h) An Individual Retirement Account in which the participant is an
accredited investor; or
Yes _______ No _______
(i) An entity (other than a trust, which should respond under (g) above) in
which all of the equity owners are accredited investors. If YES, each
equity owner must furnish Bridgetech a letter confirming that such equity
owner is an accredited investor.
Yes _______ No _______
Names of Equity Owners:
_______________________
_______________________
_______________________
-------------
(2) Individual income means adjusted gross income, as reported for federal
income tax purposes, less any income attributable to a spouse or to
property owned by a spouse, increased by the following amounts (but not
including any amounts attributable to a spouse or to property owned by a
spouse): (i) the amount of any tax-exempt interest income received under
Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"),
(ii) the amount of losses claimed as a limited partner in a limited
partnership as reported on Schedule E of Form 1040, (iii) any deduction
claimed for depletion under Section 611 et seq. of the Code, (iv) any
amounts contributed to a pension or profit-sharing plan to the extent such
contributions are vested, and (v) any amount by which income from
long-term capital gains has been reduced in arriving at adjusted gross
income pursuant to the provisions of Section 1202 of the Code.
30
4. THE UNDERSIGNED POSSESSES A GENERAL UNDERSTANDING OF THE NATURE AND RISKS
OF INVESTMENTS.
Yes _______ No _______
5. THE UNDERSIGNED CONSIDERS HIMSELF, HERSELF OR ITSELF TO BE AN EXPERIENCED,
SOPHISTICATED INVESTOR.
Yes _______ No _______
6. THE UNDERSIGNED HAS SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND
BUSINESS MATTERS THAT HE, SHE OR IT IS CAPABLE OF EVALUATING THE RISKS AND
MERITS OF AN INVESTMENT IN THE BRIDGETECH STOCK.
Yes _______ No _______
7. THE TYPES OF INVESTMENTS THE UNDERSIGNED HAS MADE IN THE PAST FIVE YEARS
ARE AS CHECKED BELOW:
Stocks ______________________ Bonds ____________________________
Oil and Gas Limited Equipment
Partnerships ________________ Limited Partnerships _____________
Certificates of Real Estate
Deposit _____________________ Limited Partnerships _____________
Non-Marketable/Restricted
Securities __________________ Mutual Funds _____________________
8. THE UNDERSIGNED HAS UTILIZED THE SERVICES OF PROFESSIONAL ADVISORS TO
ANALYZE ANY SUCH INVESTMENTS FOR THE UNDERSIGNED.
Yes _______ No _______
9. NOTE: This Section 9 will only apply to the undersigned if such
undersigned is not determined to be an "accredited investor."
THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT XXXXXXX XXXX WILL SERVE AS A PURCHASER
REPRESENTATIVE FOR THOSE SHAREHOLDERS OF CLARITY IMAGING INTERNATIONAL, INC. WHO
ARE DETERMINED TO BE UNACCREDITED INVESTORS. THE UNDERSIGNED HEREBY APPOINTS XX.
XXXX AS THE UNDERSIGNED'S PURCHASER REPRESENTATIVE, EFFECTIVE IN THE EVENT THAT
THE UNDERSIGNED IS NOT DETERMINED TO BE AN "ACCREDITED INVESTOR." THE
UNDERSIGNED ACKNOWLEDGES AND AGREES THAT XX. XXXX WILL REVIEW THE STOCK PURCHASE
AGREEMENT AND RELATED DOCUMENTS FOR THE PURPOSE OF DETERMINING, AMONG OTHER
THINGS, THE SUITABILITY OF AN INVESTMENT IN BRIDGETECH STOCK WITH RESPECT TO THE
UNDERSIGNED'S PERSONAL SITUATION.
31
10. THE UNDERSIGNED HAS INDICATED BELOW ADDITIONAL INFORMATION THAT MAY BE
HELPFUL IN ENABLING BRIDGETECH TO DETERMINE THAT THE UNDERSIGNED'S KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS ARE SUFFICIENT TO ENABLE THE
UNDERSIGNED TO EVALUATE THE MERITS AND RISKS OF THIS INVESTMENT.
