EXCHANGE AGREEMENT
Between
WATERFORD STERLING CORPORATION
and
ETERNAL TECHNOLOGIES, INC.
Dated May 24, 2002
TABLE OF CONTENTS
ARTICLE I REPRESENTATIONS, COVENANTS, AND WARRANTIES OF ETERNAL
TECHNOLOGIES GROUP LTD.
1.01 Organization 4
1.02 Capitalization 5
1.03 Subsidiaries and Predecessor Corporations 5
1.04 Financial Statements 5
1.05 Information 6
1.06 Options and Warrants 6
1.07 Absence of Certain Changes or Events 6
1.08 Title and Related Matters 7
1.09 Litigation and Proceedings 8
1.10 Contracts 8
1.11 Material Contract Defaults 8
1.12 No Conflict With Other Instruments 9
1.13 Governmental Authorizations 9
1.14 Compliance With Laws and Regulations 9
1.15 Insurance 9
1.16 Approval of Agreement 9
1.17 Material Transactions or Affiliations 9
1.18 Labor Relations 9
1.19 Eternal Concepts Schedules 10
1.20 Bank Accounts; Power of Attorney 11
1.21 Valid Obligation 11
ARTICLE II REPRESENTATIONS, COVENANTS, AND WARRANTIES OF WATERFORD
STERLING CORPORATION
2.01 Organization 11
2.02 Capitalization 12
2.03 Subsidiaries and Predecessor Corporations 12
2.04 Securities Filings; Financial Statements 12
2.05 Information 13
2.06 Options and Warrants 13
2.07 Absence of Certain Changes or Events 13
2.08 Title and Related Matters 14
2.09 Litigation and Proceedings 15
2.10 Contracts 15
2.11 Material Contract Defaults 16
2.12 No Conflict With Other Instruments 16
2.13 Governmental Authorizations 16
2.14 Compliance With Laws and Regulations 16
2.15 Insurance 16
2.16 Approval of Agreement 16
2.17 Continuity of Business Enterprises 17
2.18 Material Transactions or Affiliations 17
2.19 Labor Relations 17
2.20 Waterford Schedules 17
2.21 Bank Accounts; Power of Attorney 18
2.22 Valid Obligation 18
ARTICLE III PLAN OF EXCHANGE
3.01 The Exchange 19
3.02 Anti-Dilution 19
3.03 Closing 19
3.04 Closing Events 19
3.05 Termination 20
15
ARTICLE IV SPECIAL COVENANTS
4.01 Access to Properties and Records 22
4.02 Delivery of Books and Records 22
4.03 Third Party Consents and Certificates 22
4.04 Name Change and State of Incorporation 22
4.05 Atlantic Shareholder Meeting 22
4.06 Consent of Digital Shareholders 22
4.07 Designation of Directors and Officers 22
4.08 Exclusive Dealing Rights 23
4.09 Actions Prior to Closing 23
4.10 Sales Under Rule 144 or 145, If Applicable 25
4.11 Indemnification 25
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF WATERFORD WEB
ADVISORS
5.01 Accuracy of Representations and Performance of Covenants 26
5.02 Officer's Certificates 26
5.03 No Material Adverse Change 26
5.04 Good Standing 26
5.05 Approval by Eternal Shareholders 26
5.06 No Governmental Prohibitions 26
5.07 Consents 27
5.08 Other Items 27
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF ETERNAL TECHNOLOGIES
GROUP, INC. AND THE ETERNAL SHAREHOLDERS
6.01 Accuracy of Representations and Performance of Covenants 27
6.02 Officer's Certificate 27
6.03 No Material Adverse Change 28
6.04 Good Standing 28
6.05 No Governmental Prohibition 28
6.06 Consents 28
6.07 Other Items 28
ARTICLE VII MISCELLANEOUS
7.01 Brokers 28
7.02 Governing Law 28
7.03 Notices 29
7.04 Attorney's Fees 29
7.05 Confidentiality 29
7.06 Public Announcements and Filings 30
7.07 Schedules; Knowledge 30
7.08 Third Party Beneficiaries 30
7.09 Expenses 30
7.10 Entire Agreement 30
7.11 Survival; Termination 30
7.12 Counterparts 30
7.13 Amendment or Waiver 30
7.14 Best Efforts 31
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (hereinafter referred to as this "Agreement") is
entered into as of this 24th day of May 2002 and updated through September 30,
2002 by and between WATERFORD STERLING CORPORATION a Nevada corporation
(hereinafter referred to as ("Waterford") ETERNAL TECHNOLOGIES GROUP LTD., a
British Virgin Islands corporation (hereinafter referred to as "Eternal"), upon
the following premises:
Premises
WHEREAS, Waterford is a publicly held corporation organized under the laws
of the State of Nevada;
WHEREAS, Eternal Technologies is a privately held corporation organized
under the laws of the British Virgin Islands;
WHEREAS, the Board of Directors of the constituent corporations have
determined that it is in the best interest of the parties that Waterford acquire
100% of the issued and outstanding securities of Eternal in exchange for the
issuance of certain shares of Waterford (the "Exchange") and Eternal agreed to
use its best efforts to cause its shareholders (the "Eternal Shareholders") to
exchange their securities of Eternal on the terms described herein; and
WHEREAS, Waterford and Eternal desire to set forth the terms of the
Exchange, which is intended to constitute a tax-free reorganization pursuant to
the provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986.
Agreement
NOW THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF Eternal
As an inducement to, and to obtain the reliance of Waterford, except as
set forth on the Eternal Schedules (as hereinafter defined), Eternal represents
and warrants as follows:
Section 1.01 Organization. Eternal is a corporation duly organized,
validly existing, and in good standing under the laws of the British Virgin
Islands and has the corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances, and
orders of public authorities to own all of its properties and assets and to
carry on its business in all material respects as it is now being conducted,
including qualification to do business as a foreign corporation in the states or
countries in which the character and location of the assets owned by it or the
nature of the business transacted by it requires qualification, except where
failure to be so qualified would not have a material adverse effect on its
business. Included in the Eternal Schedules are complete and correct copies of
the articles of incorporation, and bylaws of Eternal as in effect on the date
hereof. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of Eternal's Memorandum and Articles of Association. Eternal has taken
all actions required by law, its articles of incorporation, or otherwise to
authorize the execution and delivery of this Agreement. Eternal has full power,
authority, and legal right and has taken all action required by law, its
articles of incorporation, and otherwise to consummate the transactions herein
contemplated.
Section 1.02 Capitalization. The authorized capitalization of Eternal
consists of 50,000 shares of common stock, $1.00 par value, of which 10,000
shares are currently issued and outstanding. All issued and outstanding shares
are legally issued, fully paid, and non-assessable and not issued in violation
of the preemptive or other rights of any person.
Section 1.03 Subsidiaries and Predecessor Corporations. Eternal does
not have any predecessor corporation(s) or subsidiaries, and does not own,
beneficially or of record, any shares of any other corporation, except as
disclosed in Schedule 1.03. For purposes hereinafter, the term "Eternal" also
includes those subsidiaries, if any, set forth on Schedule 1.03.
Section 1.04 Financial Statements.
--------------------
(a) Included in the Eternal Schedules are (i)the audited
balance sheets of Eternal as successor in interest as of December 31,
2000 and 2001, and the related audited statements of operations,
stockholders' equity and cash flows for the two fiscal years ended
December 31, 2000 and 2001 together with the notes to such statements
and the opinion of Xxxxxx Xxxxx & Co. independent certified public
accountants, with respect thereto and the unaudited balance sheets of
Eternal as of June 30, 2002, and 2001 and the related statements of
operations, stockholders equity and cashflows from the six months ended
June 30, 2002 and 2001 together with the note to such statements.
(b) All such financial statements have been prepared in
accordance with generally accepted accounting principles. The Eternal
balance sheets present a true and fair view as of the dates of such
balance sheets of the financial condition of Eternal. Eternal did not
have, as of the dates of such balance sheets, except as and to the
extent reflected or reserved against therein, any liabilities or
obligations (absolute or contingent) which should be reflected in the
balance sheets or the notes thereto, prepared in accordance with
generally accepted accounting principles, and all assets reflected
therein are properly reported and present fairly the value of the
assets of Eternal in accordance with generally accepted accounting
principles.
(c) Eternal has no liabilities with respect to the payment of
any federal, state, county, local or other taxes (including any
deficiencies, interest or penalties), except for taxes accrued but not
yet due and payable.
