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Exhibit: 2.3FT
STOCK PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made as of the 30th day of September, 1998, by and
between Xxx Xxxxxxxxx ("Xxxxxxxxx"), Xxx Xxxxxxx ("Xxxxxxx"), Xxxxxx X. Xxxxx
and Xxxxxx X. Xxxxx, Trustees of the Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx
Revocable Trust, dated November 1, 1996 ("Xxxxx Trust"), Xxxxxx Xxxxx
Associates, Inc. Defined Benefit Plan & Trust ("Xxxxx Plan"), Xxxxxx Xxxxx
Associates, Inc., a Nevada corporation, ("Xxxxx Inc.") and Xxxxxx X. Xxxxx
("Xxxxxx Xxxxx")(all of the foregoing persons or entities involving Xxxxxx Xxxxx
are referred to herein collectively as "Xxxxx")(all of the foregoing sometimes
hereinafter referred to individually and collectively as "Seller" or "Sellers"),
Futech Interactive Products, Inc., an Arizona corporation ("Buyer"), and Xxxxxxx
X. Xxxxx ("Xxxxx").
RECITALS:
A. Sellers own 5,219,046 shares of common stock, no par value ("Common
Stock"), of Janex International, Inc., a Colorado corporation (said corporation,
and any and all subsidiaries of said corporation, are hereinafter referred to
collectively as the "Corporation"). The shares of Common Stock of the
Corporation owned by the Sellers is sometimes referred to herein as the "Stock."
B. The Corporation owns and operates a business (the "Business")
designing, developing, manufacturing and marketing children's toys, coin and
gumball banks, flashlights, battery-operated toothbrushes and "wet pets," and
activities relating thereto, under the trade name "Janex." The Business is
operated at the following address:
000 Xxxx Xxxx
Xxxxxxxx 0, Xxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
X. Xxxxxxx are owed money by the Corporation under the "Sellers'
Receivables" described in Section 1.2 below.
X. Xxxxxxx desire to sell to Buyer, and Buyer desires to purchase from
Sellers, the Stock and Sellers' Receivables, all in accordance with the terms
and conditions set forth below (the "Transaction").
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
T E R M S:
1. PURCHASE AND SALE.
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1.1 Each Seller hereby sells to Buyer, the Stock owned by such
Seller as set forth below and Buyer hereby purchases said Stock, on the terms
and conditions set out herein. The shares of Stock owned by each Seller are as
follows:
Seller Stock
------ -----
Xxxxxxxxx 627,000
Xxxxxxx 528,000
Xxxxx Trust 2,386,184
Xxxxx Plan 718,177
Xxxxx Inc. 952,685
---------
5,219,046
Immediately after these transfers, the ownership of the Common Stock of the
Corporation will be as follows:
Shareholder Common Shares % of Common Shares
----------- ------------- ------------------
Buyer 5,219,046 52.3890%
Other Shareholders 4,743,059 47.6110%
--------- ---------
TOTAL 9,962,105 100.0000%
========= =========
Also outstanding are options to purchase 76,250 shares of Common Stock,
held by a former employee of the Corporation named Xxxx Xxxxxxx. Warrants
(at approximately $.64) for 100,000 shares of Common Stock are owned by
Deco Disc. There are 1,725,000 public warrants outstanding, having an
exercise price of $7.50 each. Assuming exercise of the warrants and options
described above, there would be 11,863,355 common shares outstanding.
The Corporation is authorized to issue 20,000,000 shares of Common
Stock, of which none are held in the Corporation's treasury. The
Corporation is also authorized to issue 5,000,000 preferred shares, no par
value, some of which were previously issued, but were reacquired by the
Corporation in exchange for the issuance of Common Stock. None of the
preferred shares are issued or outstanding and none are held in the
Corporation's treasury.
1.2 The Seller named below, sells to Buyer the debt owing from
the corporation to such Seller, as follows:
(a) Promissory Note, dated October 6, 1993, payable by
the Corporation to Xxxxxxxxx, in the original principal amount of
$560,000.00. Xxxxxxxxx represents and warrants the balance of said
debt to be $280,000.00 of principal, plus $79,800.00 of accrued
interest as of August 31, 1998. An additional Promissory Note,
dated June 28, 1996, payable by Janex Corporation to Xxxxxxxxx, in
the original principal amount of $115,000.00. Sellers represent
and warrant the balance of said debt to be
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$115,000 of principal, plus $32,750 of accrued interest, as of August
31, 1998. The total of said indebtedness is $507,550.00, principal and
interest, as of August 31, 1998.
(b) Promissory Note, dated October 6, 1993, payable by the
Corporation to Xxxxxxx, in the original principal amount of
$420,000.00. Sellers represent and warrant the balance of said debt to
be $220,000.00 of principal, plus $62,700.00 of accrued interest as of
August 31, 1998, for a total owing as of that date of $282,700.00.
(c) Eleven (11) Promissory Notes of various amounts and dates
between April 30, 1996 and June 9, 1997, totaling $615,000.00 in
principal, payable by the Corporation to the Xxxxx Trust. Sellers
represent and warrant the balance of said debt to be $615,000.00 in
principal, plus $104,782.06 of accrued interest as of August 31, 1998,
for a total owing as of that date of $719,782.06.
This Agreement shall act as a xxxx of sale and assignment of interest
wherein each Seller transfers to Buyer the debt or debts described above as
owing to such Seller, and all security interests, all rights to collateral, and
all other rights associated with said debts (collectively "Sellers'
Receivables"), and Sellers instruct the Corporation to pay all amounts due under
said debts directly to Buyer. This document shall also act as a transfer of the
UCC-1 Financing Statement filing relating to said debts. Sellers agree to
execute and deliver to Buyer immediately upon request any and all documents
necessary or appropriate to effectuate the transfers described above, including
but not limited to Financing Statement filings transferring the existing
Financing Statements to Buyer.
Each Seller, represents and warrants as to the debt or debts described
above as owing to such Seller, that the debt or debts are valid debts of the
Corporation owing to such Seller, that the Seller owns the rights relating to
said debts, has not transferred or encumbered those rights, and is transferring
those rights free and clear of any and all liabilities, and that the debts are
secured with perfected financing statements creating a valid first position lien
against all assets of the Corporation pledged as collateral for the debts.
2. PURCHASE PRICE.
2.1 The purchase price for the Stock and Seller's Receivables, subject
to adjustment as described below, shall be the sum of $1,500,000.00, payable as
follows:
(a) 1,240,965 shares of Preferred Stock (defined below) of
Buyer, to be issued to Xxxxxxxxx as soon as practicable after the
execution of this Agreement, which, when valued at $.20 per share, have
an agreed value of $248,193;
(b) 743,285 shares of Preferred Stock of Buyer, to be issued
to Xxxxxxx as soon as practicable after the execution of this
Agreement, which, when valued at $.20 per share, have an agreed value
of $148,657.00;
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(c) 1,765,750 shares of Preferred Stock of Buyer, to be issued
to Xxxxx (as Xxxxx shall designate) as soon as practicable after the
execution of this Agreement, which, when valued at $.20 per share, have
an agreed value of $353,150.00;
(d) $248,193.00 payable to Xxxxxxxxx, without interest, in
full in cash or cash equivalent, on the later to occur of ninety (90)
days after the date of this Agreement or 30 days after the closing by
Buyer of Buyer's reverse merger into the Corporation. Said obligation
shall be evidenced by a promissory note in the form of Exhibit 2.1(d)
attached hereto. The note shall bear interest at the rate of ten
percent (10%) per annum from the date of the note, if not paid when
due;
(e) $148,657.00 payable to Xxxxxxx, without interest, in full
in cash or cash equivalent, on the later to occur of ninety (90) days
after the date of this Agreement or 30 days after the closing by Buyer
of Buyer's reverse merger into the Corporation. Said obligation shall
be evidenced by a promissory note in the form of Exhibit 2.1(d)
attached hereto. The note shall bear interest at the rate of ten
percent (10%) per annum from the date of the note, if not paid when
due; and
(f) $353,150.00 payable to Xxxxx (as Xxxxx shall designate),
without interest, in full in cash or cash equivalent, on the later to
occur of ninety (90) days after the date of this Agreement or 30 days
after the closing by Buyer of Buyer's reverse merger into the
Corporation. Said obligation shall be evidenced by a promissory note in
the form of Exhibit 2.1(d) attached hereto. The note shall bear
interest at the rate of ten percent (10%) per annum from the date of
the note, if not paid when due.