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
11. ONLY IF THE UNDERSIGNED IS SIGNING ON BEHALF OF AN ENTITY (THE "ENTITY"),
PLEASE ANSWER THE FOLLOWING QUESTIONS.
(a) Was the Entity formed for the purpose of investment in Bridgetech?
Yes _______ No _______
(b) Are the shareholders, partners, grantors, beneficiaries, or other
beneficial owners(3) of the Entity's securities contributing
additional funds to the Entity for the purpose of acquiring
Bridgetech Stock?
Yes _______ No _______
(c) Are the shareholders, partners, grantors, beneficiaries, or other
beneficial owners of the Entity's securities permitted to opt in or
out of particular investments made by the Entity?
Yes _______ No _______
(d) Do the shareholders, partners, grantors, beneficiaries, or other
beneficial owners of the Entity's securities participate pro rata in
investments made by the Entity, in accordance with their respective
ownership interests in the Entity?
Yes _______ No _______
(e) Does the value of the Bridgetech Stock anticipated to be received by
the Entity (together with the value of the securities already owed
by the Entity), aggregated with the value of all other securities
owned by the Entity which are issued by private investment
companies, exceed 10% of the value of the Entity's total assets?
Yes _______ No _______
---------
(3) The term "beneficial owner" means any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or
otherwise, has or shares: (a) the power to vote, or to direct the voting
of, a security, and/or (b) the power to dispose, or to direct the
disposition of, a security.
32
(f) Provide the number of owners of the Entity's outstanding securities,
including stock interests, trust interests, debt securities, and
other beneficial interests (other than short-term
paper):__________________
(g) Is the Entity an employee benefit plan (including, but not limited
to, a pension or profit-sharing plan subject to ERISA)?
Yes _______ No _______
(h) If the answer to (g) is "Yes," do participants both (i) make
contributions to the plan, and (ii) have the power to direct
investments of the plan with respect to the portion thereof
allocable to the participant?
Yes _______ No _______
[Signature blocks appear on following pages]
33
SIGNATURE PAGE TO
CONFIDENTIAL QUESTIONNAIRE
The applicable Signature Block must be COMPLETED AND RETURNED.
INDIVIDUAL SIGNATURE BLOCK:
IN WITNESS WHEREOF , the undersigned has executed this Questionnaire
this 23rd day of June, 2005.
________________________
Signature
________________________
Print Name
________________________
Signature of Spouse or Co-Owner if Joint Tenants, Tenants in Common or Community
Property
________________________
Print Name of Spouse or Co-Owner if Joint Tenants, Tenants in Common or
Community Property
CORPORATION SIGNATURE BLOCK:
IN WITNESS WHEREOF, the undersigned corporation has caused its duly
authorized officer to execute this Questionnaire this__________ day of
__________, 2005.
_________________________________
TYPE OR PRINT NAME OF CORPORATION
Address:______________________
City: ________________________
State: _______________________
Zip: _________________________
By: __________________________
(Signature of Officer signing on behalf of Corporation)
Print Name: __________________
Title: _______________________
34
PARTNERSHIP, LIMITED LIABILITY COMPANY OR TRUST SIGNATURE BLOCK:
IN WITNESS WHEREOF, the undersigned entity has caused its duly authorized
representative to execute this Questionnaire this__________ day of __________,
2005.