(d) Eternal has filed all state, federal or local income
and/or franchise tax returns required to be filed by it from inception
to the date hereof. Each of such income tax returns reflects the taxes
due for the period covered thereby, except for amounts which, in the
aggregate, are immaterial.
(e) The books and records, financial and otherwise, of Eternal
are in all material respects complete and correct and have been
maintained in accordance with good business and accounting practices.
(f) All of Eternal' assets are reflected on its financial
statements, and, except as set forth in the Eternal Schedules or the
financial statements of Eternal or the notes thereto, Eternal has no
material liabilities, direct or indirect, matured or unmatured,
contingent or otherwise.
Section 1.05 Information. The information concerning Eternal set forth
in this Agreement and in the Eternal Schedules is complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, not misleading. In addition,
Eternal has fully disclosed in writing to Waterford (through this Agreement or
the Eternal Schedules) all information relating to matters involving Eternal or
its assets or its present or past operations or activities which (i) indicated
or may indicate, in the aggregate, the existence of a greater than $25,000
liability or diminution in value, (ii) have led or may lead to a competitive
disadvantage on the part of Eternal or (iii) either alone or in aggregation with
other information covered by this Section, otherwise have led or may lead to a
material adverse effect on the transactions contemplated herein or on Eternal,
its assets, or its operations or activities as presently conducted or as
contemplated to be conducted after the Closing Date, including, but not limited
to, information relating to governmental, employee, environmental, litigation
and securities matters and transactions with affiliates.
Section 1.06 Options or Warrants. There are no existing options,
warrants, calls, or commitments of any character relating to the authorized and
unissued Eternal common stock, except options, warrants, calls or commitments,
if any, to which Eternal is not a party and by which it is not bound.
Section 1.07 Absence of Certain Changes or Events. Except as
set forth in this Agreement or the Eternal Schedules, since June 30, 2002:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of Eternal or
(ii) any damage, destruction, or loss to Eternal (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets, or condition of Eternal;
(b) Eternal has not (i) amended its articles of incorporation
or bylaws; (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind
whatsoever to stockholders or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock; (iii) waived any rights
of value which in the aggregate are outside of the ordinary course of
business or material considering the business of Eternal; (iv) made any
material change in its method of management, operation or accounting;
(v) entered into any other material transaction other than sales in the
ordinary course of its business; (vi) made any accrual or arrangement
for payment of bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer or
employee; (vii) increased the rate of compensation payable or to become
payable by it to any of its officers or directors or any of its
salaried employees whose monthly compensation exceeds $1,000; or (viii)
made any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan,
payment, or arrangement made to, for, or with its officers, directors,
or employees;
(c) Eternal has not (i) borrowed or agreed to borrow any funds
or incurred, or become subject to, any material obligation or liability
(absolute or contingent) except as disclosed herein and except
liabilities incurred in the ordinary course of business; (ii) paid or
agreed to pay any material obligations or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent Eternal balance sheet, and current liabilities incurred
since that date in the ordinary course of business and professional and
other fees and expenses in connection with the preparation of this
Agreement and the consummation of the transactions contemplated hereby;
(iii) sold or transferred, or agreed to sell or transfer, any of its
assets, properties, or rights (except assets, properties, or rights not
used or useful in its business which, in the aggregate have a value of
less than $1,000), or canceled, or agreed to cancel, any debts or
claims (except debts or claims which in the aggregate are of a value of
less than $1,000); (iv) made or permitted any amendment or termination
of any contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of
Eternal; or (v) issued, delivered, or agreed to issue or deliver any
stock, bonds or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock); and
(d) to the best knowledge of Eternal, Eternal has not become
subject to any law or regulation which materially and adversely
affects, or in the future may adversely affect the business,
operations, properties, assets, or condition of Eternal.
Section 1.08 Title and Related Matters. Eternal has good and marketable
title to all of its properties, inventory, interests in properties, and assets,
real and personal, which are reflected in the most recent Eternal balance sheet
or acquired after that date (except properties, inventory, interests in
properties, and assets sold or otherwise disposed of since such date in the
ordinary course of business) free and clear of all liens, pledges, charges, or
encumbrances except (a) statutory liens or claims not yet delinquent; (b) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the properties subject
thereto or affected thereby or otherwise materially impair present business
operations on such properties; and (c) as described in the Eternal Schedules.
Except as set forth in the Eternal Schedules, Eternal owns, free and clear of
any liens, claims, encumbrances, royalty interests, or other restrictions or
limitations of any nature whatsoever, any and all products it is currently
manufacturing, including the underlying technology and data, and all procedures,
techniques, marketing plans, business plans, methods of management, or other
information utilized in connection with Eternal' business. Except as set forth
in the Eternal Schedules, no third party has any right to, and Eternal has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade secrets, know-how,
propriety techniques, trademarks, service marks, trade names, or copyrights
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a materially adverse effect on the
business, operations, financial condition, income, or business prospects of
Eternal or any material portion of its properties, assets, or rights.
Section 1.09 Litigation and Proceedings. Except as set forth in the
Eternal Schedules, there are no actions, suits, proceedings, or investigations
pending or, to the knowledge of Eternal after reasonable investigation,
threatened by or against Eternal or affecting Eternal or its properties, at law
or in equity, before any court or other governmental agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind. Eternal does not have
any knowledge of any material default on its part with respect to any judgment,
order, injunction, decree, award, rule, or regulation of any court, arbitrator,
or governmental agency or instrumentality or of any circumstances which, after
reasonable investigation, would result in the discovery of such a default.
Section 1.10 Contracts.
(a) Except as included or described in the Eternal Schedules,
there are no "material" contracts, agreements, franchises, license
agreements, debt instruments or other commitments to which Eternal is a
party or by which it or any of its assets, products, technology, or
properties are bound other than those incurred in the ordinary course
of business (as used in this Agreement, a "material" contract,
agreement, franchise, license agreement, debt instrument or commitment
is one which (i) will remain in effect for more than six (6) months
after the date of this Agreement or (ii) involves aggregate obligations
of at least fifty thousand dollars ($50,000));
(b) All contracts, agreements, franchises, license agreements,
and other commitments to which Eternal is a party or by which its
properties are bound and which are material to the operations of
Eternal taken as a whole are valid and enforceable by Eternal in all
respects, except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally;
(c) Eternal is not a party to or bound by, and the properties
of Eternal are not subject to any contract, agreement, other commitment
or instrument; any charter or other corporate restriction; or any
judgment, order, writ, injunction, decree, or award which materially
and adversely affects, the business operations, properties, assets, or
condition of Eternal; and
(d) Except as included or described in the Eternal Schedules
or reflected in the most recent Eternal balance sheet, Eternal is not a
party to any oral or written (i) contract for the employment of any
officer or employee which is not terminable on 30 days, or less notice;
(ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit or retirement plan, (iii) agreement,
contract, or indenture relating to the borrowing of money, (iv)
guaranty of any obligation, other than one on which Eternal is a
primary obligor, for the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties of obligations
which, in the aggregate do not exceed more than one year or providing
for payments in excess of $25,000 in the aggregate; (vi) collective
bargaining agreement; or (vii) agreement with any present or former
officer or director of Eternal.
Section 1.11 Material Contract Defaults. Eternal is not in default in
any material respect under the terms of any outstanding contract, agreement,
lease, or other commitment which is material to the business, operations,
properties, assets or condition of Eternal and there is no event of default in
any material respect under any such contract, agreement, lease, or other
commitment in respect of which Eternal has not taken adequate steps to prevent
such a default from occurring.
Section 1.12 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
an event of default under, or terminate, accelerate or modify the terms of any
material indenture, mortgage, deed of trust, or other material contract,
agreement, or instrument to which Eternal is a party or to which any of its
properties or operations are subject.
Section 1.13 Governmental Authorizations. Except as set forth in the
Eternal Schedules, Eternal has all licenses, franchises, permits, and other
governmental authorizations that are legally required to enable it to conduct
its business in all material respects as conducted on the date hereof. Except
for compliance with federal and state securities and corporation laws, as
hereinafter provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental body
is required in connection with the execution and delivery by Eternal of this
Agreement and the consummation by Eternal of the transactions contemplated
hereby.
Section 1.14 Compliance With Laws and Regulations. Except as set forth
in the Eternal Schedules, to the best of its knowledge Eternal has complied with
all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or condition of Eternal or except to the extent that noncompliance would
not result in the occurrence of any material liability for Eternal.