The term "Preferred Stock" as used above means the Series A Preferred
Stock of Buyer, said stock to have the same rights and restrictions as all other
preferred stock of Buyer has at the time the Preferred Stock is issued to
Sellers as called for above.
The $1,500,000.00 purchase price described above is allocated
$200,000.00 to the Stock and $1,300,000.00 to Sellers' Receivables.
2.2 The obligations of Buyer in subsections 2.1(d), (e) and (f) above
are hereby personally guaranteed by Xxxxx.
2.3 No representation or warranty is made by Buyer as to the value of
the shares of the Preferred Stock of Buyer issued pursuant to this Section, and
Sellers take full risk and responsibility if the value of said shares is not the
value specified above in this Section.
3. LIABILITIES.
3.1 Buyer agrees to obtain, by the later to occur of ninety (90) days
after the date
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of this Agreement or 30 days after closing by Buyer of Buyer's reverse merger
into the Corporation, the release of Xxxxxxxxx, Xxxxxxx and Xxxxx from their
personal obligation or guaranty of the Corporation's line of credit with Tinton
Falls State Bank, but the liability of Buyer under this subsection shall be
limited to the maximum amount of $300,000.00, excluding interest, costs,
attorneys' fees and other charges (the "Tinton Bank Obligation). Buyer
irrevocably agrees to defend, indemnify and hold Xxxxxxxxx, Xxxxxxx and Xxxxx
free and harmless from any claim, suit, obligation, liability, loss, cost and
expense (including attorneys' fees) arising out of or related to the Tinton Bank
Obligation, but only as to the first $300,000.00 of said debt. Sellers guaranty
that all proceeds from all advances on the Tinton Bank Obligation made after
September 1, 1998 have been and will be applied to pay normal operating expenses
of the Corporation.
3.2 The parties acknowledge and agree that the Corporation is to be
liable as of the Closing for only the following liabilities (the "Approved
Liabilities"):
(a) The obligations and liabilities as shown in the
Corporation's Financial Statement, Form 1O-QSB, for the quarter ended
June 30, 1998 ("June 98 Financial Statement");
(b) Normal trade payables for services and products received
or receivable by the Corporation, incurred in the ordinary course of
the Business, after the date of the June 98 Financial Statement;
(c) The Corporation's obligations under the leases and other
contracts identified on Schedule 3.2(c) attached hereto and hereby
made a part hereof; and
(d) Payroll and payroll tax obligations for employees for not
more than the most recent pay period prior to the Closing, plus only
the employee benefits identified on Schedule 3.2(d) attached hereto
and hereby made a part hereof.
Attached hereto as Schedule 3.2 is a calculation made by the parties as
to net liabilities of the Corporation. The parties agree that a similar
calculation will be done at the later to occur of ninety (90) days after the
date of this Agreement or thirty (30) days after the closing by Buyer of Buyer's
reverse merger into the Corporation, using figures as of the Closing, with
however the Accounts Receivable number being the dollar amount of said
receivables which were outstanding as of the Closing and actually collected
between the Closing and the date as of which the calculation is being done. If
the result of the calculation is net liabilities exceeding $1,615,000.00, then
that portion in excess of $1,615,000.00 shall proportionately reduce the
principal of the amounts owing to the Sellers under subsections 2.1 (d) through
(f) above and proportionately increase the Preferred Stock to be issued to
Sellers under subsections 2.1 (a) through (c) above. Except as provided for in
Section 6 below, the provisions of the foregoing sentence shall be the sole
remedy for a breach of the provisions of this Section 3.2.
3.3 Specifically, but not in limitation of the foregoing, the
Corporation shall be
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free from the following liabilities:
(a) Any federal, state or local income taxes through
the date of Closing, except for those reserved against in the
Corporation's Financial Statements or arising as a consequence
of or related to the transactions contemplated by this
Agreement;
(b) Any labor, discrimination, harassment or similar
claims;
(c) Any environmental liability claims;
(d) Any negligence, conversion, tortious interference
or other tort claims, or claims for infringement of trade
name, patent, or copyright, or other intangible right;
(e) Any liability associated with any litigation or
other proceeding pending or threatened at the time of the
Closing, and not identified on Schedule 6.9 attached hereto
and hereby made a part hereof;
(f) Any contractual liability for contracts not
disclosed to and agreed upon by Buyer, or any liability to or
for employees or employee benefits not expressly agreed upon
by Buyer, other that any such contracts, liabilities and
benefits shown in the Corporation's Financial Statements or
otherwise disclosed to BUYER in writing.
4. CLOSING. The closing of the Transaction (the "Closing") shall occur
simultaneously and automatically with the complete signing of this Agreement,
subject to delivery of the following:
4.1 Sellers shall deliver to Buyer, the certificates for the
Stock duly endorsed or accompanied by duly endorsed Stock Assignments
Separate from Certificate.
4.2 Sellers shall deliver executed UCC Financial Statement
assignments of the UCC-1s on file against the Corporation and held by
one or more of the Sellers.
4.3 Buyer shall deliver to the Sellers, duly executed
Promissory Notes, as required by subsections 2.1 (d) through (f).
4.4 Buyer shall deliver the Preferred Stock as required by
subsections 2.1 (a) through (c).
5. POST-CLOSING TRANSACTIONS. Sellers acknowledge and understand and
agree that Buyer intends immediately after the Closing to convert Sellers'
Receivables to common and preferred stock of the Corporation. That preferred and
common stock will be all of the authorized but unissued shares of stock of the
Corporation, that are not reserved for issuance, which Sellers represent to be
approximately 8,000,000 shares of common stock and 5,000,000 shares of preferred
stock.
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Sellers represent and warrant that Xxxxxxxxx, Xxxxxxx and Xxxx Xxxxxx,
are the sole current directors of the Corporation, and Xxxxxxxxx is the current
president of the Corporation. Within 48 hours after the Closing, Sellers
represent, warrant and guaranty that the board of directors of the Corporation,
will hold a special meeting of the board of directors. At that meeting, the
board will consider and act upon a proposal to convert Sellers' Receivables to
the common and preferred shares of stock of the Corporation as described above
in this Section, and will authorize all actions necessary or appropriate to
accomplish that conversion. Sellers represent and warrant that the directors
have full authority to consider and authorize said conversion, without the aid,
consent, vote or other action of any person or entity, including but not limited
to the shareholders of the Corporation. Buyer acknowledges and understands that
in order for the Corporation to issue new shares of preferred stock, that a
Certificate of Determination of Rights, Preferences, Privileges and Restrictions
(or similar document) may have to be prepared and filed with the Colorado
secretary of State before any such shares may be issued. Sellers acknowledge and
understand that in order for Buyer to issue new shares of preferred stock, a
Certificate of Determination of Rights, Preferences, Privileges and Restrictions
(or similar document) may have to be prepared and filed with the State of
Arizona before any such shares may be issued.