_____________________________________________________________________
TYPE OR PRINT NAME OF PARTNERSHIP, LIMITED LIABILITY COMPANY OR TRUST
Address: _____________________________________
City: ________________________________________
State: _______________________________________
Zip: _________________________________________
______________________________________________
Signature of Partner(s), Member(s), or Trustee(s)
Signing on Behalf of Partnership, Limited
Liability Company or Trust
By: ________________________________________
Print Name of Partner(s), Member(s),
Manager(s), Trustee(s) or Administrator(s)
Title: _________________________
If Partner, Member, Manager, Trustee or Administrator
is an entity:
By: _____________________________
Title: __________________________
By: __________________________________________
(Print name of additional Partner, Member, Manager, Trustee
or Administrator if signature is required by governing
documents of Partnership, Limited Liability Company, Trust
or Qualified Plan)
Title: __________________________
If Partner, Member, Manager, Trustee or Administrator
is an entity:
By: _____________________________
Title: __________________________
35
EXHIBIT B
RISK FACTORS
An investment in Bridgetech Holdings International, Inc. (the
"Company") involves a high degree of risk and, therefore, should be undertaken
only by investors capable of evaluating the risks of the Company and bearing the
risks it represents. Prospective stockholders should carefully consider the
following factors, in addition to other information furnished to prospective
stockholders. These Risk Factors do not purport to be a complete disclosure of
all risks that may be relevant to a decision to acquire the Bridgetech Stock.
Prospective stockholders must rely upon their own examination of and ability to
understand the nature of this investment, including the risks involved, in
making a decision to invest in the Company. There can be no assurance that the
Company will be able to achieve its investment objective or that stockholders
will receive a return. You should acquire shares of Bridgetech Stock only if you
can afford a complete loss of your investment.
RISKS RELATED TO OUR BUSINESS
Because we have a short operating history under our current management, there is
limited information upon which you can evaluate our business.
Our Company was formed on June 4, 1991, but it did not begin operations
in its current line of business until earlier this year. As such, we have not
engaged in a sufficient amount of consistent activity over a sustained period of
time to establish an operating history in our current line of business. Since
beginning operations in our current line of business, we have not been
profitable, and we have limited financial results upon which you may judge our
potential.
You should consider our prospects in light of the risks, uncertainties
and difficulties frequently encountered by companies that are, like us, in their
early stage of development, particularly companies in the rapidly evolving
market for medical products and services. To be successful in this market, we
must, among other things: attract and maintain a broad base of large and small
customers; increase awareness of our concept; develop and introduce functional
and attractive product and service offerings; respond to competitive and
technological developments; attract, integrate, motivate and retain qualified
personnel; and continue to build and expand our operational structure to support
our business. We cannot guarantee that we will succeed in achieving these goals,
and our failure to do so would have a material adverse effect on our business,
prospects, financial condition and operating results. We have experienced in the
past and may experience in the future under-capitalization, shortages, setbacks
and many of the problems, delays and expenses encountered by any early stage
business. As a result of these factors, other factors described herein and
unforeseen factors, we may not be able to successfully implement our business
model, and an investor in the Bridgetech Stock should be prepared to lose the
entire amount of his or her investment.
We may be unable to meet our future capital requirements.
Based on our current operating plan, we anticipate that we will need
additional capital in the near future. If we raise additional funds by issuing
equity or convertible debt securities, the percentage ownership of our
stockholders will be diluted. We currently do not have any commitments for
additional
36
financing. We cannot be certain that additional financing will be available when
and to the extent required or that, if available, it will be on acceptable
terms. If adequate funds are not available on acceptable terms, we may not be
able to fund our expansion, develop or enhance our products or services or
respond to competitive pressures. In that event, holders of the Bridgetech Stock
could lose their entire investment.
We anticipate significant future losses and are unable to accurately forecast
our revenues
We expect to incur net operating losses and negative cash flows. We
will incur significant direct expenses associated with the development of our
products and associated technology and our marketing and sales efforts. We may
not achieve sufficient revenues in relation to our expenses to ever become
profitable. If we do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis.
As a result of our lack of operating history and the emerging nature of
the markets in which we intend to compete, we are unable to forecast our
revenues with any degree of certainty. Our current and projected expense levels
are based largely on our estimates of future revenues. We expect our expenses to
increase significantly in the future as we continue to incur significant sales
and marketing, product development and administrative expenses. The success of
our business depends on our ability to increase our revenues to offset our
expenses. If our revenues fall short of our projections, our business, financial
condition and operating results will be materially adversely affected.
