AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
XXXXXXXXX.XXX, INC.
AND
TECHSCIENCE INDUSTRIES, INC.
MAY 12, 1999
TABLE OF CONTENTS
1. Plan of Reorganization...............................................1
2. Exchange of Shares.................................................. 1
3. Closing..............................................................2
4. TSCI Shares..........................................................2
5. Tax-Free Exchange....................................................2
6. Representations and Warranties of the PPI Shareholders...............2
7. Representations and Warranties of PPI................................5
8. Representations and Warranties of TSCI..............................10
9. Covenants of PPI and the PPI Shareholders...........................17
10. Covenants of TSCI...................................................18
11. Conditions Precedent to Closing.....................................19
12. Indemnification.....................................................22
13. The PPI Shareholders' Investment Intent.............................22
14. Conduct of TSCI's and PPI's Businesses Prior to the Closing Date....23
15. Registration and Registration Rights................................24
16. Access and Information..............................................26
17. Expenses............................................................26
18. Termination.........................................................26
19. Effect on Termination...............................................27
20. Meaning of Material.................................................27
21. Amendment...........................................................27
22. Waiver..............................................................27
23. Broker and Investment Banking Fees..................................28
24. Binding Effect......................................................28
25. Entire Agreement....................................................28
26. Governing Law.......................................................28
27. Arbitration.........................................................28
28. Originals...........................................................29
29. Addresses of the Parties............................................29
30. Notices.............................................................29
31. Release of Information..............................................30
32. Counterparts........................................................30
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THIS AGREEMENT AND PLAN OF REORGANIZATION, dated this 12th day of May (the
"Agreement"), among Techscience Industries, Inc., a corporation organized under
and pursuant to the laws of the State of Delaware with principal offices at 0
Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("TSCI"), XxxXxxxxx.xxx, Inc., a
corporation organized under and pursuant to the laws of the State of California
with principal offices at 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx
00000 ("PPI"), and the individual holders of all 10,570,000 issued and
outstanding shares of PPI's common stock, no par value per share (the "PPI
Shares") whose names and addresses appear on Exhibit 1 annexed hereto and made a
part hereof (the "Shareholders").
WITNESSETH:
WHEREAS, TSCI desires, pursuant to this Agreement, to exchange an
aggregate of 7,325,000 heretofore authorized but unissued shares of its Common
Stock, $.001 par value per share (the "TSCI Shares") solely for all of the PPI
Shares and the outstanding options (the "PPI Options") to purchase an aggregate
of 892,527 shares of PPI's common stock, no par value per share (the "PPI Option
Shares"); and
WHEREAS, the PPI Shareholders desire, pursuant to this Agreement, to
exchange all of the PPI Shares solely for 6,754,640 of the 7,325,000 TSCI Shares
upon the terms and conditions hereinafter set forth and for the purpose of
carrying out a tax free exchange within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, in order to carry out the foregoing intents, TSCI , the PPI
Shareholders, and PPI desire to enter into and adopt this Agreement.
NOW, THEREFORE, in consideration for the exchange of securities herein
enumerated and other good and valuable consideration, the receipt and adequacy
of which is hereby jointly and severally acknowledged and accepted, the parties
hereby agree as follows:
1. PLAN OF REORGANIZATION. The PPI Shareholders own all of the
issued and outstanding 10,570,000 PPI Shares and the holders of the PPI Options
(the "PPI Optionholders") own the exclusive right to acquire all of the 892,527
PPI Option Shares. It is the express written intention of the parties that all
of the PPI Shares and all of the PPI Options shall be acquired by TSCI solely in
exchange for 7,325,000 TSCI Shares and share equivalents.
2. EXCHANGE OF SHARES. By virtue of their respective execution of
this Agreement, TSCI, PPI and the PPI Shareholders agree and consent that on the
Closing Date (as hereinafter defined) all of the PPI Shares shall be exchanged
with TSCI solely in consideration for the TSCI Shares. The TSCI Shares shall be
delivered via certificates registered in the names of the PPI Shareholders on
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the basis of .63904 TSCI Shares for each PPI Share owned and as set forth on
Exhibit 1. All certificates representing the PPI Shares, shall be delivered to
TSCI or, if so indicated by TSCI in writing, to its transfer agent, Continental
Stock Transfer and Trust Co., 0 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
duly endorsed in blank with signature guaranteed or with executed stock power
attached thereto with Medallion signature guaranteed by a bank or brokerage firm
and in transferable form with any required documentary or transfer tax stamps
affixed at PPI's sole and exclusive expense so as to make TSCI the sole owner
thereof, free and clear of any and all liens, claims and encumbrances, of any
nature whether accrued, absolute, contingent or otherwise.
3. CLOSING. The closing of the exchange of the PPI Shares for the
TSCI Shares (the "Closing") shall take place at 10:00 A.M. Eastern time on the
first business day following the satisfaction of the conditions to closing
referenced in Section 11 hereof, at the offices of Reed, Smith, Xxxx & XxXxxx,
Xxx Xxxxxxxxxx Xxxxx, Xxxxxx, Xxx Xxxxxx 00000 or such other time and place upon
which the parties may agree. The day on which the Closing actually occurs is
herein sometimes referred to as the "Closing Date". In the event the Closing
does not occur on or before April 30, 1999, and unless extended by mutual
consent in writing or unless such failure to close is by reason of a material
breach by a party of its obligations under this Agreement, then TSCI, PPI, and
the PPI Shareholders shall return all information and documentation exchanged or
delivered hereunder to the party or parties furnishing the same and thereafter
this Agreement shall thereafter be and be deemed to be null and void and of no
further force or effect. In the event the failure to close is caused by the
material breach by a party of its obligations under this Agreement, then the
non-breaching party or parties may enforce its rights under this Agreement
including the right to seek specific performance and/or damages as provided in
Section 19 of this Agreement.
4. TSCI SHARES. The TSCI Shares originally issued and delivered
to the PPI Shareholders at the Closing shall be the common stock of TSCI, $.001
par value per share.
5. TAX-FREE EXCHANGE. Each party hereto intends that the
transaction embodied by this Agreement shall be and shall qualify as a
reorganization and a tax-free exchange under Section 368(a)(1)(B) of the Code;
and in furtherance thereof, each party hereby agrees not to take any action
which would impair the treatment of the exchange as a tax-free reorganization
for tax purposes.
6. REPRESENTATIONS AND WARRANTIES OF THE PPI SHAREHOLDERS. By
virtue of their respective execution of this Agreement, and except for
information set forth on any and all schedules or exhibits annexed to this
Agreement and incorporated herein by reference (any information on one shall be
deemed to be included on all), the PPI Shareholders hereby jointly and severally
(except as to ss. 6(a), (b), (c) and (d), which are several, not joint
representations and warranties) represent and warrant to TSCI as follows:
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(a) Each PPI Shareholder is the sole record and beneficial
owner of the PPI Shares set forth opposite such PPI Shareholder's respective
name on Exhibit 1 hereof, has the sole and undisputed power, right and authority
to sell, transfer, option, pledge or hypothecate the same and owns said PPI
Shares free and clear of any and all liens, suits, proceedings, claims and
encumbrances of any kind, nature or description whether accrued, absolute,
contingent or otherwise;
(b) Each PPI Shareholder has the power, right and authority to
execute and perform this Agreement and the execution, delivery and performance
of this Agreement, in the time and manner herein specified, will not conflict
with, result in a breach of, or constitute a default under any provisions of
law, trust or any existing agreement, indenture or other instrument to which
such PPI Shareholder is a party or by which the PPI Shares owned by such PPI
Shareholder may be bound or affected;.
(c) To the best knowledge and belief of each PPI Shareholder,
the PPI Shares held by such shareholders are duly and validly issued, fully paid
and non-assessable, and represent the only issued and outstanding class of
voting securities of PPI;
(d) The information given and every representation, warranty
and statement made or furnished by each individual PPI Shareholder herein is
true, correct and does not contain a misstatement of a material fact or omit to
state any material fact required in order to make the statements and
representations, in light of the circumstances under which they were made, not
misleading;
(e) The PPI Shareholders have no knowledge of any material
fact or facts other than disclosed herein or in the exhibits or schedules
annexed hereto which will adversely affect the business or financial condition
of PPI or the title of TSCI to the PPI Shares to be exchanged with TSCI
hereunder, and each of the PPI Shareholders agrees that they will notify TSCI of
any such facts if they acquire knowledge of the same prior to the Closing Date;
(f) Each PPI Shareholder has read and understands both this
Agreement and the nature and parameters of the transaction underlying the same;
accepts and agrees to the consummation of the transaction enumerated herein;
each PPI Shareholder accepts the original issuance of the TSCI Shares to such
PPI Shareholder as the sole and exclusive consideration for the transfer and
delivery of such PPI Shareholder's PPI Shares to TSCI.
