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Exhibit 10.40
STOCK-FOR-STOCK-AGREEMENT
REORGANIZATION AGREEMENT between HiTek Carpet Care, Inc., a Nevada
corporation (hereinafter referred to as "HiTek"), and shareholders of Venturi
Technologies, Inc., a Texas corporation (hereinafter referred to as "Venturi").
For the Acquisition by HiTek of all the outstanding common stock of
Venturi, in exchange for stock of HiTek.
AGREEMENT, dated as of this 9th day of June, 1997, between HiTek and
all of the common stock Shareholders of Venturi (hereinafter collectively
referred to as the "Common Stock Venturi Shareholders").
WHEREAS, the Common Stock Venturi Shareholders own 2,547,321 shares of
common stock, no par value per share, of Venturi and which constitutes all of
the outstanding common stock of Venturi, for a total of 2,547,321 issued and
outstanding shares of common stock of Venturi.
WHEREAS, certain Venturi shareholders (SCHEDULE IV) own 64,410 shares
of preferred stock, no par value per share, of Venturi (the "Preferred Stock
Venturi Shareholders"), which is designated "10% Cumulative Convertible Series A
Preferred Stock" and which constitutes all of the outstanding preferred stock of
Venturi, for a total of 64,410 issued and outstanding shares of preferred stock
designated 10% Cumulative Convertible Series A Preferred Stock of Venturi.
WHEREAS, certain individuals or shareholders of Venturi own warrants to
purchase 202,743 shares of common stock, no par value per share, of Venturi (the
"Venturi Warrantholders"), and which constitutes all of the outstanding warrants
to purchase common stock of Venturi, for issued and outstanding warrants to
purchase a total of 202,743 shares of common stock of Venturi. Said warrants are
as follows:
Name of Exercise Number of Shares
Warrant Holder Expiration Price to Purchase
-------------- ---------- ----- -----------
Xxxxxxx Xxxxxxxx 2001 2.00 50,000
Sentry Financial Corp. 6/18/06 1.00 83,333
Series A Preferred Stock
investors 2002 5.00 64,410
Dominion Capital Corp. 2002 5.00 5,000
WHEREAS, the Common Stock Venturi Shareholders own and have the right
to sell, transfer and exchange all of the shares for the purchase of the capital
stock of HiTek. HiTek hereby offers 2,785,714 shares of its common stock to the
Common Stock Venturi Shareholders for all of the
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outstanding common stock of Venturi. The Common Stock Venturi Shareholders wish
to make said exchange.
WHEREAS, the parties hereto intend that the securities exchange
described herein between HiTek and the Common Stock Venturi Shareholders will be
tax free in accordance with the provisions of Section 368(a)(1)(B) of the
Internal Revenue Code.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereto have agreed and by these
present do hereby agree as follows:
1. Exchange of Securities. Subject to the terms and conditions
hereinafter set forth, at the time of the closing referred to in Section 6
hereof (the "Closing Date"), HiTek will issue and deliver, or cause to be issued
and delivered to the Common Stock Venturi Shareholders, in exchange for all of
the issued and outstanding shares of common stock of Venturi, 2,785,714 shares
of its common stock. The shares of HiTek will be allocated to the Common Stock
Venturi Shareholders as set forth in SCHEDULE I, attached hereto. Further, upon
conversion of the 10% Cumulative Convertible Series A Preferred Stock into
common stock of Venturi by Preferred Stock Venturi Shareholders, HiTek will
issue and deliver or cause to be issued and delivered to the Preferred Stock
Venturi Shareholders, 1.093585771 share of HiTek common stock for each one share
of Venturi common stock. Fractions, if any, will be rounded up. Upon the
exercise of the warrants to purchase common stock of Venturi by the Venturi
Warrantholders, HiTek will issue and deliver or cause to be issued and delivered
to the Venturi Warrantholders, 1.093585771 share of HiTek common stock for each
one share of Venturi common stock. Fractions, if any, will be rounded up.