If we are unable to identify or complete acquisitions of other companies, or if
we are unable to successfully integrate any such acquisitions, we may not be
able to successfully implement our business model.
We plan on expanding our business, in part, through acquisitions. We
may compete with other companies, many of which may have greater resources than
we do, in identifying and acquiring potential targets. In addition, any
acquisitions and any internally-generated growth experienced by us could place
significant demands on our management, thereby restricting or limiting our
available time and opportunity to identify and evaluate potential future
opportunities.
Moreover, any future acquisitions, investments, strategic alliances or
related efforts will be accompanied by the risks commonly encountered in such
transactions or efforts. Such risks include, among others:
- the difficulty of identifying appropriate acquisition
candidates;
- the diversion of management's attention;
- the difficulty of assimilating the operations, technologies,
products and personnel of the respective entities;
- the inability of management to capitalize on the opportunities
presented by acquisitions, investments, strategic alliances or
related efforts; and,
- the inability to maintain uniform standards, controls,
procedures and policies and the impairment of relationships
with employees and customers as a result of changes in
management.
Further, to the extent that any such transaction involves customer bases or
businesses located outside the United States, the transaction would involve the
risks associated with international operations. There can be no assurance that
we would be successful in overcoming these risks or any other problems
encountered with such acquisitions, investments, strategic alliances or related
efforts. Further, there can be no assurance that acquisition opportunities will
be available, that we will have access to the capital required
37
to finance potential acquisitions, that we will continue to acquire businesses
or that the acquired businesses will be profitable. Acquisitions may result in
potentially dilutive issuances of equity securities, the incurrence of debt and
the amortization of expenses related to goodwill and other intangible assets,
all of which could have a material adverse effect on us.
If we are unable to develop and maintain alliances with strategic partners, we
may have difficulty developing and selling our products and services.
Our ability to develop business alliances with medical device, medical
service and/or health- related companies is an essential component of our
strategy. There can be no assurance that our efforts to develop such business
relationships will progress to mature relationships or that any such
relationships will be successful. Further, relying on these or other alliances
will present additional risks, such as:
- our partners may not devote sufficient resources to the development and
sale of our products and technologies;
- our collaborations may be unsuccessful;
- our partners may develop products or technologies competitive with our
products and technologies; and
- we may not be able to negotiate future alliances on acceptable terms.
We have entered into a Joint Venture Agreement with Amcare Labs
International, Inc., effective as of April 10, 2005. This Joint Venture
Agreement is subject to several conditions to closing and will terminate on June
30, 2005 if the closing has not occurred by such date. In addition to the risks
described above, we cannot assure you that we will be able to close the
transactions contemplated by the Joint Venture Agreement on or before June 30,
2005.
We expect intense competition in our industry.
The medical device, services and products business is highly
competitive with many companies having access to the same market. Many of our
competitors are large, diversified companies with significant expertise and
contacts. Many of these competitors have greater name recognition, greater
financial and other resources, more significant research and development staffs,
marketing and distribution programs and facilities, and longer operating
histories than we have, and these competitors can be expected to compete within
the business in which we engage and intend to engage. We cannot assure you that
we will succeed in the face of strong competition from other companies or that
we will have the necessary resources to be competitive and to achieve a
profitable position in the marketplace. Moreover, we cannot assure you that our
intellectual property rights will block competitive products. We are subject to
the risks which are common with under-capitalized companies. Therefore,
potential acquirors of Bridgetech Stock should consider an investment in us to
be an extremely risky venture.
Technological changes and uncertainty present significant challenges and risks
to us.
We are involved in the creation, production, and distribution of
medical devices, services and products. Marketing such products requires
extensive research efforts, yet their relative attractiveness in the marketplace
can be affected by rapid technological change. New developments in this area are
expected to continue at a rapid pace in both industry and academia. There can be
no assurance that research will not lead to discoveries by others that are more
effective than those of the Company, or that such research and discoveries by
others will not render some or all of the Company's programs, services or
products noncompetitive or obsolete. No assurance can be given that unforeseen
problems will not
38
develop with the technologies or applications used by the Company or that the
Company's products and services will ultimately be commercially feasible.