(g) Neither they nor any other person, firm or entity has any
right of appraisal or similar right to dissent from the transaction made the
subject of this Agreement and/or to demand payment for the PPI Shares;
(h) Prior to the Closing Date, the PPI Shareholders will not
vote for or authorize the reorganization, recapitalization, merger,
consolidation, stock split or other similar corporate action on behalf of PPI
except as may be required to effectuate the terms and conditions of this
Agreement;
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(i) Prior to the Closing Date, the PPI Shareholders will not
vote for or authorize the creation of any other class of equity or debt security
of PPI;
(j) Prior to the Closing Date, and except for: (i) advances by
PPI to fund operations or the incurring of debt to finance ongoing business
activities which shall be disclosed to TSCI in writing prior to expenditure; and
(ii) the proposed investment in 7 A.M., Inc., a non-affiliated entity, the
details of proposed investment shall be disclosed to TSCI in writing prior to
the Closing Date (the "7 A.M. Transaction"), the PPI Shareholders will not,
without the prior written consent of TSCI, cause or authorize PPI to:
(i) create or incur any indebtedness, whether funded or
not, except unsecured current liabilities incurred in the
ordinary course of business; or assume, guarantee, endorse
or otherwise become responsible for the obligation of any
other person, entity, firm or corporation;
(ii) create or incur any mortgage, lien, charge or
encumbrance of any kind, nature or description with
respect to any of PPI's properties or assets, except in
the ordinary course of business;
(iii) except in connection with the 7 A.M. Transaction,
make or become a party to any contract or commitment, or
renew, extend, amend, terminate or modify any contract or
commitment, except in the ordinary course of business;
(iv) make any capital expenditure or capital addition or
betterment except as may be involved in ordinary repairs,
maintenance and replacements and minor plant and equipment
additions;
(v) sell or otherwise dispose of any of its assets except
sales in the ordinary course of business;
(vi) declare or pay any dividend on, or make any other
distribution upon or in respect of, or purchase, retire or
redeem any shares of its capital stock;
(vii) except in connection with the 7 A.M. Transaction,
issue or sell any additional shares of capital stock,
whether or not such shares have been previously authorized
for issuance, or acquire any stock of any corporation or
any interest in any business enterprise;
(viii) except in connection with the 7 A.M. Transaction,
grant any option or make any commitment relating to the
authorized or issued capital stock of PPI;
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(ix) pay or agree to pay, conditionally or otherwise, any
pension or severance pay to any director, officer, agent
or employee, or make any advances to or increase the
compensation of, any officers or employees;
(x) except in connection with the 7 A.M. Transaction, use
any PPI assets or properties, except for proper corporate
purposes in the ordinary course of business;
(xi) make any change in PPI's Certificate of Incorporation
or By-Laws; or
(xii) change any of PPI's banking or safe deposit
arrangements or open any new bank accounts or safe deposit
boxes, other than in the normal course of business.
7. REPRESENTATIONS AND WARRANTIES OF PPI . By virtue of its
execution of this Agreement and except as expressly modified by the information
set forth on any and all schedules or exhibits annexed to this Agreement and
incorporated herein by reference, PPI hereby represents and warrants to TSCI as
follows:
(a) The PPI Shares to be transferred to TSCI on the Closing
Date will constitute all of the issued and outstanding shares of common stock of
PPI as of the Closing Date. The PPI Shares will be transferred free and clear of
any and all liens, claims, encumbrances, options, contracts, calls, commitments
or demands of any character. The PPI Shares to be transferred to TSCI on the
Closing Date will constitute the complete ownership, legal and equitable, record
and beneficial, of the PPI Shares by TSCI on the Closing Date. As of the Closing
Date, and except in connection with the 7 A.M. Transaction, PPI shall not own
any equity interest in any other corporation, partnership, joint venture or
proprietorship; and shall have on the Closing Date full corporate power and
authority to carry on its business as the same shall be conducted between the
date hereof and the Closing Date;
(b) PPI is, and at all times through and including the Closing
Date, will be a corporation duly organized, validly existing and in good
standing under the laws of the State of California and authorized to do business
in such states in the United States where such qualification is necessary, with
full power and authority to conduct its business as the same is presently being
conducted;
(c) The execution and performance of this Agreement in the
time and manner contemplated will not conflict with, result in a breach of or
constitute a default under any provision of law, the Certificate of
Incorporation or By-Laws of PPI or of any existing agreement, indenture or other
instrument to which PPI is a party or to which any of its business or its assets
may be bound or affected;
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(d) Except in connection with the 7 A.M. Transaction PPI will
not prior to the Closing Date, cause the original issuance of any of its
authorized but unissued shares of common stock without the express written
consent of TSCI;
(e) Other than PPI Options to purchase the 892,527 PPI Option
Shares as set forth on Schedule 7(e) annexed to this Agreement, there are not,
and will not be at any time prior to the Closing Date, any outstanding options,
warrants, rights, contracts, calls, demands or commitments of any type, kind or
character relating to the issuance of additional PPI Shares. Immediately after
the Closing, pursuant to new option agreements substantially identical in form
to the PPI Options, all such common stock equivalents shall be converted into
the right to receive .63904 of TSCI's common stock equivalent for each one PPI
common stock equivalent, up to an aggregate of 570,360 shares of TSCI common
stock, in accordance with the respective terms and conditions of such option
agreements.
(f) The capitalization of PPI , immediately prior to the
Closing, will be as follows:
Authorized Type of Security Issued and Outstanding
---------- ---------------- ----------------------
25,000,000 Shares Voting Common Stock, 10,570,000 Shares
no par value per share
5,000,000 Shares Preferred Stock, None
no par value per share
(g) On the Closing Date, (i) the issued and outstanding PPI
Shares will be owned beneficially or of record by those shareholders set forth
on Exhibit 1 in their respective amounts, and (ii) the options to purchase the
PPI Option Shares shall be held by the PPI Optionholders as set forth on
Schedule 7(e) in their respective amounts.
(h) All corporate action required of PPI will have been taken
on or prior to the Closing Date. PPI has complied in all material respects, and
at all times until the Closing Date will comply in all material respects with
all applicable state, federal and local laws, regulations and ordinances. PPI
has not been notified, as of the date of this Agreement, that it has failed to
so comply with any such requirements;
(i) There is no litigation or governmental proceeding or
investigation pending or, to the knowledge of PPI, threatened or in prospect
against PPI, any of its officers, directors or shareholders. PPI will notify
TSCI promptly of any such initiated or threatened proceedings or litigation
which may arise or be instituted at any time prior to the Closing Date;
(j) The audited balance sheet, income statement, statement of
cash flows, statement of changes in stockholders equity (deficiency) of PPI and
the notes thereto as at March 31, 1998 (the "PPI Audited Financial Statements")
and unaudited financial statements for the nine months ended December 31, 1998
and the notes thereto (the "PPI Unaudited Financial Statements"), attached
6
hereto as Schedule 7 (j), present the financial condition and the results of
operations of PPI as of the dates thereof and were prepared in accordance with
generally accepted accounting principles consistently applied. The PPI Audited
and Unaudited Financial Statements are hereinafter collectively referred to as
the "PPI Financial Statements". There are no material liabilities, either fixed
or contingent, not reflected in the PPI Financial Statements, and the PPI
Financial Statements are true and correct in all material aspects, and do not
omit to state any material fact required or necessary to make such statements,
in light of the circumstances in which they are made, not misleading;
(k) To the best knowledge and belief of PPI, since December
31, 1998 (date of latest PPI Unaudited Financial Statement) there has been no
material adverse change in the financial condition of PPI nor has there been any
material or substantial loss or damage to the properties or business of PPI
(whether or not covered by insurance) and no event or condition of any character
has occurred which materially adversely affects PPI's business;
(l) From the date of the PPI Unaudited Financial Statement
(December 31, 1998) through and including the date of this Agreement, PPI has
not incurred any liability or made any payments in excess of $5,000 other than
in the regular and normal course of its business and between the date of this
Agreement and the Closing Date, PPI has not transferred any property for less
than a fair and adequate consideration;
(m) PPI has not declared or paid since the date of the PPI
Unaudited Financial Statement (December 31, 1998); and will not declare or pay
prior to the Closing Date, any dividends or make any distribution, directly or
indirectly, to its shareholders, officers or directors, nor has it made, since
the said date, nor will it make, prior to the Closing Date, any loans or
advances to any shareholders, officers or directors;
(n) To the best knowledge and belief of PPI, any and all taxes
accrued or asserted against PPI have been paid, or PPI has established adequate
reserves therefor. All tax returns for PPI required to be filed have been or
will be filed for all periods ending on or up to the Closing Date; no extensions
of the applicable statutes of limitations have been, or will be, prior to the