2. Representations and Warranties by Venturi and Common Stock Venturi
Shareholders. Venturi and Common Stock Venturi Shareholders each represent and
warrant to HiTek, all of which representations and warranties shall be true at
the time of closing, and shall survive the closing for a period of six (6)
months from the date of closing, except as to the warranties and representations
set forth in subsection (i) herein, which shall survive for a period of three
(3) years from the date of closing, and those set forth in subsection (l)
herein, which shall survive for a period of six (6) months from the date of
closing, or from the date when the accounts receivable may become due and
payable, whichever shall occur later, that:
(a) Venturi is a corporation duly organized and validly
existing and in good standing under the laws of the State of Texas and
has the corporate powers to own its property and carry on its business
as and where it is now being conducted. Copies of the Certificate of
Incorporation and the By-Laws of Venturi, which have heretofore been
furnished by Venturi to HiTek, are true and correct copies of said
Certificate of Incorporation and By-Laws including all amendments to
the date hereof.
(b) The authorized capital stock of Venturi consists of
20,000,000 shares of common stock, no par value ("Common Stock of
Venturi"), of which 2,547,321 shares have
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been validly issued and are now outstanding and 5,000,000 shares of
preferred stock, no par value, of which 64,410 shares have been validly
issued and are now outstanding.
(c) Common Stock Venturi Shareholders have full power to
exchange the shares to purchase the capital stock of HiTek on behalf of
themselves upon the terms provided for in this Agreement, and said
shares have been duly and validly issued and are free and clear of any
lien or other encumbrance.
(d) From the date hereof, and until the date of closing, no
dividends or distributions of capital, surplus, or profits shall be
paid or declared by Venturi in redemption of their outstanding shares
or otherwise, and except as described herein no additional shares shall
be issued by said corporation.
(e) Since the date hereof, Venturi has not engaged in any
transaction other than transactions in the normal course of the
operations of their business, except as specifically authorized by
HiTek in writing.
(f) Venturi is not involved in any pending or threatened
litigation which would materially affect its financial condition
disclosed to HiTek in writing.
(g) Venturi has and will have on the Closing Date, good and
marketable title to all of its property and assets shown on SCHEDULE II
attached hereto, free and clear of any and all liens or encumbrances or
restrictions, except as shown on SCHEDULE II, attached hereto and
except for taxes and assessments due and payable after the Closing Date
and easements or minor restrictions with respect to its property which
do not materially affect the present use of such property.
(h) (1) The inventories of Venturi as reflected in SCHEDULE
II, furnished by Venturi to HiTek prior to the execution hereof, are
valued at book value.
(2) The inventory of Venturi listed on the schedule
referred to in (I)(1) above is hereinafter collectively referred to as
the "Inventory." The Inventory is in good and usable condition.
(i) As of the date hereof, there are no accounts receivable of
Venturi of a material nature, except for those accounts receivable set
forth in SCHEDULE II, attached hereto.
(j) Venturi does not now have, nor will it have on the Closing
Date, any long-term contracts ("long-term" being defined as more than
one year) except those set forth in SCHEDULE II attached hereto.
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(k) Venturi does not now have, nor will it have on the Closing
Date any pension plan, profit-sharing plan, or stock purchase plan for
any of its employees except those set forth in SCHEDULE II, attached
hereto and certain options to proposed executive officers.
(1) Venturi does not now have, nor will it have on the Closing
Date, any known liabilities or contingent liabilities other than those
disclosed in their unaudited financial statements dated December 31,
1996 attached hereto as SCHEDULE III except in the ordinary course of
business or in connection with its proposed private offering.
3. Representations and Warranties by HiTek. HiTek represents and
warrants to the Common Stock Venturi Shareholders, all of which representations
and warranties shall be true at the time of closing, and shall survive the
closing for a period of six (6) months from the date of closing, as follows:
(a) HiTek is a corporation duly organized and validly existing
and in good standing under the laws of the State of Nevada and has the
corporate power to own its properties and carry on its business as now
being conducted and has authorized capital stock consisting of
20,000,000 shares of common stock, $.001 par value per share, of which
there are 1,500,000 shares presently outstanding and 5,000,000 shares
of preferred stock, $.001 par value per share, of which there are no
shares outstanding.
(b) HiTek has the corporate power to execute and perform this
Agreement, and to deliver the stock required to be delivered to Common
Stock Venturi Shareholders hereunder.
(c) The execution and delivery of this Agreement, and the
issuance of the stock required to be delivered hereunder have been duly
authorized by all necessary corporate actions, and neither the
execution nor delivery of this Agreement, nor the issuance of the
stock, nor the performance, observance or compliance with the terms and
provisions of this Agreement will violate any provision of law, any
order of any court or other governmental agency, the Certificate of
Incorporation or By-Laws of HiTek or any indenture, agreement or other
instrument to which HiTek is a party, or by which HiTek is bound, or by
which any of its property is bound.