We may be unsuccessful in our efforts to protect our proprietary rights, and
third parties may assert rights in our proprietary rights.
The Company believes that its trademarks, patents and other proprietary
rights are important to its success and its competitive position. There can be
no assurance that the actions taken by the Company to establish and protect its
proprietary rights will be adequate either to prevent imitation of its products
by others or to prevent others from seeking to block sales of the Company's
products as violative of the proprietary rights of others. No assurance can be
given that others will not assert rights in, or ownership of, trademarks and
other proprietary rights of the Company. Any litigation involving our
intellectual property could be costly and time-consuming. In addition, the laws
of certain foreign countries do not protect proprietary rights to the same
extent as do the laws of the United States, with the result that our
intellectual property may not be entitled to as much protection in those
countries.
International operations present a number of risks to us.
The Company is seeking to establish international operations, with a
particular focus on China. International operations and exports to foreign
markets are subject to all of the risks generally associated with doing business
abroad, such as foreign government regulation, economic conditions, currency
fluctuations, duties and taxes, war and political unrest, changing political
conditions, disruptions or delays in shipments, expropriation, nationalization,
the inability to obtain or the renegotiation or nullification of existing
concessions, licenses, permits, approvals and contracts, taxation policies,
foreign exchange and repatriation restrictions, international monetary
fluctuations, currency controls and foreign governmental regulations that favor
or require the awarding of contracts to local contractors or require foreign
contractors to employ citizens of, or purchase supplies from, a particular
jurisdiction. In addition, in the event of a dispute arising from foreign
operations, the Company may be subject to the exclusive jurisdiction of foreign
courts or may not be successful in subjecting foreign persons to the
jurisdiction of courts in the United States. These factors, among others, could
impact the Company's ability to sell its products and services in international
markets. If any such factors were to impact the conduct of our business in a
particular country, there could be a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
majority of the Company's sales are derived from the U.S. As a result,
predicting foreign consumer demand may be more difficult for the Company than
predicting U.S. consumer preferences, and there can be no assurance that the
Company's merchandise or marketing efforts will be successful in foreign
markets.
Fluctuations in foreign currency exchange rates could result in declines in our
reported sales and earnings.
Our international sales will be denominated in local currencies and not
in U.S. dollars, and our reported sales and earnings will be subject to
fluctuations in foreign exchange rates. Foreign currency fluctuations may
adversely affect our sales and earnings. At present, we do not engage in hedging
transactions to protect against uncertainty in future exchange rates between
particular foreign currencies and the U.S. dollar.
Our products and services are subject to extensive regulations with which
compliance is costly and which expose us to penalties for non-compliance. We may
not be able to obtain required regulatory approvals for our products and
services in a cost-effective manner or at all, which could adversely affect our
business and results of operations.
39
The production and marketing of our products and our ongoing
preclinical testing and clinical trial activities are subject to extensive
regulation and review by numerous governmental authorities both in the United
States and abroad. U.S. and foreign regulations applicable to medical devices
are wide-ranging and govern, among other things, the testing, marketing and
pre-market review of new medical devices, in addition to regulating
manufacturing practices, reporting, advertising, exporting, labeling and record
keeping procedures. We are required to obtain approval or clearance from the
State Food and Drug Administration of China (the "SFDA") before we can market
our products in China. The regulatory process requires significant time, effort
and expenditures to bring our products to market, and we cannot assure that any
of our products will be approved for sale. Any failure to obtain regulatory
approvals or clearances could prevent us from successfully marketing our
products. Our failure to comply with applicable regulatory requirements could
result in governmental agencies:
- imposing fines and penalties on us;
- preventing us from manufacturing or selling our products;
- bringing civil or criminal charges against us;
- delaying the introduction of our new products into the market;
- recalling or seizing our products; or
- withdrawing or denying approvals or clearances for our products.