Closing Date, applied for by PPI. Any and all additional taxes arising from the
operation of PPI for any period up to and including the Closing Date and not
provided for on the books and records of PPI are and shall be the sole liability
of TSCI. Copies of all applicable tax returns shall be furnished to TSCI and its
counsel prior to the Closing Date;
(o) PPI has clear and unencumbered title to all of the assets
and property owned by it as reflected in the PPI Financial Statements and PPI
has no assets that are not reflected in the PPI Financial Statements;
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(p) To the best knowledge and belief of PPI, PPI is not in
material default under any material contract or obligation and all third parties
with whom PPI has contractual arrangements are in material compliance therewith
and are not in material default thereunder;
(q) PPI has not adopted, and, without written consent of TSCI,
will not prior to the Closing Date adopt, any employment or collective
bargaining agreements;
(r) There are no material liabilities, either fixed or
contingent, not reflected in the PPI Financial Statements except that there may
be contracts or obligations incurred in the usual course of business not
reflected therein which, if disclosed, would not materially adversely affect the
financial condition of PPI as reflected in the PPI Financial Statements;
(s) No representation or warranty made by PPI in this
Agreement and any schedule or exhibit attached hereto and furnished or to be
furnished to TSCI pursuant to this Agreement, contains or will contain any
untrue statement of a material fact, or omits, or will omit, to state a material
fact required or necessary to make the statements and representations herein or
therein made, in light of the circumstances under which they were made, not
misleading;
(t) On the Closing Date, PPI shall have authorized, issued and
outstanding the capital stock set forth in clause (f) of this Section 7; and all
PPI Shares indicated as being issued and outstanding on the Closing Date shall
be duly and validly issued and outstanding, fully paid and non-assessable with
no personal liability attached to the ownership thereof;
(u) PPI has not executed or delivered or issued any notes,
bonds or mortgages and has not entered into any leases, contracts or commitments
not disclosed in the PPI Financial Statements;
(v) Except as disclosed in this Agreement, and set forth on
Schedule 7(e) annexed hereto, there are no outstanding rights to subscribe
shares of stock of PPI and none will be so authorized from to the execution of
this Agreement until Closing without the prior written consent of TSCI;
(w) To the best of PPI's knowledge no PPI shareholder has any
right of appraisal or similar right to dissent from the transaction made the
subject of this Agreement and/or to demand payment for its PPI Shares;
(x) PPI has no unpaid dividends;
(y) Prior to the Closing Date, PPI will not authorize a
reorganization, recapitalization, merger, consolidation, stock split or take
other similar corporate action except as may be required to effectuate the terms
and conditions of this Agreement;
(z) Prior to the Closing Date, PPI will not create any other
class of equity or debt security of PPI;
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(aa) Prior to the Closing Date, and except for advances by
TSCI to PPI to fund operations or the incurring of debt to finance ongoing
business activities which shall be disclosed to TSCI in writing, and except in
connection with the 7 A.M. Transaction, PPI will not, without the prior written
consent of TSCI:
(i) create or incur any indebtedness, whether funded or
not, except unsecured current liabilities incurred in the
ordinary course of business; or assume, guarantee, endorse
or otherwise become responsible for the obligation of any
other person, entity, firm or corporation;
(ii) create or incur any mortgage, lien, charge or
encumbrance of any kind, nature or description with
respect to any of PPI 's properties or assets, except in
the ordinary course of business;
(iii) make or become a party to any contract or
commitment, or renew, extend, amend, terminate or modify
any contract or commitment, except in the ordinary course
of business;
(iv) make any capital expenditure or capital addition or
betterment except as may be involved in ordinary repairs,
maintenance and replacements and minor plant and equipment
additions;
(v) sell or otherwise dispose of any of its assets except
sales in the ordinary course of business;
(vi) declare or pay any dividend on, or make any other
distribution upon or in respect of, or purchase, retire or
redeem any shares of its capital stock, except as may be
required by the terms thereof;
(vii) issue or sell any additional shares of capital
stock, whether or not such shares have been previously
authorized for issuance, or acquire any stock of any
corporation or any interest in any business enterprise;
(viii) grant any option or make any commitment relating to
the authorized or issued capital stock of PPI;
(ix) pay or agree to pay, conditionally or otherwise, any
pension or severance pay to any director, officer, agent
or employee, or make any advances to or increase the
compensation of, any officers or employees;
(x) use any assets or properties except for proper
corporate purposes;
(xi) make any change in the Certificate of Incorporation
or By-Laws; and
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(xii) change any of PPI 's banking or safe deposit
arrangements or open any new bank accounts or safe deposit
boxes, other than in the normal course of business;
(bb) PPI has no liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise) which are required to be reflected
or reserved against on its balance sheets in accordance with generally accepted
accounting principles consistently applied, except for liabilities and
obligations fully reflected or reserved against in the PPI Financial Statements
or incurred in the ordinary course of business and consistent with past practice
since the date of the PPI Financial Statements;
(cc) PPI has the power to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
or will be prior to Closing Date duly authorized by PPI 's Board of Directors
and by the PPI Shareholders, and PPI shall furnish TSCI with true copies of any
and all documentation evidencing such action. PPI is not subject to or obligated
under any contract provision or any license, franchise or permit or subject to
any order or decree, which would be breached or violated by its execution and
performance of this Agreement in the time and manner contemplated herein. Except
as required by applicable securities laws or as set forth on Schedule 7(cc)
7(bb), no filing or registration with, or authorization, consent or approval of
any public body or authority is necessary to execute or perform this Agreement
and the consummation by PPI of the transactions contemplated hereby;
(dd) By virtue of its execution of this Agreement, PPI hereby
acknowledges and accepts that it has been furnished with all information
concerning the business and financial condition and corporate status of TSCI
which PPI 's management deemed necessary to its decision to proceed with the
transactions as described herein;
(ee) Other than as set forth on Schedule 7(ee) annexed hereto,
PPI has not made any patent or trademark filings in the United States;
(ff) All of the assets and property used by PPI in the
operation of its business are owned by PPI and to the extent any of such assets
and property are not so owned, PPI will arrange to have such asset and/or
property transferred to it prior to the Closing Date; and
(gg) To the best of its knowledge and belief, each of the
representations and warranties of the PPI Shareholders in Section 6 of this
Agreement is true and correct.
8. REPRESENTATIONS AND WARRANTIES OF TSCI . By virtue of its
execution of this Agreement and except as expressly modified by the information
set forth on any and all schedules or exhibits annexed to this Agreement and
incorporated herein by reference, TSCI hereby represents and warrants to PPI as
follows:
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(a) The 6,754,640 TSCI Shares to be issued and delivered to
the PPI Shareholders on the Closing Date plus the issuance of up to 760,535
shares of TSCI Common Stock referenced in the last sentence of Section 8(d),
will constitute 76.5% of the issued and outstanding shares of common stock of
TSCI as of the Closing Date giving effect to such issuance and giving effect to
the issuance contemplated by Sections 8(d) and 8(f). The TSCI Shares when issued
will be duly authorized, validly issued, fully paid and non-assessable shares of
common stock of TSCI. As of the Closing Date, TSCI shall not own any equity
interest in any other corporation, partnership, joint venture or proprietorship;
and shall have on the Closing Date full corporate power and authority to carry
on its business as the same shall be conducted between the date hereof and the
Closing Date;
(b) TSCI is, and at all times through and including the
Closing Date, will be a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and authorized to do business
in such states in the United States where such qualification is necessary, with
full power and authority to conduct its business as the same is presently being
conducted;
(c) The execution and performance of this Agreement by TSCI in
the time and manner contemplated will not conflict with, result in a breach of
or constitute a default under any provision of law, the Certificate of
Incorporation or By-Laws of TSCI or of any existing agreement, indenture or
other instrument to which TSCI is a party or to which any of its businesses or
the assets may be bound or affected;
(d) Except for (i) an option to convert an aggregate of
$50,000 of principal due from PPI pursuant to the March 4, 1999 10% Secured
Convertible Promissory Note payable to TSCI by PPI into an aggregate of 100,000
shares of TSCI's common stock, $.01 par value per share; and (ii) promissory
notes convertible into an aggregate of 400,000 shares of TSCI's common stock,
$.01 par value per share, there are not, and will not be at any time prior to
the Closing Date, any outstanding options, warrants, rights, contracts, calls,
demands or commitments of any type, kind or character relating to the issuance
of additional TSCI Shares. Immediately after the Closing, the foregoing 500,000
common stock equivalents and the 570,360 common stock equivalents in exchange
for the common stock equivalents referenced on Schedule 7(e) will be
outstanding.