(d) The shares of Common Stock of HiTek deliverable pursuant
hereto will on delivery in accordance with the terms hereof, be duly
authorized, validly issued, and fully paid, and non-assessable.
(e) To the best of HiTek's knowledge, neither HiTek, nor any
of its officers or directors have, during the past five (5) years, been
the subject of any injunction, cease and desist order, assurance of
discontinuance, suspension or restraining order, revocation or
suspension of a license to practice a trade, occupation or profession,
denial of an application to obtain or renew same, any stipulation or
consent to desist from any act or practice, any
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disciplinary action by any court or administrative agency, nor, to the
best of HiTek's knowledge, has HiTek or any of its officers or
directors knowingly violated any state or federal laws regulating the
offering and sale of securities.
4. Conditions to the Obligations of HiTek. The obligations of HiTek
hereunder shall be subject to the conditions that:
(a) HiTek shall not have discovered any material error or
misstatement in any of the representations and warranties by the Common
Stock Venturi Shareholders herein, and all the terms and conditions of
this Agreement to be performed and complied with shall have been
performed and complied with.
(b) There shall have been no substantial adverse changes in
the conditions, financial, business otherwise of Venturi from the date
of this Agreement, and until the date of closing, except for changes
resulting from those operations in the usual and ordinary course of
business, and between such dates the business and assets of Venturi
shall not have been materially adversely affected as the result of any
fire, explosion, earthquake, flood, accident, strike, lockout,
combination of workmen, taking over of any such assets by any
governmental authorities, riot, activities of armed forces, or acts of
God or of the public enemies.
(c) HiTek shall upon request and at the time of closing,
receive an opinion of counsel to the effect that: (1) Venturi is duly
organized and validly existing under the laws of the State of Texas and
has the power and authority to own its properties and to carry on its
respective business wherever the same shall be located and operated as
of the Closing Date; and, (2) this Agreement has been duly executed and
delivered by Common Stock Venturi Shareholders and constitutes a legal,
valid and binding obligation of the Common Stock Venturi Shareholders
enforceable in accordance with its terms.
(d) Venturi does not now have, nor will it have on the date of
closing, any known or unknown liabilities or contingent liabilities,
except as specifically set forth on SCHEDULE II, attached hereto.
5. Conditions to the Obligations of Common Stock Venturi Shareholders.
The obligations of the Common Stock Venturi Shareholders hereunder are subject
to the conditions that:
(a) Common Stock Venturi Shareholders shall not have
discovered any material error or misstatement in any of the
representations and warranties made by HiTek herein and all the terms
and conditions of this Agreement to be performed and complied with by
HiTek shall have been performed and complied with.
(b) The Common Stock Venturi Shareholders shall upon request,
at the time of closing, receive an opinion of counsel to the effect
that: (1) HiTek is a corporation duly
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organized and validly existing under the laws of the State of Nevada,
and has the power to own and operate its properties wherever the same
shall be located as of the Closing Date; (2) the execution, delivery
and performance of this Agreement by HiTek has been duly authorized by
all necessary corporate action and constitutes a legal, valid and
binding obligation of HiTek, enforceable in accordance with its terms;
(3) the securities to be delivered to Common Stock Venturi Shareholders
pursuant to the terms of this Agreement will have been validly issued,
fully paid and non-assessable; (4) the exchange of the securities
herein contemplated does not require the registration of the HiTek
securities pursuant to any Federal law dealing with the issuance, sale,
transfer, and/or exchange of corporate securities; (5) that HiTek is
not under investigation by the SEC, the NASD or any state securities
commission; (6) that there are no known securities violations; (7) all
shares issued by HiTek have been validly issued in accordance with
Nevada or Federal law, are fully paid and non-assessable; and (8) there
are no outstanding options, rights, warrants, conversion privileges or
other agreements which would require issuance of additional shares.
6. Closing Date. The closing shall take place on or before June 27,
1997, or as soon thereafter as is practicable, at the Law Offices of Xxx X.
Xxxxxx, 0000 Xxxx Xxxxxxxx Xxxx, Xxxxx X, Xxx Xxxxx, Xxxxxx 00000, or at such
other time and place as the parties hereto shall agree upon.