Section 1.15 Insurance. All of the properties of Eternal
are fully insured for their full replacement cost.
Section 1.16 Approval of Agreement. The board of directors of Eternal
has authorized the execution and delivery of this Agreement by Eternal and has
approved this Agreement and the transactions contemplated hereby, and will
recommend to the Eternal Shareholders that the Exchange be accepted by them.
Section 1.17 Material Transactions or Affiliations. Set forth in the
Eternal Schedules is a description of every contract, agreement, or arrangement
between Eternal and any predecessor and any person who was at the time of such
contract, agreement, or arrangement an officer, director, or person owning of
record, or known by Eternal to own beneficially, 5% or more of the issued and
outstanding common stock of Eternal and which is to be performed in whole or in
part after the date hereof or which was entered into not more than three years
prior to the date hereof. Except as disclosed in the Eternal Schedules or
otherwise disclosed herein, no officer, director, or 5% shareholder of Eternal
has, or has had since inception of Eternal, any known interest, direct or
indirect, in any transaction with Eternal which was material to the business of
Eternal. There are no commitments by Eternal, whether written or oral, to lend
any funds, or to borrow any money from, or enter into any other transaction
with, any such affiliated person.
Section 1.18 Labor Relations. Eternal has not had work stoppage
resulting from labor problems. To the knowledge of Eternal, no union or other
collective bargaining organization is organizing or attempting to organize any
employee of Eternal.
Section 1.19 Eternal Schedules. Eternal has delivered to Waterford the
following schedules, which are collectively referred to as the "Eternal
Schedules" and which consist of separate schedules dated as of the date of
execution of this Agreement, all certified by the chief executive officer of
Eternal as complete, true, and correct as of the date of this Agreement in all
material respects:
(a) a schedule containing complete and correct copies
of the articles of incorporation, and bylaws of Eternal in effect as
of the date of this Agreement;
(b) a schedule containing the financial statements of
Eternal identified in paragraph 1.04(a);
(c) a Schedule 1.19(c) containing a list indicating
the name and address of each shareholder of Eternal together with
the number of shares owned by him, her or it;
(d) a schedule containing a description of all real property
owned by Eternal, together with a description of every mortgage, deed
of trust, pledge, lien, agreement, encumbrance, claim, or equity
interest of any nature whatsoever in such real property;
(e) copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which
Eternal carries on or proposes to carry on its business (except those
which, in the aggregate, are immaterial to the present or proposed
business of Eternal);
(f) a schedule listing the accounts receivable and notes and
other obligations receivable of Eternal as of December 31, 2001, or
thereafter other than in the ordinary course of business of Eternal,
indicating the debtor and amount, and classifying the accounts to show
in reasonable detail the length of time, if any, overdue, and stating
the nature and amount of any refunds, set offs, reimbursements,
discounts, or other adjustments, which are in the aggregate material
and due to or claimed by such debtor;
(g) a schedule listing the accounts payable and notes and
other obligations payable of Eternal as of June 30, 2002, or that arose
thereafter other than in the ordinary course of the business of
Eternal, indicating the creditor and amount, classifying the accounts
to show in reasonable detail the length of time, if any, overdue, and
stating the nature and amount of any refunds, set offs, reimbursements,
discounts, or other adjustments, which in the aggregate are material
and due to or claimed by Eternal respecting such obligations;
(h) a schedule setting forth a description of any material
adverse change in the business, operations, property, inventory,
assets, or condition of Eternal since June 30, 2002, required to be
provided pursuant to section 1.07 hereof; and
(i) a schedule setting forth any other information, together
with any required copies of documents, required to be disclosed in the
Eternal Schedules by Sections 1.01 through 1.18.
Eternal shall cause the Eternal Schedules and the instruments and data
delivered to Waterford hereunder to be promptly updated after the date hereof up
to and including the Closing Date.
It is understood and agreed that not all of the schedules referred to
above have been completed or are available to be furnished by Eternal. Eternal
shall have until December 31, 2002 to provide such schedules. If Eternal cannot
or fails to do so, or if Waterford acting reasonably finds any such schedules or
updates provided after the date hereof to be unacceptable according to the
criteria set forth below, Waterford may terminate this Agreement by giving
written notice to Eternal within five (5) days after the schedules or updates
were due to be produced or were provided. For purposes of the foregoing,
Waterford may consider a disclosure in the Eternal Schedules to be
"unacceptable" only if that item would have a material adverse impact on the
financial statements listed in Section 1.04(a), taken as a whole.
Section 1.20 Bank Accounts; Power of Attorney. Set forth in Schedule
1.20 is a true and complete list of (a) all accounts with banks, money market
mutual funds or securities or other financial institutions maintained by Eternal
within the past twelve (12) months, the account numbers thereof, and all persons
authorized to sign or act on behalf of Eternal, (b) all safe deposit [PG NUMBER]
boxes and other similar custodial arrangements maintained by Eternal within the
past twelve (12) months, and (c) the names of all persons holding powers of
attorney from Eternal or who are otherwise authorized to act on behalf of
Eternal with respect to any matter, other than its officers and directors, and a
summary of the terms of such powers or authorizations.
Section 1.21 Valid Obligation. This Agreement and all agreements and
other documents executed by Eternal in connection herewith constitute the valid
and binding obligation of Eternal, enforceable in accordance with its or their
terms, except as may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF WATERFORD
As an inducement to, and to obtain the reliance of Eternal and the
Eternal Shareholders, except as set forth in the Waterford Schedules (as
hereinafter defined), Waterford represents and warrants as follows:
Section 2.01 Organization. Waterford is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada and
has the corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets, to carry on its
business in all material respects as it is now being conducted, and except where
failure to be so qualified would not have a material adverse effect on its
business, there is no jurisdiction in which it is not qualified in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included in the Waterford Schedules are
complete and correct copies of the certificate of incorporation and bylaws of
Waterford as in effect on the date hereof. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of Waterford's certificate of incorporation or
bylaws. Waterford has taken all action required by law, its certificate of
incorporation, its bylaws, or otherwise to authorize the execution and delivery
of this Agreement, and Waterford has full power, authority, and legal right and
has taken all action required by law, its certificate of incorporation, bylaws,
or otherwise to consummate the transactions herein contemplated.
Section 2.02 Capitalization. Waterford's authorized capitalization
consists of 25,000,000 shares of common stock, par value $.001 of which
20,887,815 shares are issued and outstanding (the " Waterford Shares"). These
shares will be reverse split so that as of the date of Closing there will be
3,481,130 shares issued and outstanding. All issued and outstanding shares are
legally issued, fully paid, and non-assessable and not issued in violation of
the preemptive or other rights of any person.
Section 2.03 Subsidiaries and Predecessor Corporations. Waterford does
not have any predecessor corporation(s) or subsidiaries, and does not own,
beneficially or of record, any shares of any other corporation, except as
disclosed in Schedule 2.03. For purposes hereinafter, the term "Waterford" also
includes those subsidiaries, if any, set forth on Schedule 2.03.
Section 2.04 Securities Filings; Financial Statements.
(a) For at least the past twelve months Waterford has timely
filed all forms, reports and documents required to be filed with the
Securities and Exchange Commission, and has heretofore delivered to
Eternal, in the form filed with the Commission, (i) all quarterly and
annual reports on Forms 10-QSB and 10-KSB filed since December 31,
2000, (ii) all other reports filed by Waterford with the Securities and
Exchange Commission since December 31, 2000 (collectively, the "SEC
Reports") and (iii) all comment letters from the Securities and
Exchange Commission with respect to the SEC Reports. The SEC Reports
(i) were prepared in accordance with the requirements of the Securities
Exchange Act of 1934 or the Securities Act of 1933, as appropriate, and
(ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) Included in the Waterford Schedules are (i) the audited
balance sheets of Waterford as of December 31, 2000 and 2001, and the
related audited statements of operations, stockholders' equity and cash
flows for the two fiscal years ended December 31, 2000 and December 31,
2001, together with the notes to such statements and the opinion of
Xxxxxxx XxXxxxxxxx, independent certified public accountants, with
respect thereto, all as set forth in the SEC Reports and also the
unaudited balance sheets as of June 30, 2002 and 2001 and the related
statements of operations, stockholders equity and cash flows for the
six months ended June 30, 2002 and 2001 together with notes to such
statements.