Sellers will cooperate with Buyer in the appointment of a new board of
directors selected and/or approved by Buyer. Provided, that, Buyer understands
and acknowledges that new directors may not participate on the board until there
is compliance with Section 14(f) of the Securities Exchange Act of 1934
("Exchange Act"). Buyer agrees to be responsible for all costs and expenses
involved with the preparation and filing of all reports or documents required to
be filed under the Securities Act of 1933 or the Exchange Act, as a consequence
of the transactions described in this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF SELLER. In addition to the other
representations and warranties of Sellers appearing in this Agreement, Sellers
each hereby represent and warrant, as follows:
6.1 Due Incorporation. The Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Colorado. To the knowledge of Sellers, the Corporation is duly
licensed or qualified to do business and is in good standing in each
State where the property owned or held under lease is such as to
require the Corporation to be so licensed or qualified, except those
states where the failure to be so licensed or qualified would not have
a material adverse effect on the financial condition or operations of
the Corporation or the Business. To the knowledge of Sellers, the
Corporation has the corporate power and authority to own and operate
its properties and carry on the Business as now conducted.
True, correct and complete copies of the corporate formation
documents for the Corporation, and all operating minutes, resolutions
and consents, have been delivered to Buyer. To the knowledge of
Sellers, the minute book(s) of the Corporation correctly records all
resolutions of the directors and shareholders of the Corporation, and
the Corporation's stock records correctly reflect the ownership of
stock of the Corporation.
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6.2 Authority. Sellers have the power and authority to enter into and
perform their respective obligations under this Agreement, and the documents
herein required to consummate the Transaction. This Agreement constitutes the
legally valid and binding obligation of Sellers, enforceable against Sellers in
accordance with its terms.
6.3 Capitalization. The authorized capital stock of the Corporation as
of the date of this Agreement is as shown in Section 1.1 above. No other shares
of capital stock of the Corporation are outstanding. Except as set forth in
Schedule 6.3, there are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or otherwise acquire
from the Corporation any shares of capital stock of the Corporation, or
securities or obligations of any kind of the Corporation convertible into or
exchangeable for any shares of capital stock of the Corporation. To the
knowledge of sellers, all issued shares have been duly authorized, and the
issued and outstanding shares of stock are fully paid, non-assessable, and were
not issued in violation of the terms of any agreement or other understanding,
and were issued in compliance with all applicable federal and state securities
or "blue sky" laws and regulations. Sellers own of record and beneficially, and
have good and marketable title to, the Stock. Sellers have provided a complete
and accurate list of the identity of each shareholder of the Corporation (other
than shares held in street name), and the numbers of shares of each class of
stock held by each such shareholder, and such list is consistent with the
capitalization information appearing in Section 1.1 above. Buyer acknowledges
that Sellers own certain warrants of the Corporation, which unless otherwise
agreed in writing with Buyer, Sellers will cancel as of the Closing.
No legend or other reference to any purported encumbrance appears on
any certificate representing equity shares of the Corporation, except for shares
issued by the Corporation in a private placement.
Ownership of the Stock purchased in this Transaction shall permit the
owners thereof to control the Corporation for all purposes except as
specifically provided by federal law or by the corporate statutes of the State
of Colorado.
6.4 Subsidiaries. The Corporation does not own and does not have any
agreement, whether written or oral, regarding rights or contracts to acquire any
equity securities or other securities of any company, or any direct or indirect
equity or ownership interest in any other entity, except as set forth in
Schedule 6.4.
6.5 Financial Information. Sellers or the Corporation have furnished
Buyer with true, correct and complete copies of the Corporation's financial
statements and other books and records. To the knowledge of Sellers, the
Corporation's financial statements were prepared in accordance with the books
and records of the Corporation, have been prepared in accordance with generally
accepted accounting principles consistently applied, and present fairly the
financial condition of the Corporation as of their respective dates and the
results of operations and changes in financial positions for the periods then
ended.
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The Corporation's December 31, 1997 Balance Sheet has been audited by
BDO Xxxxxxx, LLP, independent certified public accountants. To the knowledge of
Sellers, all financial statements provided to Buyer, except for adjustments from
matters raised during the audit, do not contain any material items of special or
non-recurring income or other income not earned in the ordinary course of
business, except as expressly specified therein.
At the Closing, all of the books and records of the Corporation will be
in the possession of the Corporation.
6.6 Taxes. To the knowledge of Sellers, all federal and state income,
excise, franchise, payroll, property, sales, and other tax returns required to
be filed by or with respect to the Corporation (except returns not yet due) have
been filed, are complete and accurately reflect in all material respects all
matters therein required to be reflected, and all taxes shown on such returns to
be due, and any assessments received by the Corporation with respect thereto,
have been paid in full.
6.7 Material Changes. To the knowledge of Sellers, from the date of the
most recent financial statements of the Corporation provided by Sellers to
Buyer, and through the date hereof, the Business has been conducted only in the
ordinary course, there have been no material adverse changes in the financial
condition or operations of the Business except as set forth on Schedule 6.7, and
there has been no damage, destruction or other occurrence (whether or not
insured against) which materially adversely affects the financial condition or
operations of the Business.
6.8 Title to Assets; Liens. To the knowledge of Sellers, the
Corporation owns all assets it purports to own, including all assets reflected
in its financial statements and information. The Corporation does not own any
real property. All assets of the Corporation are free and clear of all
restrictions, claims, liens, encumbrances or rights of others, other than those
imposed under the Articles of Incorporation or Bylaws of the Corporation, and
other than by Sellers' Receivables or the debts described in Section 3.1 above.
The Stock is free and clear of any and all liens, claims and encumbrances.
6.9 Litigation. To the knowledge of Sellers, and except as disclosed on
Schedule 6.9 attached hereto, there is no litigation, proceeding, or
investigation pending against Sellers or the Business, and the Sellers have no
reasonable grounds to know any basis for such litigation, proceeding or
investigation.
6.10 Compliance with Laws. Sellers are not aware of any investigation
with respect to any violation of any provision of any federal, state or local
law, regulation, ordinance, order or administrative ruling, relating to the
Corporation or the Business.
6.11 Insurance. The Corporation carries insurance against personal
injury and property damage to third persons and in respect of its products and
services, and other insurance, including any and all workers compensation
insurance required by law. To the knowledge of Sellers, the Corporation has not
received any notice that the Corporation is in
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default with respect to any provision contained in any insurance policy, and
Sellers are not aware of any such default. Sellers have delivered to Buyer
copies of all insurance policies of the Corporation.
6.12 Licenses. To the knowledge of Sellers, the Corporation has any and
all licenses, permits, and contracts necessary and/or appropriate to operate the
Business in the manner in which the Business is currently operated.
6.13 Hazardous Materials. To the knowledge of Sellers, the Business has
not dealt in any manner with any hazardous or toxic materials or waste.
6.14 Judgments Against Corporation and/or Business. To the knowledge of
Sellers, neither the Corporation nor the Business is under any governmental
investigation, no such investigation has been threatened, and there are no
judgments against the Corporation, the Business or the assets of the
Corporation.