7. Actions at the Closing. At the closing, HiTek and Common Stock
Venturi Shareholders will each deliver, or cause to be delivered to the other,
the securities to be exchanged in accordance with Section I of this Agreement
and each party shall pay any and all Federal and State taxes required to be paid
in connection with the issuance and the delivery of their own securities. All
stock certificates shall be in the name of the party to which the same are
deliverable.
8. Conduct of Business, Board of Directors, etc. Between the date
hereof and the Closing Date, Venturi will conduct its business in the same
manner in which it has heretofore been conducted and the Common Stock Venturi
Shareholders will not permit Venturi to: (1) enter into any contract, etc.,
other than in the ordinary course of business; or (2) declare or make any
distribution of any kind to the stockholders of Venturi, without first obtaining
the written consent of HiTek.
Upon closing, the old officers and members of the board of directors of
HiTek will tender their resignations and a new Board of Directors will be
elected by the shareholders of HiTek, which shall consist of the following
individuals.
Xxxxxxx Xxxxxx
Xxxx Xxxxxxx
Upon election of the above Board of Directors, and subject to the
authority of the Board of Directors as provided by law and the By-Laws of HiTek,
the new officers of HiTek, after the closing date of this Agreement shall be as
follows:
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Xxxxxxx Xxxxxx Chairman of the Board and Chief Executive Officer
Xxxx Xxxxxxx President
Xxxxxx Xxxxxxxxxx Chief Financial Officer and Treasurer
Xxxxx Xxxxxxx Secretary
9. Access to the Properties and Books of Venturi. The Common Stock
Venturi Shareholders hereby grant to HiTek, through their duly authorized
representatives and during normal business hours between the date hereof and the
Closing Date, the right of full and complete access to the properties of Venturi
and full opportunity to examine their books and records.
10. Miscellaneous.
(a) This Agreement shall be controlled, construed and enforced
in accordance with the laws of the State of Nevada.
(b) Each of the Constituent Corporations shall bear and pay
all costs and expenses incurred by it or on its behalf in connection
with the consummation of this Agreement, including, without limiting
the generality of the foregoing, fees and expenses of financial
consultants, accountants and counsel and the cost of any documentary
stamps, sales and excise taxes which may be imposed upon or be payable
in respect to the transaction.
(c) At any time before or after the approval and adoption by
the respective stockholders of the Constituent Corporations, if
required, this Reorganization Agreement may be amended or supplemented
by additional written agreements, as may be determined in the judgment
of the respective Boards of Directors of the Constituent Corporations
to be necessary, desirable or expedient to further the purpose of this
Reorganization Agreement, to clarify the intention of the parties, to
add to or to modify the covenants, terms or conditions contained
herein, or otherwise to effectuate or facilitate the consummation of
the transaction contemplated hereby. Any written agreement referred to
in this paragraph shall be validly and sufficiently authorized for the
purposes of this Reorganization Agreement if signed on behalf of
Venturi or HiTek, as the case may be, by its Chairman of the Board, or
its President.
(d) This Reorganization Agreement may be executed in any
number of counterparts and each counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall
constitute but one Reorganization Agreement.
(e) This Agreement shall be binding upon and shall inure to
the benefit of the heirs, executors, administrators and assigns of the
Common Stock Venturi Shareholders and upon the successors and assigns
of HiTek.
(f) All notices, requests, instructions, or other documents to
be given hereunder shall be in writing and sent by registered mail:
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If to Common Stock
Venturi Shareholders, then: 0000 Xxxxx Xxxxx
Xxxx, XX 00000
If to HiTek, then: The Law Offices of Xxx X. Xxxxxx
0000 X. Xxxxxxxx, Xxxxx X
Xxx Xxxxx, XX 00000
The foregoing Reorganization Agreement, having been duly approved or
adopted by the Board of Directors, and duly approved or adopted by the
stockholders of the constituent corporation, as required, in the manner provided
by the laws of the State of Nevada, the Chairman of the Board, President or the
Secretary of said corporations, and the Common Stock Venturi Shareholders do now
execute this Reorganization Agreement under the respective seals of said
corporation by the authority of the directors and stockholders of each, as
required, as the act, deed and agreement of each of said corporations. This
Stock-For-Stock Agreement may be signed in two or more counterparts.
HITEK CARPET CARE, INC.
By:
Xxxxxx Xxxxx, President
VENTURI TECHNOLOGIES, INC,
By: /s/ Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx, Chairman of the Board
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