(c) All such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved. The Waterford balance sheets
present fairly as of their respective dates the financial condition of
Waterford. As of the date of such balance sheets, except as and to the
extent reflected or reserved against therein, Waterford had no
liabilities or obligations (absolute or contingent) which should be
reflected in the balance sheets or the notes thereto prepared in
accordance with generally accepted accounting principles, and all
assets reflected therein are properly reported and present fairly the
value of the assets of Waterford, in accordance with generally accepted
accounting principles. The statements of operations, stockholders'
equity and cash flows reflect fairly the information required to be set
forth therein by generally accepted accounting principles.
(d) Waterford has no liabilities with respect to the payment
of any federal, state, county, local or other taxes (including any
deficiencies, interest or penalties), except for taxes accrued but not
yet due and payable.
(e) Waterford has timely filed all state, federal or local
income and/or franchise tax returns required to be filed by it from
inception to the date hereof. Each of such income tax returns reflects
the taxes due for the period covered thereby, except for amounts which,
in the aggregate, are immaterial.
(f) The books and records, financial and otherwise, of
Waterford are in all material aspects complete and correct and have
been maintained in accordance with good business and accounting
practices.
(g) All of Waterford's assets are reflected on its financial
statements, and, except as set forth in the Waterford Schedules or the
financial statements of Waterford or the notes thereto, Waterford has
no material liabilities, direct or indirect, matured or unmatured,
contingent or otherwise.
Section 2.05 Information. The information concerning Waterford set
forth in this Agreement and the Waterford Schedules is complete and accurate in
all material respects and does not contain any untrue statements of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading. In
addition, Waterford has fully disclosed in writing to Eternal (through this
Agreement or the Waterford Schedules) all information relating to matters
involving Waterford or its assets or its present or past operations or
activities which (i) indicated or may indicate, in the aggregate, the existence
of a greater than $25,000 liability or diminution in value, (ii) have led or may
lead to a competitive disadvantage on the part of Waterford or (iii) either
alone or in aggregation with other information covered by this Section,
otherwise have led or may lead to a material adverse effect on the transactions
contemplated herein or on Waterford, its assets, or its operations or activities
as presently conducted or as contemplated to be conducted after the Closing
Date, including, but not limited to, information relating to governmental,
employee, environmental, litigation and securities matters and transactions with
affiliates.
Section 2.06 Options or Warrants. There are no existing options,
warrants, calls, or commitments of any character relating to the authorized
and unissued stock of Waterford.
Section 2.07 Absence of Certain Changes or Events. Except as disclosed
in Exhibit 2.07, or permitted in writing by Eternal, since the date of the most
recent Waterford balance sheet:
(a) there has not been (i) any material adverse change in the
business, operations, properties, assets or condition of Waterford or
(ii) any damage, destruction or loss to Waterford (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets or condition of Waterford;
(b) Waterford has not (i) amended its certificate of
incorporation or bylaws; (ii) declared or made, or agreed to declare or
make any payment of dividends or distributions of any assets of any
kind whatsoever to stockholders or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock; (iii) waived any rights
of value which in the aggregate are outside of the ordinary course of
business or material considering the business of Waterford; (iv) made
any material change in its method of management, operation, or
accounting; (v) entered into any transactions or agreements other than
in the ordinary course of business; (vi) made any accrual or
arrangement for or payment of bonuses or special compensation of any
kind or any severance or termination pay to any present or former
officer or employee; (vii) increased the rate of compensation payable
or to become payable by it to any of its officers or directors or any
of its salaried employees whose monthly compensation exceed $1,000; or
(viii) made any increase in any profit sharing, bonus, deferred
compensation, insurance, pension, retirement, or other employee benefit
plan, payment, or arrangement, made to, for or with its officers,
directors, or employees;
(c) Waterford has not (i) granted or agreed to grant any
options, warrants, or other rights for its stock, bonds, or other
corporate securities calling for the issuance thereof; (ii) borrowed or
agreed to borrow any funds or incurred, or become subject to, any
material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid or
agreed to pay any material obligations or liabilities (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent Waterford balance sheet and current liabilities incurred
since that date in the ordinary course of business and professional and
other fees and expenses in connection with the preparation of this
Agreement and the consummation of the transaction contemplated hereby;
(iv) sold or transferred, or agreed to sell or transfer, any of its
assets, properties, or rights (except assets, properties, or rights not
used or useful in its business which, in the aggregate have a value of
less than $1000), or canceled, or agreed to cancel, any debts or claims
(except debts or claims which in the aggregate are of a value less than
$1000); (v) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of
Waterford; or (vi) issued, delivered or agreed to issue or deliver, any
stock, bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock), except in
connection with this Agreement; and
(d) to the best knowledge of Waterford, it has not become
subject to any law or regulation which materially and adversely
affects, or in the future, may adversely affect, the business,
operations, properties, assets or condition of Waterford.
Section 2.08 Title and Related Matters. Waterford has good and
marketable title to all of its properties, inventory, interest in properties,
and assets, real and personal, which are reflected in the most recent Waterford
balance sheet or acquired after that date (except properties, inventory,
interest in properties, and assets sold or otherwise disposed of since such date
in the ordinary course of business), free and clear of all liens, pledges,
charges, or encumbrances except (a) statutory liens or claims not yet
delinquent; (b) such imperfections of title and easements as do not and will not
materially detract from or interfere with the present or proposed use of the
properties subject thereto or affected thereby or otherwise materially impair
present business operations on such properties; and (c) as described in the
Waterford Schedules. Except as set forth in the Waterford Schedules, Waterford
owns, free and clear of any liens, claims, encumbrances, royalty interests, or
other restrictions or limitations of any nature whatsoever, any and all products
it is currently manufacturing, including the underlying technology and data, and
all procedures, techniques, marketing plans, business plans, methods of
management, or other information utilized in connection with Waterford's
business. Except as set forth in the Waterford Schedules, no third party has any
right to, and Waterford has not received any notice of infringement of or
conflict with asserted rights of others with respect to any product, technology,
data, trade secrets, know-how, propriety techniques, trademarks, service marks,
trade names, or copyrights which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a materially
adverse effect on the business, operations, financial condition, income, or
business prospects of Waterford or any material portion of its properties,
assets, or rights.
Section 2.09 Litigation and Proceedings. There are no actions, suits,
proceedings or investigations pending or, to the knowledge Waterford after
reasonable investigation, threatened by or against Waterford or affecting
Waterford or its properties, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind except as disclosed in Schedule 2.09. Waterford has no
knowledge of any default on its part with respect to any judgement, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator, or
governmental agency or instrumentality or any circumstance which after
reasonable investigation would result in the discovery of such default.
Section 2.10 Contracts.
(a) Waterford is not a party to, and its assets, products,
technology and properties are not bound by, any material contract,
franchise, license agreement, agreement, debt instrument or other
commitments whether such agreement is in writing or oral, except as
disclosed in Schedule 2.10.
(b) All contracts, agreements, franchises, license agreements,
and other commitments to which Waterford is a party or by which its
properties are bound and which are material to the operations of
Waterford taken as a whole are valid and enforceable by Waterford in
all respects, except as limited by bankruptcy and insolvency laws and
by other laws affecting the rights of creditors generally;
(c) Waterford is not a party to or bound by, and the
properties of Waterford are not subject to any contract, agreement,
other commitment or instrument; any charter or other corporate
restriction; or any judgment, order, writ, injunction, decree, or award
which materially and adversely affects, the business operations,
properties, assets, or condition of Waterford; and
(d) Except as included or described in the Waterford Schedules
or reflected in the most recent Waterford balance sheet, Waterford is
not a party to any oral or written (i) contract for the employment of
any officer or employee which is not terminable on 30 days, or less
notice; (ii) profit sharing, bonus, deferred compensation, stock
option, severance pay, pension benefit or retirement plan, (iii)
agreement, contract, or indenture relating to the borrowing of money,
(iv) guaranty of any obligation, other than one on which Waterford is a
primary obligor, for the borrowing of money or otherwise, excluding
endorsements made for collection and other guaranties of obligations
which, in the aggregate do not exceed more than one year or providing
for payments in excess of $25,000 in the aggregate; (vi) collective
bargaining agreement; or (vii) agreement with any present or former
officer or director of Waterford.