(e) On the date of this Agreement, there are 1,600,000 shares
of TSCI's common stock issued and outstanding. Assuming that: (i) only 250,000
of the maximum of 375,000 shares comprising the second of two private offerings
under Rule 506 of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act") comprising the 1999 Financings (as that term is hereinafter
defined) are sold; and (ii) the 500,000 common stock equivalents referenced in
the first sentence of Section 8(d) are converted, the capitalization of TSCI, at
Closing, will be as follows:
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Authorized Issued and Outstanding
---------- ----------------------
20,000,000 shares of Common 2,350,000 shares of Common Stock
Stock, $.001 par value per share $.001 par value per share
1,000,000 shares of Preferred No shares of Preferred Stock
Stock, $.001 par value per share $.001 par value per share
(f) Prior to the Closing Date, and except for (i) the original
issuance of up to 375,000 shares of TSCI's common stock to be issued in
connection with the private offering made pursuant to Rule 506 of Regulation D
under the Securities Act and referenced in Section 8(e)(i) above; and (ii) the
original issuance of up to 400,000 shares of TSCI common stock to be issued upon
the conversion of convertible promissory notes referenced in Section 8(d)(ii)
above, TSCI will not cause the original issuance of any of its authorized but
unissued shares of common stock without the express written consent of PPI;
(g) On the Closing Date, the issued and outstanding TSCI
Shares will be owned of record by not less than 500 shareholders;
(h) All corporate action required of TSCI will have been taken
prior to the Closing Date. TSCI has complied in all material respects, and at
all times until the Closing Date will comply in all material respects with all
applicable state, federal and local laws, regulations and ordinances. TSCI has
not been notified, as of the date of this Agreement, that it has failed to so
comply with any such requirements;
(i) There is no litigation or governmental proceeding or
investigation pending or, to the knowledge of TSCI, threatened or in prospect
against TSCI, any of its officers, directors or shareholders or their properties
or relating to its capital stock. TSCI will notify PPI promptly of any such
initiated or threatened proceedings or litigation which may arise or be
instituted at any time prior to the Closing Date;
(j) The audited balance sheet audited balance sheet, statement
of cash flows, statement of changes in stockholders equity (deficiency) of TSCI
and the notes thereto for the fiscal years ended December 31, 1997 and December
31, 1998 (the "TSCI Audited Financial Statements") and unaudited financial
statements for the three months ending March 31, 1999 (the "TSCI Unaudited
Financial Statements") and the notes thereto, attached hereto as Schedule 8(j),
shall present the financial condition and the results of operations of TSCI as
of the dates thereof and shall be prepared in accordance with generally accepted
accounting principles consistently applied. The TSCI Audited and Unaudited
Financial Statements are hereinafter collectively referred to as the TSCI
Financial Statements". There are no material liabilities, either fixed or
contingent, not reflected in the TSCI Financial Statements, and the TSCI
Financial Statements are true and correct in all material aspects, and do not
omit to state any material fact required or necessary to make such statements,
in light of the circumstances in which they are made, not misleading;
12
(k) To the best knowledge and belief of TSCI, since December
31, 1998 (date of latest TSCI Audited Financial Statement) there has been no
material adverse change in the financial condition of TSCI nor has there been
any material or substantial loss or damage to the properties or business of TSCI
(whether or not covered by insurance) and no event or condition of any character
has occurred which adversely affects TSCI's business;
(l) From the date of the latest Audited Financial Statement
(December 31, 1998) through and including the date of this Agreement and
subsequent Closing Date, and except for the two private offerings under Rule 506
of Regulation D under the Securities Act and the $150,000 Bridge Loan to PPI
(collectively the "1999 Financing"), TSCI has not and will not incur any
liability or made any payments other than in the regular and normal course of
its business and between the date of this Agreement and the Closing Date, TSCI
has not transferred any property for less than a fair and adequate
consideration;
(m) As of the time of Closing, TSCI shall not have declared or
paid since the date of the latest Audited Financial Statement (December 31,
1998); and will not declare or pay prior to the Closing Date, any dividends or
make any distribution, directly or indirectly, to its shareholders, officers or
directors, nor has it made, since the said date, nor will it make, prior to the
Closing Date, any loans or advances to any shareholders, officers or directors;
(n) To the best knowledge and belief of TSCI, any and all
taxes accrued or asserted against TSCI have been paid, or TSCI has established
adequate reserves therefor. All tax returns for TSCI required to be filed have
been or will be filed for all periods ending on or up to the Closing Date; no
extensions of the applicable statutes of limitations have been, or will be,
prior to the Closing Date, applied for by TSCI. Any and all additional taxes
arising from the operation of TSCI for any period up to and including the
Closing Date and not provided for on the books and records of TSCI are and shall
be the sole liability of TSCI. Copies of all applicable tax returns shall be
furnished to PPI and its counsel prior to the Closing Date;
(o) TSCI has clear and unencumbered title to all of the assets
and property owned by it as shall be reflected in the TSCI Financial Statements
and TSCI shall have no assets that are not reflected in the TSCI Financial
Statements;
(p) To the best knowledge and belief of TSCI, TSCI is not in
material default under any material contract or obligation and all third parties
with whom TSCI has contractual arrangements are in material compliance therewith
and are not in material default thereunder;
(q) TSCI has not adopted, and, without written consent of PPI,
will not prior to the Closing Date adopt, any employment or collective
bargaining agreements;
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(r) There are no material liabilities, either fixed or
contingent, not reflected in the TSCI Financial Statements except that there may
be contracts or obligations incurred in the usual course of business not
reflected therein which, if disclosed, would not materially adversely affect the
financial condition of TSCI as reflected in the TSCI Financial Statements;
(s) No representation or warranty made by TSCI in this
Agreement and any schedule or exhibit attached hereto and furnished or to be
furnished to PPI pursuant to this Agreement, contains or will contain any untrue
statement of a material fact, or omits, or will omit, to state a material fact
required or necessary to make the statements and representations herein or
therein made, in light of the circumstances under which they were made, not
misleading;
(t) On the Closing Date, TSCI shall have authorized, issued
and outstanding the securities set forth in clause (e) of this Section 8; and
all TSCI Shares indicated as being issued and outstanding on the Closing Date
shall be duly and validly issued and outstanding, fully paid and non-assessable
with no personal liability attached to the ownership thereof;
(u) Except for the 1999 Financing, TSCI has not executed or
delivered or issued any notes, bonds or mortgages and has not entered into any
leases, contracts or commitments not disclosed in the TSCI Financial Statements;
(v) Except as provided in Section 8(d) there are no
outstanding rights to subscribe shares of stock of TSCI and none will be so
authorized subsequent to the execution of this Agreement without the prior
written consent of PPI;
(w) No TSCI shareholder has any right of appraisal or similar
right to dissent from the transaction made the subject of this Agreement and/or
to demand payment for its TSCI Shares;
(x) TSCI has no unpaid dividends;
(y) Prior to the Closing Date, TSCI will not authorize a
reorganization, recapitalization, merger, consolidation, stock split or take
other similar corporate action except as may be required to effectuate the terms
and conditions of this Agreement;
(z) Prior to the Closing Date, TSCI will not create any other
class of equity or debt security of TSCI;
(aa) Prior to the Closing Date, and except for the 1999
Financing and advances by investors to fund operations or the incurring of debt
to finance ongoing business activities which shall be disclosed to PPI in
writing, TSCI will not, without the prior written consent of PPI:
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(i) create or incur any indebtedness, whether funded or
not, except unsecured current liabilities incurred in the
ordinary course of business; or assume, guarantee, endorse
or otherwise become responsible for the obligation of any
other person, entity, firm or corporation;
(ii) create or incur any mortgage, lien, charge or
encumbrance of any kind, nature or description with
respect to any of TSCI 's properties or assets, except in
the ordinary course of business;
(iii) make or become a party to any contract or
commitment, or renew, extend, amend, terminate or modify
any contract or commitment, except in the ordinary course
of business;
(iv) make any capital expenditure or capital addition or
betterment except as may be involved in ordinary repairs,
maintenance and replacements and minor plant and equipment
additions;
(v) sell or otherwise dispose of any of its assets except
sales in the ordinary course of business;
(vi) declare or pay any dividend on, or make any other
distribution upon or in respect of, or purchase, retire or
redeem any shares of its capital stock, except as may be
required by the terms thereof;
(vii) issue or sell any additional shares of capital
stock, whether or not such shares have been previously
authorized for issuance, or acquire any stock of any
corporation or any interest in any business enterprise;
(viii) grant any option or make any commitment relating to
the authorized or issued capital stock of TSCI;
(ix) pay or agree to pay, conditionally or otherwise, any
pension or severance pay to any director, officer, agent
or employee, or make any advances to or increase the
compensation of, any officers or employees;
(x) use any assets or properties except for proper
corporate purposes;
(xiii) make any change in the Certificate of Incorporation
or By-Laws; and
(xi) change any of TSCI 's banking or safe deposit
arrangements or open any new bank accounts or safe deposit
boxes, other than in the normal course of business;
15
(bb) TSCI has no liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise) which are required to be reflected
or reserved against on its balance sheets in accordance with generally accepted
accounting principles consistently applied, except for liabilities and
obligations which shall be fully reflected or reserved against in the TSCI
Financial Statements or incurred in the ordinary course of business and
consistent with past practice since the date of the TSCI Financial Statements;
(cc) TSCI has the power to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
or will be prior to Closing Date duly authorized by TSCI's Board of Directors
and shareholders in accordance with Delaware law, and TSCI shall furnish PPI
with true copies of any and all documentation evidencing such action. TSCI is
not subject to or obligated under any contract provision or any license,
franchise or permit or subject to any order or decree, which would be breached
or violated by its execution and performance of this Agreement in the time and
manner contemplated herein. Except as required by applicable securities laws or
as set forth on Schedule 8(cc), no filing or registration with, or
authorization, consent or approval of any public body or authority is necessary
to execute or perform this Agreement and the consummation by TSCI of the
transactions contemplated hereby;
(dd) By virtue of its execution of this Agreement, TSCI hereby
acknowledges and accepts that it has been furnished with all information
concerning the business and financial condition and corporate status of PPI
which TSCI 's management deemed necessary to its decision to proceed with the
transactions as described herein;
(ee) TSCI has not made any patent or trademark filings in the
United States;
(ff) All of the assets and property used by TSCI in the
operation of its business are owned by TSCI and to the extent any of such assets
and property are not so owned, TSCI will arrange to have such asset and/or
property transferred to it prior to the Closing Date;
(gg) On or prior to the Closing Date, TSCI shall have prepared
and filed with the Securities and Exchange Commission (the "SEC"), all reports
and filings required to be filed by a company having a reporting obligation
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") and such reports and filings shall be true and accurate
and prepared in material compliance with the applicable disclosure provisions of
the 1934 Act covering the periods included in the TSCI Financial Statements
(hereinafter collectively referred to as the "Periodic Reports");
(hh) Immediately prior to the Closing, TSCI will have a
positive tangible net worth of at least $975,000 as determined in accordance
with generally accepted accounting principles, giving PRO FORMA effect to1999
Financings;
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(ii) On the Closing Date, each executive officer and director
of TSCI shall resign seriatim with such vacancies filled by the nominees of PPI;
and
(jj) Each of the representations in this Section 8 shall be
true and correct at the Closing Date and shall survive the Closing for a period
of six months.
