EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of
the 3rd day of August, 2002 between Helsinki Capital Partners, Inc., a Delaware
corporation ("Company") and SkyFrames, Inc., a Texas corporation ("Acquiree").
WHEREAS, the Boards of Directors of Company and Acquiree deem it
advisable and in the best interests of Company and Acquiree and their respective
shareholders that Company and Acquiree combine; and
WHEREAS, the outstanding shares of Acquiree, being 85,000 shares of
Common Stock, are held by the persons listed on Exhibit 1 hereto; and
WHEREAS, the Boards of Directors of Company, Shareholder and Acquiree
deem it advisable that the acquisition by Company of Acquiree be effected
through the issuance of shares of Common Stock of Company (the "Company Shares")
(the "Exchange") of Company pursuant to this Agreement; and
WHEREAS, the Boards of Directors of Company and Acquiree intend that the
Exchange constitute a "reorganization" under Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations of the Internal Revenue Service (the "IRS") promulgated thereunder,
have approved and adopted this Agreement as a "plan of reorganization" within
the meaning of Section 368 of the Code, and the rules and regulations of the IRS
promulgated thereunder, and intend that the Exchange be treated as a tax free
merger under the Code and the rules and regulations of the IRS promulgated
thereunder.
NOW THEREFORE, in consideration of the mutual agreements hereinafter set
forth, the parties hereto, intending to be legally bound, hereby agree as
follows:
Section 1. Definitions. Certain words and terms as used in this
Agreement shall have the meanings given to them by the definitions and
descriptions in this Section, and such definitions shall be equally applicable
to both the singular and plural forms of any of the words and terms defined
below. All accounting terms not specifically defined shall be construed in
accordance with generally accepted accounting principles.
"Acquiree Group" means Acquiree and each of its Subsidiaries.
"Affiliate" of any specified Person means (i) any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, or (ii) any trust of which such Person is
the settlor. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings relative to
the foregoing.
"Acquiree Common Stock" means the common stock, $_____ par
value, of Acquiree.
"Closing" has the definition set forth in Section 3.
"Closing Date" means the date on which the Closing shall take place
pursuant to Section 3 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as now in effect or
hereafter amended, and as now or hereafter construed, interpreted and applied by
regulations, rulings and cases.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning set forth in the opening paragraph of this
Agreement and includes, unless the context otherwise requires, its Subsidiaries.
"Company 10-KSB" has the meaning assigned to that term in Section 6.28
of this Agreement.
"Company Common Stock" means the common stock of Company,
$.001 par value.
"Contractual Obligation" means for any Person any evidence of
indebtedness or any agreement or instrument under or pursuant to which any
evidence of Indebtedness has been issued, or any other agreement, instrument or
Guaranty, whether written or oral, to which such Person is a party or by which
such Person or any of its assets or properties are bound.
"Disclosure Schedules" means those certain schedules of even date
herewith delivered in response to the List of Requested Documents delivered by
Company to Acquiree, consisting of a Schedule of Financial Statements, a
Schedule of Capitalization, a Schedule of Subsidiaries, a Schedule of Changes, a
Schedule of Personal Property, a Schedule of Real Property, a Schedule of
Contracts, a Schedule of Litigation, a Schedule of Patents and Trademarks, a
Schedule of Compliance, a Schedule of Consents, a Schedule of Employees, a
Schedule of Enforceability, a Schedule of Transactions with Interested Persons,
a Schedule of Insurance, a Schedule of Permitted Affiliate Transactions, a
Schedule of Taxes, and a Schedule of Bank Accounts.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange" has the meaning assigned to that term in Section
2 of this Agreement.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Government" means the government of the United States of America, the
government of any other nation, any political subdivision of the United States
of America or any such other nation (including, without limitation, any state,
commonwealth, territory, federal district, municipality or possession) and any
department, agency, or instrumentality thereof; and "Governmental" means of, by
or pertaining to, any Government.
"Guaranty" means, at any date, for any Person, all obligations of such
Person guaranteeing or in effect guaranteeing any Indebtedness, Leases,
dividends or other obligations of any other Person (the "primary obligor") in
any manner, whether directly or indirectly; provided, however, that Guaranty
does not include endorsements for collection in the ordinary course.
"Indebtedness" means all items which , in accordance with generally
accepted accounting principles, would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of such Person
as at the date on which Indebtedness is to be determined.
"IRS" means the Internal Revenue Service.
"Lease" means any lease or other agreement (however denominated)
providing for the use by one Person or real or personal property owned by
another Person (or, the entering into such a lease or agreement).
"Lien" means any mortgage, lien, charge, security interest or
encumbrance of any kind upon, option to acquire, equity in, or pledge of, any
property or asset, whether now owned or hereafter acquired, and includes the
acquisition of, or agreement to acquire any property or asset subject to any
conditional sale agreement or other title retention agreement, including a Lease
on terms tantamount thereto or on terms otherwise substantially equivalent to a
purchase.
"Marks" means any trademarks, trade names, copyrights, service marks,
label filings or patents including, without limitation, all marks, trade names,
copyrights, service marks and label filings, or application or filing therefor.
"Material" when capitalized and used in this Agreement in relation to
any Person means material in relation to the business, financial condition, or
results of operations of such Person and its Subsidiaries, if any, taken as a
whole.
"Permitted Lien" means (a) Liens for current taxes not yet due and
payable, (b) such imperfections of title and easements, if any, which are not
known and which are not material in character, amount or extent and do not
materially detract from the value or
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interfere with the use, of the assets subject thereto or affected thereby or
otherwise impair business operations, (c) statutory Liens of landlords and Liens
of carriers, warehousemen, mechanics, workmen and materialmen incurred in the
ordinary course of business for sums not yet due or being contested in good
faith and disclosed on the Schedule of Real Property or Personal Property, and
(d) Liens (other than any Lien created by Section 4068 of ERISA) incurred on
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
Government.
"Plan" means any employee benefit plan, as defined in ERISA, and any
other plan, benefit or program of benefits or perquisites (other than a
Governmental plan, benefit or program) provided to one or more employees, which
is or has been established, maintained, participated in or contributed to by a
Person or a predecessor or successor of a person within the meaning of Section
414 of the Code.
"Related Party" of any specified Person means any Affiliate
of such Person.
"Reporting Act Documents" means the documents filed by Company with the
Commission pursuant to the Exchange Act since the date their reporting
obligations arose under Section 13 or 15(d) of the Exchange Act (including
without limitation, each Annual Report on Form 10-KSB, Quarterly Report on Form
10-QSB, and all proxy material) and all press releases distributed or
disseminated by Company.
"Requirement of Law" means, for any Person, any law, rule, judgment,
regulation, order, writ, injunction or decree of any court or Government and any
decision or ruling of any arbitrator to which such Person is a party or by which
such Person or any of its assets or property is bound or affected or from which
such Person derives benefits, including without limitation, those relating to
the discharge of materials into the environment and environmental protection,
and if such Person is a corporation, its charter documents and bylaws.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" of a Person means any corporation of which at least a
majority of the outstanding stock having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation, irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency, is at the time directly or indirectly owned by such
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Person, by one or more Subsidiaries of such Person, or by such Person and one or
more Subsidiaries.
Section 2. Exchange. Company shall acquire Acquiree, at the Closing, by
the issuance of 8,500,000 shares of Company Common Stock, in exchange for all of
the Acquiree Shares (the "Exchange"). The Exchange shall be effective at the
Closing set forth in Section 3 hereof.
Section 3. Time, Date and Place of Closing. The closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the corporate offices of Acquiree on August 31, 2002. At the Closing, the
documents set forth in Section 4 shall be delivered by the respective parties.
Section 4. Deliveries at Closing. The following documents
shall be delivered at or prior to Closing:
4.1 Company shall cause its transfer agent to issue the Company
Common Stock required to be issued pursuant to Sections 2 and
7.2 hereof;
4.2 The Shareholders of Acquiree shall transmit to the Company the
Acquiree Shares, duly endorsed for transfer to the Company.
Section 5. Representations, Warranties and Covenants of
Acquiree.
Acquiree represents, warrants and covenants as follows:
5.1 Organization, etc. Each member of the Acquiree Group is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation.
Each member of the Acquiree Group has the corporate power to
own its properties and carry on its business as now being
conducted, execute and deliver this Agreement and consummate
the transactions contemplated hereby and thereby. The copies of
the charter documents of each member of the Acquiree Group
provided to Company shall reflect all amendments made thereto
at any time prior to and as of the Closing and are correct and
complete.
5.2 Capital Stock and Related Matters. The authorized capital stock
of Acquiree consists of 100,000 shares of common stock, no par
value per share, of which 85,000 shares are issued and
outstanding, and no shares of preferred stock are authorized.
The authorized capital stock of each Subsidiary is as set forth
in its respective charter documents and the all of the
outstanding capital stock of each Subsidiary is owned by
Acquiree, except as set forth in the Schedule of
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Compliance (all of which capital stock is validly issued, fully
paid and nonassessable in full compliance with all applicable
securities laws). Except as set forth in the Schedule of
Compliance, (i) each of member of the Acquiree Group will not
have outstanding any stock or securities convertible or
exchangeable for any shares of capital stock, nor will there be
outstanding any rights or options to subscribe for or to
purchase any capital stock or any stock or securities
convertible into or exchangeable for any capital stock of any
member of the Acquiree Group, (ii) no member of the Acquiree
Group will be subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock, except as contemplated by this
Agreement, and (iii) to the best of the knowledge of the
officers of the Acquiree, there are no shareholder agreements,
proxies, voting trust agreements or similar agreements or
options executed by any shareholders of Acquiree.
5.3 Subsidiaries. Except as set forth in the Schedule of
Compliance, Acquiree owns no securities of any Person and to
the best of Acquiree's knowledge, no officer, director or
controlling shareholder of Acquiree or its Subsidiary owns,
directly or indirectly, any security or financial interest in
any other Person which competes with or does business with
Acquiree or its Subsidiary.