6.15 Complete Sale. All assets used by the Corporation in the operation
of the Business are either owned by the Corporation or leased by the Corporation
under the leases described on Schedule 3.2(c) attached hereto. The assets of
the Corporation include, without limitation, the assets identified on Schedule
6.15 attached hereto.
By this Agreement, Sellers sell to Buyer all of the issued and
outstanding shares of capital stock of the Corporation which Sellers own or have
a right to acquire, including but not limited to any and options to acquire
shares of any type, except for Sellers' warrants and options, which warrants and
options Sellers will cancel.
6.16 Amounts Owing to Sellers. No amounts are owing to any of the
Sellers from the Corporation other than Sellers' Receivables, expenses incurred
by such Seller in connection with the Business, commissions owing and contingent
obligations to Sellers related to the Tinton Bank Obligation and the Xxxxx
Letter of Credit.
6.17 Inventory. The inventory held by the Corporation is useable and in
good condition, with not more than 10% thereof being obsolete, and all of the
Inventory is owned by the Corporation, none of it being held by the Corporation
on consignment. To the knowledge of Sellers, the quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Corporation.
6.18 Disclosure Material. The financial condition of the Business is
as presented in the financial information, including tax returns and financial
statements, and books and records provided by Sellers to Buyer. To the knowledge
of Sellers, those materials and the other materials disclosed to Buyer are true,
complete and accurate in all respects, and fairly represent the information they
purport to provide. To the knowledge of Sellers, all of the information
disclosed, as a whole, does not contain any statement that, as of the date
hereof, is false or misleading, and does not omit to state any material fact (i)
necessary to make the
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statements made, in light of the circumstances under which they were made, not
false or misleading, or (ii) necessary to provide Buyer with complete and
accurate information as to the assets and financial standing of the Business.
Sellers have provided Buyer with complete and accurate copies of all
organizational documents of and/or relating to the Corporation, as well as a
complete copy of the existing minute book(s) for the Corporation.
6.19 Defaults. To the knowledge of Sellers, there are no defaults or
events with which the giving of notice or the passage of time would constitute
defaults under any document under which the Corporation is obligated, except
that the corporation is in default under its obligations to keep the prospectus
updated relating to the public warrants and the warrants issued to Deco Disc.
6.20 Vendor Accounts. Sellers shall do nothing to cause the Corporation
to lose any of the Corporation's supplier and other vendor accounts, or to cause
adverse changes in the account terms.
6.21 Material Contract. Except as disclosed in Schedule 3.2(c)
attached hereto, disclosed in the Corporation's Financial Statements or known to
Buyer, to the best of Sellers' knowledge, the Corporation is not a party to or
bound by any agreement not made in the ordinary course of its business which is
material to the financial condition or operations of the Corporation.
6.22 Outstanding Liabilities. To the knowledge of Sellers, there are no
liabilities of the Corporation other than as are shown on the June 30, 1998
Financial Statements, and other than liabilities arising in the normal course of
business since the June 30, 1998 Financial Statements.
6.23 Losses. To the knowledge of Sellers, there are no unrealized or
anticipated losses on any commitment or contract of the Corporation.
6.24 Patents. Except as disclosed on Schedule 6.24 attached hereto, to
the Sellers' knowledge, there is no litigation pending or threatened with
respect to the patents of the Corporation, there is no outstanding order,
judgment, decree or stipulation affecting the validity or enforceability of said
patents, there exits no outstanding notices of infringement given by the
Corporation regarding the patents, there are no pending interferences or other
contested proceedings pending, or to the knowledge of Sellers that are in the
process of being instituted, in the United States Patent Office or in the
courts, relating to said patents, and, to the best knowledge of Sellers, none of
the Corporation's patents are being presently infringed.
6.25 Receivables. All accounts receivable of the Corporation arose in
the regular course of business, and, to the best knowledge of Sellers, represent
valid obligations arising from sales actually made or services actually
performed in the ordinary course of business and are collectable and subject to
no defenses or counterclaims, except as may be reserved against in the
Corporation's financial statements.
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6.26 Employees. There are no employee benefits for the Corporation's
employee other than those described in Schedule 3.2(d) attached hereto. To the
knowledge of Sellers, the Corporation is in compliance with all terms of all
employee benefit plans of the Corporation.
Sellers have provided to Buyer a complete and accurate list of the
following information for each employee of the Corporation, including each
employee on leave of absence or layoff status: name; job title; current
compensation; vacation and sick pay accrued; and services credited for purposes
of vesting and eligibility to participate in any of the Corporation's employee
benefit plans.
6.27 No Conflicts. The execution, delivery and performance of this
Agreement and the other documents and instruments to be executed and delivered
by Sellers pursuant hereto, and the consummation by Sellers of the transactions
contemplated herein or therein:
(a) Will not violate or conflict with any applicable federal,
state, foreign, local or other law, ordinance, rule, regulation, or
governmental requirement or restriction of any kind, including any
rules, regulations, and orders promulgated thereunder, and any final
orders, decrees, consents, or judgments of any regulatory agency or
court ("Law");
(b) Except as may be required to comply with the Securities
Act and the Exchange Act, will not require any authorization, consent,
approval, exemption or other action by or notice to any government
entity (including, without limitation, under any "plant closing" or
similar law) (neither Sellers nor the Corporation are required to give
any notice or to obtain any consent from any person, entity, or
governmental agency in connection with the execution and delivery of
this Agreement or the consummation of the Transaction);
(c) Will not constitute a default or an event that, with
notice, lapse of time, or both, would be a default, breach, or
violation of the Articles of Incorporation or Bylaws of the
Corporation or any lease, license, promissory note, conditional sales,
contract, commitment, indenture, mortgage, deed of trust, or other
agreement, instrument, or arrangement to which Corporation is a party
or by which the Corporation or its property is bound.
(d) Will not cause the creation or imposition of any lien,
charge, or encumbrance on any of the properties of the Corporation;
(e) Will not give any governmental body the right to revoke,
withdraw, suspend, cancel, terminate, or modify any governmental
authorization held by the Corporation or that otherwise relates to the
Business, except with respect to immaterial instances; and
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(f) Will not cause Buyer or the Corporation to become subject
to, or to become liable for, the payment of any tax which relates to
time periods prior to the Closing.
6.28 Violations of Law.
(a) To the knowledge of Sellers, none of the present or past
operations of the Business, the products of the Business, or the
Corporation's assets violate or conflict, in any material respect, with
any permits, any law (including environmental laws), governmental
specification, authorization, or requirement, or any decree, judgment,
order, or similar restriction. To the knowledge of Sellers, neither the
Corporation nor any supplier of the Corporation is the subject of an
inspection or inquiry regarding violations or alleged violations of any
law by any state, federal, or local agency.
(b) To the knowledge of Sellers, there are no proceedings,
threatened proceedings, orders, notice of violations, inspection
reports, and other similar occurrences, if any, relating to the conduct
of the Business or the Corporation's assets.
(c) To the knowledge of Sellers, the Corporation has not been
the subject of an Occupational and Safety Health Administration
inspection or found by any agency to be in violation of any state or
federal occupational safety or health law in the conduct of the
Business.
6.29 Condition and Sufficiency of Assets. To the knowledge of Sellers,
all tangible assets of the Corporation are in operating condition and repair,
and are adequate for the uses to which they are being put, and none of such
items is in need of maintenance or repairs, except for ordinary, routine
maintenance and repairs that are not material in nature or cost. To the
knowledge of Sellers, the assets are sufficient for the continued conduct of the
Corporation's businesses after the Closing in substantially the same manner as
conducted prior to the Closing.