9. COVENANTS OF PPI AND THE PPI SHAREHOLDERS. By virtue of its
and their respective execution of this Agreement, PPI, and the PPI Shareholders
hereby jointly and severally covenant and agree with TSCI as follows:
(a) On the Closing Date, each PPI Shareholder will deliver an
executed investment/lock up letter to TSCI in the form annexed hereto as
Schedule 9(a) (the "PPI Investment Letter");
(b) PPI agrees and covenants to execute the certificates
identified in Section 11(a)(ii),(iii), (iv) and (x) below;
(c) On the Closing Date, PPI will furnish TSCI with an opinion
of securities counsel to PPI to the effect that the PPI Shares are duly and
validly issued, fully paid and non-assessable;
(d) At all times prior to the Closing Date, TSCI through its
duly authorized representatives, may inspect, copy and reproduce any tax
returns, accounting and other records of PPI relating to its property, assets or
business. PPI will afford to the officers and authorized representatives of TSCI
access to the properties, books and records of PPI and will furnish such
information as TSCI and its counsel may from time to time reasonably request;
(e) If requested by TSCI, PPI will deliver to TSCI an accurate
and complete list and brief description of all policies of fire, liability,
errors and omissions and other insurance carried by PPI as of the date of this
Agreement. PPI will take all steps necessary to keep such policies in full force
and effect through the Closing Date and will inform TSCI of any changes in
coverage or additional policies prior to the entering into such policies;
(f) Copies of PPI's Certificate of Incorporation, all
amendments thereto, By-Laws, and all minutes of PPI are contained in the minute
books which will be furnished to TSCI and its counsel prior to the Closing Date;
and all additional minutes and other corporate documents of PPI adopted or
executed subsequent to this Agreement, but prior to the Closing Date (none of
which will diminish or dilute the rights of TSCI hereunder), will be furnished
to TSCI and its counsel prior to the Closing Date;
(g) As soon as practicable following the execution of this
Agreement, but no later than five (5) business days prior to the Closing Date,
PPI will provide TSCI with the PPI Audited and Unaudited Financial Statements;
17
(h) All of the representations, warranties of PPI, and the PPI
Shareholders made in this Agreement shall survive the Closing Date for a period
of six months;
(i) As soon as practicable following the execution of this
Agreement, but no later than five (5) business days prior to the Closing Date,
PPI will furnish to TSCI copies of proposed forms of employment agreement with
such executive officers of PPI as TSCI shall have designated to PPI in writing
as soon as practicable following the execution of this Agreement (the "PPI
Employment Agreements"). The terms of such PPI Employment Agreements shall be
satisfactory to TSCI. Any and all such PPI Employment Agreements shall be duly
executed on the Closing Date; and
(j) No later than twenty (20) business days prior to the
Closing Date, PPI shall have taken such corporate action as shall be necessary
to comply with the requirements of the California Business Corporation Act and
to cause its shareholders to authorize the transaction referenced in this
Agreement.
10. COVENANTS OF TSCI. By virtue of its execution of this
Agreement, TSCI hereby covenants and agrees with PPI and the PPI Shareholders as
follows:
(a) TSCI agrees and covenants to deliver at Closing all
certificates and related documents identified in Section 11(b);
(b) On the Closing Date, TSCI will furnish PPI with an opinion
of securities counsel to the effect that the TSCI Shares are duly and validly
issued, fully paid and non-assessable;
(c) At all times prior to the Closing Date, PPI and/or the PPI
Shareholders through its or their duly authorized representatives, may inspect,
copy and reproduce any tax returns, accounting and other records of TSCI
relating to its property, assets or business. TSCI will afford to the officers
and authorized representatives of PPI and/or the PPI Shareholders access to the
properties, books and records of TSCI and will furnish such information as PPI
and/or the PPI Shareholders and its or their counsel may from time to time
reasonably request;
(d) Copies of TSCI's Certificate of Incorporation, all
amendments thereto, By-Laws, and all minutes of TSCI are contained in the minute
books which will be furnished to PPI and the PPI Shareholders and its or their
counsel prior to the Closing Date; and all additional minutes and other
corporate documents of TSCI adopted or executed subsequent to this Agreement,
but prior to the Closing Date (none of which will diminish or dilute the rights
of PPI, the PPI Optionholders and the PPI Shareholders hereunder), will be
furnished to PPI, and the PPI Shareholders and its or their counsel prior to the
Closing Date;
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(e) As soon as practicable following the execution of this
Agreement, but no later than ten (10) days prior to the Closing Date, TSCI will
provide PPI, and the PPI Shareholders with the TSCI Audited and Unaudited
Financial Statements;
(f) All of the representations, warranties and covenants of
TSCI made in this Agreement shall survive the Closing Date for a period of
twelve months;
(g) No later than twenty (20) business days prior to the
Closing Date, TSCI shall have taken such corporate action as shall be necessary
to comply with the requirements of the Delaware General Corporation Law and to
cause its shareholders to authorize the transaction referenced in this Agreement
and furnish evidence of such shareholder approval reasonably satisfactory to
PPI's counsel; and
(h) On the Closing Date, TSCI will have filed all of the
Periodic Reports; and
(i) On the Closing Date, TSCI's escrow account held by Xxxxxx
Xxxxxxxxxxx, Esq. will have at least $975,000 of available funds.
11. CONDITIONS PRECEDENT TO CLOSING.
(a) All of the obligations of TSCI under and pursuant to this
Agreement are and shall be subject to the representations and warranties of PPI
and the PPI Shareholders being true and correct in all material respects on the
Closing Date except for such representation and warranties that are expressly
given as of a specific date or as of the date hereof and the delivery to TSCI,
prior to or on the Closing Date of each of the following:
(i) a certificate or certificates representing all of the
PPI Shares in proper transferable form, endorsed in blank,
with signatures guaranteed and with all necessary
documentary transfer tax stamps affixed;
(ii) a certificate signed by the President and Secretary
of PPI, dated the Closing Date, to effect that all of the
representations and warranties of PPI set forth in Section
7 hereof, and elsewhere in this Agreement are true and
correct in all material respects except for such
representations and warranties that are expressly given as
of a specific date or as of the date hereof;
(iii) a certified copy of the resolution of PPI's Board of
Directors authorizing the execution, delivery and
performance of this Agreement;
(iv) a certificate signed by PPI, dated the Closing Date,
to the effect its representations and warranties of the
PPI Shareholders set forth in Section 6 and elsewhere in
the Agreement are, to the best of PPI's knowledge and
19
belief, true and correct except for such representations
and warranties that are expressly given as of a specific
date or as of the date hereof;
(v) the PPI Audited Financial Statements containing an
opinion of Wiss & Company, LLP, PPI's independent
certified public accountants, together with the PPI
Unaudited Financial Statements (which shall contain no
material change in the financial condition of PPI since
the date of the last PPI 's Audited Financial Statement
(March 31, 1998) other than expenditures authorized by
this Agreement, and reviewed by such firm);
(vi) a Certificate of Good Standing of PPI from the
appropriate authority in the State of California dated
within ten (10) days of the Closing Date;
(vii) a certificate from the appropriate authority in the
State of California dated within ten (10) days of the
Closing Date evidencing payment by PPI of all outstanding
taxes due to the State of California;
(viii) an executed copy of the PPI Investment Letters from
each holder of the PPI Shares;
(ix) an opinion of corporate and securities counsel to PPI
that the PPI Shares are duly and validly issued, fully
paid and non-assessable;
(x) a certificate of the President and Corporate Secretary
of PPI certifying that, effective as of the Closing, all
other covenants of PPI to be satisfied on or before the
Closing, as contained in Section 10 above have been
satisfied;
(xi) duly executed copies of the PPI Employment
Agreements;
(xii) the repayment by PPI of any and all bridge loans
theretofore made by TSCI; and
(xiii) that each of the representations of the PPI
Shareholders in Section 6 shall be true and correct at the
Closing Date.