Section 2.11 Material Contract Defaults. Waterford is not in default in
any material respect under the terms of any outstanding contract, agreement,
lease, or other commitment which is material to the business, operations,
properties, assets or condition of Waterford and there is no event of default in
any material respect under any such contract, agreement, lease, or other
commitment in respect of which Waterford has not taken adequate steps to prevent
such a default from occurring.
Section 2.12 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, constitute
a default under, or terminate, accelerate or modify the terms of, any indenture,
mortgage, deed of trust, or other material agreement or instrument to which
Waterford is a party or to which any of its assets or operations are subject.
Section 2.13 Governmental Authorizations. Waterford has all licenses,
franchises, permits, and other governmental authorizations, that are legally
required to enable it to conduct its business operations in all material
respects as conducted on the date hereof. Except for compliance with federal and
state securities or corporation laws, as hereinafter provided, no authorization,
approval, consent or order of, of registration, declaration or filing with, any
court or other governmental body is required in connection with the execution
and delivery by Waterford of this Agreement and the consummation by Waterford of
the transactions contemplated hereby.
Section 2.14 Compliance With Laws and Regulations. To the best of its
knowledge, Waterford has complied with all applicable statutes and regulations
of any federal, state, or other applicable governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets or condition of
Waterford or except to the extent that noncompliance would not result in the
occurrence of any material liability. This compliance includes, but is not
limited to, the filing of all reports to date with federal and state securities
authorities.
Section 2.15 Insurance. All of the properties of Waterford are
fully insured for their full replacement cost.
Section 2.16 Approval of Agreement. The board of directors of Waterford
has authorized the execution and delivery of this Agreement by Waterford and has
approved this Agreement and the transactions contemplated hereby and will
recommend to its shareholders that they approve this Agreement and the
transactions contemplated hereby.
Section 2.17 Continuity of Business Enterprises. Waterford has no
commitment or present intention to liquidate Eternal or sell or otherwise
dispose of a material portion of Eternal' business or assets following the
consummation of the transactions contemplated hereby.
Section 2.18 Material Transactions or Affiliations. Except as disclosed
herein and in the Waterford Schedules, there exists no contract, agreement or
arrangement between Waterford and any predecessor and any person who was at the
time of such contract, agreement or arrangement an officer, director, or person
owning of record or known by Waterford to own beneficially, 5% or more of the
issued and outstanding common stock of Waterford and which is to be performed in
whole or in part after the date hereof or was entered into not more than three
years prior to the date hereof. Neither any officer, director, nor 5%
shareholder of Waterford has, or has had since inception of Waterford, any known
interest, direct or indirect, in any such transaction with Waterford which was
material to the business of Waterford. Waterford has no commitment, whether
written or oral, to lend any funds to, borrow any money from, or enter into any
other transaction with, any such affiliated person.
Section 2.19 Labor Relations. Waterford has not had work stoppage
resulting from labor problems. To the knowledge of Waterford, no union or other
collective bargaining organization is organizing or attempting to organize any
employee of Waterford.
Section 2.20 Waterford Schedules. Waterford has delivered to Eternal
the following schedules, which are collectively referred to as the "Waterford
Schedules" and which consist of separate schedules, which are dated the date of
this Agreement, all certified by the chief executive officer of Waterford to be
complete, true, and accurate in all material respects as of the date of this
Agreement:
(a) a schedule containing complete and accurate copies
of the certificate of incorporation and bylaws of Waterford as in
effect as of the date of this Agreement;
(b) a schedule containing the financial statements of
Waterford identified in paragraph 2.04(b);
(c) a Schedule 2.20(c) containing a list indicating
the name and address of each shareholder of Waterford together
with the number of shares owned by him, her or it;
(d) a schedule containing a description of all real property
owned by Waterford, together with a description of every mortgage, deed
of trust, pledge, lien, agreement, encumbrance, claim, or equity
interest of any nature whatsoever in such real property;
(e) copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which
Waterford carries on or proposes to carry on its business (except those
which, in the aggregate, are immaterial to the present or proposed
business of Waterford);
(f) a schedule listing the accounts receivable and notes and
other obligations receivable of Waterford as of December 31, 2001, or
thereafter other than in the ordinary course of business of Waterford,
indicating the debtor and amount, and classifying the accounts to show
in reasonable detail the length of time, if any, overdue, and stating
the nature and amount of any refunds, set offs, reimbursements,
discounts, or other adjustments which are in the aggregate material and
due to or claimed by such debtor;
(g) a schedule listing the accounts payable and notes and
other obligations payable of Waterford as of December 31, 2001, or that
arose thereafter other than in the ordinary course of the business of
Waterford, indicating the creditor and amount, classifying the accounts
to show in reasonable detail the length of time, if any, overdue, and
stating the nature and amount of any refunds, set offs, reimbursements,
discounts, or other adjustments, which in the aggregate are material
and due to or claimed by Waterford respecting such obligations;
(h) a schedule setting forth a description of any material
adverse change in the business, operations, property, inventory,
assets, or condition of Waterford since December 31, 2001 required to
be provided pursuant to section 2.07 hereof; and
(i) a schedule setting forth any other information, together
with any required copies of documents, required to be disclosed in the
Waterford Schedules by Sections 2.01 through 2.19.
Waterford shall cause the Waterford Schedules and the instruments and
data delivered to Eternal hereunder to be promptly updated after the date hereof
up to and including the Closing Date.
It is understood and agreed that not all of the schedules referred to
above have been completed or are available to be furnished by Waterford.
Waterford shall have until December 31, 2002 to provide such schedules. If
Waterford cannot or fails to do so, or if Eternal acting reasonably finds any
such schedules or updates provided after the date hereof to be unacceptable
according to the criteria set forth below, Eternal may terminate this Agreement
by giving written notice to Waterford within five (5) days after the schedules
or updates were due to be produced or were provided. For purposes of the
foregoing, Eternal may consider a disclosure in the Waterford Schedules to be
"unacceptable" only if that item would have a material adverse impact on the
financial statements listed in Section 2.04(b), taken as a whole.
Section 2.21 Bank Accounts; Power of Attorney. Set forth in Schedule
2.21 is a true and complete list of (a) all accounts with banks, money market
mutual funds or securities or other financial institutions maintained by
Waterford within the past twelve (12) months, the account numbers thereof, and
all persons authorized to sign or act on behalf of Waterford, (b) all safe
deposit boxes and other similar custodial arrangements maintained by Waterford
within the past twelve (12) months, and (c) the names of all persons holding
powers of attorney from Waterford or who are otherwise authorized to act on
behalf of Waterford with respect to any matter, other than its officers and
directors, and a summary of the terms of such powers or authorizations.
Section 2.22 Valid Obligation. This Agreement and all agreements and
other documents executed by Waterford in connection herewith constitute the
valid and binding obligation of Waterford, enforceable in accordance with its or
their terms, except as may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
subject to the qualification that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding therefor may
be brought.
ARTICLE III
PLAN OF EXCHANGE
Section 3.01 The Exchange. On the terms and subject to the conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3.03),
each Eternal Shareholder who shall elect to accept the exchange offer described
herein (the "Accepting Shareholders"), shall assign, transfer and deliver, free
and clear of all liens, pledges, encumbrances, charges, restrictions or known
claims of any kind, nature, or description, the number of shares of common stock
of Eternal set forth on Schedule 1.19(c) attached hereto, in the aggregate
constituting 100% of the issued and outstanding shares of common stock of
Eternal held by each of such shareholders; the objective of such Exchange being
the acquisition by Waterford of 100% of the issued and outstanding common stock
of Eternal. In exchange for the transfer of such securities by the Eternal
Shareholders, Waterford shall issue to the Eternal Shareholders (1) an aggregate
of 22,050,000 of common stock of Waterford. At the Closing, each Eternal
Shareholder shall, on surrender of his certificate or certificates representing
such Eternal shares to Waterford or its registrar or transfer agent, be entitled
to receive a certificate or certificates evidencing his proportionate interest
in the Initial Shares. Upon consummation of the transaction contemplated herein,
assuming participation by all of the Eternal Shareholders, all of the shares of
capital stock of Eternal shall be held by Waterford.
Section 3.02 Anti-Dilution. The number of shares of Waterford common
stock issuable upon exchange pursuant to Section 3.01 shall be appropriately
adjusted to take into account any other stock split, stock dividend, reverse
stock split, recapitalization, or similar change in the Waterford common stock
which may occur (i) between the date of the execution of this Agreement and the
Closing Date, as to the Initial Shares, and (ii) between the date of the
execution of this Agreement and the release date, as to the Additional Shares.
