20
ACQUISITION AGREEMENT
Agreement dated as of June 11, 2001, between ELAST TECHNOLOGIES,
INC., a Nevada corporation ("ELTI"), and PTS, INC., a Nevada
corporation ("PTS").
The parties agree as follows:
1. The Exchange
1.1 Tender and Exchange. Subject to the terms and conditions of
this Agreement, at the Closing to be held as provided in Section
2, ELTI shall tender the ELTI Shares (defined below) to PTS, and
PTS shall receive the ELTI Shares from ELTI, free and clear of
all encumbrances other than restrictions imposed by Federal and
State securities laws.
1.2 Transaction. ELTI will deliver 9,000,000 shares of its
common stock (the "ELTI Shares"), and PTS will deliver 300,000
shares of its common stock (the "PTS Shares"), which represents
all of the issued and outstanding shares as well as the sum of
US$1 million to be paid in $80,000.00 monthly installments
commencing August 1, 2001 until July 1, 2002, with the remaining
$40,000.00 to be paid August 1, 2002.
2. The Closing.
2.1 Place and Time. The closing of the instant transaction
(the "Closing") shall take place at the Law Offices of
Xxxxxxx and Xxxxxxxx, Ltd., 000 X. Xxxxxxx Xxxx., Xxxxx
000, Xxx Xxxxx, Xxxxxx 00000, no later than the close of
business (Pacific Time) on June 11, 2001, or at such
other place, date and time as the parties may agree in
writing.
2.2 Deliveries by PTS. At the Closing, PTS shall deliver the
following to ELTI:
a. The documents contemplated by Section 3.
b. All other documents, instruments and writings
required by this Agreement to be delivered by PTS at
the Closing and any other documents or records
relating to PTS' business reasonably requested by
ELTI in correction with this Agreement.
2.3 Deliveries by ELTI. At the Closing, ELTI shall deliver the
following to PTS.
a. The ELTI Shares as contemplated by section 1.
b. The documents contemplated by Section 4.
c. All other documents, instruments and writings required by
this Agreement to be delivered by ELTI at the Closing.
2.4 Escrow Agent. Xxxxxxx & Xxxxxxxx, Ltd., shall serve as the
escrow agent. All shares that are to be exchanged as part
of this Agreement shall be given to the Escrow Agent. At
the Closing, assuming that all obligations of each party
have been fulfilled, the Escrow Agent shall complete the
transfer of all property in his possession in accordance
with the terms of this Agreement.
3. Conditions to ELTI's Obligations.
The obligations of ELTI to effect the Closing shall be subject to
the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by ELTI:
3.1 No Injunction. There shall not be in effect any
injunction, order or decree of a court of competent
jurisdiction that prevents the consummation of the
transactions contemplated by this Agreement, that
prohibits ELTI's acquisition of the PTS Shares or ELTI's
receipt of the PTS Shares or that will require any
divestiture as a result of ELTI's acquisition of the PTS
Shares or that will require all or any part of the
business of ELTI to be held separate and no litigation or
proceedings seeking the issuance of such an injunction,
order or decree or seeking to impose substantial penalties
on ELTI or PTS if this Agreement is consummated shall be
pending.
3.2 Representations, Warranties and Agreements. (a) The
representations and warranties of PTS set forth in this
Agreement shall be true and complete in all material
respects as of the Closing Date as though made at such
time, (b) PTS shall have performed and complied in all
material respects with the agreements contained in this
Agreement required to be performed and complied with by it
at or prior to the Closing and (c) ELTI shall have
received a certificate to that effect signed by an
authorized representative of PTS.
3.3 Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental
Bodies necessary for the consummation of ELTI's
acquisition of the PTS Shares shall have been obtained and
shall be in full force and effect.
4. Conditions to PTS's Obligations.
The obligations of PTS to effect the Closing shall be subject
to the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by PTS:
4.1 No Injunction. There shall not be in effect any
injunction, order or decree of a court of competent
jurisdiction that prevents the consummation of the
transactions contemplated by this Agreement, that
prohibits PTS's acquisition of the ELTI Shares or PTS's
receipt of the ELTI Shares or that will require any
divestiture as a result of PTS's acquisition of the ELTI
Shares or that will require all or any part of the
business of PTS to be held separate and no litigation or
proceedings seeking the issuance of such an injunction,
order or decree or seeking to impose substantial penalties
on ELTI or PTS if this Agreement is consummated shall be
pending.
4.2 Representations, Warranties and Agreements. The
representations and warranties of ELTI set forth in this
Agreement shall be true and complete in all material
respects as of the Closing Date as though made at such
time, (b) ELTI shall have performed and complied in all
material respects with the agreements contained in this
Agreement required to be performed and complied with by it
at or prior to the Closing and (c) PTS shall have received
a certificate to that effect signed by an authorized
representative of ELTI.
4.3 Legal Opinion. PTS shall have received an opinion from
appropriate counsel to ELTI dated the Closing Date, to the
effect that ELTI is a corporation duly organized, validly
existing and in good standing under the laws of the State
of Nevada and has the requisite power and authority to
own, lease and operate its properties and corporate power
to carry on its business as now being conducted; all of
the outstanding shares of ELTI are duly and validly
issued, fully paid and non-assessable and the issuance of
such shares has complied with the applicable Federal and
State securities laws and the regulations promulgated
thereunder; ELTI is duly qualified and in good standing as
a domestic corporation and is authorized to do business in
all states or other jurisdictions in which such
qualification or authorization is necessary and there has
not been any claim by any other state of jurisdiction to
the effect that ELTI is required to qualify or otherwise
be authorized to do business as a foreign corporation
therein; all persons who have executed or will execute
this Agreement on behalf of ELTI or its Shareholders have
been duty authorized to do so; to the best knowledge of
such counsel there is no action, suit or proceeding and no
investigation by any governmental agency pending or
threatened against ELTI or the assets or business of ELTI
that could have a materially adverse effect on the
financial condition of ELTI or PTS.
4.4Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental
Bodies necessary for the consummation of ELTI's
acquisition of the PTS' Shares shall have been obtained
and shall be in full force and effect.
5. Representations and Warranties of PTS
PTS represents and warrants to ELTI that, to the knowledge of PTS
(which limitation shall not apply to Section 5.3), and except as
set forth in the PTS Disclosure Letter:
5.1 Organization of PTS; Authorization. PTS is a corporation
duly organized, validly existing and in good standing
under the laws of Nevada with full corporate power and
authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery
and performance of this Agreement have been duly
authorized by all necessary corporate action of PTS and
this Agreement constitutes a valid and binding obligation
of PTS; enforceable against it in accordance with its
terms.
5.2 Capitalization. The authorized capital stock of PTS
consists of 1,000,000 shares of common stock, $0.01 par
value, and no shares of preferred stock. As of the date
hereof, 300,000 of such common shares of PTS were issued
and outstanding. No shares have been registered under
state or federal securities laws. As of the Closing Date,
all of the issued and outstanding shares of common stock
of PTS are validly issued, fully paid and nonassessable.
5.3 No Conflict as to PTS. Neither the execution and delivery
of this Agreement nor the consummation of the sale of the
PTS Shares to ELTI will (a) violate any provision of the
certificate of incorporation or by-laws of PTS or (b)
violate, be in conflict with, or constitute a default (or
an event which, with notice or lapse of time or both,
would constitute a default) under any agreement to which
PTS is a party or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court
or other Governmental Body applicable to PTS.
5.4 Ownership of PTS Shares. The delivery of certificates to
ELTI provided in Section 2.2 and the delivery of
certificates to PTS as provided in Section 2.3 will result
in ELTI's immediate acquisition of record and beneficial
ownership of the PTS Shares, free and clear of all
Encumbrances subject to applicable State and Federal
securities laws. There are no outstanding options, rights,
conversion rights, agreements or commitments of any kind
relating to the issuance, sale or transfer of any Equity
Securities or other securities of PTS.