(b) All of the obligations of PPI and the PPI Shareholders
under and pursuant to this Agreement are and shall be subject to the
representations and warranties of TSCI being true and correct at the Closing
Date except for such representations and warranties that are expressly given as
of a specific date or as of the date hereof and the fulfillment prior to or on
the Closing Date of each of the following:
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(i) certificates for the TSCI Stock in such names and in
such denominations as PPI shall have indicated to TSCI in
writing at least ten days prior to the Closing Date;
(ii) a certificate signed by the President and Secretary
of TSCI, dated the Closing Date, to effect that all of the
representations and warranties of TSCI set forth in
Section 8 hereof, and elsewhere in this Agreement are true
and correct in all material respects except for such
representations and warranties that are expressly given as
of a specific date or as of the date hereof;
(iii) a certified copy of the resolution of TSCI's Board
of Directors authorizing the execution, delivery and
performance of this Agreement;
(iv) the TSCI Audited Financial Statements containing an
opinion of Wiss & Company, LLP, TSCI's independent
certified public accountants, together with the TSCI
Unaudited Financial Statements (which shall contain no
material change in the financial condition of TSCI since
the date of the last TSCI's Audited Financial Statement
(December 31, 1998) other than expenditures authorized by
this Agreement, and reviewed by such firm;
(v) a Certificate of Good Standing of TSCI from the
appropriate authority in the State of Delaware dated
within ten (10) days of the Closing Date;
(vi) a certificate from the appropriate authority in the
State of Delaware dated within ten (10) days of the
Closing Date evidencing payment by TSCI of all outstanding
taxes due to the State of Delaware;
(vii) an opinion of corporate and securities counsel to
TSCI that the TSCI Shares are duly and validly issued,
fully paid and non-assessable; and
(viii) a certificate of the President and Corporate
Secretary of TSCI certifying that, effective as of the
Closing, all other covenants of TSCI to be satisfied on or
before the Closing, as contained in Section 10 above have
been satisfied;
(ix) TSCI having a tangible net worth of no less than
$975,000 GIVING PRO FORMA effect to the 1999 Financings,
as evidenced by an unaudited PRO FORMA balance sheet
prepared by Wiss & Co., LLP;
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(x) Evidence, as of the Closing Date, of no less than
$975,000 of available funds in TSCI's escrow account held
by Xxxxxx Xxxxxxxxxxx, Esq.; and
(xi) Evidence of TSCI having filed all required Periodic
Reports.
12. INDEMNIFICATION.
(a) PPI and the PPI Shareholders hereby jointly and severely
agree to hold TSCI harmless from any and all loss, cost, expense, liability or
damage, including reasonable attorney's fees, resulting from any inaccurate
representation made by either PPI or the PPI Shareholders, breach of any
warranty herein made and breach or default in PPI or the PPI Shareholders
performance of any of the covenants which PPI and the PPI Shareholders are to
perform hereunder; provided, however, no claim may be made under this Agreement
for breach of warranty or covenant, or seek any indemnification with regard
thereto until such time as there has been an aggregate of Ten Thousand Dollars
($10,000) damages incurred by TSCI. All claims made hereunder must be made
within eighteen (18) months of the Closing hereunder or they shall be deemed
waived.
(b) TSCI hereby agrees to hold PPI and the PPI Shareholders
harmless from any and all loss, cost, expense, liability or damage, including
reasonable attorney's fees, resulting from any inaccurate representation made by
TSCI, breach of any warranty herein made and breach or default in TSCI's
performance of any of the covenants which it is to perform hereunder; provided,
however, no claim may be made under this Agreement for breach of warranty or
covenant, or seek any indemnification with regard thereto until such time as
there has been an aggregate of Ten Thousand Dollars ($10,000) damages incurred
by PPI and the PPI Shareholders. All claims made hereunder must be made within
eighteen (18) months of the Closing hereunder or they shall be deemed waived.
13. THE PPI SHAREHOLDERS' INVESTMENT INTENT. The PPI Shareholders
have been advised, and by the execution of this Agreement, hereby agree, accept
and acknowledge:
(a) That none of the TSCI Shares to be delivered hereunder
shall have been registered under the Securities Act or under state securities
law, and that both TSCI and its present management are relying upon an exemption
from registration based upon the investment and other representations of PPI and
the PPI Shareholders. In this regard, PPI and the PPI Shareholders hereby
represent, covenant and warrant that:
(i) the PPI Shareholders are acquiring the TSCI Shares
issuable hereunder for investment purposes and without any
view to the transfer or resale thereof and that such
shares shall not be sold, transferred, assigned, pledged
or hypothecated in any violation of the Securities Act, or
the applicable securities laws of any state;
22
(ii) the PPI Shareholders have no present reason to
anticipate any change in their circumstances or any other
particular occasion or event which would cause them to
sell the TSCI Shares, subject, however, to the disposition
of such property at all time being within their exclusive
control;
(iii) In addition to the lock-up legend enumerated in the
Investment Letter, the certificates representing all of
the TSCI Shares to be delivered pursuant to this
Agreement, shall bear a restrictive legend in
substantially the following form:
"The Shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended
(the "Securities Act"). They may not be sold, assigned or
transferred in the absence of an effective registration
statement for the Shares under the said Securities Act,
receipt of a 'no action' letter from the Securities and
Exchange Commission or an opinion of counsel satisfactory
to the Corporation that registration is not required under
said Securities Act."
(iv) The TSCI Shares will bear a lock-up legend in the
form set forth in the Investment Letter for no less than
thirteen (13) months, unless such lock-up legend is
removed prior thereto, as provided for in the Investment
Letter.
(v) The Company shall place stop transfer orders with its
transfer agent against the transfer of the TSCI Shares in
the absence of registration under the Securities Act or an
exemption therefrom.
14. CONDUCT OF TSCI'S AND PPI'S BUSINESSES PRIOR TO THE CLOSING
DATE.
From the date hereof and prior to the Closing Date, unless the other
party hereto shall otherwise agree in writing:
(a) The business of TSCI and PPI shall be conducted only in
the ordinary and usual course and there shall be no material adverse changes in
the nature and extent of its respective properties, the conduct of its
respective operations except in connection with the 7 A.M. Transaction.
(b) Neither TSCI nor PPI shall encumber by lien, encumbrance,
security interest or otherwise any of its respective assets or properties or
authorize the reorganization, recapitalization, merger, consolidation or other
similar action on behalf of TSCI or PPI except any that may be permitted by or
required to effectuate the terms and conditions of this Agreement or as
otherwise mutually agreed upon in writing; except in connection with the 7 A.M.
Transaction.
23
(c) Except as permitted by this Agreement, neither TSCI nor
PPI shall dispose of any material amount of assets other than in the ordinary
course of business; incur a material amount of additional indebtedness or other
material liabilities, other than liabilities for borrowed money or except in
connection with the 7 A.M. Transaction enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(d) Neither TSCI nor PPI shall enter into any employment or
similar contract with any shareholder or employee or make any changes in its
respective management or executive assignments or compensation, except for
changes in its management or executive assignments or compensation which occur
in the ordinary course of business or as otherwise permitted by this Agreement;
and
(e) TSCI and PPI shall use their respective best efforts to
preserve intact its business organization, to keep available the services of its
present key employees, and to preserve the good will of those having business
relationships with them.
15. REGISTRATION AND REGISTRATION RIGHTS. The following provisions
shall be applicable:
(a) REGISTRATION. Within 12 months from the Closing Date, PPI
hereby covenants and agrees to utilize its bests efforts to prepare and file a
registration statement (a "Registration Statement") with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "Act").