6.30 Bank Accounts. Sellers have to the best of their knowledge,
disclosed to Buyer the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which the
Corporation maintains a safe deposit box, lock box or checking, savings,
custodial or other account of any nature, the type and number of each such
account and the signatories therefor, a description of any compensating balance
arrangements, and the names of all individuals authorized to draw thereon, make
withdrawals therefrom or otherwise have access thereto.
6.31 Intentionally Omitted.
6.32 Environmental Matters. For the purposes of this Section:
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(i) "Environmental Law" means all federal, state, local,
foreign, and other applicable jurisdiction Laws relating to the
environment or the use, disposal, existence, or release of any
Hazardous Materials, including but not limited to any and all Laws
concerning, affecting, controlling, or in any way relating to, whether
in whole or in part, noise levels, ground vibrations, air pollutants,
water pollutants, process waste water, or Hazardous Materials;
(ii) "Environmental Release" means any release, spill,
emission, leaking, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the atmosphere, soil, surface water,
groundwater or property;
(iii) "Hazardous Materials" means: (A) any waste, hazardous
waste, pollutant, contaminant, or hazardous or toxic substance
regulated by Law; (B) asbestos; (C) formaldehyde; (D) polychlorinated
biphenuls; (E) radioactive materials; (F) waste oil and other petroleum
products; and (G) any other substance which constitutes a nuisance or
hazard to the environment or to the public health, safety, or welfare;
6.32.1 To the knowledge of Sellers, the Corporation is, and
at all times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law. Sellers have no basis to
expect, nor has any of them or any other person for whose conduct they are or
may be held to be responsible received, any actual or threatened order, notice,
or other communication from (i) any governmental body or private citizen acting
in the public interest, or (ii) the current or prior owner or operator of any of
the Corporation's properties or assets, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or threatened
obligation to undertake or bear the cost of any environmental, health, and
safety liabilities with respect to any of the Corporation's properties or assets
(whether real, personal, or mixed) in which Sellers or the Corporation have had
an interest, or with respect to any of the Corporation's properties at or to
which Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by Sellers, the Corporation, or any other person
for whose conduct they are or may be held responsible, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
6.32.2 Sellers have delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Sellers or the Corporation pertaining to Hazardous
Materials or hazardous activities in, on, or under the Corporation's properties
or concerning compliance by Sellers, the Corporation, or any other person for
whose conduct they are or may be held responsible, with Environmental Laws.
6.33 Intellectual Property.
(a) Sellers have provided Buyer with a true, correct and
complete list of (i) all patents held by the Corporation and all
re-examinations, re-issues, divisions, continuations, continuations in
part and extensions thereof and all pending patent
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applications by the Corporation, including for each such patent the
serial or patent number, country, filing and expiration date and title,
(ii) all registered trademarks of the Corporation and pending trademark
registrations by the Corporation, including, for each such trademark,
the registration number, country, filing and expiration date, xxxx and
class, (iii) all registered copyrights of the Corporation and copyright
applications by the Corporation, including the registration number,
country and filing and expiration date of each such copyright, and (iv)
all service marks, trade names and brand names of the Corporation, used
in the Business (whether or not registered) (all of the foregoing
collectively referred to as the "Intellectual Property"). All such
patents, trademarks and copyrights are properly registered, any
applications therefor have been properly made, and all annuity,
maintenance, renewal and other fees in connection with any of the
foregoing are current.
(b) Sellers have provided Buyer with a list of all material
licenses, contracts, commitments (including, without limitation,
confidentiality agreements) to which to the knowledge of Sellers, the
Corporation is a party or otherwise subject relating to the
Intellectual Property, including, without limitation, computer software
(except for standard licensing agreements or provisions from the seller
or licensor of such software). During the preceding three (3) fiscal
years and the current fiscal year to date, no claim or allegation of
infringement has been made by or against the Corporation, whether
relating to any item of Intellectual Property or otherwise, no claim or
allegation of misappropriation or misuse of any item of Intellectual
Property has been made by or against the Corporation, and no claim or
allegation has been asserted against the Corporation with respect to
the ownership or use of any of the Intellectual Property by the
Corporation or challenging or questioning the validity or effectiveness
of any such license, contract or commitment, and there does not exist
to the knowledge of any Seller or of the Corporation any valid basis
for any such claim or allegation.
(c) The Corporation has good and valid title to, or otherwise
possesses rights to use, the Intellectual Property.
6.34 Intentionally omitted.
6.35 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental person, whether
federal, state or local, is required of Sellers in connection with the execution
or delivery by Seller of this Agreement or the consummation by Sellers of any of
the transactions contemplated hereby, except as may be required to comply with
the Securities Act or the Exchange Act and a filing with the Colorado Secretary
of State pertaining to the preferred stock contemplated to be issued to the
Buyer.
6.36 Customers and Supplier. Sellers have provided Buyer with a list,
which to the knowledge of Sellers, sets forth the ten (10) largest customers of
the Corporation in terms of dollar volume of sales for the three (3) preceding
fiscal years and for the current fiscal
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year, showing the approximate total dollar amount of sales to each such customer
during each such fiscal year. Sellers have provided Buyer with a list, which to
the knowledge of Sellers, sets forth the ten (10) largest suppliers to the
Corporation in terms of dollar volume of purchases for the three (3) preceding
fiscal years and for the current fiscal year showing the approximate total
dollar amount of purchases from each supplier during each such fiscal year. To
the knowledge of Sellers, since January 1, 1994, the Corporation has not
received any notice from and has not otherwise been informed or made aware that
any such ten (10) largest suppliers or customers will be terminating or
curtailing its business with the Corporation in a manner that would have a
material adverse effect on the Corporation, except as may be indicated in the
lists, and by virtue of any decrease in business or production from such
customers or suppliers over the three (3) year period indicated, to the date of
the Closing.
6.37 Changes in the Corporation or its Documents. Except as set forth
in Schedule 6.37, none of the following has occurred within the last twelve
months prior to the date of this Agreement: (i) any change in the Articles of
Incorporation or Bylaws of the Corporation; (ii) any change in the number of
shares of stock issued and outstanding; (iii) the merger or consolidation of the
Corporation with or into any other corporation or other entity; (iv) declaration
or payment by the Corporation of any dividend or any repurchase by the
Corporation of any shares of stock of the Corporation; or (v) except in the
ordinary course of business and consistent with the Corporation's past practice,
any increase in the compensation payable by the Corporation to any director,
officer, employee or agent, or payment of any bonus, severance payment or other
compensation to any director, officer, employee or agent, or the entering into
of any agreement of any type which is not terminable by the Corporation on no
more than 30 days notice.
6.38 Shareholders Agreements and Other Agreements. Except as set forth
in Schedule 6.38, there are no shareholders agreements of any type, including
but not limited to any voting trust agreements, voting agreements or similar
arrangements restricting voting rights or the transferability of any interest in
the Corporation relating to the capital stock of the Corporation, or otherwise
relating to the Corporation. Furthermore, there are no employment agreements,
consulting agreements or similar type agreements relating to the Corporation,
other than one independent contractor agreement which is terminable by the
Corporation on not more than 30 days notice. There are no leases affecting the
Corporation other than one lease of real property in California, where the
leased property has been subleased to third parties.
6.39 Certain payments. To the knowledge of Sellers, neither the
Corporation nor any director, officer, agent or employee of the Corporation, or
any other person associated with or acting for or on behalf of the Corporation,
has directly or indirectly: (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any person, private or
public, regardless of form, whether in money, property, or services: (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, or (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of the Corporation, or
(iv) in violation of any law; or (b)
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established or maintained any fund or asset that has not been recorded in the
books and records of the Corporation.