5.5 No Conflict as to PTS and Subsidiaries. Neither the
execution and delivery of this Agreement nor the
consummation of the acquisition of the PTS Shares to ELTI
will (a) violate any provision of the certificate of
incorporation or by-laws (or other governing instrument)
of PTS or any of its Subsidiaries or (b) violate, or be in
conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a
default) under, or result in the termination, of, or
accelerate the performance required by, or excuse
performance by any Person of its obligations under, or
cause the acceleration of the maturity of any debt or
obligation pursuant to, or result in the creation or
imposition of any Encumbrance upon any property or assets
of PTS or any of its Subsidiaries under, any material
agreement or commitment to which PTS or any of its
Subsidiaries is a party or by which any of their
respective property or assets is bound, or to which any of
the property or assets of PTS or any of its Subsidiaries
is subject, or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court
or other Governmental Body applicable to PTS or any of its
Subsidiaries except, in the case of violations, conflicts,
defaults, terminations, accelerations or Encumbrances
described in clause (b) of this Section 5.5, for such
matters which are not likely to have a material adverse
effect on the business or financial condition of PTS and
its Subsidiaries, taken as a whole.
5.6 Consent and Approvals of Governmental Authorities. Except
with respect to applicable State and Federal securities
laws, no consent, approval or authorization of, or
declaration, filing or registration with, any Governmental
Body is required to be made or obtained by PTS or ELTI or
any of its Subsidiaries in connection with the execution,
delivery and performance of this Agreement by PTS or the
consummation of the acquisition of the PTS Shares to ELTI.
5.7 Other Consents. No consent of any Person is required to be
obtained by PTS or ELTI prior to the execution, delivery
and performance of this Agreement or the consummation of
the acquisition of the PTS Shares to ELTI, including, but
not limited to, consents from parties to leases or other
agreements or commitments, except for any consent which
the failure to obtain would not be likely to have a
material adverse effect on the business and financial
condition of PTS or ELTI.
5.8 Financial Statements. PTS has delivered to ELTI
consolidated balance sheets of PTS and its Subsidiaries as
at December 31, 1999, and statements of income and changes
in financial position for the period then ended. Such PTS
Financial Statements and notes fairly present the
consolidated financial condition and results of operations
of PTS and its Subsidiaries as at the respective dates
thereof and for the periods therein.
5.9 Title to Properties. Either PTS or one of its Subsidiaries
owns all the material properties and assets that they
purport to own (real, personal and mixed, tangible and
intangible), including, without limitation, all the
material properties and assets reflected in the PTS
Financial Statements (except for property sold since the
date of the PTS Financial Statements in the ordinary
course of business or leased under capitalized leases),
and alI the material properties and assets purchased or
otherwise acquired by PTS or any of its Subsidiaries since
the date of the PTS Financial. Statements. All properties
and assets reflected in the PTS Financial Statements are
free and clear of all material Encumbrances and are not,
in the case of real property, subject to any material
rights of way, building use restrictions, exceptions,
variances, reservations or limitations of any nature
whatsoever except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the
PTS Financial Statements as securing specified liabilities
or obligations, with respect to which no default (or event
which, with notice or lapse of time or both, would
constitute a default) exists, and all of which are listed
in the PTS Disclosure Letter, (b) mortgages or security
interests incurred in connection with the purchase of
property or assets after the date of the PTS Financial
Statements (such mortgages and security interests being
limited to the property or assets so acquired), with
respect to which no default (or event which, with notice
or lapse of time or both, would constitute a default)
exists, (c) as to real property, (i) imperfections of
title, if any, none of which materially detracts from the
value or impairs the use of the property subject thereto,
or impairs the operations of PTS or any of its
Subsidiaries and (ii) zoning laws that do not impair the
present or anticipated use of the property subject
thereto, and (d) liens for current taxes not yet due. The
properties and assets of PTS and its Subsidiaries include
all rights, properties and other assets necessary to
permit PTS and its Subsidiaries to conduct PTS's business
in all material respects in the same manner as it is
conducted on the date of this Agreement.
5.10 Buildings, Plants and Equipment. The buildings, plants,
structures and material items of equipment and other
personal property owned or leased by PTS or its
Subsidiaries are, in all respects material to the business
or financial condition of PTS and its Subsidiaries, taken
as a whole, in good operating condition and repair
(ordinary wear and tear excepted) and are adequate in all
such respects for the purposes for which they are being
used. PTS has not received notification that it or any of
its Subsidiaries is in violation of any applicable
building, zoning, anti-pollution, health, safety or other
law, ordinance or regulation in respect of its buildings,
plants or structures or their operations, which violation
is likely to have a material adverse effect on the business
or financial condition of PTS and its Subsidiaries, taken
as a whole or which would require a payment by PTS or ELTI
or any of their subsidiaries in excess of $2,000 in the
aggregate, and which has not been cured.
5.11 No Condemnation or Expropriation. Neither the whole nor any
portion of the property or leaseholds owned or held by PTS
or any of its Subsidiaries is subject to any governmental
decree or order to be sold or is being condemned,
expropriated or otherwise taken by any Governmental Body or
other Person with or without payment of compensation
therefor, which action is likely to have a material adverse
effect on the business or financial condition of ELTI and
its Subsidiaries, taken as a whole.
5.12 Litigation. There is no action, suit, inquiry, proceeding
or investigation by or before any court or Governmental
Body pending or threatened in writing against or involving
PTS or any of its Subsidiaries which is likely to have a
material adverse effect on the business or financial
condition of PTS, ELTI and any of their Subsidiaries, taken
as whole, or which would require a payment by PTS or its
subsidiaries in excess of $2,000 in the aggregate or which
questions or challenges the validity of this Agreement.
Neither PTS nor any or its Subsidiaries is subject to any
judgment, order or decree that is likely to have a material
adverse effect on the business or financial condition of
PTS, ELTI or any of their Subsidiaries, taken as a whole,
or which would require a payment by PTS or its subsidiaries
in excess of $2,000 in the aggregate.
5.13 Absence of Certain Changes. Except as set forth in Section
5.13 of the PTS Disclosure Letter, since the date of the PTS
Financial Statements, neither PTS nor any of its
Subsidiaries has;
a. suffered the damage or destruction of any of its
properties or assets (whether or not covered by
insurance) which is materially adverse to the business
or financial condition of PTS and its Subsidiaries,
taken as a whole, or made any disposition of any of its
material properties or assets other than in the
ordinary course of business;
b. made any change or amendment in its certificate of
incorporation or by-laws, or other governing
instruments;
c. issued or sold any Equity Securities or other
securities, acquired, directly or indirectly, by
redemption or otherwise, any such Equity Securities,
reclassified, split-up or otherwise changed any such
Equity Security, or granted or entered into any
options, warrants, calls or commitments of any kind
with respect thereto;
d. organized any new Subsidiary or acquired any Equity
Securities of any Person, or any equity or ownership
interest in any business;
e. borrowed any funds or incurred, or assumed or become
subject to, whether directly or by way of guarantee or
otherwise, any obligation or liability with respect to
any such indebtedness for borrowed money;
f. paid, discharged or satisfied any material claim,
liability or obligation (absolute, accrued, contingent
or otherwise), other than in the ordinary course of
business;
g. prepaid any material obligation having a maturity of
more than 90 days from the date such obligation was
issued or incurred;
h. canceled any material debts or waived any material
claims or rights, except in the ordinary course of
business;
i. disposed of or permitted to lapse any rights to the use
of any material patent or registered trademark or
copyright or other intellectual property owned or used
by it;
j. granted any general increase in the compensation of
officers or employees (including any such increase
pursuant to any employee benefit plan);
k. purchased or entered into any contract or commitment to
purchase any material quantity of raw materials or
supplies, or sold or entered into any contract or
commitment to sell any material quantity of property or
assets, except (i) normal contracts or commitments for
the purchase of, and normal purchases of, raw materials
or supplies, made in the ordinary course business, (11)
normal contracts or commitments for the sale of, and
normal sales of, inventory in the ordinary course of
business, and (iii) other contracts, commitments,
purchases or sales in the ordinary course of business;
l. made any capital expenditures or additions to property,
plant or equipment or acquired any other property or
assets (other than raw materials and supplies) at a
cost in excess of $25,000 in the aggregate;
m. written off or been required to write off any notes or
accounts receivable in an aggregate amount in excess of
$2,000;
n. written down or been required to write down any
inventory in an aggregate amount in excess of $ 2,000;
o. entered into any collective bargaining or union
contract or agreement; or
p. other than the ordinary course of business, incurred
any liability required by generally accepted accounting
principles to be reflected on a balance sheet and
material to the business or financial condition of PTS
and its subsidiaries taken as a whole.