(b) PIGGY BACK REGISTRATION RIGHTS. If at any time during the
two year period following the date of this Agreement, PPI proposes to register
for sale in any offering, whether to the public or otherwise, of any equity or
debt securities pursuant to a Registration Statement with the SEC under the
Securities Act, and/or under any state statute, it will at such time give
written notice of its intention to do so (the "Registration Notice") to the
registered holders of up to 375,000 shares of TSCI common stock issued pursuant
to Rule 506 of Regulation D referenced in Section 8(l) of this Agreement (the
"506 Holders") offered at a price of $4.00 to "Accredited Investors" in TSCI's
February 1999 private offering under and pursuant to Rule 506 of Regulation D
under the Securities Act (the "506 Shares") at their address appearing on the
books and records of PPI's transfer agent. TSCI's obligation to furnish the
Registration Notice to the 506 Holders shall arise within three days from PPI's
execution of a written letter of intent with any broker-dealer registered with
the National Association of Securities Dealers, Inc. or of PPI's engagement of
securities counsel to prepare a Registration Statement for filing with the SEC,
whichever shall sooner occur. Within 15 days after the receipt of the
Registration Notice, any 506 Holder may request the inclusion of such 506
Holder's 506 Shares in any Registration Statement which PPI intends to file with
24
the SEC (the "Covered Share Notice"). The Covered Share Notice shall: (i)
specify the number of 506 Shares intended to be offered and sold by the 506
Holder (the "Covered Shares"); (ii) express the 506 Holder's present intent to
offer such Covered Shares for distribution; and (iii) undertake to provide all
such information and materials and to take all such action as may be required in
order to permit PPI to comply with all applicable requirements of the SEC and/or
applicable state regulatory body, as the case may be, and to obtain acceleration
of the effective date of the Registration Statement therefor. Upon receipt of
the Covered Share Notice, PPI shall use its best efforts to cause the offering
of the Covered Shares so specified in the Covered Share Notice to be registered
under the Act as soon as reasonably practicable (but in any event not later than
75 days from the date of the Covered Share Notice) so as to permit the sale or
other distribution by the 506 Holder of the Covered Shares specified in the
Covered Share Notice; PROVIDED, HOWEVER, if the offering to which the proposed
Registration Statement relates is to be distributed by or through an underwriter
approved by PPI, the 506 Holder may, at such 506 Holder's option, agree to sell
the 506 Holder's Covered Shares through such underwriter on the same terms and
conditions as the underwriter agrees to sell the other securities proposed to be
registered, and PROVIDED FURTHER, that, if such underwriter determines that the
inclusion of all such Covered Shares for which registration is requested would
have an adverse effect on the offering and furnishes PPI written notice to that
effect (the "Adverse Notice"), the 506 Holders shall, upon being furnished with
a copy of the Adverse Notice, be entitled hereunder to participate in the
underwriting and register the Covered Shares only on a pro rata basis with the
shares otherwise being offered. If the 506 Holder opts not to sell 506 Holder's
Covered Shares through such underwriter, the 506 Holder may use the Registration
Statement for such underwriting to register such Covered Shares under the Act
within 60 days after such Registration Statement becomes effective.
(c) REGISTRATION EXPENSES. PPI shall bear the costs and
expenses incurred in connection with the registration of the sale or other
distribution of the Covered Shares pursuant to the terms of this Agreement
(except that the 506 Holder shall pay any underwriting fees, discounts or
commissions attributable to sales of Covered Shares by the 506 Holder and any
"out of pocket" expenses of the 506 Holder, including the 506 Holder's counsel's
fees and expenses). The costs and expenses payable by PPI shall include, without
limitation, (i) all filing fees with the SEC and the NASD; (ii) fees and
expenses of compliance with securities or blue sky laws (including fees and
disbursements of counsel in connection with blue sky qualifications of the
Covered Shares); (iii) printing expenses; (iv) the fees and expenses incurred in
connection with the listing of the Covered Shares; and (v) fees and expenses of
counsel and independent certified public accountants for PPI (including the
expenses of any comfort letters).
25
(d) PUBLIC OFFERING INDEMNITIES. In the event of any
registered offering of the Covered Shares, pursuant to Section 15 hereof, the
506 Holders will provide standard Unites States indemnification to any
underwriter against losses, damages, claims or liabilities arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or the prospectus included therein,
as amended or supplemented, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading, made by the 506 Holders.
16. ACCESS AND INFORMATION. Each party hereto shall afford to
other party's accountants, counsel and other duly authorized representatives
access, during normal business hours and on reasonable advance notice, during
the period after execution of this Agreement and prior to the Closing Date, the
right to make copies of all properties, books, contracts, commitments and
records (including but not limited to tax returns). In addition, each party
shall furnish promptly to the other party: (i) a copy of each report, schedule
and other document file received by it pursuant to the requirements of Federal
or state securities laws; (ii) a copy of any summons, complaint, petition,
notice of hearing or notice of the commencement of any governmental or
administrative investigation; and (iii) all other information concerning its
business, properties and personnel as may reasonably be requested; provided,
however, that no investigation pursuant to this Section 16 shall affect any
representations or warranties or the conditions to the obligations of the
parties to consummate a transaction referenced herein. In the event of a
termination of this Agreement whether in accordance with the provisions of
Section18 or otherwise, each party shall return to the party furnishing
information all documents, work papers and other material obtained by or on its
behalf as a result of this Agreement or in connection herewith whether obtained
before or after the execution hereof, and the party receiving such information
from the party furnishing same shall hold such information in confidence until
such time as such information is otherwise publicly available. Notwithstanding
the foregoing and until the Closing Date, PPI shall be under no obligation to
disclose to TSCI and TSCI shall be under no obligation to disclose to PPI any
proprietary or secret or confidential information concerning its respective
operations.
17. EXPENSES. Regardless of whether or not the transaction
contemplated herein is consummated, each party shall promptly pay, shall be
responsible for, and account for on its respective financial statements all
costs and expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby.
18. TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date: (i) by mutual consent of the Boards of Directors of
both TSCI and PPI ; (ii) by failure to close as provided in Section 3; or (iii)
as a result of the occurrence, prior to the Closing Date, of any of the
following events with respect to or by either PPI or TSCI: (aa) The making of a
general
26
assignment for the benefit of creditors; (bb) The filing of any petition or the
commencement of any proceeding by or against either corporation for any relief
under any bankruptcy, or insolvency laws or any laws related to the relief of
debtors, readjustment of indebtedness, reorganizations, compositions or
extensions; (cc) The appointment of a receiver of or the issuance of making of a
writ or order of attachment or garnishment against, a majority of the property
or assets of either corporation ; (dd) The filing of a tax lien or warrant or
judgment against either corporation in favor of the United States of America or
in favor of any state in an amount in excess of Twenty Five Thousand ($25,000)
Dollars where said lien or judgment is not satisfied and discharged within
thirty (30) days from the date of such filing; or (ee) A judgment is rendered
against either corporation on an uninsured claim of $50,000 or more and either
corporation fails to commence an appeal of such judgment within the applicable
appeal period.
19. EFFECT ON TERMINATION. In the event of termination of this
Agreement as provided in Section 18, this Agreement shall forthwith become null
and void and there shall be no further liability on the part of TSCI or PPI or
its respective officers or directors. Termination of this Agreement by either
TSCI or PPI as a result of the breach of the terms and conditions hereof by the
other shall not relieve any party of any liability for a breach of, or for any
misrepresentation under this Agreement, or be deemed to constitute a waiver of
any available remedy (including specific performance if available) for any such
breach or misrepresentation.
20. MEANING OF MATERIAL. As used herein, the term "material" shall
be construed in its generally accepted United States Federal securities law
context.
21. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
22. WAIVER. At any time prior to the Closing Date, the parties
hereto, by action taken by its respective Boards of Directors and accepted in
writing by the other parties, may: (i) extend the time for the performance of
any party; (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto; and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid if set forth in an instrument in writing signed on behalf of such party
and accepted in writing by the other parties. The failure of any party to insist
upon strict performance of any of the provisions of this Agreement shall not be
construed as a waiver of any subsequent default of the same or similar nature or
of any of provision, term, condition, warranty, representation or guaranty
contained herein.
27
23. BROKER AND INVESTMENT BANKING FEES. TSCI and PPI represent and
warrant that except for Xxxxxxx Xxxxxxxxx, they have not engaged the services of
any broker, finder, or other person of similar kind who might be due
compensation as a result of the transactions contemplated herein. TSCI, PPI, and
the PPI Shareholders agree to hold and indemnify each other harmless from and
against claims by any third party due compensation as a broker, finder, or other
person of similar kind who might be due compensation as a result of the
transactions contemplated herein.
24. BINDING EFFECT. All of the terms and provisions of the
Agreement shall be binding upon and inure to the benefit of and be enforceable
by and against the parties hereto and their respective successors. This
Agreement shall not be assignable under any circumstances.
25. ENTIRE AGREEMENT. Each of the parties hereto, covenants that
this Agreement is intended to and does contain and embody herein all of the
understandings and agreements, both written and oral, of the parties hereby with
respect to the subject matter of this Agreement and that there exists no oral
agreement or understanding express or implied, whereby the absolute, final and
unconditional character and nature of this Agreement shall be in any way
invalidated, impaired or affected.
