AGREEMENT FOR PURCHASE AND SALE OF STOCK
This Agreement for Purchase and Sale of Stock (this "Agreement") is dated
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_________________ among AMERICAN FIRE RETARDANT CORP., a Nevada Corporation
("Buyer"), having its principal office at 0000 Xxxxxxxxxx Xxxx, Xxxxxx,
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Xxxxxxxxxx 00000; XXXXXX X. XXXXX and XXXXXXX XXXXX ("Shareholders"), residing
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at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000; and ALCHEMCO, INC., a
California Corporation, having its principal office at 00000 Xxxxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000 ("Corporation"). In this Agreement, Shareholders and
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Corporation are collectively referred to as "Selling Parties."
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RECITALS
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A. Shareholders have represented that Shareholders own all the
outstanding stock of Corporation.
B. Buyer desires to purchase from Shareholders, and Shareholders desire
to sell to Buyer, all the outstanding stock of Corporation (the "Shares").
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In consideration of the mutual covenants, agreements, representations, and
warranties contained in this Agreement, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE. Subject to the terms and conditions set forth
in this Agreement, on the closing date, Shareholders will transfer and convey
the Shares to Buyer, and Buyer will acquire the Shares from Shareholders.
1.2 ESCROW. An escrow account has been opened at International City
Escrow, 000 Xxxx Xxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxxxxxxx (escrow number 40060-DM)
(the "Escrow").
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1.3 CONSIDERATION. As payment for the transfer of the Shares by
Shareholders to Buyer, Buyer agrees to pay to Shareholders the following:
(a) A bank cashier's check, payable to the order of XXXXXX X.
XXXXX and XXXXXXX XXXXX in the amount of Two Hundred Fifty Thousand Dollars
($250,000), payable from Escrow upon execution and delivery to Escrow of
this Agreement by all parties.
(b) Buyer's promissory note, dated as of the closing date, in the
principal amount of Two Million Nine Hundred Fifty-Three Thousand Fifty-Six
and Forty-Seven Hundredths Dollars ($2,949,963.33) (the "Promissory Note").
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This Promissory Note shall be in the form of Exhibit A. The Promissory Note
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shall be secured by the Shares pursuant to a Pledge Agreement in the form
of Exhibit B.
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ARTICLE II
SELLING PARTIES' REPRESENTATIONS AND WARRANTIES
Selling Parties, jointly and severally, warrant that, to the best of their
knowledge, except as disclosed in this Agreement or the attached exhibits and
schedules, as of this date:
2.1 ORGANIZATION. Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of California and has all
necessary corporate powers to own its properties and operate its business as now
owned and operated by it. Neither the ownership of its properties nor the nature
of its business requires Corporation to be qualified in any jurisdiction other
than the state of its incorporation.
2.2 CAPITAL STRUCTURE. The authorized capital stock of Corporation
consists of one hundred thousand (100,000) shares of common stock, of which
seven hundred sixty-five (765) shares are issued and outstanding. All the Shares
are validly issued, fully paid, and non-assessable, and such shares have been so
issued in full compliance with all federal and state securities laws. There are
no outstanding subscriptions, options, rights, warrants, convertible securities,
or other agreements or commitments obligating Corporation to issue or to
transfer from treasury any additional shares of its capital stock of any class.
2.3 TITLE TO SHARES. Shareholders are the owners, beneficially and of
record, of all the Shares free and clear of all liens, encumbrances, security
agreements, equities, options, claims, charges, and restrictions. Shareholders
have full power to transfer the Shares to Buyer without obtaining the consent or
approval of any other person or governmental authority
2.4 SUBSIDIARIES. Corporation does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation,
partnership, business, trust, or other entity.