5.14 No Material Adverse Change. Since the date of the PTS
Financial Statements, there has not been any material
adverse change in the business or financial condition of
PTS.
5.15 Contracts and Commitments. Except as set forth in Section
5.15 of the PTS Disclosure Letter, neither PTS nor any of
its Subsidiaries is a party to any:
a. Contract or agreement (other than purchase or sales
orders entered into in the ordinary course of business)
involving any liability on the part of PTS or one of
its Subsidiaries of more than $25,000 and not
cancelable by PTS or the relevant Subsidiary (without
liability to PTS or such Subsidiary) within 60 days;
b. Except with respect to the lease on its business
location, lease of personal property involving annual
rental payments in excess of $25,000 and not cancelable
by PTS or the relevant Subsidiary (without liability to
PTS or such Subsidiary) within 90 days;
c. Except with respect to the options referenced above,
Employee bonus, stock option or stock purchase,
performance unit, profit sharing, pension, savings,
retirement, health, deferred or incentive compensation,
insurance or other material employee benefit plan (as
defined in Section 2(3) of ERISA) or program for any of
the employees, former employees or retired employees of
PTS or any of its Subsidiaries;
d. Commitment, contract or agreement that is currently
expected by the management of PTS to result in any
material loss upon completion or performance thereof;
e. Contract, agreement or commitment that is material to
the business of PTS and its Subsidiaries, taken as a
whole, with any officer, employee, agent, consultant,
advisor, salesman, sales representative, value added
reseller, distributor or dealer; or
f Employment agreement or other similar agreement that
contains any severance or termination pay, liabilities
or obligations.
All such contracts and agreements are in full force and
effect. Neither PTS nor any or its Subsidiaries is in breach
of, in violation of or in default under, any agreement,
instrument, indenture, deed of trust, commitment, contract
or other obligation of any type to which PTS or any of its
Subsidiaries is a party or is or may be bound that relates
to the business of PTS or any of its Subsidiaries or to
which any of the assets or properties of PTS or any of its
Subsidiaries is subject, the effect of which breach,
violation or default is likely to materially and adversely
affect the business or financial condition of PTS and its
Subsidiaries, taken as a whole. ELTI has not guaranteed or
assumed and specifically does not guarantee or assume any
obligations of PTS or any of its Subsidiaries.
5.16 Labor Relations. Neither PTS nor any of its Subsidiaries is
a party to any collective bargaining agreement. Except for
any matter which is not likely to have a material adverse
effect on the business or financial condition of PTS and its
Subsidiaries, taken as a whole, (a) PTS and each of its
Subsidiaries is in compliance with all applicable laws
respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not
engaged in any unfair labor practice, (b) there is no unfair
labor practice complaint against PTS or any of its
Subsidiaries pending before the National Labor Relations
Board, (c) there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against PTS or any
of its Subsidiaries, (d) no representation question exists
respecting the employees of PTS or any of its Subsidiaries,
(e) neither PTS nor any of its Subsidiaries has experienced
any strike, work stoppage or other labor difficulty, and (f)
no collective bargaining agreement relating to employees of
PTS or any of its Subsidiaries is currently being
negotiated.
5.17 Employee Benefit Plans. Section 5.16 of the PTS Disclosure
Letter contains a list of all material employee pension and
welfare benefit plans covering employees of PTS and its
Subsidiaries. No listed plan is (1) a multi-employer plan as
defined in Section 3(37) of ERISA, or (2) a defined benefit
plan as defined in Section 3(35) of ERISA, any listed
individual account pension plan is duly qualified as tax
exempt under the applicable sections of the Code, each
listed benefit plan and related funding arrangement, if any,
has been maintained in all material respects in compliance
with its terms and the provisions of ERISA and the Code, and
the PTS Disclosure Letter also lists all material management
incentive plans and all material employment contracts or
severance arrangements pertaining to one or more specific
employees.
5.18 Compliance with Law. The operations of PTS and its
Subsidiaries have been conducted in accordance with all
applicable laws and regulations of all Governmental Bodies
having jurisdiction over them, except for violations thereof
which are not likely to have a material adverse effect on
the business or financial condition of PTS and its
Subsidiaries, taken as a whole, or which would not require a
payment by PTS or its Subsidiaries in excess of $2,000 in
the aggregate, or which have been cured. Neither PTS nor any
of its Subsidiaries has received any notification of any
asserted present or past failure by it to comply with any
such applicable laws or regulations. PTS and its
Subsidiaries have all material licenses, permits, orders or
approvals from the Governmental Bodies required for the
conduct of their businesses, and are not in material
violation of any such licenses, permits, orders and
approvals. All such licenses, permits, orders and approvals
are in full force and effect, and no suspension or
cancellation of any thereof has been threatened.
5.19 Tax Matters.
a. PTS and each of its Subsidiaries (1) has filed all
nonconsolidated and noncombined Tax Returns and all
consolidated or combined Tax Returns that include only
PTS and/or its Subsidiaries and not Seller or its other
Affiliates (for the purposes of this Section 5.19, such
tax Returns shall be considered nonconsolidated and
noncombined Tax Returns) required to be filed through
the date hereof and has paid any Tax due through the
date hereof with respect to the time periods covered by
such nonconsolidated and noncombined Tax Returns and
shall timely pay any such Taxes required to be paid by
it after the date hereof with respect to such Tax
Returns and (2) shall prepare and timely file all such
nonconsolidated and noncombined Tax Returns required to
be filed after the date hereof and through the Closing
Date and pay all Taxes required to be paid by it with
respect to the periods covered by such Tax Returns; (B)
all such Tax Returns filed pursuant to clause (A) after
the date hereof shall, in each case, be prepared and
filed in a manner consistent in all material -respects
(including elections and accounting methods and
conventions) with such Tax Return most recently filed in
the relevant jurisdiction prior to the date hereof,
except as otherwise required by law or regulation. Any
such Tax Return filed or required to be filed after the
date hereof shall not reflect any new elections or the
adoption of any new accounting methods or conventions or
other similar items, except to the extent such
particular reflection or adoption is required to comply
with any law or regulation.