6.40 SEC Filings Complete. To Sellers' knowledge, the
Corporation's most recent Form 10-K for the fiscal year ended December
31, 1997 and all intervening Form 8-Ks AND Form 10-Qs, and the
Corporation's most recent annual meeting proxy statement and most
recent registration statement filed under the Securities Act, all as
filed with the SEC, do not contain a misstatement of a material fact or
an omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading as of the time
such document was filed or became effective. Since the filing of the
most recent Form 1O-K, no other document has been required to be filed
by the Corporation with the SEC which has not been filed, and no event
or transaction has occurred which will thereafter be required to be
disclosed by the Corporation in an Form 10-Q, Form 8-K or similar
filing except as expressly disclosed in this Agreement.
Sellers will cooperate with Buyer with respect to all filings
that Buyer or the Corporation make in connection with this Transaction.
6.41 Products. To the knowledge of Sellers, the products
offered currently or in the past by the Corporation for sale meet all
product and/or process specifications which they purport or are
required to meet, and satisfy in all material respects all applicable
laws.
An individual will be deemed to have knowledge of a particular fact or
other matter if such individual is actually aware of such fact or other matter
without inquiring.
The representations and warranties in this Section, and elsewhere in
this Agreement shall survive the Closing of the Transaction for a period of two
(2) years.
Sellers will indemnify and defend and hold Buyer free and harmless from
and against any liability, obligation, loss, cost and expense, including
attorneys' fees incurred by Buyer, in connection with any material breach by
Sellers of any their representations, warranties or covenants, contained in this
Agreement. Provided, however, that each Seller's maximum liability under this
paragraph and this Agreement, shall be limited to the aggregate value of the
consideration received by such Seller from Buyer under this Agreement.
7. REPRESENTATIONS AND WARRANTIES OF BUYER. In addition to the other
representations and warranties of Buyer appearing in this Agreement, Buyer
hereby represents and warrants, as follows:
7.1 Due Incorporation. Buyer is duly organized, validly
existing and in good standing under the laws of the State of Arizona.
To the knowledge of Buyer, Buyer is duly licensed or qualified to do
business and is in good standing in each State where the property owned
or held under lease is such as to require the Buyer to be so licensed
or qualified, except those states where the failure to be so licensed
or qualified would not have a material adverse effect on the financial
condition or operations of Buyer or its business. To the
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knowledge of Buyer, Buyer has the corporate power and authority to own and
operate its properties and carry on its business as now conducted.
7.2 Authority. Buyer has full power and authority to enter into and
perform its obligations under this Agreement, and the documents herein required
to consummate the Transaction. This Agreement has been approved by all required
action of the Board of Directors and shareholders of Buyer. This Agreement
constitutes the legally valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
7.3 Capitalization. The authorized capital stock of the Buyer as of the
date of this Agreement is 235,000,000 shares of common stock, no par value, of
which there are 106,942,457 shares issued and outstanding, and 100,000,000
shares of Series A preferred stock, no par value, of which there are no shares
issued and outstanding. No other shares of capital stock of the Buyer are
outstanding. To the knowledge of Buyer, all issued shares and the shares of
Preferred Stock to be issued to Sellers, have been duly authorized, and the
issued and outstanding shares of stock, and the shares of Preferred Stock to be
issued to Sellers, are fully paid, non-assessable, and were and will not be
issued in violation of the terms of any agreement or other understanding, and
were and will be issued in compliance with all applicable federal and state
securities or "blue sky" laws and regulations.
7.4 Financial Information. Buyer has furnished to Sellers, true,
correct and complete copies of Buyer's financial statement, including a balance
sheet, profit and loss statement and notes thereto, for the fiscal year ended
December 31, 1997, and interim financial statements for June 30, 1998 ("Buyer's
Financial Statements"). To the knowledge of Buyer, Buyer's Financial Statements
were prepared in accordance with the books and records of the Buyer, have been
prepared in accordance with generally accepted accounting principles
consistently applied, and present fairly the financial condition of the Buyer as
of their respective dates and the results of operations and changes in financial
positions for the periods then ended.
Buyer's Financial Statement for the fiscal year ended December 31, 1997
has been audited by Ernst and Young, independent certified public accountants.
To the knowledge of Buyer, all financial statements provided by Buyer, except
for adjustments from matters raised during the audit, do not contain any
material items of special or non-recurring income or other income not earned in
the ordinary course of business, except as expressly specified therein.
7.5 Taxes. To the knowledge of Buyer, all federal and state income,
excise, franchise, payroll, property, sales, and other tax returns required to
be filed by or with respect to the Buyer (except returns not yet due) have been
filed, are complete and accurately reflect in all material respects all matters
therein required to be reflected, and all taxes shown on such returns to be due,
and any assessments received by the Buyer with respect thereto, have been paid
in full.
7.6 Material Changes. To the knowledge of Buyer, from the date of
Buyer's
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Financial Statements, through the date hereof, Buyer's business has been
conducted only in the ordinary course, there have been no material adverse
changes in the financial condition or operations of its business except as set
forth on Schedule 7.6 and there has been no damage, destruction or other
occurrence (whether or not insured against) which materially adversely affects
the financial condition or operations of Buyer's business.
7.7 Title, to Assets; Liens. To the knowledge of Buyer, Buyer owns all
assets it purports to own, including all assets reflected in Buyer's Financial
Statements. All assets of the Buyer are free and clear of all restrictions,
claims, liens, encumbrances or rights of others, other than those imposed under
the Articles of Incorporation or Bylaws of the Buyer, and other than as set
forth in Buyer's Financial Statements, and other than for debts incurred or
amended since the date of Buyer's Financial Statements.
7.8 Litigation. To the knowledge of Buyer, and except as disclosed on
Schedule 7.8 attached hereto, there is no litigation, proceeding, or
investigation pending against Buyer or its business, and Buyer has no reasonable
grounds to know any basis for such litigation, proceeding or investigation.
7.9 Compliance with Laws. Buyer is not aware of any investigation with
respect to any violation of any provision of any federal, state or local law,
regulation, ordinance, order or administrative ruling, relating to Buyer or its
business.
7. 10 License. To the knowledge of Buyer, Buyer has any and all
licenses, permits, and contracts necessary and/or appropriate to operate its
business in the manner in which the business is currently operated.
7.11 Hazardous Materials. To the knowledge of Buyer, Buyer has not
dealt in any manner with any hazardous or toxic materials or waste, as defined
under any federal, state or local law.
7.12 Judgments Against Buyer and/or its Business. To the knowledge of
Buyer, neither the Buyer nor its business is under any governmental
investigation, no such investigation has been threatened, and there are no
judgments against the Buyer, its business or the assets of Buyer.
7.13 Defaults. To the knowledge of Buyer, there are no defaults or
events with which the giving of notice or the passage of time would constitute
defaults under any document under which the Buyer is obligated.