If any or all of the foregoing were to occur, our business, prospects,
financial condition or results of operations could be adversely affected.
Even if regulatory approval or clearance of a product is granted, the
approval or clearance could limit the uses for which the product may be labeled
and promoted, which may limit the market for our products. Further, for a
marketed product, its manufacturer and manufacturing facilities are subject to
periodic reviews and inspections by the SFDA and foreign regulatory authorities.
Subsequent discovery of problems with a product, manufacturer or facility may
result in restrictions on the product, manufacturer or facility, including
withdrawal of the product from the market or other enforcement actions. In
addition, regulatory agencies may not agree with the extent or speed of
corrective actions relating to product or manufacturing problems.
Furthermore, because we are subject to extensive regulation in the
countries in which we operate, we are subject to the risk that regulations could
change in a way that would expose us to additional costs, penalties or
liabilities.
The operation of our products could result in product liability claims.
Given the nature of our business, we face an inherent risk of exposure
to product liability claims in the event that the use of products or services
that we sell results in injury. While we intend to obtain product liability
insurance, there can be no assurance that such insurance will continue to be
available at a reasonable cost, or, if available, will be adequate to cover
liabilities. We do not anticipate obtaining contractual indemnification from
parties acquiring or using our products. In any event, any such indemnification
if obtained will be limited by our terms and, as a practical matter, to the
creditworthiness of the indemnifying party. In the event that we do not have
adequate insurance or contractual indemnification, product liabilities relating
to defective products could have a material adverse effect on our operations and
financial conditions.
We depend heavily on key personnel.
Our performance is substantially dependent on the performance of our
Chairman, Xxxxxxx Xxxx,
40
our President and Chief Executive Officer, Xxxxxxx Xxxxxxx, our Executive Vice
President and Chief Financial Officer, Xxxxxx X. Xxxx III, our Chief Information
Officer, Xxxxx Xxxxxx, and other key employees. Although none of these employees
has indicated that he intends to leave the Company, the loss of the services of
any of these employees could have a material adverse effect on the business,
operating results and financial condition of the Company.
The Company's new management team is currently reviewing the Company's corporate
history and may discover material issues.
The Company's new management team is currently engaged in a review of
the Company's books, records and other information. At this point, the review
has not yet been completed. During the course of this review, we may discover
significant corporate governance and other "clean-up" issues, deficiencies or
liabilities that will need to be resolved. Our attempts to resolve these issues
could require material costs and expenses, could divert management's attention,
could create uncertainty for the Company and could postpone or cause us to
abandon other initiatives. Moreover, we can offer no assurance that we will be
able to adequately resolve any such issues.
We are not subject to the reporting requirements of the Securities Exchange Act
of 1934; as such, there is limited business and financial information publicly
available to you regarding our business.
In December 2004, the Company (then known as Parentech, Inc. and then
engaged in a different business) withdrew its registration under Section 12(g)
of the Securities Exchange Act of 1934, as amended. Prior to the Company's
withdrawal, the Company had not generated material revenues for three years.
Because we are not subject to Securities and Exchange Commission reporting
requirements, there is limited public information available regarding our
current business. Additionally, we have not obtained any audited financial
statements for 2004. As such, you do not have access to such information
normally available to evaluate our business and financial condition.
We may have insufficient assets upon dissolution or termination to return any
amounts to our stockholders.
In the event of dissolution of the Company, the proceeds from the
liquidation of its assets, if any, will be first used to satisfy the claims of
creditors. There is no assurance that the Company's assets would be sufficient
to satisfy creditors' claims in full. Only after all outstanding debts are
satisfied will the remaining proceeds, if any, be distributed to our
stockholders. Accordingly, our stockholders' ability to recover all or any
portion of their investment under such circumstances will depend on the amount
of proceeds that the Company realizes from liquidation of its assets.