b. All consolidated or combined Tax Returns (except those
described in subparagraph (a) above) required to be
filed by any person through the date hereof that are
required or permitted to include the income, or reflect
the activities, operations and transactions, of PTS or
any of its Subsidiaries for any taxable period have been
timely filed, and the income, activities, operations and
transactions of PTS and Subsidiaries have been properly
included and reflected thereon. PTS shall prepare and
file, or cause to be prepared and filed, all such
consolidated or combined Tax Returns that are required
or permitted to include the income, or reflect the
activities, operations and transactions, of PTS or any
Subsidiary, with respect to any taxable year or the
portion thereof ending on or prior to the Closing Date,
including, without limitation, PTS's consolidated
federal income tax return for such taxable years. PTS
will timely file a consolidated federal income tax
return for the taxable year ended December 31, 1999 and
such return shall include and reflect the income,
activities, operations and transactions of PTS and
Subsidiaries for the taxable period then ended, and
hereby expressly covenants and agrees to file a
consolidated federal income tax return, and to include
and reflect thereon the income, activities, operations
and transactions of PTS and Subsidiaries for the taxable
period through the Closing Date. All Tax Returns filed
pursuant to this subparagraph (b) after the date hereof
shall, in each case, to the extent that such Tax Returns
specifically relate to PTS or any of its Subsidiaries
and do not generally relate to matters affecting other
members of PTS's consolidated group, be prepared and
filed in a manner consistent in all material respects
(including elections and accounting methods and
conventions) with the Tax Return most recently filed in
the relevant jurisdictions prior to the date hereof,
except as otherwise required by law or regulation. PTS
has paid or will pay all Taxes that may now or hereafter
be due with respect to the taxable periods covered by
such consolidated or combined Tax Returns.
c. Neither PTS nor any of its subsidiaries has agreed, or
is required, to make any adjustment (x) under Section
481(a) of the Code by reason, of a change in accounting
method or otherwise or (y) pursuant to any provision of
the Tax Reform Act of 1986, the Revenue Act of 1987 or
the Technical and Miscellaneous Revenue Act of 1988.
d. Neither PTS nor any of its Subsidiaries or any
predecessor or Affiliate of the foregoing has, at any
time, filed a consent under Section 341(f)(1) of the
Code, or agreed under Section 341(f)(3) of the Code, to
have the provisions of Section 341(f)(2) of the Code
apply to any sale of its stock.
e. There is no (nor has there been any request for an)
agreement, waiver or consent providing for an extension
of time with respect to the assessment of any Taxes
attributable to PTS or its Subsidiaries, or their assets
or operations and no power of attorney granted by PTS or
any of its Subsidiaries with respect to any Tax matter
is currently in force.
f There is no action, suit, proceeding, investigation,
audit, claim, demand, deficiency or additional
assessment in PTS, pending or threatened against or with
respect to any Tax attributable to PTS, its Subsidiaries
or their assets or operations.
g. Except as set forth in the PTS Disclosure Letter, all
amounts required to be withheld as of the Closing Date
for Taxes or otherwise have been withheld and paid when
due to the appropriate agency or authority.
h. No property of PTS is "tax-exempt use property" within
the meaning of Section 168(h) of the Code nor property
that PTS and/or its Subsidiaries will be required to
treat as being owned by another person pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954,
as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to ELTI true
and complete copies of all income Tax Returns (or with
respect to consolidated or combined returns, the portion
thereof) and any other Tax Returns requested by ELTI as
may be relevant to PTS, its Subsidiaries, or their
assets or operations for any and all periods ending
after December 31, 1998, or for any Tax years which are
subject to audit or investigation by any taxing
authority or entity.
j. There is no contract, agreement, plan or arrangement
including but not limited to the provisions of this
Agreement, covering any employee or former employee of
PTS or its Subsidiaries that, individually or
collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Section
280G or 162 of the Code.
5.20 Environmental Matters.
a. At all times prior to the date hereof, PTS and its
Subsidiaries have complied in all material respects
with applicable environmental laws, orders,
regulations, rules and. ordinances relating to the
Properties (as hereinafter defined), the violation of
which would have a material adverse effect on the
business or financial condition of PTS and its
Subsidiaries, taken as a whole, or which would require
a payment by PTS or' its Subsidiaries in excess of
$2,000 in the aggregate, and which have been duly
adopted, imposed or promulgated by any legislative,
executive, administrative or judicial body or officer
of any Governmental Body.
b. The environmental licenses, permits and authorizations
that are material to the operations of PTS and its
Subsidiaries, taken as a whole, are in full force and
effect.
c. Neither PTS nor any of its Subsidiaries has released or
caused to be released on or about the properties
currently owned or leased by PTS or any of its
Subsidiaries (the "Properties") any (i) pollutants,
(ii) contaminants, (iii) "Hazardous Substances," as
that term is defined in Section 101(14) of the
Comprehensive Environmental Response Act, as amended or
(iv) "Regulated Substances," as that term in defined in
Section 9001 of the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., as amended, which
would be required to be remediated by any governmental
agency with jurisdiction over the Properties under the
authority of laws, regulations and ordinances as in
effect and currently interpreted on the date hereof,
which remediation would have a material adverse effect
on the business or financial condition of PTS and its
Subsidiaries, taken as a whole.
5.21 Brokers or Finders. No Brokers or Finders have been used in
this transaction.
5.22 Absence of Certain Commercial Practices. Neither PTS nor any
of its Subsidiaries has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item
of property, however characterized, to any finder, agent,
government official or other party, in the United States or
any other country, which is in any manner related to the
business or operations of PTS or its Subsidiaries, which PTS
or one of its Subsidiaries knows or has reason to believe to
have been illegal under any federal, state or local laws of
the United States or any other country having jurisdiction;
and neither PTS nor any of its Subsidiaries has
participated, directly or indirectly, in any boycotts or
other similar practices affecting any of its actual or
potential shareholders in violation of any applicable law or
regulation.
5.23 Transactions with Directors and Officers. Except as set
forth in Section 5.23 of the PTS Disclosure Letter, PTS and
its Subsidiaries do not engage in business with any Person
in which any of PTS' directors or officers has a material
equity interest. No director or officer of PTS owns any
property, asset or right which is material to the business
of PTS and its Subsidiaries, taken as a whole.
5.24 Borrowing and Guarantees. Except as set forth in Section
5.24 of the PTS Disclosure Letter, PTS and its Subsidiaries
(a) do not have any indebtedness for borrowed money, (b) are
not lending or committed to lend any money (except for
advances to employees in the ordinary course of business),
and (c) are not guarantors or sureties with respect to the
obligations of any Person.
6. Representations and Warranties of ELTI
ELTI represents and warrants to PTS that, to the Knowledge of
ELTI (which limitation shall not apply to Section 6.3), and
except as set forth in the ELTI Disclosure Letter:
6.1 Organization of ELTI; Authorization. ELTI is a corporation
duly organized, validly existing and in good standing under
the laws of Nevada with full corporate power and authority
to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by
all necessary corporate action of ELTI arid this Agreement
constitutes a valid and binding obligation of ELTI,
enforceable against it in accordance with its terms.
6.2 Capitalization. The authorized capital stock of ELTI
consists of 25,000,000 shares of common stock, par value
$.001 per share, and no shares of preferred stock. As of
the date of this Agreement, ELTI has 7,541,796 shares of
common stock issued and outstanding. As of the Closing
Date, all of the issued and outstanding shares of common
stock of ELTI are validly issued, fully paid and non-
assessable and they are not and as of the Closing Date
there will not be outstanding any other warrants, options
or other agreements on the part of ELTI obligating ELTI to
issue any additional shares of common or preferred stock or
any of its securities of any kind. ELTI will not issue any
shares of capital stock from the date of this Agreement
through the Closing Date.
6.3 No Conflict as to PTS. Neither the execution and delivery of
this Agreement nor the consummation of the sale of the ELTI
Shares to PTS will (a) violate any provision of the
certificate of incorporation or by-laws of ELTI, or (b)
violate, be in conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would
constitute a default) under any agreement to which ELTI is a
party or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or other
Governmental Body applicable to ELTI.
6.4 Ownership of ELTI Shares. The delivery of certificates to
PTS provided in Section 2.3 will result in PTS's immediate
acquisition of record and beneficial ownership of the ELTI
Shares, free and clear of all Encumbrances other than as
required by Federal and State securities laws. Other than
the Put Option described above, there are no outstanding
options, rights, conversion rights, agreements or
commitments of any kind relating to the issuance, sale or
transfer of any Equity Securities or other securities of
ELTI. Nothing in this Agreement shall be deemed to be a
representation or warranty as to the tradability of any of
the ELTI Shares under Federal or any States' security laws.