7.14 No Conflict. The execution, delivery and performance of this
Agreement and the other documents and instruments to be executed and delivered
by Buyer pursuant hereto, and the consummation by Buyer of the transactions
contemplated herein or therein:
(a) Will not violate or conflict with any applicable federal,
state, foreign, local or other law, ordinance, rule, regulation, or governmental
requirement or restriction of
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any kind, including any rules, regulations, and orders promulgated thereunder,
and any final orders, decrees, consents, or judgments of any regulatory agency
or court ("Law");
(b) Will not require any authorization, consent, approval,
exemption or other action by or notice to any government entity (including,
without limitation, under any "plant closing" or similar law) (neither Sellers
nor the Buyer are required to give any notice or to obtain any consent from any
person, entity, or governmental agency in connection with the execution and
delivery of this Agreement or the consummation of the Transaction);
(c) Will not constitute a default or an event that, with
notice, lapse of time, or both, would be a default, breach, or violation of the
Articles of Incorporation or Bylaws of Buyer or any lease, license, promissory
note, conditional sales, contract, commitment, indenture, mortgage, deed of
trust, or other agreement, instrument, or arrangement to which Buyer is a party
or by which Buyer or its property it bound.
(d) Will not cause the creation or imposition of any lien,
charge, or encumbrance on any of the properties of Buyer.
(e) Will not give any governmental body the right to revoke,
withdraw, suspend, cancel, terminate, or modify any governmental authorization
held by the Buyer or that otherwise relates to Buyer's business, except with
respect to immaterial instances; and
(f) Will not cause Buyer to become subject to, or to become
liable for, the payment of any tax which relates to time periods prior to the
Closing.
7.15 Violations of Law.
(a) To the knowledge of Buyer, none of the present or past
operations of its business, the products of the Business, or the
Buyer's assets violate or conflict, in any material respect, with any
permits, any law (including environmental laws), governmental
specification, authorization, or requirement, or any decree, judgment,
order, or similar restriction. To the knowledge of Buyer, neither the
Buyer nor any supplier of the Buyer is the subject of an inspection or
inquiry regarding violations or alleged violations of any law by any
state, federal, or local agency.
(b) To the knowledge of Buyer, there are no proceedings,
threatened proceedings, orders, notice of violations, inspection
reports, and other similar occurrences, if any, relating to the conduct
of its business or the Buyer's assets.
(c) To the knowledge of Buyer, Buyer has not been the subject
of an Occupational and Safety Health Administration inspection or found
by any agency to be in violation of any state or federal occupational
safety or health law in the conduct of its business.
7.16 Environmental Matters. For the purposes of this Section:
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(i) "Environmental Law" means all federal, state, local,
foreign, and other applicable jurisdiction Laws relating to the
environment or the use, disposal, existence, or release of any
Hazardous Materials, including but not limited to any and all Laws
concerning, affecting, controlling, or in any way relating to, whether
in whole or in part, noise levels, ground vibrations, air pollutants,
water pollutants, process waste water, or Hazardous Materials;
(ii) "Environmental Release" means any release, spill,
emission, leaking, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the atmosphere, soil, surface water,
groundwater or property;
(iii) "Hazardous Materials" means: (A) any waste, hazardous
waste, pollutant, contaminant, or hazardous or toxic substance
regulated by Law; (B) asbestos; (C) formaldehyde; (D) polychlorinated
biphenuls; (E) radioactive materials; (F) waste oil and other petroleum
products; and (G) any other substance which constitutes a nuisance or
hazard to the environment or to the public health, safety, or welfare;
7.16.1 To the knowledge of Buyer, the Buyer is, and at all
times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law. Buyer has no basis
to expect, nor has any Buyer or any other person for whose conduct
Buyer is or may be held to be responsible received, any actual or
threatened order, notice, or other communication from (i) any
governmental body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any of the Buyer's
properties or assets, of any actual or potential violation or failure
to comply with any Environmental Law, or of any actual or threatened
obligation to undertake or bear the cost of any environmental, health,
and safety liabilities with respect to any of the Buyer's properties or
assets (whether real, personal, or mixed) in which the Buyer had an
interest, or with respect to any of the Buyer's properties at or to
which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used, or processed by Buyer, the Buyer, or any
other person for whose conduct they are or may be held responsible, or
from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
7.16.2 Buyer has delivered to Sellers true and complete copies
and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Buyer pertaining to Hazardous Materials or
hazardous activities in, on, or under the Buyer's properties or
concerning compliance by Buyer, or any other person for whose conduct
Buyer is or may be held responsible, with Environmental Laws.
7.17 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental person, whether
federal, state or local, is required of Buyer in connection with the execution
or delivery by Buyer of this
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Agreement or the consummation by Buyer of any of the transactions
contemplated hereby, except as may be required to comply with the
Securities Act or the Exchange Act and a filing with the Colorado
Secretary of State pertaining to the preferred stock contemplated to be
issued to Buyer.
7.18 Buyer's Intent. In order to induce Sellers to sell the
Stock and the Sellers' Receivables to Buyer, Buyer represents and
warrants to Sellers that Buyer is acquiring the Stock and any
securities that Buyer may obtain upon conversion of the Sellers'
receivables into securities, for investment, for its own account and
not with a view to further distribution thereof, and Buyer further
represents and warrants that neither it nor any affiliate of Buyer has
any present intent to dissolve or liquidate the Corporation, or to
dissipate its assets or to take any actions which are not commercially
reasonable and might be viewed as materially detrimental to the
shareholders of the Corporation; provided, however, that Buyer does
intent to convert Sellers' Receivables to stock, and consummate a
reverse merger, as described herein.
7.19 Buyer's Due Diligence. Buyer acknowledges that it has
completed its own due diligence investigation of the Corporation,
including but not limited to reviewing the books and records of the
Corporation. Buyer further acknowledges that it has reviewed internal
financial statements for the Corporation as at June 30, 1998. Buyer
further acknowledges and understands that the Corporation has been
losing money every month in the recent past and that such losses shall
not be considered in determining whether or not an adverse material
affect on the financial condition of the Corporation has occurred.
An individual will be deemed to have knowledge of a particular fact or
other matter if such individual is actually aware of such fact or other matter
without inquiring.
The representations and warranties of Buyer in this Section, and
elsewhere in this Agreement shall survive the Closing of the Transaction for a
period of two (2) years.
Buyer will indemnify and defend and hold Sellers, and each of them,
free and harmless from and against any liability, obligation, loss, cost and
expense, including attorneys' fees incurred by Sellers or any of them, in
connection with any material breach by Buyer of any its representations,
warranties or covenants, contained in this Agreement; provided, however, that
Buyer's maximum liability for indemnification under this paragraph and elsewhere
in this Agreement shall be limited to $1,500,000.00.
8. EXPENSES. Each party shall bear its own expenses in completing the
Transaction. "Expenses" shall mean any expense of any nature incurred in
connection with the Transaction, including without limitation attorneys' fees,
accounting fees, filing fees and other costs.
9. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Arizona,
without giving effect to the conflicts of laws rules thereof. The courts of the
State of Arizona shall have the sole and exclusive jurisdiction and venue in any
case or controversy arising under this Agreement or by reason of this
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Agreement. The parties agree that any litigation or arbitration arising from the
interpretation or enforcement of this Agreement shall be only in either Maricopa
County Superior Court or in the United States Federal District Court for the
District of Arizona, and for this purpose each party to this Agreement (and each
person who shall become a party) hereby expressly and irrevocably consents to
the jurisdiction and venue of such courts.
10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. No Sellers may assign any rights of the
Sellers under this Agreement without the prior written consent of Buyer and the
remaining Sellers.
11. ENTIRE AGREEMENT. Except as otherwise set forth herein, this
Agreement constitutes the entire agreement between the parties which respect to
the subject matter hereof, and supersedes all prior understandings, if any, with
respect thereto.