Section 3.03 Closing. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date") but not later than December 31, 2002, subject
to the right of Waterford or Eternal to extend such Closing Date by up to an
additional sixty (60) days. Such Closing shall take place at a mutually
agreeable time and place.
Section 3.04 Closing Events. At the Closing, Waterford, Eternal and
each of the Accepting Shareholders shall execute, acknowledge, and deliver (or
shall ensure to be executed, acknowledged, and delivered) any and all
certificates, opinions, financial statements, schedules, agreements,
resolutions, rulings or other instruments required by this Agreement to be so
delivered at or prior to the Closing, together with such other items as may be
reasonably requested by the parties hereto and their respective legal counsel in
order to effectuate or evidence the transactions contemplated hereby. Among
other things, Waterford shall provide an opinion of counsel acceptable to
Eternal as to such matters as Eternal may reasonably request, which shall
include, but not be limited to, a statement, to the effect that (i) to such
counsel's best knowledge, after reasonable investigation, from inception until
the Closing Date, Waterford has complied with all applicable statutes and
regulations of any federal, state, or other applicable governmental entity or
agency thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets or condition of
Waterford or except to the extent that noncompliance would not result in the
occurrence of any material liability (such compliance including, but not being
limited to, the filing of all reports to date with federal and state securities
authorities) and
Section 3.05 Termination.
(a) This Agreement may be terminated by the board of
directors of either Waterford or Eternal at any time prior to the
Closing Date if:
(i) there shall be any actual or threatened action or
proceeding before any court or any governmental body which
shall seek to restrain, prohibit, or invalidate the
transactions contemplated by this Agreement and which, in the
judgement of such board of directors, made in good faith and
based upon the advice of its legal counsel, makes it
inadvisable to proceed with the Exchange; or
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is
required to consummate such transactions (which does not
include the Securities and Exchange Commission) or in the
judgement of such board of directors, made in good faith and
based on the advice of counsel, there is substantial
likelihood that any such approval will not be obtained or will
be obtained only on a condition or conditions which would be
unduly burdensome, making it inadvisable to proceed with the
Exchange.
In the event of termination pursuant to this paragraph (a) of Section
3.05, no obligation, right or liability shall arise hereunder, and each
party shall bear all of the expenses incurred by it in connection with
the negotiation, drafting, and execution of this Agreement and the
transactions herein contemplated in accordance with the Expense Sharing
Agreement attached hereto as Exhibit "B".
(b) This Agreement may be terminated by the board of
directors of Waterford at any time prior to the Closing Date if:
(i) there shall have been any change after the date
of the latest balance sheet of Eternal in the assets,
properties, business, or financial condition of Eternal, which
could have a materially adverse effect on the financial
statements of Eternal listed in Section 1.04(a) taken as a
whole, except any changes disclosed in the Eternal Schedules;
(ii) the board of directors of Waterford determines
in good faith that one or more of Waterford's conditions to
Closing has not occurred, through no fault of Waterford.
(iii) Waterford takes the termination action
specified in Section 1.18 as a result of Eternal Schedules or
updates thereto which Waterford finds unacceptable;
(iv) on or before October 15, 2002, Waterford
notifies Eternal that Waterford's investigation pursuant to
Section 4.01 below has uncovered information which it finds
unacceptable by the same criteria set forth in Section 1.19;
or
(v) Eternal shall fail to comply in any material
respect with any of its covenants or agreements contained in
this Agreement or if any of the representations or warranties
of Eternal contained herein shall be inaccurate in any
material respect, where such noncompliance or inaccuracy has
not been cured within ten (10) days after written notice
thereof.
If this Agreement is terminated pursuant to this paragraph (b) of
Section 3.05, this Agreement shall be of no further force or effect,
and no obligation, right or liability shall arise hereunder, except
that Eternal shall bear its own costs as well as the reasonable costs
of Waterford in connection with the negotiation, preparation, and
execution of this Agreement and qualifying the offer and sale of
securities to be issued in the Exchange under the registration
requirements, or exemption from the registration requirements, of state
and federal securities laws.
(c) This Agreement may be terminated by the board of
directors of Eternal at any time prior to the Closing Date if:
(i) there shall have been any change after the date
of the latest balance sheet of Waterford in the assets,
properties, business or financial condition of Waterford,
which could have a material adverse effect on the financial
statements of Waterford listed in Section 2.04(b) taken as a
whole,except any changes disclosed in the Waterford Schedules;
(ii) the board of directors of Eternal determines
in good faith that one or more of Eternal' conditions to
Closing has not occurred, through no fault of Eternal;
(iii) Eternal takes the termination action specified
in Section 2.20 as a result of Waterford Schedules or updates
thereto which Eternal finds unacceptable;
(iv) on or before October 15, 2002 Eternal notifies
Waterford that Eternal' investigation pursuant to Section 4.01
below has uncovered information which it finds unacceptable by
the same criteria set forth in Section 2.20; or
(v) Waterford shall fail to comply in any material
respect with any of its covenants or agreements contained in
this Agreement or if any of the representations or warranties
of Waterford contained herein shall be inaccurate in any
material respect, where such noncompliance or inaccuracy has
not been cured within ten (10) days after written notice
thereof.
If this Agreement is terminated pursuant to this paragraph (c) of
Section 3.05, this Agreement shall be of no further force or effect,
and no obligation, right or liability shall arise hereunder, except
that Waterford shall bear its own costs as well as the reasonable costs
of Eternal and its principal shareholders incurred in connection with
the negotiation, preparation and execution of this Agreement.
ARTICLE IV
SPECIAL COVENANTS
Section 4.01 Access to Properties and Records. Waterford and Eternal
will each afford to the officers and authorized representatives of the other
full access to the properties, books and records of Waterford or Eternal, as the
case may be, in order that each may have a full opportunity to make such
reasonable investigation as it shall desire to make of the affairs of the other,
and each will furnish the other with such additional financial and operating
data and other information as to the business and properties of Waterford or
Eternal, as the case may be, as the other shall from time to time reasonably
request. Without limiting the foregoing, as soon as practicable after the end of
each fiscal quarter (and in any event through the last fiscal quarter prior to
the Closing Date), each party shall provide the other with quarterly internally
prepared and unaudited financial statements.
Section 4.02 Delivery of Books and Records. At the Closing, Eternal
shall deliver to Waterford the originals of the corporate minute books, books of
account, contracts, records, and all other books or documents of Eternal now in
the possession of Eternal or its representatives.
Section 4.03 Third Party Consents and Certificates. Waterford and
Eternal agree to cooperate with each other in order to obtain any required third
party consents to this Agreement and the transactions herein contemplated.
Section 4.04 Name Change & State of Incorporation. At or prior to the
Closing Date, Waterford's Board of Directors shall have approved an amendment to
the certificate of incorporation to change the name of Waterford to
"BIOENGINEERING , INC." and to change the state of incorporation from Utah to
Nevada. Such amendment shall be carried out promptly upon approval of the same
by the shareholders of Waterford.
Section 4.05 Waterford Shareholder Meeting. Waterford shall call a
special shareholders meeting to be held on or prior to the Closing Date at which
meeting the shareholders of Waterford shall be requested to approve, and
Waterford's Board of Directors shall recommend approval of, the terms of this
Agreement, including the name change and the change in the state of
incorporation described in Section 4.04 and such other matters as shall require
shareholder approval hereunder.
Section 4.06 Consent of Eternal Shareholders. Eternal shall
use its best efforts to obtain the consent of all Eternal Shareholders to
participate in the Exchange.
Section 4.07 Designation of Directors and Officers. On or before
the Closing Date, Waterford shall increase its board of directors to six(6)
persons. Messrs. Xxxxx Xx, Xx. Xxxxxx X. Xxxxxx, Xxxxxxxxx Xxx, Xxxxx Xxx and
Xxxxx X. Xxxx, shall be designated as additional board members at the Closing.
The existing officer(s) and directors of Waterford shall submit their
resignation.
Section 4.08 The Exclusive Dealing Rights. Until 5:00 P.M.
Eastern Daylight Time on October 15, 2002.