6.5 No Conflict as to ELTI and Subsidiaries. Neither the
execution and delivery of this Agreement nor the consummation
of the of the instant agreement will (a) violate any
provision of the certificate of incorporation or by-laws (or
other governing instrument) of ELTI or any of its
Subsidiaries or (b) violate, or be in conflict with, or
constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required
by, or excuse performance by any Person of any of its
obligations under, or cause the acceleration of the maturity
of any debt or obligation pursuant to, or result in the
creation or imposition of any Encumbrance upon any property
or assets of ELTI or any of its Subsidiaries under, any
material agreement or commitment to which ELTI or any of its
Subsidiaries is a party or by which any of their respective
property or assets is bound, or to which any of the property
or assets of ELTI or any of its Subsidiaries is subject, or
(c) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or other Governmental
Body applicable to ELTI or any of its Subsidiaries except, in
the case of violations, conflicts, defaults, termination's,
accelerations or Encumbrances described in clause (b) of this
Section. 6.5, for such matters which are not likely to have a
material adverse effect on the business or financial
condition of ELTI and its Subsidiaries, taken as a whole.
6.6 Consents and Approvals of Governmental Authorities. No
consent, approval or authorization of, or declaration, filing
or registration with, any Governmental Body is required to be
made or obtained by ELTI or PTS or any of either of their
Subsidiaries in connection with the execution, delivery and
performance of this Agreement by ELTI or the consummation of
the contemplated transaction.
6.7 Other Consents. No consent of any Person is required to be
obtained by PTS or ELTI to the execution, delivery and
performance of this Agreement or the consummation of the
contemplated transaction including, but not limited to,
consents from parties to leases or other agreements or
commitments, except for any consent which the failure to
obtain would not be likely to have a material adverse effect
on the business and financial condition of PTS or ELTI.
6.8 Financial Statements. ELTI has delivered to PTS consolidated
balance sheets of ELTI and its Subsidiaries as at December
31, 2000 and December 31, 1999, and statements of income and
changes in financial position for each of the years in the
two-year period then ended, together with the report thereon
of ELTI's independent accountant (the "ELTI Financial
Statements"). Such ELTI Financial Statements and notes fairly
present the consolidated financial condition and results of
operations of ELTI and its Subsidiaries as at the respective
dates thereof and for the periods therein referred to, all in
accordance with generally accepted United States accounting
principles consistently applied throughout the periods
involved, except as set forth in the notes thereto.
6.9 Title to Properties. Either ELTI or one of its Subsidiaries
owns all the material properties and assets that they purport
to own (real, personal and mixed, tangible and intangible),
including, without limitation, all the material properties
and assets reflected in the ELTI Financial Statements and all
the material properties and assets purchased or otherwise
acquired by ELTI or any of its Subsidiaries since the date of
the ELTI Financial Statements. All properties and assets
reflected in the ELTI Financial Statements are free and clear
of all material Encumbrances and are not, in the case of real
property, subject to any material rights of way, building use
restrictions, exceptions, variances, reservations or
limitations of any nature whatsoever except, with respect to
all such properties and assets, (a) mortgages or security
interests shown on the ELTI Financial Statements as securing
specified liabilities or obligations, with respect to which
no default (or event which, with notice or lapse of time or
both, would constitute a default) exists, and all of which
are listed in the ELTI Disclosure Letter, (b) mortgages or
security interests incurred in connection with the purchase
of property or assets after the date of the ELTI Financial
Statements (such mortgages and security interests being
limited to the property or assets so acquired), with respect
to which no default (or event which, with notice or lapse of
time or both, would constitute a default) exists, (c) as to
real property, (i) imperfections of title, if any, none of
which materially detracts from the value or impairs the use
of the property subject thereto, or impairs the operations of
ELTI or any of its Subsidiaries and (ii) zoning laws that do
not impair the present or anticipated use of the property
subject thereto, and (d) liens for current taxes not yet due.
The properties and assets of ELTI and its Subsidiaries
include all rights, properties and other assets necessary to
permit ELTI and its Subsidiaries to conduct ELTI's business
in all material respects in the same manner as it is
conducted on the date of this Agreement.
6.10 Buildings, Plants and Equipment. The buildings, plants,
structures and material items of equipment and other personal
property owned or leased by ELTI or its Subsidiaries are, in
all respects material to the business or financial condition
of ELTI and its Subsidiaries, taken as a whole, in good
operating condition and repair (ordinary wear and tear
excepted) and are adequate in all such respects for the
purposes for which they are being used. ELTI has not received
notification that it or any of its Subsidiaries is in
violation of any applicable building, zoning, anti-pollution,
health, safety or other law, ordinance or regulation in
respect of its buildings, plants or structures or their
operations, which violation is likely to have a material
adverse effect on the business or financial condition of ELTI
and its Subsidiaries, taken as a whole or which would require
a payment by PTS or ELTI or any of their subsidiaries in
excess of $2,000 in the aggregate, and which has not been
cured.
6.11 No Condemnation or Expropriation. Neither the whole nor
any portion of the property or leaseholds owned or held by
ELTI or any of its Subsidiaries is subject to any
governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any
Governmental Body or other Person with or without payment of
compensation therefore, which action is likely to have a
material adverse effect on the business or financial
condition of PTS and its Subsidiaries, taken as a whole.
6.12 Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or
Governmental Body pending or threatened in writing against or
involving ELTI or any of its Subsidiaries which is likely to
have a material adverse effect on the business or financial
condition of PTS, ELTI and any of their Subsidiaries, taken
as whole, or which would require a payment by ELTI or its
subsidiaries in excess of $2,000 in the aggregate or which
questions or challenges the validity of this Agreement.
Neither ELTI nor any or its Subsidiaries is subject to any
judgment, order or decree that is likely to have a material
adverse effect on the business or financial condition of PTS,
ELTI or any of their Subsidiaries, taken as a whole, or which
would require a payment by ELTI or its subsidiaries in excess
of $2,000 in the aggregate.
6.13 Absence of Certain Changes. Since the date of the ELTI
Financial Statements, neither ELTI nor any of its
Subsidiaries has:
a. suffered the damage or destruction of any of its
properties or assets (whether or not covered by
insurance) which is materially adverse to the business
or financial condition of ELTI and its Subsidiaries,
taken as a whole, or made any disposition of any of its
material properties or assets other than in the
ordinary course of business;
b. made any change or amendment in its certificate of
incorporation or by-laws, or other governing
instruments;
c. issued or sold any Equity Securities or other
securities, acquired, directly or indirectly, by
redemption or otherwise, any such Equity Securities,
reclassified, split-up or otherwise changed any such
Equity Security, or granted or entered into any
options, warrants, calls or commitments of any kind
with respect thereto;
d. organized any new Subsidiary or acquired any Equity
Securities of any Person or any equity or ownership
interest in any business;
e. borrowed any funds or incurred, or assumed or become
subject to, whether directly or by way of guarantee or
otherwise, any obligation or liability with respect to
any such indebtedness for borrowed money;
f. paid, discharged or satisfied any material claim,
liability or obligation (absolute, accrued, contingent
or otherwise), other than in the ordinary course of
business;
g. prepaid any material obligation having a maturity of
more than 90 days from the date such obligation was
issued or incurred;
h. canceled any material debts or waived any material
claims or rights, except in the ordinary course of
business;
i. disposed of or permitted to lapse any rights to the use
of any material patent or registered trademark or
copyright or other intellectual property owned or used
by it;
j. granted any general increase in the compensation of
officers or employees (including any such increase
pursuant to any employee benefit plan);
k. purchased or entered into any contract or commitment to
purchase any material quantity of raw materials or
supplies, or sold or entered into any contract or
commitment to sell any material quantity of property or
assets, except (i) normal contracts or commitments for
the purchase of, and normal purchases of, raw materials
or supplies, made in the ordinary course business, (ii)
normal contracts or commitments for the sale of, and
normal sales of, inventory in the ordinary course of
business, and (iii) other contracts, commitments,
purchases or sales in the ordinary course of business;
l. made any capital expenditures or additions to property,
plant or equipment or acquired any other property or
assets (other than raw materials and supplies) at a
cost in excess of $2,000 in the aggregate;
m. written off or been required to write off any notes or
accounts receivable in an aggregate amount in excess of
$2,000;
n. written down or been required to write down any
inventory in an aggregate amount in excess of $ 2,000;
o. entered into any collective bargaining or union
contract or agreement; or
p. other than the ordinary course of business, incurred
any liability required by generally accepted accounting
principles to be reflected on a balance sheet and
material to the business or financial condition of ELTI
and its subsidiaries taken as a whole.