RISKS RELATED TO THE BRIDGETECH STOCK
The determination of the subscription price is arbitrary and is significantly
higher than the subscription price for recent sales of the shares
The price of $3.00 per share of Bridgetech Stock ascribed to the
Bridgetech Stock in the Stock Purchase Agreement has been arbitrarily
determined. We issued shares of Bridgetech Stock at a price of $1.00 per share
in February 2005, and we are currently offering shares of Bridgetech Stock at a
price of $2.00 per share to a small number of potential investors. The price for
the shares set forth in the Stock Purchase Agreement is not an indication of the
shares' market value or of the value of the Company's assets. The Company cannot
provide any assurance that the shares, if transferable, can be sold for such
price or for any amount. As a result, a stockholder may be unable to sell or
otherwise dispose of the Bridgetech Stock should he or she desire to liquidate
his or her investment in the event of an emergency
41
or other financial need or to pay any tax liability incurred related to the
Bridgetech Stock.
There is no trading market for the Bridgetech Stock and a trading market may
never develop which may prevent you from selling your shares and may result in
the loss of your entire investment.
The purchase of the Bridgetech Stock should be considered an illiquid
investment and should be undertaken only if you are prepared to bear the risk of
an investment in the Bridgetech Stock for an indefinite period. We are issuing
the Bridgetech Stock pursuant to exemptions from registration under applicable
federal and state securities laws. Any subsequent transfer or resale of the
Bridgetech Stock by you will be restricted unless other exemptions from such
registration provisions are applicable for such transfer or unless the shares of
Bridgetech Stock issued to you is registered under the federal and state
securities laws. Therefore, while shares of our common Bridgetech Stock are
quoted on the "pink sheets," we cannot assure you that any other trading market
for our securities will develop and you should anticipate bearing the economic
risk of your investment for an indefinite period of time.
If the Company were to seek to have shares of its common stock quoted
on the OTC Bulletin Board or other trading medium, it may be subject to lengthy
delays in doing so, and there can be no assurance that the Company's efforts
will be successful. Moreover, in the event that the Company's shares become
quoted on any such trading medium, we may be subject to the xxxxx stock rules by
the Securities and Exchange Commission that require brokers to provide extensive
disclosure to their customers prior to executing trades in xxxxx stocks, and as
such there may be a reduction in the trading activity of our common stock. As a
result, you may find it difficult to sell your shares of Bridgetech Stock.
Bridgetech Stockholders are subject to potential dilution as a result of future
issuances of securities.
In the event the Company needs additional capital, the Company may
offer to sell additional stock. Some such stock could have rights, preferences
and privileges senior to the Bridgetech Stock. Any such issuance would dilute
the subscriber's equity interest in the Company and might adversely affect the
value of his or her investment.
We do not intend to declare dividends.
We have not paid any dividends in the past and do not anticipate paying
any dividends in the foreseeable future.
RISKS RELATED TO THE TRANSACTION
Any projections regarding our future performance may be incorrect.
Any projections delivered to prospective stockholders were prepared by
the Company's management based on assumptions that they believe to be
reasonable, but are nonetheless subject to inherent uncertainties and
contingencies, many of which are beyond the control of the Company. These
inherent uncertainties are compounded because of the Company's brief operating
history, and none of the data contained in the projections has been audited.
There can be no assurance that these or any other assumptions will prove to be
justified, or that the Company's results will resemble those set forth in the
financial projections. Indeed, you should assume that actual operational results
for the Company will vary materially from those set forth in the projections.
Furthermore, no assurance can be given to you that the basis for these
assumptions or the assumptions themselves will prove well-founded.
42
Our financial statements are unaudited.
Any historic financial statements presented to you in connection with
the Transaction are unaudited financial statements.
No Investors' Counsel
The Company has not retained any independent professionals to review or
comment on the Transaction or the issuance of Bridgetech Stock in connection
therewith, or to otherwise protect the interests of the Clarity Stockholders in
connection therewith. Although the Company has retained its own counsel, neither
that law firm nor any other law firm has made, on behalf of the Clarity
Stockholders, any investigation of the merits or the fairness of the
Transaction, the issuance of Bridgetech Stock in connection therewith or of any
factual matters represented in connection therewith, and the Clarity
Stockholders should not rely on the law firm so retained with respect to any
matters herein described. Prior to making an investment in the Company, all
potential stockholders should consult with their own legal, financial and tax
advisers.