(a) In recognition of the substantial time and effort which
Waterford has spent and will continue to spend in investigating Eternal
and its business and in addressing the matters related to the
transactions contemplated herein, each of which may preempt or delay
other management activities, neither Eternal, nor any of its officers,
employees, representatives or agents will directly or indirectly
solicit or initiate any discussions or negotiations with, or, except
where required by fiduciary obligations under applicable law as advised
by counsel, participate in any negotiations with or provide any
information to or otherwise cooperate in any other way with, or
facilitate or encourage any effort or attempt by, any corporation,
partnership, person or other entity or group (other than Waterford and
its directors, officers, employees, representatives and agents)
concerning any merger, sale of substantial assets, sale of shares of
capital stock, (including without limitation, any public or private
offering of the common stock of Eternal) or similar transactions
involving Eternal (all such transactions being referred to as "Eternal
Acquisition Transactions"). If Eternal receives any proposal with
respect to a Eternal Acquisition Transaction, it will immediately
communicate to Waterford the fact that it has received such proposal
and the principal terms thereof.
(b) In recognition of the substantial time and effort which
Eternal has spent and will continue to spend in investigating Waterford
and its business and in addressing the matters related to the
transactions contemplated herein, each of which may preempt or delay
other management activities, neither Waterford, nor any of its
officers, employees, representatives or agents will directly or
indirectly solicit or initiate any discussions or negotiations with,
or, except where required by fiduciary obligations under applicable law
as advised by counsel, participate in any negotiations with or provide
any information to or otherwise cooperate in any other way with, or
facilitate or encourage any effort or attempt by, any corporation,
partnership, person or other entity or group (other than Eternal and
its directors, officers, employees, representatives and agents)
concerning any merger, sale of substantial assets, sale of shares of
capital stock, (including without limitation, any public or private
offering of the common stock of Waterford or similar transactions
involving Waterford (all such transactions being referred to as
"Waterford Acquisition Transactions"). If Waterford receives any
proposal with respect to a Waterford Acquisition Transaction, it will
immediately communicate to Eternal the fact that it has received such
proposal and the principal terms thereof.
Section 4.09 Actions Prior to Closing.
(a) From and after the date of this Agreement until the
Closing Date and except as set forth in the Waterford Schedules or
Eternal Schedules or as permitted or contemplated by this Agreement,
Waterford (subject to paragraph (d) below) and Eternal respectively,
will each:
(i) carry on its business in substantially the same manner as it has
heretofore;
(ii) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary wear
and tear and damage due to casualty;
(iii)maintain in full force and effect insurance comparable in amount and
in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligations under material
contracts, leases, and instruments relating to or affecting its
assets, properties, and business;
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material respects all obligations
and duties imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither Waterford nor Eternal will:
(i) make any changes in their articles or certificate of incorporation or
bylaws;
(ii) take any action described in Section 1.07 in the case of Eternal, or
in Section 2.07, in the case of Waterford (all except as permitted
therein or as disclosed in the applicable party's schedules);
(iii)enter into or amend any contract, agreement, or other instrument of
any of the types described in such party's schedules, except that a
party may enter into or amend any contract, agreement, or other
instrument in the ordinary course of business involving the sale of
goods or services; or
(iv) sell any assets or discontinue any operations (other than the
Divestiture), sell any shares of capital stock or conduct any similar
transactions other than in the ordinary course of business.
(C) In light of the fact that Eternal' shareholders will control Waterford
as a result of the Exchange, from and after the date of this Agreement until the
Closing Date, Waterford shall take no action which is material to its business
without the prior written approval of Eternal, which Eternal may give or
withhold in its sole discretion after consultation with Waterford.
Section 4.10 Sales Under Rule 144 or 145,If Applicable.
(a) Waterford will use its best efforts to at all times comply
with the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), including timely filing of all
periodic reports required under the provisions of the Exchange Act and
the rules and regulations promulgated thereunder.
(b) Upon being informed in writing by any such person holding
restricted stock of Waterford that such person intends to sell any
shares under Rule 144, Rule 145 or Regulation S promulgated under the
Securities Act (including any rule adopted in substitution or
replacement thereof), Waterford will certify in writing to such person
that it has filed all of the reports required to be filed by it under
the Exchange Act to enable such person to sell such person's restricted
stock under Rule 144, 145 or Regulation S, as may be applicable in the
circumstances, or will inform such person in writing that it has not
filed any such report or reports.
(c) If any certificate representing any such restricted stock
is presented to Waterford's transfer agent for registration of transfer
in connection with any sale theretofore made under Rule 144, 145 or
Regulation S, provided such certificate is duly endorsed for transfer
by the appropriate person(s) or accompanied by a separate stock power
duly executed by the appropriate person(s) in each case with reasonable
assurances that such endorsements are genuine and effective, and is
accompanied by an opinion of counsel satisfactory to Waterford and its
counsel that the stock transfer has complied with the requirements of
Rule 144, 145 or Regulation S, as the case may be, Waterford will
promptly instruct its transfer agent to register such shares and to
issue one or more new certificates representing such shares to the
transferee and, if appropriate under the provisions of Rule 144, 145 or
Regulation S, as the case may be, free of any stop transfer order or
restrictive legend. The provisions of this Section 4.11 shall survive
the Closing and the consummation of the transactions contemplated by
this Agreement.
Section 4.11 Indemnification.
(a) Eternal hereby agrees to indemnify Waterford and each of
the officers, agents and directors of Waterford as of the date of
execution of this Agreement against any loss, liability, claim, damage,
or expense (including, but not limited to, any and all expense
whatsoever reasonably incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever), to which it or they may become subject arising out of or
based on any inaccuracy appearing in or misrepresentations made under
Article I of this Agreement. The indemnification provided for in this
paragraph shall survive the Closing and consummation of the
transactions contemplated hereby and termination of this Agreement.
(b) Waterford hereby agrees to indemnify Eternal and each of
the officers, agents, and directors of Eternal and each of the Eternal
Shareholders as of the date of execution of this Agreement against any
loss, liability, claim, damage, or expense (including, but not limited
to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever), to which it or they
may become subject arising out of or based on any inaccuracy appearing
in or misrepresentation made under Article II of this Agreement. The
indemnification provided for in this paragraph shall survive the
Closing and consummation of the transactions contemplated hereby and
termination of this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF WATERFORD
The obligations of Waterford under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 5.01 Accuracy of Representations and Performance of Covenants.
The representations and warranties made by Eternal in this Agreement were true
when made and shall be true at the Closing Date with the same force and effect
as if such representations and warranties were made at and as of the Closing
Date (except for changes therein permitted by this Agreement). Eternal shall
have performed or complied with all covenants and conditions required by this
Agreement to be performed or complied with by Eternal prior to or at the
Closing. Waterford shall be furnished with a certificate, signed by a duly
authorized executive officer of Eternal and dated the Closing Date, to the
foregoing effect.
Section 5.02 Officer's Certificate. Waterford shall have been furnished
with a certificate dated the Closing Date and signed by a duly authorized
officer of Eternal to the effect that no litigation, proceeding, investigation,
or inquiry is pending, or to the best knowledge of Eternal threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement, or, to the extent not disclosed in
the Eternal Schedules, by or against Eternal, which might result in any material
adverse change in any of the assets, properties, business, or operations of
Eternal.
Section 5.03 No Material Adverse Change. Prior to the Closing Date,
there shall not have occurred any change in the financial condition, business,
or operations of Eternal nor shall any event have occurred which, with the lapse
of time or the giving of notice, is determined to be unacceptable using the
criteria set forth in Section 1.19.
Section 5.04 Good Standing. Waterford shall have received a certificate
of good standing from the British Virgin Islands, dated as of a date within ten
days prior to the Closing Date certifying that Eternal is in good standing as a
corporation in the British Virgin Islands.
Section 5.05 Approval by Eternal Shareholders. The Exchange shall have
been approved, and shares delivered in accordance with Section 3.01, by the
holders of not less than ninety percent (90%) of the outstanding common stock of
Eternal, unless a lesser number is agreed to by Waterford.
Section 5.06 No Governmental Prohibition. No order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 5.07 Consents. All consents, approvals, waivers or amendments
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of Waterford and Eternal after the Closing Date on the basis as
presently operated shall have been obtained.
Section 5.08 Other Items.
(a) Waterford shall have received a list of Eternal'
shareholders containing the name, address, and number of shares held by
each Eternal shareholder as of the date of Closing, certified by an
executive officer of Eternal as being true, complete and accurate; and
(b) Waterford shall have received such further opinions,
documents, certificates or instruments relating to the transactions
contemplated hereby as Waterford may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF ETERNAL
AND THE ETERNAL SHAREHOLDERS
The obligations of Eternal and the Eternal Shareholders under this
Agreement are subject to the satisfaction, at or before the Closing Date, of the
following conditions:
Section 6.01 Accuracy of Representations and Performance of Covenants.