5.4 Authorization; No Breach. The execution and delivery by
Acquiree of this Agreement and each of the other agreements and
transactions contemplated hereby have been duly authorized by
all necessary proceedings of the Board of Directors of Acquiree
and, upon the requisite adoption and approval by the
shareholders of Acquiree, all corporate action of Acquiree
necessary for the authorization and consummation of the
transactions contemplated by this Agreement shall have been
taken. This Agreement and each of the other agreements
contemplated hereby constitute the valid and binding
obligations of Acquiree enforceable against it in accordance
with their respective terms. The execution, delivery and
compliance with and performance by Acquiree of this Agreement
and each of the other agreements contemplated hereby, does not
and will not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any material lien,
security interest, charge or encumbrance upon either Acquiree's
or any Subsidiary's capital stock or assets pursuant to, (iv)
give any third party the right to accelerate any material
obligation under, (v) result in a material violation of, or
(vi) require any authorization, consent, approval, permit,
exemption or other action by or notice to any court or
Governmental body, pursuant to
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the charter documents of Acquiree or its Subsidiary or any
Requirement of Law to which Acquiree or its Subsidiary is
subject or any Contractual Obligation or other instrument,
order, judgment or decree to which Acquiree or its Subsidiary
is subject.
5.5 Changes Since August 31, 2002. Except as set forth in
the Schedule of Changes or as contemplated hereby, since
August 31, 2002, Acquiree has not:
5.5.1 Incurred any obligations or liabilities, whether
absolute, accrued, contingent or otherwise,
including, without limitation, liabilities as
guarantor under any Guaranty, other than
obligations and liabilities (a) incurred under
this Agreement or (b) incurred in the ordinary
course of its business or (c) incurred under the
Contractual Obligations referred to in the
Schedule of Contracts;
5.5.2 Suffered any adverse change in its business,
condition, sales, income, assets or liabilities,
other than changes in the ordinary course of
business, none of which has been, in any case or
in the aggregate, Materially adverse to Acquiree;
5.5.3 Suffered any strike, or to the knowledge of
Acquiree and its Subsidiaries after due inquiry,
any threatened strike, work stoppage,
organizational attempts, boycotts, or
informational or direct picketing or leafletting
with regard to labor matters;
5.5.4 Made any loans or advances or entered into any
Contractual Obligations therefor, other than (a)
those not exceeding $5,000 in the aggregate or
(b) those made in the ordinary course of business
which have been properly reflected as
"receivables" or "prepaid expenses" on the books
of account and records of Acquiree and its
Subsidiaries;
5.5.5 Changed any of the accounting principles, methods
of applying such principles or estimates used to
prepare the Financial Statements;
5.5.6 Mortgaged, pledged or subjected to any Lien or
Lease any assets, tangible or intangible, except
for Permitted Liens;
5.5.7 Acquired or disposed of any assets or properties,
by sale, merger or otherwise, or entered into any
Contractual Obligation for any such acquisition or
disposition, except in the ordinary course of
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business or except for such acquisitions or
dispositions which do not, in any case or in the
aggregate, exceed $100,000;
5.5.8 Forgiven or canceled any Indebtedness or
Contractual Obligation or waived any rights of
value, in any case of in the aggregate, involving
amounts exceeding $100,000;
5.5.9 Entered into any transaction involving the
expenditure of more than $100,000 other than in
the ordinary course of business, except with
respect to the Contractual Obligations referred to
in the Schedule of Contracts;
5.5.10 Granted any rights or licenses under any Marks,
or entered into any licensing or distributorship
arrangement;
5.5.11 Suffered any damage, destruction or loss in any
amount exceeding $100,000 (whether or not covered
by insurance) adversely affecting, in any case or
in the aggregate, its business, condition,
operations, prospects, properties or assets;
5.5.12 Modified, altered, amended, terminated, adopted,
commenced or withdrawn from participation in any
Plan or any Contractual Obligation relating to any
Plan, in whole or in part, or caused or permitted
any such modification, alteration, amendment,
termination, adoption, commencement or withdrawal
from participation;
5.5.13 Caused or permitted any Material change in the
manner in which it conducts its business;
5.5.14 Caused or suffered any amendment or termination
(other than by its terms) of any Contractual
Obligation referred to in the Schedule of
Contracts or Schedule of Capitalization;
5.5.15 Discharged or satisfied any Lien or paid any
liability exceeding $100,000 other than (a) with
respect to the Contractual Obligations referred
to in the Schedule of Contracts or Schedule of
Capitalization, (b) those adequately and
specifically disclosed or reserved against on the
Financial Statements, or (c) those incurred in
the ordinary course of its business consistent
with past practices;
5.5.16 Failed to discharge or satisfy when due any
liability and such failure has caused or will
cause actual damages or risk of loss in any
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amount exceeding $100,000 over and above amounts
actually due which appear on the Financial
Statements;
5.5.17 Issued, sold, or delivered or agreed to issue,
sell or deliver any additional shares of its
capital stock or any options, warrants or rights
to acquire any such capital stock or securities
convertible into or exchangeable for such capital
stock;
5.5.18 Declared, made, paid or set apart any sum or
property for any dividend or other distribution to
its shareholders or purchased or redeemed any
shares of its capital stock or any option, warrant
or right to purchase any such capital stock, or
reclassified its capital stock;
5.5.19 Increased the wages, salaries, compensation,
pension or other benefits payable or to become
payable by Acquiree or any of its Subsidiaries to
any officer, employee or agent, other than merit,
cost-of-living and other normal increases;
5.6 Taxes.
5.6.1 Each member of the Acquiree Group has timely
filed (within the applicable extension periods)
with the appropriate Governmental agencies all
Governmental tax returns, information returns,
tax reports and declarations which are required
to be filed by any member of the Acquiree Group,
except for late filings which did not result in
the imposition of any substantial monetary
liabilities. All Governmental tax returns,
information returns, tax reports and declarations
filed by any member of the Acquiree Group for
years for which the statute of limitations has
not run (the "Tax Returns") are correct in all
Material respects. Each member of the Acquiree
Group has timely paid (or has collected and paid
over in the case of sales, use or similar taxes)
all taxes, additions to tax, penalties, interest,
assessments, deposits, and other Governmental
charges imposed by law upon it or any of its
properties, tangible or intangible assets,
income, receipts, payrolls, transactions,
capital, net worth, franchises, or upon the sale,
use or delivery of any item sold by any member of
the Acquiree Group, other than as may be
disclosed in the Schedule of Taxes. Except as
set forth in the Schedule of Taxes, no Tax
Returns have been examined by any Governmental
authority. Except as may be disclosed in the
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Schedule of Taxes or in any document delivered to
Acquiree therewith, no member of the Acquiree
Group (i) is currently being audited with respect
to any tax, assessment or other Governmental
charge, (ii) has received formal or informal
notice from any Government that an audit or
investigation with respect to any tax, assessment
or other Governmental charge is to be initiated,
(iii) is formal or informally discussing Material
pending ruling requests or other Material tax or
assessment issued with any other Governmental
taxing authority in connection with any matter
concerning any member of the Acquiree Group, or
(iv) has been formally or informally notified of
any potential tax or assessment issued which any
Governmental taxing authority intends to raise in
connection with any matter concerning any member
of the Acquiree Group. Except (i) as may be
disclosed in the Schedule of Taxes or (ii) in
connection with any pending audit or
investigation, no member of the Acquiree Group has
granted or proposed any waiver of any statue of
limitations with respect to, or any extension of a
period for the assessment or collection of, or any
offer in compromise of any Governmental tax. The
accruals and reserves for taxes reflected on the
Financial Statements are adequate to cover
substantially all taxes (including additions to
tax, interest, penalties, and other charges or
assessments, if any) which become due and payable
or accruable by reason of business conducted by
any member of the Acquiree Group through March 31,
1993. No Person has ever been a "consenting
corporation" within the meaning of Section 341(f)
of the Code. No member of the Acquiree Group is
now or has ever been a "personal holding company"
within the meaning of Section 542(a) of the Code
nor is now nor has ever been a corporation which
meets the tests of Section 542(b)(2) of the Code.
No member of the Acquiree Group has participated
in, or is required to participate in for any
period prior to the date of this Agreement, the
filing of any consolidated Tax Return, other than
(i) as set forth in the Schedule of Taxes or (ii)
as a member of an affiliated group of which
Acquiree is the common parent.
5.7 Contractual Obligations.
5.7.1 Except as may be set forth in the Schedule of
Contracts, there are no Contractual Obligations
of the following types to which Acquiree or any
of its Subsidiaries or any Plan is a party or by
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which Acquiree or any of its Subsidiaries or any
of their properties are bound as of the date
hereof:
(a) Mortgages, indentures, loan agreements,
security agreements, conditional sales
contracts, forms of consumer credit agree-
ments or other Contractual Obligations
relating to Indebtedness, the extension of
credit to Acquiree or any of its
Subsidiaries or by Acquiree or any of its
Subsidiaries to their customers or the
obtaining or issuance of letters of credit.
(b) Partnership or joint venture agreements.
(c) Employment, consulting or management
service agreements.
(d) Collective bargaining agreements.
(e) Plans or Contractual Obligations, trusts,
funds or arrangements for the benefit of
employees (whether or not legally binding).
(f) License, sales agency, franchise, or
distributorship agreements.
(g) Contractual Obligations for the assignment
by Acquiree or any of its Subsidiaries or
accounts receivable.
(h) Contractual Obligations for the sale or
Lease by Acquiree or any of its
Subsidiaries or any assets for a sales
price or aggregate rentals exceeding
$10,000 in the aggregate to any one
Person.
(i) Licenses of Marks or other intellectual
property rights.
(j) Contractual Obligations for capital
expenditures in excess of $100,000 for a
single project.
(k) Brokerage or finder's agreements.
(l) Agreements or other documents creating
Liens relating to any real or personal
property owned or Leased.
(m) Leases of, commitments to Lease, and other
agreements relating to the Lease of, real
or personal property.
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(n) Contractual Obligations containing
covenants limiting the freedom of
Acquiree or any of its Subsidiaries to
compete in any line of business with any
Person or in any area.
(o) Contractual Obligations containing in any
case a specific clause or affected by a
Requirement of Law giving any Person who is
a party to such Contractual Obligation the
right to renegotiate or require a reduction
in price or the repayment of any amount
previously paid because the profit
resulting to Acquiree or any of its
Subsidiaries from such Contractual Obliga-
tion is directly related to a specific
factor or factors including, but not
limited to sales, cost, assets or invested
capital.
(p) Guaranties.
(q) Any registration rights or pre-emptive
rights to any holder or prospective holder
of its securities.
(r) Other Contractual Obligations which in
any case involve payments or receipts
thereunder of more than $100,000 in the
aggregate with any one Person or which
cannot be terminated without any payment
on notice of 30 days or less.