26. GOVERNING LAW. This Agreement shall be governed by and
interpreted under and construed in all respects in accordance with the laws of
the State of New Jersey, irrespective of the place of domicile or residence of
any party.
27. ARBITRATION. The parties agree that in the event of a
controversy arising out of the interpretation, construction, performance or
breach of the Agreement, any and all claims arising out of or relating to this
Agreement shall be settled by arbitration according to the Commercial
Arbitration Rules of the American Arbitration Association located in New York
City before a single arbitrator, except as provided below. The decision of the
arbitrator(s) will be enforceable in any court of competent jurisdiction. The
parties hereby agree and consent that service of process by mail in any such
arbitration proceeding outside the City of New York shall be tantamount to
service in person within New York, New York and shall confer personal
jurisdiction on the American Arbitration Association. In any dispute where a
party seeks Fifty Thousand Dollars ($50,000.00) or more in damages, three (3)
arbitrators will be employed. In resolving all disputes between the parties, the
arbitrators will apply the law of the State of New York, except as may be
modified by this Agreement. The arbitrators are, by this Agreement, directed to
conduct the arbitration hearing no later than three (3) months from the service
of the statement of claim and demand for arbitration unless good cause is shown
establishing that the hearing cannot fairly and practically be so convened. The
arbitrators will resolve any discovery disputes by such prehearing conferences
as may be needed. All parties agree that the arbitrators and any counsel of
record to the proceeding will have
28
the power of subpoena process as provided by law. Notwithstanding the foregoing,
if a dispute arises out of or related to this Agreement, or the breach thereof,
before resorting to arbitration the parties agree first to try in good faith to
settle the dispute by mediation under the Commercial Mediation Rules of the
American Arbitration Association.
28. ORIGINALS. This Agreement may be executed in counterparts each
of which so executed shall be deemed an original and constitute one and the same
agreement.
29. ADDRESSES OF THE PARTIES. Each party shall at all times keep
the other party informed of its principal place of business if different from
that stated herein, and promptly notify the other of any change, giving the
address of the new principal place of business.
30. NOTICES. Any notice required or contemplated by this Agreement
shall be deemed sufficiently given when delivered in person, transmitted by
facsimile (if followed by a copy by mail within three (3) business days) or sent
by registered or certified mail or priority overnight package delivery service
to the principal office of the party entitled to notice or at such other address
as the same may designate in a notice for that purpose. All notices shall be
deemed to have been made upon receipt, in the case of mail, personal delivery or
facsimile, or on the next business day, in the case of priority overnight
package delivery service. Such notices shall be addressed and sent or delivered
to the following:
IF TO TECHSCIENCE INDUSTRIES, INC.:
0 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxx
WITH A COPY TO:
Xxxxxx Xxxxxxxxxxx, Esq.
0000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
IF TO XXXXXXXXX.XXX, INC.:
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
29
WITH A COPY TO:
Xxxxxx X. XxXxxxx, Esq.
c/o Xxxx Xxxxx Xxxx & XxXxxx LLP
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
IF TO ANY OF THE PPI SHAREHOLDERS:
To the PPI Shareholder at the address set forth on
Exhibit 1
WITH A COPY TO:
Xxxxxx X. XxXxxxx, Esq.
c/o Xxxx Xxxxx Xxxx & XxXxxx LLP
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
or to such other address of which a party may notify the other parties as
provided above.
31. RELEASE OF INFORMATION. In light of the nature and extent of
the conditions precedent to PPI 's and TSCI's obligations hereunder, the parties
hereby agree that any and all releases of public information concerning this
transaction shall be made only with the mutual consent in writing of both PPI
and TSCI as to form, content and kind.
32. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and which
counterparts together shall constitute one and the same Agreement of the parties
hereto.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
30
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
TECHSCIENCE INDUSTRIES, INC.
By:/s/ XXXXX X. XXXX
------------------------------------
Xxxxx X. Xxxx, President
XXXXXXXXX.XXX, INC.
By:/s/ XXXXXX X. XXXXXX
------------------------------------
Xxxxxx X. Xxxxxx, President
SHAREHOLDERS OF XXXXXXXXX.XXX, INC.
/s/ XXXXX X. XXXXXX
---------------------------------------
Xxxxx X. Xxxxxx
/s/ XXXXXXX XXXXXXXXX
---------------------------------------
Xxxxxxx Xxxxxxxxx
/s/ XXXXXXX XXXXXX
---------------------------------------
Xxxxxxx Xxxxxx
/s/ XXXXXXXX XXXXXX
---------------------------------------
Xxxxxxxx Xxxxxx
31
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit 1 Names, Addresses and Shareholdings of Each PPI Shareholder
SCHEDULES
Schedule 7(e) Outstanding options, warrants and other derivative
securities of PPI
Schedule 7(j) PPI Audited and Unaudited Financial Statements
Schedule 7(ee) Patent or Trademark filings
Schedule 8(j) TSCI Audited and Unaudited Financial Statements
Schedule 9(a) PPI Investment letters
Schedule 9(i) PPI Employment Agreements
EXHIBIT 1
Names, Addresses and Shareholdings of Each PPI Shareholder
Name, Address Holdings of Common Stock
------------- ------------------------
Xxxxxx X. Xxxxxx 9,870,000
000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
SSN: ###-##-####
Xxxxxxx Xxxxxxxxx 250,000
2432 Tour Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
SSN: ###-##-####
Xxxxxxxx Xxxxxx 130,000
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
SSN: ###-##-####
Xxxxxxx Xxxxxx 320,000
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
SSN: ###-##-####
SCHEDULE 7(e)
OUTSTANDING OPTIONS, WARRANTS AND
OTHER DERIVATIVE SECURITIES OF PPI
COMMON STOCK OPTIONS
Holder Options
------ -------
Xxx Xxxxxx 400,000
000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
SSN: ###-##-####
Xxxxxxx Xxxxxx 80,000
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
SSN: ###-##-####
Outlook Technologies, Inc. 210,527
0000 X. Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
EIN: 00-0000000
Xxxxxxx & Xxxxx Xxxxxxxx 2,500
00 Xxxxxxxx Xxxxxx
Xxxx Xxxxxxxxx, XX 00000
SSN: ###-##-####
Xxxxx Star 2,500
0 Xxxxxxxxx Xxx
Xxxxxxxx, XX 00000
SSN: ###-##-####
Xxxxx Xxxxx 7,500
0000 0xx Xxxxxx
Xxx Xxxxx, XX 00000
SSN: ###-##-####
Xxxxxxx Xxxxxx 77,000
0000 Xxxx Xxxxxx, #000
Xxxxx Xxxxxx, XX 00000
SSN: ###-##-####
Xxx Xxxxxxx 50,000
000 Xxxx 00xx Xxxxxx, Xxx. 0X
Xxx Xxxx, XX 00000
SSN: ###-##-####
Mara Surrey 10,000
00 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
SSN: ###-##-####
Xxxxx Nusspickle 10,000
00 Xxxxx Xxxxxx, #0
Xxxxx, XX 00000
SSN: ###-##-####
Xxxxxxx Xxxxx 2,500
0000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
SSN: ###-##-####
Xxxxxxxx Xxxxxx 25,000
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
SSN: ###-##-####
BSC Ventures I, LLC 15,000
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
EIN: 00-0000000
SCHEDULE 7(j)
PPI AUDITED AND UNAUDITED FINANCIAL STATEMENTS
SCHEDULE 7(ee)
PATENT OR TRADEMARK FILINGS
Serial No. 75/129835
Xxxx: XXXXXXXXX.XXX
In Class 35.
Notice of Allowance issued 11/5/98, request for extension issued 11/6/98
Statement of Use filed on 3/15/99
Serial No. 75/129836
Xxxx: XXXXXXXXX.XXX
In classes 42 and 35.
Publication Date 11/3/98
Amendment to Allege Use filed 3/15/99
Serial No. 75/129837
Xxxx: XXXXXXXXX.XXX
In Class 41
Notice of Allowance issued 11/5/98, request for extension issued 11/6/98
Statement of Use filed on 3/15/99
NOTE: This schedule excludes various domain registrations.
SCHEDULE 8(j)
TSCI AUDITED AND UNAUDITED FINANCIAL STATEMENTS
SCHEDULE 9(a)
PPI INVESTMENT LETTERS
1. Xxxxxx X. Xxxxxx
2. Xxxxxxx Xxxxxxxxx
3. Xxxxxxxx Xxxxxx
4. Xxxxxxx Xxxxxx
SCHEDULE 9(i)
PPI EMPLOYMENT AGREEMENTS
1. Xxxxxx X. Xxxxxx
2. Xxxx Xxxxxx
3. Xxxxxxx Xxxxxx
4. Xxx Xxxxxx