43
EXHIBIT B
BUYER'S CERTIFICATE
See attached.
44
BRIDGETECH HOLDINGS INTERNATIONAL, INC.
BUYER'S CERTIFICATE
THIS BUYER'S CERTIFICATE is being executed and delivered by Bridgetech
Holdings International, Inc., a Delaware corporation (the "Company"), pursuant
to Section 2.2(a)(iii) of that certain Stock Purchase Agreement, dated June 23,
2005 (the "Agreement"), by and among the Company and the shareholders of Clarity
Imaging International, Inc., a Texas corporation ("Clarity").
1. The Company has the corporate power and authority to execute, deliver and
perform the Agreement and the agreements, instruments and documents to be
executed and delivered by it pursuant to the Agreement.
2. The Agreement and each other agreement, instrument and document executed
by the Company in connection with the consummation of the transactions
contemplated by the Agreement have been duly executed and delivered by the
Company, and each constitutes the legal, valid and binding obligation of
the Company, enforceable in accordance with their terms. Without limiting
the foregoing, the Company has taken all necessary corporate action in
connection with the approval of the Agreement and the other agreements,
instruments and documents executed by the Company pursuant thereto.
3. The representations and warranties of the Company contained in the
Agreement are true and correct in all material respects on and as of the
date hereof.
4. The Company is in compliance with all covenants with which it is obligated
to comply under the Agreement as of the date hereof.
The foregoing shall be deemed to be certifications of the Company and not
of the undersigned personally.
IN WITNESS WHEREOF, the undersigned has executed this certificate pursuant
to Section 2.2(a)(iii) of the Agreement this ____ day of June, 2005.
BRIDGETECH HOLDINGS INTERNATIONAL, INC.
By:
-----------------------------------
Name: Xxxxxx X. Xxxx III
Title: Executive Vice President and
Chief Financial Officer
45
EXHIBIT C
STOCKHOLDER'S CERTIFICATE
See attached.
46
STOCKHOLDERS' REPRESENTATIVE CERTIFICATE
THIS STOCKHOLDERS' REPRESENTATIVE CERTIFICATE is being executed and
delivered by Xxxxxxx Xxxx, in his capacity as the Stockholders' Representative
of the stockholders of Clarity Imaging International, Inc., a Texas corporation
("Clarity"), with respect to that certain Stock Purchase Agreement, dated June
23, 2005 (the "Agreement"), by and among the stockholders of Clarity (the
"Clarity Stockholders") and Bridgetech Holdings International, Inc., a Delaware
corporation ("Bridgetech").
Xx. Xxxx hereby certifies as follows:
1. He is familiar with the Agreement.
2. He and the Clarity Stockholders have the power and authority to execute,
deliver and perform the Agreement and the agreements, instruments and
documents to be executed and delivered by them pursuant to the Agreement.
3. The Agreement and each other agreement, instrument and document executed
by the Stockholders' Representative and the Clarity Stockholders in
connection with the consummation of the transactions contemplated by the
Agreement have been duly executed and delivered by such persons, and each
constitutes the legal, valid and binding obligation of such persons,
enforceable in accordance with its terms. Without limiting the foregoing,
the Stockholders' Representative and the Clarity Stockholders have taken
all necessary action in connection with the approval of the Agreement and
the other agreements, instruments and documents executed by them pursuant
thereto.
4. The representations and warranties of the Clarity Stockholders contained
in the Agreement are true and correct in all material respects on and as
of the date hereof.
5. The Clarity Stockholders are in compliance with all covenants with which
they are obligated to comply under the Agreement as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this certificate pursuant
to Section 2.2(b)(iv) of the Agreement this ___ day of June, 2005.
____________________________
Xxxxxxx Xxxx
47