5.7.2 Except as may be set forth in the Schedule of
Contracts:
(a) Each Contractual Obligation therein listed
in is full force and effect;
(b) Acquiree and each of its Subsidiaries and,
to the knowledge of Acquiree and each of
its Subsidiaries, all other parties to such
Contractual Obligations have performed all
obligations required to be performed by
them to date and no party to any such
Contractual Obligation is in default
thereunder;
(c) No such Contractual Obligation contains
any provision which is unusually
burdensome, restrictive or unfavorable
to Acquiree or any of its Subsidiaries
or which has a Materially adverse
effect, or is likely to
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have a Materially adverse effect in the
future, on Acquiree, and no event or
condition exists which constitutes, or
after notice or lapse of time or both,
would constitute, a default on the part
of Acquiree or any of its Subsidiaries,
would constitute a default on the part
of any of the other parties thereto.
(d) There has been no expressly or impliedly
irrevocable termination or cancellation of
the business relationship of Acquiree or
any of its Subsidiaries with (i) any
supplier or affiliated group of suppliers
whose sales, individually or in the
aggregate, constituted more than $100,000
or gross purchases made by Acquiree and its
Subsidiaries for the past 12 months or (ii)
any customer or affiliated group of
customers whose purchases, individually or
in the aggregate, constituted more than
$100,000 of gross sales made by Acquiree
and its Subsidiaries for the past 12
months.
(e) Neither Acquiree nor any of its
Subsidiaries has outstanding any powers of
attorney.
5.7.3 The Schedule of Contracts accurately sets forth
the aggregate amount of open purchases orders and
sales orders outstanding on the date hereof.
5.8 Litigation.
5.8.1 Except as may be disclosed in the Schedule of
Litigation, there are no:
(a) pending, or to the knowledge of Acquiree or
any of its Subsidiaries, contemplated,
administrative or judicial proceedings
against Acquiree or any of its Subsidiaries
arising under any Governmental provisions
regulating the discharge or materials into
the environment or otherwise relating to
the protection of the environment or
occupational and safety laws relating to
job conditions or safety;
(b) pending or, to the knowledge of Acquiree or
any of its Subsidiaries, contemplated,
administrative or judicial proceedings
against Acquiree or any of its Subsidiaries
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arising out of the Foreign Corrupt
Practices Act; nor
(c) claims, actions, suits, proceedings,
arbitrations, investigations or inquiries
pending before any court or Governmental
body or agency, or any private arbitration
tribunal, or, to the knowledge of Acquiree
or any of its Subsidiaries, threatened
against or relating to Acquiree, any of its
Subsidiaries, any Plan, any assets,
properties, or business of Acquiree or any
of its Subsidiaries, or the transactions
contemplated by this Agreement nor to the
knowledge of Acquiree or any of its
Subsidiaries its there any basis for any
such claim, action, suit, proceeding,
arbitration, investigation or inquiry.
5.8.2 Except as set forth in the Schedule of
Litigation, neither Acquiree or any of its
Subsidiaries, nor any officer, director, partner,
or employee of Acquiree or any of its
Subsidiaries, has been permanently or temporarily
enjoined by order, judgment or decree of any
court or other tribunal or any Governmental
agency from engaging in or continuing in the
conduct or practice of its business. There is
not in existence any judgment, order, writ,
injunction or decree to take action of any kind
or to which Acquiree or any of its Subsidiaries
or their business, properties or assets are
subject or bound.
5.9 Product Liability. Except as set forth on the Schedule of
Litigation, there is no existing or threatened claim, or facts
upon which a claim could be based, against Acquiree or any of
its Subsidiaries for any product sold or Leased or service
performed by Acquiree or any of its Subsidiaries prior to the
date of this Agreement which is defective or fails or has
failed to meet any product warranties.
5.10 Claims for Injuries. Except as set forth on the Schedule of
Litigation, there are no claims seeking damages for personal or
other injuries resulting from the Lease, sale or use of any of
the assets, products, services, or goods of Acquiree or any of
its assets, products, services, or goods of Acquiree or any of
its Subsidiaries which Acquiree has placed in the hands of
insurance carriers.
5.11 Trademarks, Trade Names, Patents, etc.
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5.11.1 Except as may be listed in the Schedule of
Patents and Trademarks, (a) there are no Marks
owned, licensed, used by or registered in the
name of Acquiree or any of its Subsidiaries and
no applications for Marks made by Acquiree or any
of its Subsidiaries or by their employees for the
benefit of Acquiree or any of its Subsidiaries;
(b) Acquiree or one of its Subsidiaries is the
registered and beneficial owned or the Marks
listed in the Schedule of Patents and Trademarks
as owned by it, free and clear of any royalty or
Lien; (c) all of such Marks are freely assignable
by Acquiree or any of its Subsidiaries; (d)
neither Acquiree nor any of its Subsidiaries has
any knowledge of any notice or claim or other
reason to believe that any xxxx is not valid or
enforceable by the owner thereof or of any
infringement upon or conflict with any Xxxx or
proprietary right of any third Person by the
owner thereof or any claim of a third Person
alleging such infringement or conflict; (e)
neither Acquiree nor any of its Subsidiaries has
any knowledge of any infringement by any third
Person upon any Xxxx listed in the Schedule of
Patents and Trademarks; and (f) neither Acquiree
nor any of its Subsidiaries has taken or omitted
to take any action which would have the effect of
waiving any of the rights of Acquiree or its
Subsidiaries under any Xxxx.
5.11.2 The Schedule of Patents and Trademarks sets forth
a complete and correct list of all inventions,
formulae, trade secrets, manufacturing processes,
know-how or other intellectual property rights
which have been reduced to writing and which are
necessary or useful in the operation of the
business of Acquiree or its Subsidiaries in the
manner presently operated by Acquiree or any of
its Subsidiaries or in the marketing of the
products presently marketed by Acquiree or any of
its Subsidiaries. Except as set forth in the
Schedule of Patents and Trademarks, (a) Acquiree
or any of its Subsidiaries has the right to use,
free and clear of any know royalties, claims or
rights of others, all such inventions, formulae,
trade secrets, manufacturing processes, know-how
or other intellectual property rights (whether or
not reduced to writing) necessary or useful in
the operation of the business of Acquiree and its
Subsidiaries in the manner presently operated by
Acquiree and Subsidiaries or in the marketing of
the products presently marketed by Acquiree or
any of its Subsidiaries, including, without
limitation (subject to licensor's rights under
15
Contractual Obligations which are listed in the
Schedule of Contracts), any product licensed from
others; and (b) the record and beneficial
ownership of all Marks, inventions, formulae,
trade secrets, know-how and other intellectual
property rights used in the business of Acquiree
and each of its Subsidiaries has been duly and
effectively transferred to Acquiree or one or more
of its Subsidiaries.
5.12 Employee Matters.
5.12.1 Except as may be set forth in the Schedule of
Employees, (a) Acquiree and its Subsidiaries are
in compliance with Requirements of Law respecting
employment and employment practices, terms and
conditions of employment, and wages and hours and
are not engaged in any unfair labor practice; (b)
there is no unfair labor practice complaint
pending or, to the knowledge of Acquiree or any
of its Subsidiaries, threatened against Acquiree
or any of its Subsidiaries before the National
Labor Relations Board or any Governmental agency;
(c) there is not now nor has there been during
the last four years any labor strike, dispute,
grievance, controversy or other labor trouble;
(d) no union representation question exists
respecting the employees of Acquiree or any of
its Subsidiaries; (e) there are no collective
bargaining agreements binding upon Acquiree or
any of its Subsidiaries; and (f) there is no
pending arbitration or judicial proceeding
arising out of or under collective bargaining
agreements or other employment agreements or the
employer-employee relationship.
5.12.2 Except as set forth in the Schedule of Employees,
no employee of Acquiree or any of its
Subsidiaries is now due a bonus, or would be due
a bonus at the end of the current fiscal year,
upon the occurrence of a contingency or
otherwise, under agreements currently in effect.
Except as may be set forth in the Schedule of
Employees, all accrued obligations of Acquiree or
any of its Subsidiaries, whether arising by
operation of law, by Contractual Obligation or by
past custom, for payments to trusts or other
funds or to any Governmental agency, with respect
to unemployment compensation, social security,
workers' compensation, disability programs,
accrued vacation, accrued sick pay, pension or
any other benefits for employees as of the date
hereof have been paid or adequate accruals
therefor on the books of account of Acquiree or
16
any of its Subsidiaries have been provided, and
none of the foregoing has been rendered not due by
reason of any extension of waiver.
5.12.3 The data printout attached to the Schedule of
Employees correctly and accurately sets forth
each employee, consultant or commission agent of
the Acquiree Group who is employed by the
Acquiree Group as of the date of such printout
and with respect to each such employee presently
employed, such Person's rate of compensation
(including any commissions) for the period
specified and such Person's year to date compen-
sation as of the end of such period. The
Schedule of Employees correctly and accurately
lists with respect to each employee, consultant
or commission agent of the Acquiree Group who,
during the last fiscal year earned or who, during
the current fiscal year would earn (based on
current practices) $100,000 or more on an
annualized basis, and with respect to each such
Person, the positions held as of the date hereof
and held since April 1, 1990, and the date on
which the compensation of such Person was last
changed, including the amount of such change.
5.12.4 Except as set forth in the Schedule of Employees,
Acquiree is not a party to or bound by any
employment or commission agreements in excess of
one year or which could require compensation and
benefits, collective employment contracts,
deferred compensation agreements, bonus plans,
profit sharing plans, pension plans or any other
Plans. There have been no material labor
difficulties.
5.13 Employee Benefit Plans.
5.13.1 All Plans comply with all Requirements of Law.
No liabilities to any Government for taxes,
penalties, interest, premiums, contributions, or
any other items have been incurred with respect
to any Plan other than in the ordinary course of
business for current items paid or items set
forth or reserved against on the Financial
Statements.
5.13.2 The Schedule of Employees sets forth a complete
list of all Plans covering any employee of
Acquiree or any of its Subsidiaries, the identity
of each funding agency holding assets of any such
Plan, the identity of any insurance company
issuing any contract or policy under any such
Plan, and the identity of any actuarial adviser
17
or service provider retained by, or who provided
services to, any Plan during the past 18 months.
5.13.3 No Plan has incurred any liability other than
pursuant to the terms of the Plan in the ordinary
course of business of the Plan. No assets of any
Plan have suffered any material adverse change
since the last valuation report.