6.14 No Material Adverse Change. Since the, date of the ELTI
Financial Statements, there has not been any material adverse
change in the business or financial condition of ELTI and its
Subsidiaries taken, as a whole, other than changes resulting
from economic conditions prevailing in the United States
precious coins, collectibles and metals industry.
6.15 Contracts and Commitments. Neither ELTI nor any of its
Subsidiaries is party to any:
a. Contract or agreement (other than purchase on sales
orders entered into in the ordinary course of business)
involving any liability on the part of ELTI or one of
its Subsidiaries of more than $2,000 and not cancelable
by ELTI or the relevant Subsidiary (without liability
to ELTI or such Subsidiary) within 60 days;
b. Lease of personal property involving annual rental
payments in excess of $2,000 and not cancelable by ELTI
or the relevant Subsidiary (without liability to ELTI
or such Subsidiary) within 90 days;
c. Commitment, contract or agreement that is currently
expected by the management of ELTI to result in any
material loss upon completion or performance thereof;
d. Contract, agreement or commitment that is material to
the business of ELTI and its Subsidiaries, taken as a
whole, with any officer, employee, agent, consultant,
advisor, salesman, sales representative , value added
reseller, distributor or dealer; or
e. Employment agreement or other similar agreement that
contains any severance or termination pay, liabilities
or obligations.
All such contracts and agreements are in full force and effect.
Neither ELTI nor any or its Subsidiaries is in breach of, in
violation of or in default under, any agreement, instrument,
indenture, deed of trust, commitment, contract or other
obligation of any type to which ELTI or any of its Subsidiaries
is a party or is or may be bound as it relates to the business of
ELTI or any of its Subsidiaries or to which I any of the assets
or properties of ELTI or any of its Subsidiaries is subject, the
effect of which breach, violation or default is likely to
materially and adversity affect the business or financial
condition of ELTI and its Subsidiaries, taken as a whole.
6.16 Labor Relations. Neither ELTI nor any of its
Subsidiaries is a party to any collective bargaining
agreement. Except for any matter which is not likely to have
a material adverse effect on the business or financial
condition of ELTI and its Subsidiaries, taken as a whole, (a)
ELTI and each of its Subsidiaries is in compliance with all
applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice, (b)
there is no unfair labor practice complaint against ELTI or
any of its Subsidiaries pending before the National Labor
Relations Board, (c) there is no labor strike, dispute,
slowdown or stoppage actually pending or threatened against
ELTI or any of its Subsidiaries, (d) no representation
question exists respecting the employees of ELTI or any of
its Subsidiaries, (e) neither ELTI nor any of its
Subsidiaries has experienced any strike, work stoppage or
other labor difficulty, and (f) no collective bargaining
agreement relating to employees of ELTI or any of its
Subsidiaries is currently being negotiated.
6.17 Employee Benefit Plans. Section 6.17 of the ELTI
Disclosure Letter contains a list of all material employee
pension and welfare benefit plans covering employees of ELTI
and its Subsidiaries. No listed plan is (1) a multi-employer
plan as defined in Section 3(37) of ERISA, or (2) a defined
benefit plan as defined in Section 3(35) of ERISA, any listed
individual account pension plan is duly qualified as tax
exempt under the applicable sections of the Code, each listed
benefit plan and related funding arrangement, if any, has
been maintained in all material respects in compliance with
its terms and the provisions of ERISA and the Code, and the
ELTI Disclosure Letter also lists all material management
incentive plans and all material employment contracts or
severance arrangements pertaining to one or more specific
employees.
6.18 Compliance with Law. The operations of ELTI and its
Subsidiaries have been conducted in accordance with all
applicable laws and regulations of all Governmental Bodies
having jurisdiction over them, except for violations thereof
which are not likely to have a material adverse effect on the
business or financial condition of ELTI and its Subsidiaries,
taken as a whole, or which would not require a payment by
ELTI or its Subsidiaries in excess of $2,000 in the
aggregate, or which have been cured. Neither ELTI nor any of
its Subsidiaries has received any notification of any
asserted present or past failure by it to comply with any
such applicable laws or regulations. ELTI and its
Subsidiaries have all material licenses, permits, orders or
approvals from the Governmental Bodies required for the
conduct of their businesses, and are not in material
violation of any such licenses, permits, orders and
approvals. All such licenses, permits, orders and approvals
are in full force and effect, and no suspension or
cancellation of any thereof has been threatened.
6.19 Tax Matters.
a. ELTI and each of its Subsidiaries (1) has filed all
nonconsolidated and noncombined Tax Returns and all
consolidated or combined Tax Returns that include only
ELTI and/or its Subsidiaries and not Seller or its
other Affiliates (for the purposes of this Section
6.19, such tax returns shall be considered
nonconsolidated and noncombined Tax Returns) required
to be filed through the date hereof and has paid any
Tax due through the date hereof with respect to the
time periods covered by such nonconsolidated and
noncombined Tax Returns and shall timely pay any such
Taxes required to be paid by it after the date hereof
with respect to such Tax Returns and (2) shall prepare
and timely file all such nonconsolidated and
noncombined Tax Returns required to be filed after the
date hereof and through the Closing Date and pay all
Taxes required to be paid by it with respect to the
periods covered by such Tax Returns; (B) all such Tax
Returns filed pursuant to clause (A) after the date
hereof shall, in each case, be prepared and filed in a
manner consistent in all material respects (including
elections and, accounting methods and conventions) with
such Tax Return most recently filed in the relevant
jurisdiction prior to the date hereof, except as
otherwise required by law or regulation. Any such Tax
Return filed or required to be filed after the date
hereof shall not reflect, any new elections or the
adoption of any new accounting methods or conventions
or other similar items, except to the extent such
particular reflection or adoption is required to comply
with any law or regulation.
b. All consolidated or combined Tax Returns (except those
described in subparagraph (a) above) required to be
filed by any person through the date hereof that are
required or permitted to include the income, or reflect
the activities, operations and transactions, of ELTI or
any of its Subsidiaries for any taxable period have
been timely filed, and the income, activities,
operations and transactions of ELTI and Subsidiaries
have been properly included and reflected thereon. ELTI
shall prepare and file, or cause to be prepared and
filed, all such consolidated or combined Tax Returns
that are required or permitted to include the income,
or reflect the activities, operations and transactions,
of ELTI or any Subsidiary, with respect to any taxable
year or the portion thereof ending on or prior to the
Closing Date, including, without limitation, ELTI's
consolidated federal income tax return for such taxable
years. ELTI will cooperate with PTS to timely file a
consolidated federal income tax return for the taxable
year ended December 31, 1999 and such return shall
include and reflect the income, activities, operations
and transactions of ELTI and Subsidiaries for the
taxable period then ended, and hereby expressly
covenants and agrees to file a consolidated federal
income tax return, and to include and reflect thereon
the income, activities, operations and transactions of
ELTI and Subsidiaries for the taxable period through
the Closing Date. All Tax Returns filed pursuant to
this subparagraph (b) after the date hereof shall, in
each case, to the extent that such Tax Returns
specifically relate to ELTI or any of its Subsidiaries
and do not generally relate to matters affecting other
members of ELTI's consolidated group, be prepared and
filed in a manner consistent in all material respects
(including elections and accounting methods and
conventions) with the Tax Return most recently filed in
the relevant jurisdictions prior to the date hereof,
except as otherwise required by law or regulation. ELTI
has paid or will pay all Taxes that may now or
hereafter be due with respect to the taxable periods
covered by such consolidated or combined Tax Returns.