The representations and warranties made by Waterford in this Agreement were true
when made and shall be true as of the Closing Date (except for changes therein
permitted by this Agreement) with the same force and effect as if such
representations and warranties were made at and as of the Closing Date.
Additionally, Waterford shall have performed and complied with all covenants and
conditions required by this Agreement to be performed or complied with by
Waterford and shall have satisfied the conditions described below prior to or at
the Closing:
(a) Immediately prior to the Closing, Waterford shall have no
more than an aggregate of 3,481,130 shares of common stock issued and
outstanding.
(b) The shareholders of Waterford shall have approved the
Exchange and the related transactions described herein and the related
name change.
Eternal shall have been furnished with certificates, signed by duly authorized
executive officers of Waterford and dated the Closing Date, to the foregoing
effect.
Section 6.02 Officer's Certificate. Eternal shall have been furnished
with certificates dated the Closing Date and signed by duly authorized executive
officers of Waterford, to the effect that no litigation, proceeding,
investigation or inquiry is pending, or to the best knowledge of Waterford
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the Waterford Schedules, by or against Waterford, which
might result in any material adverse change in any of the assets, properties or
operations of Waterford.
Section 6.03 No Material Adverse Change. Prior to the Closing Date,
there shall not have occurred any change in the financial condition, business or
operations of Waterford nor shall any event have occurred which, with the lapse
of time or the giving of notice, is determined to be unacceptable using the
criteria set forth in Section 2.20.
Section 6.04 Good Standing. Eternal shall have received a certificate
of good standing from the Secretary of State of the State of Nevada or other
appropriate office, dated as of a date within ten days prior to the Closing Date
certifying that Waterford is in good standing as a corporation in the State of
Utah and has filed all tax returns required to have been filed by it to date and
has paid all taxes reported as due thereon.
Section 6.05 No Governmental Prohibition. No order, statute, rule,
regulation, executive order, injunction, stay, decree, judgment or restraining
order shall have been enacted, entered, promulgated or enforced by any court or
governmental or regulatory authority or instrumentality which prohibits the
consummation of the transactions contemplated hereby.
Section 6.06 Consents. All consents, approvals, waivers or amendments
pursuant to all contracts, licenses, permits, trademarks and other intangibles
in connection with the transactions contemplated herein, or for the continued
operation of Waterford and Eternal after the Closing Date on the basis as
presently operated shall have been obtained.
Section 6.07 Other Items. Eternal shall have received further opinions,
documents, certificates, or instruments relating to the transactions
contemplated hereby as Eternal may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Brokers. Waterford and Eternal agree that, except as set
out on Schedule 7.01 attached hereto, there were no finders or brokers involved
in bringing the parties together or who were instrumental in the negotiation,
execution or consummation of this Agreement. Waterford and Eternal each agree to
indemnify the other against any claim by any third person other than those
described above for any commission, brokerage, or finder's fee arising from the
transactions contemplated hereby based on any alleged agreement or understanding
between the indemnifying party and such third person, whether express or implied
from the actions of the indemnifying party.
Section 7.02 Governing Law. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to the matters of state law, with the laws
of the State of Nevada without giving effect to principles of conflicts of law
thereunder. Each of the parties (a) irrevocably consents and agrees that any
legal or equitable action or proceedings arising under or in connection with
this Agreement shall be brought exclusively in the federal courts of the United
States, (b) by execution and delivery of this Agreement, irrevocably submits to
and accepts, with respect to any such action or proceeding, generally and
unconditionally, the jurisdiction of the aforesaid court, and irrevocably waives
any and all rights such party may now or hereafter have to object to such
jurisdiction.
Section 7.03 Notices. Any notice or other communications required or
permitted hereunder shall be in writing and shall be sufficiently given if
personally delivered to it or sent by telecopy, overnight courier or registered
mail or certified mail, postage prepaid, addressed as follows:
If to Waterford, to: WATERFORD STERLING CORPORATION
000 X. Xxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
With copies to:
If to Eternal, to: ETERNAL TECHNOLOGIES GROUP LTD.
1808-1802 Evening Newspaper Mansion,
000 Xxxxxxx Xxxx, Xxxxxxx X.X.X.
With copies to: Vanderkam & Xxxxxxx
000 Xxxxxxxxx, #000
Xxxxxxx, Xxxxx 00000
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given (i) upon receipt, if personally delivered, (ii) on
the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if
transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3)
days after mailing, if sent by registered or certified mail.
Section 7.04 Attorney's Fees. In the event that either party institutes
any action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the prevailing party shall be reimbursed by
the losing party for all costs, including reasonable attorney's fees, incurred
in connection therewith and in enforcing or collecting any judgement rendered
therein.
Section 7.05 Confidentiality. Each party hereto agrees with the other
that, unless and until the transactions contemplated by this Agreement have been
consummated, it and its representatives will hold in strict confidence all data
and information obtained with respect to another party or any subsidiary thereof
from any representative, officer, director or employee, or from any books or
records or from personal inspection, of such other party, and shall not use such
data or information or disclose the same to others, except (i) to the extent
such data or information is published, is a matter of public knowledge, or is
required by law to be published; or (ii) to the extent that such data or
information must be used or disclosed in order to consummate the transactions
contemplated by this Agreement. In the event of the termination of this
Agreement, each party shall return to the other party all documents and other
materials obtained by it or on its behalf and shall destroy all copies, digests,
work papers, abstracts or other materials relating thereto, and each party will
continue to comply with the confidentiality provisions set forth herein.
Section 7.06 Public Announcements and Filings. Unless required by
applicable law or regulatory authority, none of the parties will issue any
report, statement or press release to the general public, to the trade, to the
general trade or trade press, or to any third party (other than its advisors and
representatives in connection with the transactions contemplated hereby) or file
any document, relating to this Agreement and the transactions contemplated
hereby, except as may be mutually agreed by the parties. Copies of any such
filings, public announcements or disclosures, including any announcements or
disclosures mandated by law or regulatory authorities, shall be delivered to
each party at least one (1) business day prior to the release thereof.
Section 7.07 Schedules; Knowledge. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 7.08 Third Party Beneficiaries. This contract is strictly
between Waterford and Eternal, and, except as specifically provided, no
director, officer, stockholder (other than the Eternal Shareholders), employee,
agent, independent contractor or any other person or entity shall be deemed to
be a third party beneficiary of this Agreement.
Section 7.09 Expenses. Subject to Sections 3.05 and 7.04 above, whether
or not the Exchange is consummated, each of Waterford and Eternal will bear
their own respective expenses, including legal, accounting and professional
fees, incurred in connection with the Exchange or any of the other transactions
contemplated hereby.
Section 7.10 Entire Agreement. This Agreement represents the entire
agreement between the parties relating to the subject matter thereof and
supersedes all prior agreements, understandings and negotiations, written or
oral, with respect to such subject matter.
Section 7.11 Survival; Termination. The representations, warranties,
and covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for a period of two years.
Section 7.12 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 7.13 Amendment or Waiver. Every right and remedy provided
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may by amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance may be extended by a writing
signed by the party or parties for whose benefit the provision is intended.
Section 7.14 Best Efforts. Subject to the terms and conditions herein
provided, each party shall use its best efforts to perform or fulfill all
conditions and obligations to be performed or fulfilled by it under this
Agreement so that the transactions contemplated hereby shall be consummated as
soon as practicable. Each party also agrees that it shall use its best efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective this Agreement and the transactions contemplated
herein.
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly authorized,
as of the date first-above written.
ATTEST: WATERFORD STERLING CORPORATION
BY:
-------------------------------- --------------------------------------
Secretary or Assistant Secretary President
ATTEST: ETERNAL TECHNOLOGIES GROUP LTD.
BY:____________________
Secretary or Assistant Secretary President
The undersigned shareholders of ETERNAL TECHNOLOGIES GROUP LTD. hereby
agree to participate in the Exchange on the terms set forth above. Subject to
Section 7.11 above, each of the undersigned hereby represents and affirms that
he has read each of the representations and warranties of ETERNAL TECHNOLOGIES
GROUP LTD. set out in Article I hereof and that, to the best of his knowledge,
all of such representations and warranties are true and correct.
__________________, individually
__________________, individually
__________________, individually