5.13.4 Each Plan has good and marketable title to all of
the assets it purports to own free and clear of
all Liens. No Plan is a party to any (a) Con-
tractual Obligation other than one entered into
in the ordinary course of business, (b)
partnership or joint venture agreements, or (c)
employment, consulting, or management agreements
except as may be set forth on the Schedule of
Contracts.
5.13.5 The Schedule of Transactions with Interest
Persons completely and accurately describes (a)
all Indebtedness outstanding on March 31, 2002 or
thereafter incurred and (b) all sales of property
or performances of services for which payment has
been incurred or accrued on or after March 31,
2002, between any Plan on the one hand, and any
officer, director, or partner of Acquiree or any
of its Subsidiaries, or any Affiliate of any of
them, on the other.
5.14 Compliance with Laws. Except as set forth in the Schedule of
Compliance, no member of the Acquiree Group is in Material
violation of any Material applicable Requirement of Law.
5.15 Consents. Except as may be set forth in the Schedule of
Consents:
5.15.1 There is no consent, approval, order, or
authorization of, or registration, declaration or
filing with, any Governmental authority on the
part of Acquiree or any of its Subsidiaries
required in connection with the valid execution,
delivery and performance by Acquiree or any of
its Subsidiaries of this Agreement and the
consummation of the transactions contemplated
herein by Acquiree or any of its Subsidiaries.
5.15.2 All permits, concessions, grants, franchises,
licenses and other Governmental authorizations and
approvals necessary for the conduct of the
business of Acquiree and its Subsidiaries have
been duly obtained and are in full force and
effect, and there are no proceedings pending or,
18
to the knowledge of Acquiree or any of its
Subsidiaries, threatened which may result in the
revocation, cancellation or suspension, or any
materially adverse modification of any thereof.
5.15.3 There is no consent, approval or authorization of
any landlord under any Lease of any member of the
Acquiree Group required in order to prevent such
landlord from having the right to take action (or
refrain from taking action).
5.15.4 There is no consent, approval or authorization of
any other Person (a) whose consent is required
under any agreement set forth in the Schedule of
Contracts in order to permit Acquiree to
consummate the transaction contemplated hereby,
(b) who in the absence of such consent, would
have the right to (i) declare such agreement in
default, (ii) terminate or modify such agreement,
or (iii) accelerate the time within which, or the
terms under which any member of the Acquiree
Group is to perform any act or receive any rights
or benefits under such agreement, or (c) which,
if not received, would result in (i) a default
under such agreement, (ii) the termination or
modification of such agreement, or (iii) the
acceleration of the time within which, or the
terms under which, any member of the Acquiree
Group is to perform any act or receive any rights
or benefits under such agreement.
5.16 Effect of Agreement. Except as disclosed in the Schedule of
Enforceability, the execution, delivery and performance of this
Agreement by Acquiree or any of its Subsidiaries and the
consummation of the transactions contemplated hereby will not,
with or without the giving of notice or the lapse of time, or
both:
5.16.1 Violate any Requirement of Law applicable to
Acquiree or any of its Subsidiaries.
5.16.2 Result in the breach of or conflict with any
term, covenant, condition, or provision of,
result in the modification or termination of,
constitute a default under, or result in the
creation or imposition of any Lien upon any of
the properties or assets of Acquiree or any of
its Subsidiaries under, any Contractual
Obligation to which Acquiree or any of its
Subsidiaries is a party or by which any of their
property is bound.
5.17 Transactions With Interested Persons.
19
5.17.1 Except as may be set forth in the Schedule of
Transactions with Interested Persons, no officer,
director, or partner of Acquiree or any of its
Subsidiaries or any Affiliate of the foregoing
owns, directly or indirectly, on an individual or
joint basis, any Material interest in, or serves
as an officer, director or employee of, any
customer, competitor or supplier of Acquiree or
any of its Subsidiaries, or any Person which has
a Material contract or arrangement with Acquiree
or any of its Subsidiaries or any Related Party.
5.17.2 The Schedule of Transactions with Interested
Persons correctly and accurately describes all
Indebtedness, all sales of property and
performances of services and any other
transaction between Acquiree or any of its
Subsidiaries, on the one hand, and any Related
Party or officer, director or partner of Acquiree
or any of its Subsidiaries or any Affiliate of
the foregoing, on the other, which (a) was
outstanding on Xxxxx 00, 0000 (x) was incurred or
took place after March 31, 1993, or (c) was
outstanding on the date hereof other than for
personal services performed by an officer for
Acquiree or any of its Subsidiaries within the
past 30 days.
5.17.3 The Schedule of Transactions with Interested
Persons correctly and accurately sets forth with
respect to the sale of any property or the
performance of any services between Acquiree or
any of its Subsidiaries, on the one hand, and any
Related Party or officer, director, or partner of
Acquiree or any of its Subsidiaries or any
Affiliates of the foregoing, on the other, which
is described in response to Section 5.17.2, (a)
whether such transaction was on terms comparable
to those that would have resulted from dealing
between unrelated parties, and, (b) if any such
transaction was not on terms which would have
resulted from dealings between unrelated parties,
the terms comparable to those that would have
resulted from dealings between unrelated parties.
5.17.4 The Schedule of Transactions with Interested
Persons correctly and accurately describes all
items of personal property, other than expendable
supplies, physically removed from the possession
of Acquiree or any of its Subsidiaries or retired
from the books of accounts of Acquiree or any of
its Subsidiaries by any Related Party or officer,
director, or partner of Acquiree or any of its
20
Subsidiaries or any Affiliate of the foregoing
since December 31, 1991.
5.18 Books and Records. The books of account and other financial and
corporate records of Acquiree and its Subsidiaries and of each
Plan are in all Material respects complete and correct, are
maintained in accordance with usual business practices and
comply with all Material applicable Requirements of Law. Such
books and records reflect only valid transactions and all valid
transactions involving Acquiree or any of its Subsidiaries of a
kind required to be reflected on such books and records are
reflected on such books and records. The corporate minute books
of each member of the Acquiree Group contain accurate records
of all meetings and consents of all of the directors and
shareholders since the incorporation of each member. The stock
books and ledgers of each member of the Acquiree Group contain
accurate records of all issuances, retirements and transfers of
record of capital stock.
5.19 Property.
5.19.1 The Schedule of Real Property or the Schedule of
Leases completely and accurately describes all
real property and interests in real property
owned or Leased by the Acquiree Group including,
without limitation, for each Lease, the address
of the real property, the name and address of the
landlord, the term of the Lease, the amount of
rent payable under the Lease and, as to any
option to renew, for each option, the number of
years covered by such option. Acquiree and its
Subsidiaries have good and marketable title to
all real properties which they purport to own and
valid leasehold interests in all real properties
which they purport to Lease, in each case free
and clear of all Liens, except Permitted Liens or
Liens set forth in the Schedule of Real Property.
Except as set forth in the Schedule of Real
Property, (i) each Lease of real property to
which Acquiree or any of its Subsidiaries is a
party is in full force and effect in accordance
with its terms, (ii) all rents and other amounts
required to be paid to date under such Leases
have been paid, (iii) no event or condition
exists which constitutes, or after notice or
lapse of time or both would constitute, a default
on the part of Acquiree or any of its
Subsidiaries under any Lease of real property to
which Acquiree or any of its Subsidiaries is a
party and, to the knowledge of Acquiree or any of
its Subsidiaries, there exists no such event or
21
condition which constitutes or would constitute
such a default on the part of any of the other
parties thereto. Except as set forth in the
Schedule of Real Property, no property owned by
Acquiree or any of its Subsidiaries is subject to
any sublease, concession or license which entitles
any Person (other than employees of Acquiree or
any of its Subsidiaries) to transact business on
any such property.
5.19.2 Acquiree and its Subsidiaries have valid Leases
respecting all personal property they purport to
Lease. The rights of Acquiree and its Subsidiar-
ies as lessee under such Leases are free and
clear of all Liens, except Permitted Liens.
Except as set forth in the Schedule of Personal
Property, (i) each Lease of personal property to
which Acquiree or any of its Subsidiaries is a
party is in full force and effect in accordance
with its terms, (ii) all rents and other amounts
required to be paid to date under such Leases
have been paid, (iii) no event or condition
exists which constitutes, or after notice or
lapse of time or both would constitute, a default
on the part of Acquiree or any of its
Subsidiaries under any such Lease, and (iv) to
the knowledge of Acquiree or any of its
Subsidiaries, there exists no such event or
condition which constitutes or would constitute
such a default on the part of any of the other
parties thereto.
5.20 Reporting Act Documents. Except as set forth in the Schedule of
Compliance, Acquiree has, in all Reporting Act Documents,
complied in all material respects with the reporting and proxy
requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder. The information
contained in each Reporting Act Document of Acquiree is true
and correct in all Material respects as of the date thereof,
and no Reporting Act Document contains any untrue statement of
a Material fact or omits to state a Material fact required to
be stated therein or necessary to make the statements therein
not misleading as of the date thereof.
5.21 Financial Statements. Except as set forth on the Schedule of
Financial Statements, the consolidated financial statements of
Acquiree (for purposes of this Article V, the "Financial
Statements) present fairly the consolidated financial position
and results or operations and changes in the consolidated
financial position of Acquiree and its Subsidiaries at the
respective dates and for the respective periods indicated in
accordance
22
with generally accepted accounting principles applied on
a consistent basis.
5.22 Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved against on the Financial Statements or as
set forth in the Disclosure Schedules, no member of the
Acquiree Group has any liability, whether absolute, accrued,
known or unknown, contingent or otherwise, whether due or to be
come due, including without limitation, liabilities as
guarantor under any Guaranty and any liabilities for taxes or
other Governmental charges, for any period prior to April 1,
1993, or arising out of any transaction any member of the
Acquiree Group entered into prior to such date or arising out
of any state of facts arising prior to such date, other than
those incurred in the ordinary course of business, none of
which has had, or may be reasonably expected to have, a
Material adverse effect on Acquiree.
5.23 Insurance. Except as set forth in the Schedule of
Insurance:
5.23.1 (a) Acquiree and each of its Subsidiaries has
maintained insurance with respect to its
properties and business against loss or damage of
the kinds customarily insured against by
corporations of established reputation engaged in
the same or similar business and similarly
situated, including insurance with respect to
product liability and warranty claims of such
types and in such amounts as are customary under
the circumstances, (b) Acquiree and each of its
Subsidiaries has maintained such insurance with
financially sound and reputable insurers, and (c)
each insurance policy maintained by Acquiree and
its Subsidiaries is in full force and effect, all
premiums due thereon having been paid and all
provisions of such policy having been complied
with.