c. Neither ELTI nor any of its Subsidiaries has agreed, or
is required, to make any adjustment (x) under Section
481(a) of the Code by reason of a change in accounting
method or otherwise or (y) pursuant to any provision of
the Tax Reform Act of 1986, the Revenue Act of 1987 or
the Technical and Miscellaneous Revenue Act of 1988.
d. Neither ELTI nor any of its Subsidiaries or any
predecessor or Affiliate of the foregoing has, at any
time, filed a consent under Section 341(f)(1) of the
Code, or agreed under Section 341(f)(3) of the Code, to
have the provisions of Section 341(f)(2) of the Code
apply to any sale of its stock.
e. There is no (nor has there been any request for an)
agreement, waiver or consent providing for an extension
of time with respect to the assessment of any Taxes
attributable to ELTI or its Subsidiaries, or their
assets or operations and no power of attorney granted
by ELTI or any of its Subsidiaries with respect to any
Tax matter is currently in force.
f. There is no action, suit, proceeding, investigation,
audit, claim, demand, deficiency or additional
assessment in ELTI, pending or threatened against or
with respect to any Tax attributable to ELTI, its
Subsidiaries or their assets or operations.
g. All amounts required to be withheld as of the Closing
Date for Taxes or otherwise have been withheld and paid
when due to the appropriate agency or authority.
h. No property of ELTI is "tax-exempt use property" within
the meaning of Section 168(h) of the Code nor property
that ELTI and/or its Subsidiaries will be required to
treat as being owned by another person pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954,
as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to PTS true
and complete copies of all income Tax Returns (or with
respect to consolidated or combined returns, the
portion thereof) and any other Tax Returns requested by
PTS as may be relevant to ELTI, its Subsidiaries, or
their assets or operations for any and all periods
ending after December 31, 1998, or for any Tax years
which are subject to audit or investigation by any
taxing authority or entity.
There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this
Agreement, covering any employee or former employee of ELTI
or its Subsidiaries that, individually or collectively,
could give rise to the payment of any amount that would not
be deductible pursuant to Section 280G or 162 of the Code.
6.20 Environmental Matters.
a. At all times prior to the date hereof, ELTI and its
Subsidiaries have complied in all material respects
with applicable environmental laws, orders,
regulations, rules and ordinances relating to the
Properties (as hereinafter defined), the violation of
which would have a material adverse effect on the
business or financial condition of ELTI and its
Subsidiaries, taken as a whole, or which would require
a payment by ELTI or its Subsidiaries in excess of
$2,000 in the aggregate, and which have been duly
adopted, imposed or promulgated by any legislative,
executive, administrative or judicial body or officer
of any Governmental Body.
b. The environmental licenses, permits and authorizations
that are material to the operations of ELTI and its
Subsidiaries, taken as a whole, are in full force and
effect.
c. Neither ELTI nor any of its Subsidiaries has released
or caused to be released on or about the properties
currently owned or leased by ELTI or any of its
Subsidiaries (the "Properties") any (i) pollutants,
(ii) contaminants, (iii) "Hazardous Substances," as
that term is defined in Section 101(14) of the
Comprehensive Environmental Response Act, as amended or
(iv) "Regulated Substances," as that term in defined in
Section 9001 of the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., as amended, which
would be required to be remediated by any governmental
agency with jurisdiction over the Properties under the
authority of laws, regulations and ordinances as in
effect and currently interpreted on the date hereof,
which remediation would have a material adverse effect
on the business or financial condition of ELTI and its
Subsidiaries, taken as a whole.
6.21 Brokers or Finders. No brokers or finders have been used
in this transaction.
6.22 Absence of Certain Commercial Practices. Neither ELTI
nor any of its Subsidiaries has, directly or indirectly, paid
or delivered any fee, commission or other sum of money or
item of property, however characterized, to any finder,
agent, government official or other party, in the United
States or any other country, which is in any manner related
to the business or operations of ELTI or its Subsidiaries,
which ELTI or one of its Subsidiaries knows or has reason to
believe to have been illegal under any federal, state or
local laws of the United States or any other country having
jurisdiction; and neither ELTI nor any of its Subsidiaries
has participated, directly or indirectly, in any boycotts or
other similar practices affecting any of its actual or
potential shareholders in violation of any applicable law or
regulation.
6.23 Transactions with Directors and Officers. ELTI and its
Subsidiaries do not engage in business with any Person in
which any of ELTI's directors or officers has a material
equity interest. No director or officer of ELTI owns any
property, asset or right which is material to the business of
ELTI and its Subsidiaries, taken as a whole.
6.24 Borrowing and Guarantees. ELTI and its Subsidiaries (a)
do not have any indebtedness for borrowed money, (b) are not
lending or committed to lend any money (except for advances
to employees in the ordinary course of business), and (c) are
not guarantors or Sureties with respect to the obligations of
any Person.
6.25 Purchase for Investment. ELTI is obtaining the PTS
Shares solely for its own account for the purpose of
investment and not with a view to, or for sale in connection
with, any distribution of any portion thereof in violation of
any applicable securities law.
7. Access and Reporting; Filings With Governmental Authorities;
Other Covenants.
7.1 Access between the date of this Agreement and the Closing
Date. Each of PTS and ELTI shall (a) give to the other and
its authorized representatives reasonable access to all
plants, offices, warehouse and other facilities and
properties of PTS or ELTI, as the case may be, and to its
books and records, (b) permit the other to make inspections
thereof, and (c) cause its officers and its advisors to
furnish the other with such financial and operating data
and other information with respect to the business and
properties of such party and its Subsidiaries and to
discuss with such and its authorized representatives its
affairs and those of its Subsidiaries, all as the other may
from time to time reasonably request.
7.2 Exclusivity. From the date hereof until the earlier of the
Closing or the termination of this Agreement, ELTI shall
not solicit or negotiate or enter into any agreement with
any other Person with respect to or in furtherance of any
proposal for a merger or business combination involving, or
acquisition of any interest in, or (except in the ordinary
course of business) sale of assets by, ELTI, except for the
exchange of the ELTI Shares for the PTS Shares from PTS's
shareholders.
7.3 Publicity. Between the date of this Agreement and the
Closing Date, ELTI and PTS shall discuss and coordinate
with respect to any public filing or announcement or any
internal or private announcement (including any general
announcement to employees) concerning the contemplated
transaction.
7.4 Regulatory Matters. PTS and ELTI shall (a) file with
applicable regulatory authorities any applications and
related documents required to be filed by them in order to
consummate the contemplated transaction and (b) cooperate
with each other as they may reasonably request in
connection with the foregoing.