12. FURTHER ASSURANCES. The parties agree to do such further acts and
things and to execute and deliver such additional agreements and instruments as
any party may reasonably require to consummate, evidence, or confirm any
agreement contained herein in the manner contemplated hereby.
13. MODIFICATION. Any modification or waiver of any term of this
Agreement, including a modification or waiver of this term, must be in writing
and signed by the parties to be bound by the modification or waiver.
14. SEVERABILITY. In the event any portion of this Agreement shall be
declared by any court of competent jurisdiction to be invalid, illegal, or
unenforceable, such portion shall be deemed severed from this Agreement, and the
remaining parts hereof shall remain in full force and effect as fully as though
such invalid, illegal or unenforceable portion had never been a part of this
Agreement.
15. COUNTERPARTS, FACSIMILE SIGNATURES. This Agreement may be executed
by the parties in one or more counterparts, and any number of counterparts
signed in the aggregate by the parties shall constitute a single instrument. The
parties authorize and agree to accept facsimile signatures in counterparts to
this Agreement, and that said facsimile signatures shall for all purposes be
binding upon the parties as if the same were original signatures.
16. ATTORNEY'S FEES. Should any party institute any action or
proceeding to enforce this Agreement or any provision hereof, or for damages by
reason of any alleged breach of this Agreement, or of any provision hereof, or
for a declaration of rights hereunder, the prevailing party(s) of such action or
proceeding shall be entitled to receive from the other involved party or parties
all costs and expenses, including reasonable attorneys' fees and expert witness
fees incurred by the prevailing party(s) in connection with such action or
proceeding.
17. NOTICES. Any notice or communication given under the terms of this
Agreement ("Notice") shall be in writing and shall be delivered in person or
mailed by certified mail, return
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receipt requested, in the United States Mail, postage pre-paid, addressed as
follows:
If to Xxxxxxxxx: Xxx Xxxxxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
If to Xxxxxxx: Xxx Xxxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
If to Xxxxx: Xxxxxx X. Xxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxx 00000
If to Buyer: Futech Interactive Products, Inc.
Attention: Xxxxxxx X. Xxxxx
0000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000-0000
or at such other address as a person may from time to time designate by Notice
hereunder. Notice shall be effective upon delivery in person, or if mailed, at
midnight on the third business day after the date of mailing.
18. PARAGRAPH TITLES AND HEADINGS. The titles and headings of sections
of this Agreement are for the convenience of reference only, and are not
intended to define, limit, or describe the scope or intent of any provision of
this Agreement, and shall not affect the construction of any provision of this
Agreement.
19. PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as Buyer determines. Unless
consented to by Buyer in advance or required by legal requirements, Sellers
shall keep this Agreement strictly confidential and may not make any disclosure
of this Agreement to any person. Sellers and Buyer will consult with each other
concerning the means by which the Corporation's employees, customers, and
suppliers and others having dealings with the Corporation will be informed of
this Agreement and the Transactions, and Buyer will have the right to be present
for any such communication.
20. MISCELLANEOUS . The parties agree that each party and its counsel
have reviewed and revised this Agreement, or had an opportunity to review and
revise this Agreement, and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not apply to the
interpretation of this Agreement or any amendments or exhibits hereto. In the
event of default by Sellers hereunder, Buyer shall, in addition to its other
remedies under this Agreement and in law or equity, be entitled to specific
performance of Sellers' obligations under this Agreement. The parties do not
intend to confer any benefit upon any person, firm, or corporation other than
the parties hereto. No representation or warranty herein may be relied upon by
any person not a party
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to this Agreement. No waiver of any provision of this Agreement shall be
effective unless made in writing.
21. GUARANTY REGARDING SELLERS' SPOUSES. Each Seller who is married
hereby represents, warrants, and guaranties that he has the authority to enter
into and consummate the Transaction, including the transfer of the Stock,
without the signature or consent of his spouse, and agrees to defend and hold
Buyer harmless from and against any and all loss and expense, including
attorneys' fees and costs, incurred by Buyer as a result of said representation
not being accurate.
22. BROKERS. Each party to this Agreement represents and warrants that
he/she/it has not dealt with a broker regarding this transaction, and agrees to
indemnify, defend and hold the other parties to this Agreement harmless from and
against any and all expenses or other obligations, including attorneys' fees and
costs, claimed by any broker or finder as a result of dealings with the
indemnifying party.
23. AUTHORITY. Any individual executing this Agreement on behalf of an
entity represents and warrants that such individual has the right and authority
to execute this Agreement on behalf of such entity and that the entity will be
bound by this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SELLERS:
/s/ Xxx Xxxxxxxxx
-----------------
Xxx Xxxxxxxxx
/s/ Xxx Xxxxxxx
---------------
Xxx Xxxxxxx
/s/ Xxxxxx Xxxxx
-------------------
Xxxxxx X. Xxxxx
XXXXXX X. XXXXX and XXXXXX XXXXX
REVOCABLE TRUST DATED
------------
By: /s/ Xxxxxx Xxxxx Trustee
---------------------------
Xxxxxx X. Xxxxx, Trustee
By: /s/ Xxxxxx Xxxxx, Trustee
---------------------------
Xxxxxx X. Xxxxx, Trustee
XXXXXX XXXXX & ASSOCIATES, INC.
By: /s/ Xxxxxx Xxxxx President
-----------------------------
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Xxxxxx X. Xxxxx, President
XXXXXX XXXXX & ASSOCIATES DEFINED
BENEFIT PLAN AND TRUST
By: /s/ Xxxxxx Xxxxx, Trustee
----------------------------
Xxxxxx X. Xxxxx, Trustee
BUYER: Futech Interactive Products, Inc.,
an Arizona corporation
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Xxxxxxx X. Xxxxx, CEO
XXXXX: /s/ Xxxxxxx X. Xxxxx
------------------------------
Xxxxxxx X. Xxxxx
LIST OF SCHEDULES
Schedules Subject Matter
--------- --------------
2.1(d) Promissory Note Form
3.2 Net Liabilities Calculation
3.2(c) Leases and Contracts
3.2(d) Approved Employee Benefits
6.3 Exceptions to Capitalization
6.4 Subsidiaries
6.7 Material Changes of Corporation
6.9 Litigation involving Corporation
6.15 Certain Assets of Corporation
6.24 Patent Exceptions
6.37 Changes in Corporation and Documents
6.38 Shareholders and Related Agreements
7.6 Material Changes of Buyer
7.7 Litigation involving Buyer
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SCHEDULE 3.2(c)
(APPROVED LEASES AND OTHER CONTRACTUAL OBLIGATIONS)
1. The Corporation's only real property lease is the lease on certain
Woodland, California property, on which the Corporation has an exposure limited
to the payment of approximately $1600. 00 per month through December, 2000, at
which time such lease shall expire.
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SCHEDULE 3.2(d)
(APPROVED EMPLOYEE BENEFITS)
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SCHEDULE 6.15
(LIST OF CERTAIN ASSETS OF THE CORPORATION)
1. All rights to the trade name "Janex" and any and all other trade
names used by the Business, along with any and all trademarks, service marks,
logos and designs relating thereto.
2. All of Sellers' and the Corporation's books and records, computer
programs, software, drawings, financial and tax information, and customer and
vendor files.
3. All patents, copyrights, trade secrets, customer and supplier lists,
promotional materials, and other intangible rights used in connection with the
operation of the Business.
4. The phone numbers and all phone and other advertising associated
with the Business.
5. The equipment, toolings and other fixed assets and personal property
described on the personal property lists provided by Sellers to Buyer.