5.23.2 Neither Acquiree nor any of its Subsidiaries has
received any notice of any pending or threatened
terminations or premium increases with respect to
such insurance policies.
5.23.3 Neither Acquiree nor any Subsidiary of Acquiree
has failed to give any notice or present any claim
under any insurance policy in a due and timely
fashion.
5.23.4 There are no outstanding requirements or
recommendations by or mad eon behalf of any
insurance company that issued a policy with
23
respect to any of the properties, assets or
business of Acquiree or any of its Subsidiaries
requiring or recommending any equipment or
facilities to be installed on or in connection
with any of the properties or assets owned or
leased by Acquiree or any of its Subsidiaries.
5.24 Disclosure. Neither this Agreement nor any written document,
statement, list, schedule, certificate or other instrument
referred to herein or delivered by or on behalf of Acquiree or
any of its Subsidiaries in connection with the transactions
contemplated hereby contains any untrue statement of a Material
fact or omits to state a Material fact necessary to make the
statements herein and therein, in light of the circumstances
under which they were made, not misleading. There is no fact
known to Acquiree or any of its Subsidiaries which Materially
adversely affects, or in the future is likely to (so far as
Acquiree or any of its Subsidiaries can now reasonably foresee)
Materially adversely affect Acquiree or any Plan, other than
(a) general economic or business conditions or (b) facts set
forth herein or which may be set forth in the Disclosure
Schedules referred to herein.
5.25 Brokers. Neither Acquiree nor any Subsidiary of Acquiree has
incurred or become liable for any commission, fee or other
similar payment to any broker, agent, finder or other
intermediary in connection with the negotiation of this
Agreement or the consummation of the transactions contemplated
hereby.
5.26 Records of the Business. The books of account and other
financial records of Acquiree and Subsidiary are complete and
correct, are maintained in accordance with usual business
practices and comply with all Requirements of Law. Such books
and records reflect only valid transactions and all valid
transactions required to be reflected on such books and records
are reflected upon such books and records.
Section 6. Representations and Warranties of Company.
Company hereby represents and warrants to Acquiree, Shareholder
and Whitehall as follows:
6.1 Organization, etc. Company is a corporation duly organized,
validly existing and in good standing under the laws of the
state of Colorado. Company has the corporate power to own its
properties and carry on its business as now being conducted,
execute and deliver this Agreement and consummate the
transactions contemplated hereby and thereby. The copies of the
articles of incorporation and bylaws of Company provided to
Acquiree shall reflect all amendments made thereto at
24
any time prior to and as of the Closing and are correct
and complete.
6.2 Capital Stock and Related Matters. The authorized capital stock
of Company consists of 20,000,000 shares of common stock, par
value $.001 per share, of which 424,600 shares are issued and
outstanding, and 1,000,000 shares of preferred stock, $.001 par
value per share, of which no shares are outstanding. Company
has no Subsidiary. There are currently outstanding convertible
notes convertible into 1,155,500 shares of Company Common
Stock, to be converted on closing. Except as set forth in
Exhibit 6.2, (i) Company will not have outstanding any stock or
securities convertible or exchangeable for any shares of
capital stock, nor will there be outstanding any rights or
options to subscribe for or to purchase any capital stock or
any stock or securities convertible into or exchangeable for
any capital stock of Company (ii) Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock, except as
contemplated by this Agreement, and (iii) to the best of the
knowledge of the officers of the Company, there are no
shareholder agreements, proxies, voting trust agreements or
similar agreements or options executed by any shareholders of
Company.
6.3 Subsidiaries. Except as set forth in the Schedule of
Compliance, Company owns no securities of any Person and to the
best of Company's knowledge, no officer, director or
controlling shareholder of Company owns, directly or
indirectly, any security or financial interest in any other
Person which competes with or does business with Company.
6.4 Authorization; No Breach. The execution and delivery by Company
of this Agreement and each of the other agreements and
transactions contemplated hereby have been duly authorized by
all necessary proceedings of the Board of Directors of Company
and all corporate action of Company necessary for the
authorization and consummation of the transactions contemplated
by this Agreement shall have been taken. This Agreement and
each of the other agreements contemplated hereby constitute the
valid and binding obligations of Company enforceable against it
in accordance with their respective terms. The execution,
delivery and compliance with and performance by Company of this
Agreement and each of the other agreements contemplated hereby,
does not and will not (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any material
lien, security interest, charge or encumbrance upon either
Company's or any Subsidiary's capital stock
25
or assets pursuant to, (iv) give any third party the right to
accelerate any material obligation under, (v) result in a
material violation of, or (vi) require any authorization,
consent, approval, permit, exemption or other action by or
notice to any court or Governmental body, pursuant to the
articles of incorporation or bylaws of Company or its
Subsidiary or any Requirement of Law to which Company or its
Subsidiary is subject or any Contractual Obligation or other
instrument, order, judgment or decree to which Company or its
Subsidiary is subject.
6.5 Changes Since March 31, 2002. Except as set forth in
the Schedule of Changes or as contemplated hereby, since
March 31, 2002, Company has not:
6.5.1 Incurred any obligations or liabilities, whether
absolute, accrued, contingent or otherwise,
including, without limitation, liabilities as
guarantor under any Guaranty, other than
obligations and liabilities (a) incurred under
this Agreement or (b) incurred in the ordinary
course of its business or (c) incurred under the
Contractual Obligations referred to in the
Schedule of Contracts;
6.5.2 Suffered any adverse change in its business,
condition, sales, income, assets or liabilities,
other than changes in the ordinary course of
business, none of which has been, in any case or
in the aggregate, Materially adverse to Company;
6.5.3 Suffered any strike, or to the knowledge of
Company after due inquiry, any threatened strike,
work stoppage, organizational attempts, boycotts,
or informational or direct picketing or
leafletting with regard to labor matters;
6.5.4 Made any loans or advances or entered into any
Contractual Obligations therefor, other than (a)
those not exceeding $10,000 in the aggregate or
(b) those made in the ordinary course of business
which have been properly reflected as
"receivables" or "prepaid expenses" on the books
of account and records of Company;
6.5.6 Changed any of the accounting principles, methods
of applying such principles or estimates used to
prepare the Financial Statements;
6.5.6 Mortgaged, pledged or subjected to any Lien or
Lease any assets, tangible or intangible, except
for Permitted Liens;
26
6.5.7 Acquired or disposed of any assets or properties,
by sale, merger or otherwise, or entered into any
Contractual Obligation for any such acquisition or
disposition, except in the ordinary course of
business or except for such acquisitions or
dispositions which do not, in any case or in the
aggregate, exceed $100,000;
6.5.8 Forgiven or canceled any Indebtedness or
Contractual Obligation or waived any rights of
value, in any case of in the aggregate, involving
amounts exceeding $100,000;
6.5.9 Entered into any transaction involving the
expenditure of more than $100,000 other than in
the ordinary course of business, except with
respect to the Contractual Obligations referred to
in the Schedule of Contracts;
6.5.10 Granted any rights or licenses under any Marks,
or entered into any licensing or distributorship
arrangement;
6.5.11 Suffered any damage, destruction or loss in any
amount exceeding $100,000 (whether or not covered
by insurance) adversely affecting, in any case or
in the aggregate, its business, condition,
operations, prospects, properties or assets;
6.5.12 Modified, altered, amended, terminated, adopted,
commenced or withdrawn from participation in any
Plan or any Contractual Obligation relating to any
Plan, in whole or in part, or caused or permitted
any such modification, alteration, amendment,
termination, adoption, commencement or withdrawal
from participation;
6.5.13 Caused or permitted any Material change in the
manner in which it conducts its business;
6.5.14 Caused or suffered any amendment or termination
(other than by its terms) of any Contractual
Obligation referred to in the Schedule of
Contracts or Schedule of Capitalization;
6.5.15 Discharged or satisfied any Lien or paid any
liability exceeding $100,000 other than (a) with
respect to the Contractual Obligations referred
to in the Schedule of Contracts or Schedule of
Capitalization, (b) those adequately and
specifically disclosed or reserved against on the
Financial Statements, or (c) those incurred in
the ordinary course of its business consistent
with past practices;
27
6.5.16 Failed to discharge or satisfy when due any
liability and such failure has caused or will
cause actual damages or risk of loss in any amount
exceeding $100,000 over and above amounts actually
due which appear on the Closing Balance Sheet;
6.5.17 Issued, sold, or delivered or agreed to issue,
sell or deliver any additional shares of its
capital stock or any options, warrants or rights
to acquire any such capital stock or securities
convertible into or exchangeable for such capital
stock;
6.5.18 Declared, made, paid or set apart any sum or
property for any dividend or other distribution to
its shareholders or purchased or redeemed any
shares of its capital stock or any option, warrant
or right to purchase any such capital stock, or
reclassified its capital stock;
6.5.19 Increased the wages, salaries, compensation,
pension or other benefits payable or to become
payable by Company to any officer, employee or
agent, other than merit, cost-of-living and other
normal increases;
6.6 Taxes.
6.6.1 Company has timely filed (within the applicable
extension periods) with the appropriate
Governmental agencies all Governmental tax
returns, information returns, tax reports and
declarations which are required to be filed by
the Company, except for late filings which did
not result in the imposition of any substantial
monetary liabilities. All Governmental tax
returns, information returns, tax reports and
declarations filed by the Company for years for
which the statute of limitations has not run (the
"Tax Returns") are correct in all Material
respects. Company has timely paid (or has
collected and paid over in the case of sales, use
or similar taxes) all taxes, additions to tax,
penalties, interest, assessments, deposits, and
other Governmental charges imposed by law upon it
or any of its properties, tangible or intangible
assets, income, receipts, payrolls, transactions,
capital, net worth, franchises, or upon the sale,
use or delivery of any item sold by the Company,
other than as may be disclosed in the Schedule of
Taxes. Except as set forth in the Schedule of
Taxes, no Tax Returns have been examined by the
IRS or any other Governmental authority. Except
28
as may be disclosed in the Schedule of Taxes or in
any document delivered to Company therewith, the
Company (i) is not currently being audited with
respect to any tax, assessment or other
Governmental charge, (ii) has not received formal
or informal notice from any Government that an
audit or investigation with respect to any tax,
assessment or other Governmental charge is to be
initiated, (iii) is not formal or informally
discussing Material pending ruling requests or
other Material tax or assessment issued with the
IRS or any other Governmental taxing authority in
connection with any matter concerning any member
of the Company Group, or (iv) has not been
formally or informally notified of any potential
tax or assessment issued which the IRS or any
other Governmental taxing authority intends to
raise in connection with any matter concerning any
member of the Company Group. Except (i) as may be
disclosed in the Schedule of Taxes or (ii) in
connection with any pending audit or
investigation, Company has not granted or proposed
any waiver of any statue of limitations with
respect to, or any extension of a period for the
assessment or collection of, or any offer in
compromise of any Governmental tax. The accruals
and reserves for taxes reflected on the Financial
Statements are adequate to cover substantially all
taxes (including additions to tax, interest,
penalties, and other charges or assessments, if
any) which become due and payable or accruable by
reason of business conducted by the Company
through September 30, 1993. No Person has ever
been a "consenting corporation" within the meaning
of Section 341(f) of the Code. The Company is not
now or has ever been a "personal holding company"
within the meaning of Section 542(a) of the Code
nor is now nor has ever been a corporation which
meets the tests of Section 542(b)(2) of the Code.