7.5 Confidentiality. Prior to the Closing Date (or at any time
if the Closing does not occur) each of PTS and ELTI shall
keep confidential and not disclose to any Person (other
than its employees, attorneys, accountants and advisors) or
use (except in connection with the transactions
contemplated hereby) all non-public information obtained
pursuant to Section 7.1. Following the Closing, each of PTS
and ELTI shall keep confidential and not disclose to any
Person (other than its employees, attorneys, accountants
and advisors) or use (except in connection. with preparing
Tax Returns and conducting proceeds relating to Taxes) any
nonpublic information relating to the other. This Section
7.5 shall not be violated by disclosure pursuant to court
order or as otherwise required by law, on condition that
notice of the requirement for such disclosure is given the
other party prior to making any disclosure and the party
subject to such requirement cooperates as the other may
reasonably request in resisting it. If the Closing does not
occur, each of PTS and ELTI shall return to the other, or
destroy, all information it shall have received from the
other in connection with this Agreement and the
transactions contemplated hereby, together with any copies
or summaries thereof or extracts therefrom. Each of PTS and
ELTI shall use their best efforts to cause their respective
representatives, employees, attorneys, accountants and
advisors to whom information is disclosed pursuant to
Section 7.1 to comply with the provisions of this Section
7.5.
8. Conduct of ELTI's Business Prior to the Closing.
8.1 Operation in Ordinary Course. Between the date of this
Agreement and the Closing Date. ELTI shall cause conduct
its businesses in all material respects in the ordinary
course.
8.2 Business Organization. Between the date of this
Agreement and the Closing Date, ELTI shall (a) preserve
substantially intact the business organization of ELTI;
and (b) preserve in all material respects the present
business relationships and good will of ELTI and each of
its Subsidiaries.
8.3 Corporate Organization. Between the date of this
Agreement and the Closing Date, ELTI shall not cause or
permit any amendment of its certificate of incorporation
or by-laws (or other governing instrument) and shall
not:
a. issue, sell or otherwise dispose of any of its
Equity Securities, or create, sell or otherwise
dispose of any options, rights, conversion rights
or other agreements or commitments of any kind
relating to the issuance, sale or disposition of
any of its Equity Securities;
create or suffer to be created any Encumbrance
thereon, or create, sell or otherwise dispose of
any options, rights, conversion rights or other
agreements or commitments of any kind relating to
the sale or disposition of any Equity Securities;
c. reclassify, split up or otherwise change any of
its Equity Securities,
d. be party to any merger, consolidation or other
business combination;
e. sell, lease, license or otherwise dispose of any
of its properties or assets (including, but not
limited to rights with respect to patents and
registered trademarks and copyrights or other
proprietary rights), in an amount which is
material to the business or financial condition of
ELTI and its Subsidiaries, taken as a whole,
except in the ordinary course of business; or
f. organize any new Subsidiary or acquire any Equity
Securities of any Person or any equity or
ownership interest in any business.
8.4 Other Restrictions. Between the date of this Agreement
and the Closing Date, ELTI shall not:
a. borrow any funds or otherwise become subject to,
whether directly or by way of guarantee or
otherwise, any indebtedness for borrowed money;
b. create any material Encumbrance on any of its
material properties or assets;
c. except in the ordinary course of business,
increase in any manner the compensation of any
director or officer or increase in any manner the
compensation of any class of employees;
d. create or materially modify any material bonus,
deferred compensation, pension, profit sharing,
retirement, insurance, stock purchase, stock
option, or other fringe benefit plan, arrangement
(any other employee benefit plan as defined in
section 3(3) of ERISA);
e. make any capital expenditure or acquire any
property or assets;
f enter into any agreement that materially restricts
ELTI, PTS or any of their Subsidiaries from
carrying on business;
g. pay, discharge or satisfy any material claim,
liability or obligation, absolute, accrued,
contingent or otherwise, other than the payment
discharge or satisfaction. in the ordinary course
of business of liabilities or obligations
reflected in the ELTI Financial Statements or
incurred in the ordinary course of business and
consistent with past practice since the date of
the ELTI Financial Statements; or
h. cancel any material debts or waive any material
claims or rights.
9. Definitions.
As used in this Agreement, the following terms have the
meanings specified or referred to in this Section 9.
9.1 "Business Day" - Any day that is not a Saturday or
Sunday or a day on which banks located in the City of
New York are authorized or required to be closed.
9.2 "Code" - The Internal Revenue Code of 1986, as amended.
9.3 "Disclosure Letter" -- A letter dated the date of this
Agreement, executed by either PTS and ELTI, addressed
and delivered to the other and containing information
required by this Agreement and exceptions to the
representations and warranties under this Agreement.
9.4 "Encumbrances" - any security interest, mortgage, lien,
charge, adverse claim or restriction of any kind,
including, but not limited to, any restriction on the
use, voting, transfer, receipt of income or other
exercise of any attributes of ownership, other than a
restriction on transfer arising under Federal or state
securities laws.
9.5 "Equity Securities" See Rule 3a-11-l under the
Securities Exchange Act of 1934.
9.6 "ERISA"- The Employee Retirement Income Security Act of
1974, as amended.
9.7 "Governmental Body" - Any domestic or foreign national,
state or municipal or other local government or multi-
national body (including, but not limited to, the
European Economic Community), any subdivision, agency,
commissioner authority thereof.
9.8 "Knowledge" - Actual knowledge, after reasonable
investigation.
9.9 "Person" - Any individual, corporation, partnership,
joint venture, trust, association, unincorporated
organization, other entity, or Governmental Body.
9.10 "Subsidiary" - With respect to any Person, any
corporation of which securities having the power to
elect a majority of that corporation's Board of
Directors (other than securities having that power only
upon the happening of a contingency that has not
occurred) are held by such Person or one or more of its
Subsidiaries.
10. Termination.
10.1 Termination. This Agreement may be terminated before
the Closing occurs only as follows:
a. By written agreement of PTS and ELTI at any time.
b. By ELTI, by notice to PTS at any time, if one or
more of the conditions specified in Section 4 is
not satisfied at the time at which the Closing (as
it may be deferred pursuant to Section 2.1) would
otherwise occur or if satisfaction of such a
condition is or becomes impossible.
c. By PTS, by notice to ELTI at any time, if one or
more of the conditions specified in Section 3 is
not satisfied at the time at which the Closing (as
it may be deferred pursuant to Section 2.1), would
otherwise occur of if satisfaction of such a
condition is or becomes impossible.
d. By PTS or ELTI, by notice to the other at any time
after _____________, 2001.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall
terminate without any liability or further obligation
of any party to another.
11. Intentionally left blank.
12. Intentionally left blank.
13. Notices. All notices, consents, assignments and other
communications under this Agreement shall be in writing and shall
be deemed to have been duly given when (a) delivered by hand, (b)
sent by telex or facsimile (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt
requested, or (c) received by the delivery service (receipt
requested), in each case to the appropriate addresses, telex
numbers and facsimile numbers set forth below (or to such other
addresses, telex numbers and facsimile numbers as a party may
designate as to itself by notice to the other parties),
(a) If to ELTI:
c/x Xxxxxxx & Xxxxxxxx, Ltd.
000 X. Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
(b) If to PTS, Inc.:
Facsimile No.: (702)
Attention:
14. Miscellaneous.
14.2 Expenses. Each party shall bear its own expenses
incident to the preparation, negotiation, execution and
delivery of this Agreement and the performance of its
obligations hereunder.
14.3 Captions. The captions in this Agreement are for
convenience of reference only and shall not be given any
effect in the interpretation of this agreement,
14.4 No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion
shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence
to that term or any other term of this Agreement. Any
waiver must be in writing.
14.5 Exclusive Agreement; Amendment. This Agreement
supersedes all prior agreements among the parties with
respect to its subject matter with respect thereto and
cannot be changed or terminated orally.
14.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an
original, but all of which together shall constitute the
same instrument.
14.7 Governing Law. This Agreement and (unless otherwise
provided) all amendments hereof and waivers and consents
hereunder shall be governed by the internal law of the
State of Nevada, without regard to the conflicts of law
principles thereof
14.8 Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and
their respective successors and assigns, provided that
neither party may assign. its rights hereunder without
the consent of the other, provided that, after the
Closing, no consent of PTS shall be needed in connection
with any merger or consolidation of ELTI with or into
another entity.
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto
duly authorized, and entered into as of the date first above
written.