The Company has not participated in, or is
required to participate in for any period prior to
the date of this Agreement, the filing of any
consolidated Tax Return, other than (i) as set
forth in the Schedule of Taxes or (ii) as a member
of an affiliated group of which Company is the
common parent.
6.7 Contractual Obligations.
6.7.1 Except as may be set forth in the Schedule of
Contracts, there are no Contractual Obligations of
the following types to which Company or any Plan
is a party or by which Company or any of their
properties are bound as of the date hereof:
29
(a) Mortgages, indentures, loan agreements,
security agreements, conditional sales
contracts, forms of consumer credit agree-
ments or other Contractual Obligations
relating to Indebtedness, the extension of
credit to Company or by Company or to their
customers or the obtaining or issuance of
letters of credit.
(b) Partnership or joint venture agreements.
(c) Employment, consulting or management
service agreements.
(d) Collective bargaining agreements.
(e) Plans or Contractual Obligations, trusts,
funds or arrangements for the benefit of
employees (whether or not legally binding).
(f) License, sales agency, franchise, or
distributorship agreements.
(g) Contractual Obligations for the assignment
by Company of accounts receivable.
(h) Contractual Obligations for the sale or
Lease by Company or any assets for a
sales price or aggregate rentals
exceeding $10,000 in the aggregate to
any one Person.
(i) Licenses of Marks or other intellectual
property rights.
(j) Contractual Obligations for capital
expenditures in excess of $100,000 for a
single project.
(k) Brokerage or finder's agreements.
(l) Agreements or other documents creating
Liens relating to any real or personal
property owned or Leased.
(m) Leases of, commitments to Lease, and other
agreements relating to the Lease of, real
or personal property.
(n) Contractual Obligations containing
covenants limiting the freedom of
Company to compete in any line of
business with any Person or in any area.
30
(o) Contractual Obligations containing in any
case a specific clause or affected by a
Requirement of Law giving any Person who is
a party to such Contractual Obligation the
right to renegotiate or require a reduction
in price or the repayment of any amount
previously paid because the profit
resulting to Company from such Contractual
Obligation is directly related to a
specific factor or factors including, but
not limited to sales, cost, assets or
invested capital.
(p) Guaranties.
(q) Any registration rights or pre-emptive
rights to any holder or prospective holder
of its securities.
(r) Other Contractual Obligations which in
any case involve payments or receipts
thereunder of more than $100,000 in the
aggregate with any one Person or which
cannot be terminated without any payment
on notice of 30 days or less.
6.7.2 Except as may be set forth in the Schedule of
Contracts:
(a) Each Contractual Obligation therein listed
in is full force and effect;
(b) Company and, to the knowledge of
Company, all other parties to such
Contractual Obligations have performed
all obligations required to be performed
by them to date and no party to any such
Contractual Obligation is in default
thereunder;
(c) No such Contractual Obligation contains any
provision which is unusually burdensome,
restrictive or unfavorable to Company or
which has a Materially adverse effect, or
is likely to have a Materially adverse
effect in the future, on Company, and no
event or condition exists which con-
stitutes, or after notice or lapse of time
or both, would constitute, a default on the
part of Company or would constitute a
default on the part of any of the other
parties thereto.
(d) There has been no expressly or impliedly
irrevocable termination or cancellation of
31
the business relationship of Company
with (i) any supplier or affiliated
group of suppliers whose sales,
individually or in the aggregate,
constituted more than $100,000 or gross
purchases made by Company for the past
12 months or (ii) any customer or
affiliated group of customers whose
purchases, individually or in the
aggregate, constituted more than
$100,000 of gross sales made by Company
for the past 12 months.
(e) Company has no outstanding powers of
attorney.
6.7.3 The Schedule of Contracts accurately sets forth
the aggregate amount of open purchases orders and
sales orders outstanding on the date hereof.
6.8 Litigation.
6.8.1 Except as may be disclosed in the Schedule of
Litigation, there are no:
(a) pending, or to the knowledge of Company,
contemplated, administrative or judicial
proceedings against Company arising under
any Governmental provisions regulating the
discharge or materials into the environment
or otherwise relating to the protection of
the environment or occupational and safety
laws relating to job conditions or safety;
(b) pending or, to the knowledge of Company ,
contemplated, administrative or judicial
proceedings against Company arising out of
the Foreign Corrupt Practices Act; nor
(c) claims, actions, suits, proceedings,
arbitrations, investigations or inquiries
pending before any court or Governmental
body or agency, or any private arbitration
tribunal, or, to the knowledge of Company,
threatened against or relating to Company,
any Plan, any assets, properties, or
business of Company, or the transactions
contemplated by this Agreement nor to the
knowledge of Company is there any basis for
any such claim, action, suit, proceeding,
arbitration, investigation or inquiry.
6.8.2 Except as set forth in the Schedule of
Litigation, neither Company, nor any officer,
director, partner, or employee of Company has
32
been permanently or temporarily enjoined by order,
judgment or decree of any court or other tribunal
or any Governmental agency from engaging in or
continuing in the conduct or practice of its
business. There is not in existence any judgment,
order, writ, injunction or decree to take action
of any kind or to which Company or their business,
properties or assets are subject or bound.
6.9 Product Liability. Except as set forth on the Schedule of
Litigation, there is no existing or threatened claim, or facts
upon which a claim could be based, against Company for any
product sold or Leased or service performed by Company prior to
the date of this Agreement which is defective or fails or has
failed to meet any product warranties.
6.10 Claims for Injuries. Except as set forth on the Schedule of
Litigation, there are no claims seeking damages for personal or
other injuries resulting from the Lease, sale or use of any of
the assets, products, services, or goods of Company or any of
its assets, products, services, or goods of Company which
Company has placed in the hands of insurance carriers.
6.11 Trademarks, Trade Names, Patents, etc.
6.11.1 Except as may be listed in the Schedule of
Patents and Trademarks, (a) there are no Marks
owned, licensed, used by or registered in the
name of Company and no applications for Marks
made by Company or by their employees for the
benefit of Company; (b) Company is the regis-
tered and beneficial owned or the Marks listed in
the Schedule of Patents and Trademarks as owned
by it, free and clear of any royalty or Lien;
(c) all of such Marks are freely assignable by
Company; (d) Company has no knowledge of any
notice or claim or other reason to believe that
any xxxx is not valid or enforceable by the owner
thereof or of any infringement upon or conflict
with any Xxxx or proprietary right of any third
Person by the owner thereof or any claim of a
third Person alleging such infringement or
conflict; (e) Company has no knowledge of any
infringement by any third Person upon any Xxxx
listed in the Schedule of Patents and Trademarks;
and (f) neither Company has not taken or omitted
to take any action which would have the effect of
waiving any of the rights of Company under any
Xxxx.
33
6.11.2 The Schedule of Patents and Trademarks sets forth
a complete and correct list of all inventions,
formulae, trade secrets, manufacturing processes,
know-how or other intellectual property rights
which have been reduced to writing and which are
necessary or useful in the operation of the
business of Company in the manner presently
operated by Company or in the marketing of the
products presently marketed by Company. Except
as set forth in the Schedule of Patents and
Trademarks, (a) Company has the right to use,
free and clear of any know royalties, claims or
rights of others, all such inventions, formulae,
trade secrets, manufacturing processes, know-how
or other intellectual property rights (whether or
not reduced to writing) necessary or useful in
the operation of the business of Company in the
manner presently operated by Company or in the
marketing of the products presently marketed by
Company, including, without limitation (subject
to licensor's rights under Contractual
Obligations which are listed in the Schedule of
Contracts), any product licensed from others; and
(b) the record and beneficial ownership of all
Marks, inventions, formulae, trade secrets, know-
how and other intellectual property rights used
in the business of Company has been duly and
effectively transferred to Company.
6.12 Employee Matters.
6.12.1 Except as may be set forth in the Schedule of
Employees, (a) Company is in compliance with
Requirements of Law respecting employment and
employment practices, terms and conditions of
employment, and wages and hours and are not
engaged in any unfair labor practice; (b) there
is no unfair labor practice complaint pending or,
to the knowledge of Company, threatened against
Company before the National Labor Relations Board
or any Governmental agency; (c) there is not now
nor has there been during the last four years any
labor strike, dispute, grievance, controversy or
other labor trouble; (d) no union representation
question exists respecting the employees of
Company; (e) there are no collective bargaining
agreements binding upon Company; and (f) there is
no pending arbitration or judicial proceeding
arising out of or under collective bargaining
agreements or other employment agreements or the
employer-employee relationship.
6.12.2 Except as set forth in the Schedule of Employees,
no employee of Company is now due a bonus, or
34
would be due a bonus at the end of the current
fiscal year, upon the occurrence of a contingency
or otherwise, under agreements currently in
effect. Except as may be set forth in the Schedule
of Employees, all accrued obligations of Company,
whether arising by operation of law, by
Contractual Obligation or by past custom, for
payments to trusts or other funds or to any
Governmental agency, with respect to unemployment
compensation, social security, workers'
compensation, disability programs, accrued
vacation, accrued sick pay, pension or any other
benefits for employees as of the date hereof have
been paid or adequate accruals therefor on the
books of account of Company have been provided,
and none of the foregoing has been rendered not
due by reason of any extension of waiver.
6.12.3 The data printout attached to the Schedule of
Employees correctly and accurately sets forth
each employee, consultant or commission agent of
the Company who is employed by the Company as of
the date of such printout and with respect to
each such employee presently employed, such
Person's rate of compensation (including any
commissions) for the period specified and such
Person's year to date compensation as of the end
of such period. The Schedule of Employees cor-
rectly and accurately lists with respect to each
employee, consultant or commission agent of the
Company who, during the last fiscal year earned
or who, during the current fiscal year would earn
(based on current practices) $100,000 or more on
an annualized basis, and with respect to each
such Person, the positions held as of the date
hereof and held since April 1, 1990, and the date
on which the compensation of such Person was last
changed, including the amount of such change.
6.12.4 Except as set forth in the Schedule of Employees,
Company is not a party to or bound by any
employment or commission agreements in excess of
one year or which could require compensation and
benefits, collective employment contracts,
deferred compensation agreements, bonus plans,
profit sharing plans, pension plans or any other
Plans. There have been no material labor
difficulties.
6.13 Employee Benefit Plans.
6.13.1 All Plans comply with all Requirements of Law
(including, without limitation, requirements of
the Code for status as a qualified plan under
35
Section 401 of the Code) and all material
obligations applicable thereto. Company has not,
with respect to any Plan, incurred any liability
on account of any accumulated funding deficiency
under ERISA or the Code or on account of any
failure to make any payments under any Contractual
Obligation relating to any Plan. Each Plan has
sufficient assets held in a trust, insurance or
annuity contract, or other funding vehicle to
provide for the payment of all benefits accrued or
currently obligated to be paid if the Plan were
terminated now or in the future or adequate
accruals therefor have been made on the Financial
Statements. Neither Company nor any other Person
has engaged in any prohibited transaction,
determined without regard to the applicability of
any exemptions, within the meaning or ERISA or the
Code with respect to any Plan or otherwise
violated any statutory, contractual or fiduciary
duty to any such Plan or its participants. No
reportable event within the meaning of ERISA has
occurred with respect to any Plan. Company has no
existing or potential withdrawal liability to any
multiemployer pension plan for any unfunded vested
benefits, and Company has no, is not a party to,
nor makes contributions to any multiemployer plan
which is being reorganized or terminated by the
Pension Benefit Guaranty Corporation, all within
the meaning of ERISA. Neither Company nor any
other Person has incurred any liability on account
of any Plan to any Person or Government which
might, by law or otherwise, be imposed on or
assessed against Company or result in the
imposition of any Lien upon any assets of Company.
No Plan is in a financial or other condition which
would permit any Government to terminate such
Plan, to impose on the Plan or Company any change
in the benefits of the Plan or to impose or
accelerate any liability of the Plan or to the
Plan. No Contractual Obligation relation to any
Plan exists which might Materially and adversely
restrict or affect the ability of the employer
under the Plan to modify, alter, amend, or
terminate the Plan. No liabilities to any
Government for taxes, penalties, interest,
premiums, contributions, or any other items have
been incurred with respect to any Plan other than
in the ordinary course of business for current
items paid or items set forth or reserved against
on the Financial Statements.
6.13.2 The Schedule of Employees sets forth a complete
list of all Plans covering any employee of
36
Company, the identity of each funding agency
holding assets of any such Plan, the identity of
any insurance company issuing any contract or
policy under any such Plan, and the identity of
any actuarial adviser or service provider retained
by, or who provided services to, any Plan during
the past 18 months.
6.13.3 No Plan has incurred any liability other than
pursuant to the terms of the Plan in the ordinary
course of business of the Plan. No assets of any
Plan have suffered any material adverse change
since the last valuation report.
6.13.4 Each Plan has good and marketable title to all of
the assets it purports to own free and clear of
all Liens. No Plan is a party to any (a) Con-
tractual Obligation other than one entered into
in the ordinary course of business, (b)
partnership or joint venture agreements, or (c)
employment, consulting, or management agreements
except as may be set forth on the Schedule of
Contracts.
6.13.5 The Schedule of Transactions with Interest
Persons completely and accurately describes (a)
all Indebtedness outstanding on March 31, 2002 or
thereafter incurred and (b) all sales of property
or performances of services for which payment has
been incurred or accrued on or after March 31,
2002, between any Plan on the one hand, and any
officer, director, or partner of Company, or any
Affiliate of any of them, on the other.
6.14 Compliance with Laws. Except as set forth in the
Schedule of Compliance, the Company is not in Material
violation of any Material applicable Requirement of Law.
6.15 Consents. Except as may be set forth in the Schedule of
Consents:
6.15.1 There is no consent, approval, order, or
authorization of, or registration, declaration or
filing with, any Governmental authority on the
part of Company required in connection with the
valid execution, delivery and performance by
Company of this Agreement and the consummation of
the transactions contemplated herein by Company.
6.15.2 All permits, concessions, grants, franchises,
licenses and other Governmental authorizations and
approvals necessary for the conduct of the
business of Company have been duly obtained and
are in full force and effect, and there are no
37
proceedings pending or, to the knowledge of
Company, threatened which may result in the
revocation, cancellation or suspension, or any
materially adverse modification of any thereof.
6.15.3 There is no consent, approval or authorization of
any landlord under any Lease of the Company
required in order to prevent such landlord from
having the right to take action (or refrain from
taking action).
6.15.4 There is no consent, approval or authorization of
any other Person (a) whose consent is required
under any agreement set forth in the Schedule of
Contracts in order to permit Company to
consummate the transaction contemplated hereby,
(b) who in the absence of such consent, would
have the right to (i) declare such agreement in
default, (ii) terminate or modify such agreement,
or (iii) accelerate the time within which, or the
terms under which the Company is to perform any
act or receive any rights or benefits under such
agreement, or (c) which, if not received, would
result in (i) a default under such agreement,
(ii) the termination or modification of such
agreement, or (iii) the acceleration of the time
within which, or the terms under which, the
Company is to perform any act or receive any
rights or benefits under such agreement.
6.16 Effect of Agreement. Except as disclosed in the Schedule of
Enforceability, the execution, delivery and performance of this
Agreement by Company and the consummation of the transactions
contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both:
6.16.1 Violate any Requirement of Law applicable to
Company.
6.16.2 Result in the breach of or conflict with any
term, covenant, condition, or provision of,
result in the modification or termination of,
constitute a default under, or result in the
creation or imposition of any Lien upon any of
the properties or assets of Company under, any
Contractual Obligation to which Company is a
party or by which any of their property is bound.
6.17 Transactions With Interested Persons.
6.17.1 Except as may be set forth in the Schedule of
Transactions with Interested Persons, no officer,
director, or partner of Company or any Affiliate
38
of the foregoing owns, directly or indirectly, on
an individual or joint basis, any Material
interest in, or serves as an officer, director or
employee of, any customer, competitor or supplier
of Company, or any Person which has a Material
contract or arrangement with Company or any
Related Party.
6.17.2 The Schedule of Transactions with Interested
Persons correctly and accurately describes all
Indebtedness, all sales of property and
performances of services and any other
transaction between Company, on the one hand, and
any Related Party or officer, director or partner
of Company or any Affiliate of the foregoing, on
the other, which (a) was outstanding on Xxxxx 00,
0000 (x) was incurred or took place after March
31, 2002, or (c) was outstanding on the date
hereof other than for personal services performed
by an officer for Company within the past 30
days.
6.17.3 The Schedule of Transactions with Interested
Persons correctly and accurately sets forth with
respect to the sale of any property or the
performance of any services between Company, on
the one hand, and any Related Party or officer,
director, or partner of Company or any Affiliates
of the foregoing, on the other, which is
described in response to Section 6.17.2, (a)
whether such transaction was on terms comparable
to those that would have resulted from dealing
between unrelated parties, and, (b) if any such
transaction was not on terms which would have
resulted from dealings between unrelated parties,
the terms comparable to those that would have
resulted from dealings between unrelated parties.
6.17.4 The Schedule of Transactions with Interested
Persons correctly and accurately describes all
items of personal property, other than expendable
supplies, physically removed from the possession
of Company or retired from the books of accounts
of Company by any Related Party or officer,
director, or partner of Company or any Affiliate
of the foregoing since March 31, 2002.
6.18 Books and Records. The books of account and other financial and
corporate records of Company and of each Plan are in all
Material respects complete and correct, are maintained in
accordance with usual business practices and comply with all
Material applicable Requirements of Law. Such books and records
reflect only valid transactions and all valid transactions
39
involving Company of a kind required to be reflected on such
books and records are reflected on such books and records. The
corporate minute books of Company contain accurate records of
all meetings and consents of all of the directors and
shareholders since the incorporation of the Company. The stock
books and ledgers of Company contain accurate records of all
issuances, retirements and transfers of record of capital
stock.
6.19 Property.
6.19.1 The Schedule of Real Property or the Schedule of
Leases completely and accurately describes all
real property and interests in real property
owned or Leased by the Company including, without
limitation, for each Lease, the address of the
real property, the name and address of the
landlord, the term of the Lease, the amount of
rent payable under the Lease and, as to any
option to renew, for each option, the number of
years covered by such option. Company has good
and marketable title to all real properties which
they purport to own and valid leasehold interests
in all real properties which they purport to
Lease, in each case free and clear of all Liens,
except Permitted Liens or Liens set forth in the
Schedule of Real Property. Except as set forth
in the Schedule of Real Property, (i) each Lease
of real property to which Company is a party is
in full force and effect in accordance with its
terms, (ii) all rents and other amounts required
to be paid to date under such Leases have been
paid, (iii) no event or condition exists which
constitutes, or after notice or lapse of time or
both would constitute, a default on the part of
Company under any Lease of real property to which
Company is a party and, to the knowledge of
Company, there exists no such event or condition
which constitutes or would constitute such a
default on the part of any of the other parties
thereto. Except as set forth in the Schedule of
Real Property, no property owned by Company is
subject to any sublease, concession or license
which entitles any Person (other than employees
of Company) to transact business on any such
property.
6.19.2 Company has valid Leases respecting all personal
property they purport to Lease. The rights of
Company as lessee under such Leases are free and
clear of all Liens, except Permitted Liens. Except
as set forth in the Schedule of Personal Property,
(i) each Lease of personal property to which
Company is a party is in full force and
40
effect in accordance with its terms, (ii) all
rents and other amounts required to be paid to
date under such Leases have been paid, (iii) no
event or condition exists which constitutes, or
after notice or lapse of time or both would
constitute, a default on the part of Company under
any such Lease, and (iv) to the knowledge of
Company, there exists no such event or condition
which constitutes or would constitute such a
default on the part of any of the other parties
thereto.
6.20 Reporting Act Documents. Except as set forth in the Schedule of
Compliance, Company has, in all Reporting Act Documents,
complied in all material respects with the reporting and proxy
requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder. The information
contained in each Reporting Act Document of Company is true and
correct in all Material respects as of the date thereof, and no
Reporting Act Document contains any untrue statement of a
Material fact or omits to state a Material fact required to be
stated therein or necessary to make the statements therein not
misleading as of the date thereof.
6.21 Financial Statements. Except as set forth on the Schedule of
Financial Statements, the Financial Statements present fairly
the consolidated financial position and results or operations
and changes in the consolidated financial position of Company
at the respective dates and for the respective periods
indicated in accordance with generally accepted accounting
principles applied on a consistent basis.
6.22 Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved against on the Financial Statements or as
set forth in the Disclosure Schedules, the Company has no
liability, whether absolute, accrued, known or unknown,
contingent or otherwise, whether due or to be come due,
including without limitation, liabilities as guarantor under
any Guaranty and any liabilities for taxes or other
Governmental charges, for any period prior to October 1, 1993,
or arising out of any transaction the Company entered into
prior to such date or arising out of any state of facts arising
prior to such date, other than those incurred in the ordinary
course of business, none of which has had, or may be reasonably
expected to have, a Material adverse effect on Company.
6.23 Insurance. Except as set forth in the Schedule of
Insurance:
41
6.23.1 (a) Company has maintained insurance with
respect to its properties and business against
loss or damage of the kinds customarily insured
against by corporations of established reputation
engaged in the same or similar business and
similarly situated, including insurance with
respect to product liability and warranty claims
of such types and in such amounts as are
customary under the circumstances, (b) Company
has maintained such insurance with financially
sound and reputable insurers, and (c) each
insurance policy maintained by Company is in full
force and effect, all premiums due thereon having
been paid and all provisions of such policy
having been complied with.
6.23.2 Company has not received any notice of any pending
or threatened terminations or premium increases
with respect to such insurance policies.
6.23.3 Neither Company nor any Subsidiary of Company has
failed to give any notice or present any claim
under any insurance policy in a due and timely
fashion.
6.23.4 There are no outstanding requirements or
recommendations by or mad eon behalf of any
insurance company that issued a policy with
respect to any of the properties, assets or
business of Company requiring or recommending any
equipment or facilities to be installed on or in
connection with any of the properties or assets
owned or leased by Company.
6.24 Disclosure. Neither this Agreement nor any written document,
statement, list, schedule, certificate or other instrument
referred to herein or delivered by or on behalf of Company in
connection with the transactions contemplated hereby contains
any untrue statement of a Material fact or omits to state a
Material fact necessary to make the statements herein and
therein, in light of the circumstances under which they were
made, not misleading. There is no fact known to Company which
Materially adversely affects, or in the future is likely to (so
far as Company can now reasonably foresee) Materially adversely
affect Company or any Plan, other than (a) general economic or
business conditions or (b) facts set forth herein or which may
be set forth in the Disclosure Schedules referred to herein.
6.25 Brokers. Company has not incurred or become liable for
any commission, fee or other similar payment to any
broker, agent, finder or other intermediary in
42
connection with the negotiation of this Agreement or the
consummation of the transactions contemplated hereby, except as
set forth herein.
6.26 Bank Accounts. Except as set forth in the Schedule of Bank
Accounts, there are no bank accounts or safe deposit boxes
maintained by the Company or in which its property is held at
the date hereof, and (b) there are no Persons authorized to
draw thereon or have access thereto.
6.27 Records of the Business. The books of account and other
financial records of Company are complete and correct, are
maintained in accordance with usual business practices and
comply with all Requirements of Law. Such books and records
reflect only valid transactions and all valid transactions
required to be reflected on such books and records are
reflected upon such books and records.
6.28 Financial. Company has previously furnished Acquiree a true and
complete copy of its Annual Report on Form 10K for the year
ended March 31, 2002 (the "Company 10K). The financial
statements contained in the Company 10K have been prepared in
conformity with generally accepted accounting principles
consistently applied. The balance sheets of Company contained
in the Company 10K fairly present the financial condition of
Company as at the dates thereof, and the related statements of
operations of Company contained in the Company 10K fairly
present the results of operations of Company for the period
ended.
6.29 Status of Company Common Stock. The shares of Company Common
Stock to be issued pursuant to this Agreement, when so issued,
will be duly authorized, validly issued and outstanding, fully
paid and non-assessable.
Section 7. Certain Understandings and Agreements.
7.1 Form 8-K. Company shall file a current report on Form 8-K
within 15 days of the Closing in compliance with the Exchange
Act, with the audited financial statements of Acquiree (the
"Audit") and the pro forma statements required by the Exchange
Act via amendment of the Form 8-K within 75 days of the
Closing, and will otherwise comply with the reporting
requirements of the Exchange Act and all material requirements
of NASDAQ following the Closing.
7.2 Shares. At the Closing, Company shall issue 1,155,500
shares of Common Stock on conversion of the outstanding
convertible notes.
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7.3 Survival of Representations and Warranties. No representations
or warranties of the parties hereto contained in this
Agreement, in any exhibit hereto, in the Disclosure Schedules,
or in any certificate or document delivered in connection
herewith or pursuant hereto, shall survive after the third
anniversary of the date of the Closing except (a) as to any
matters with respect to which an action at law or in equity
shall have been commenced before such date, in which event such
survival shall continue until the resolution of such action, or
(b) as to any claim by any Person (other than a party to this
Agreement, or an Affiliate of any such party) the existence of
which breaches a representation or warranty of a party to this
Agreement, in which event such survival shall continue until
the running of the applicable statute of limitations and any
extensions thereof.
7.3 Forward Stock Split. Immediately prior to closing the
Company shall effect a 1.5 for one forward stock split.
Section 8. General.
8.1 Successors. Each and all of the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties
hereto, and their respective heirs, legal representatives,
successors and assigns. Neither this Agreement, nor any rights
herein granted may be assigned, transferred or encumbered by
any party.
8.2 Survival of Representations and Warranties. The respective
representations and warranties of Company and Acquiree
contained herein shall survive for three years following the
Closing.
8.3 Governing Law. Except where the laws of another jurisdiction
are mandatorily applicable, this Agreement and the legal
relations among the parties hereto shall be governed by and
construed in accordance with the laws of the State of Colorado.
8.4 Headings. The descriptive headings of the sections and
subsections of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement. They do not
define, limit, construe or describe the scope or intent of the
provision of this Agreement.
8.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which, when executed by a party hereto,
shall be deemed an original and all of which together shall be
deemed one and the same agreement.
44
8.6 Reliance Upon Representations and Warranties. Notwithstanding
any right of any party hereto fully to investigate the affairs
of any other party, the parties hereto may rely upon the
representations, warranties and covenants made to it in this
Agreement and on the accuracy of any certificate, any schedule
attached hereto (collectively, the "Disclosure Schedules"),
exhibit or other document given or delivered to it pursuant to
this Agreement. Further, knowledge by an agent of any party
hereto of any facts not otherwise disclosed in this Agreement
the Disclosure Schedules shall not constitute a defense to any
claim for misrepresentation, breach of any warranty, agreement,
or covenant under this Agreement, or the Disclosure Schedules.
No representations or warranties have been made by or on behalf
of any person to induce any party to enter into this Agreement
or to abide by or consummate the transactions contemplated by
this Agreement, except representations and warranties expressly
set forth herein or in the Disclosure Schedules or in any
certificate, exhibit or other document delivered in connection
with or pursuant to this Agreement.
8.7 Waiver. No purported waiver by any party of any default by any
other party of any term, covenant or condition contained herein
shall be deemed to be a waiver of such term, covenant or
condition unless the waiver is in writing and signed by the
waiving party. No such waiver shall in any event be deemed a
waiver of any subsequent default under the same or any other
term, covenant or condition contained herein.
8.8 Notices. Any consent, waiver, notice, demand, request or other
instrument required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
properly given when delivered in person or sent by certified or
registered United States mail, return receipt requested,
postage prepaid, addressed:
If to Company: Helsinki Capital Partners,
Inc.
00000 Xxxxx Xxxx Xxxxx X
Xxxx Xxxxx Xxxxxxxxxx 00000
If to Acquiree: Skyframes, Inc.
0000 Xxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
8.9 Entire Agreement. This Agreement, as from time to time
amended, together with the schedules attached hereto and
any certificate, exhibit or other document given or
delivered pursuant hereto, sets forth the entire
understanding among the parties concerning the subject
45
matter of this Agreement and incorporates all prior
negotiations and understandings. There are no covenants,
promises, agreements, conditions or understandings, either oral
or written, between them relating to the subject matter of this
Agreement other than those set forth herein. No alteration,
amendment, change or addition to this Agreement shall be
binding upon any party unless in writing and signed by the
party to be charged.
8.10 No Partnership. Nothing contained in this Agreement
will be deemed or construed by the parties hereto or by
any third person to create the relationship of principal
and agent or partnership or joint venture.
8.11 Partial Invalidity. If any term, covenant or condition in this
Agreement or the application thereof to any Person or
circumstance shall be invalid or unenforce- able, the remainder
of this Agreement or the application of such term, covenant or
condition to Persons or circumstances, other than those as to
which it is held invalid, shall be unaffected thereby and each
term, covenant or condition of this Agreement shall be valid
and enforced to the fullest extent permitted by law.
8.12 Joint Preparation. This Agreement is to be deemed to have been
prepared jointly by the parties hereto and any uncertainty or
ambiguity existing herein, if any, shall not be interpreted
against any party, but shall be interpreted according to the
application of the rules of interpretation for arm's length
agreements.
8.13 Disclosure. Until the Closing, no press releases or other
disclosures (except those required by law) shall be made with
respect to the transactions contemplated hereunder by either
Company or Acquiree without the approval of both parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their authorized officers as of the date and year first above
written.
SKYFRAMES, INC. HELSINKI CAPITAL PARTNERS,
INC.
By: By:
Name: Name:
Title: Title:
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