2.5 FINANCIAL STATEMENTS. Exhibit C to this Agreement sets forth
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balance sheets of Corporation as of December 31, 2001, December 31,2002, and
December 31, 2003, as well as the six month period ending June 30, 2004, and the
related statements of income and retained earnings for the three years ending on
those dates. The financial statements in Exhibit C are referred to as the
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financial statements. The financial statements have been prepared consistently
by Corporation throughout the periods indicated, and fairly present the
financial position of Corporation on the respective dates of the balance sheets
included in the financial statements, and the results of its operations for the
respective periods indicated. No representation is made that the financial
statements have been prepared in accordance with generally accepted accounting
principles.
2.6 TAX RETURNS AND AUDITS. Within the times and in the manner
prescribed by law, Corporation has filed all federal, state, and local tax
returns required by law and have paid all taxes, assessments, and penalties
shown to be due and payable on such returns. There are no present disputes
about taxes of any nature payable by Corporation.
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2.7 REAL PROPERTY INTERESTS. Exhibit D to this Agreement is a complete
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and accurate list of all real property owned by or leased to Corporation,
together with an accurate brief description of each property.
2.8 HAZARDOUS MATERIALS. There are no underground storage tanks
located on the real property described in Exhibit D in which any hazardous
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material, as defined below, has been in the past five (5) years or is being
stored, nor has there been any spill, disposal, discharge, or release of any
hazardous material into, on, from, or over that real property or into or on
ground or surface water on that real property. As used in this paragraph,
"hazardous material" means any hazardous or toxic substance, material, or waste
that is regulated by any federal authority or by any state or local governmental
authority where the substance, material, or waste is located.
2.9 INVENTORY. The inventories of raw materials, work in process, and
finished goods (collectively called inventories) shown on Corporation's balance
sheet as of June 30, 2004 consist of items that are usable and salable in the
ordinary course of business by Corporation. Except for sales made in the
ordinary course of business since that date, all the inventories are the
property of Corporation. The value of the inventories has been determined
consistently from year to year.
2.10 ACCOUNTS RECEIVABLE. All accounts receivable of Corporation shown
on the balance sheet of Corporation as of June 30, 2004 arose from valid sales
in the ordinary course of business. No representation is made as to whether any
such accounts are collectible.
2.11 TRADE NAMES, COPYRIGHTS, TRADEMARKS. Corporation does not use any
trademark, service xxxx, trade name, or copyright in its business, and does not
own any trademarks, trademark registrations or applications, trade names,
service marks, copyrights, or copyright registrations or applications. No person
owns any trademark, trademark registration or application, service xxxx, trade
name, copyright, or copyright registration, or application the use of which is
necessary or contemplated in connection with the operation of Corporation's
business or in connection with the performance of any contract to which
Corporation is a party.
2.12 PATENTS AND PATENT RIGHTS. Exhibit E to this Agreement is a
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complete schedule of all patents, inventions, industrial models, processes,
designs, and applications for patents owned by Corporation or in which they have
any rights, licenses, or immunities. The patents and applications for patents
listed in Exhibit E are valid and in full force and effect.
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2.13 TITLE TO ASSETS. Corporation has good and marketable title to all
its assets and interests in assets, whether real, personal, mixed, tangible, or
intangible, that constitute all the assets and interests in assets that are used
in the business of Corporation.
2.14 LAWFUL OCCUPATION OF REAL PROPERTY. Corporation occupancy of any
real property in not in violation of any law, regulation, or decree.
2.15 INSURANCE POLICIES. Exhibit F to this Agreement is a description
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of all insurance policies held by Corporation concerning its business and
properties. All these policies are in the respective principal amounts set forth
in Exhibit F.
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2.16 COMPLIANCE WITH LAWS. Except as set forth in Exhibit G,
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Corporation has not
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received notice of any violation of any applicable federal, state, or local
statute, law, or regulation (including any applicable building, zoning,
environmental protection, or other law, ordinance, or regulation) affecting its
properties or the operation of its business.
2.17 LITIGATION. Except as set forth in Exhibit H, there is no
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pending, or, to the best knowledge of the Shareholders and Corporation,
threatened, suit, action, arbitration, or legal, administrative, or other
proceeding, or governmental investigation against or affecting Corporation or
its business, assets, or financial condition.
2.18 AUTHORITY AND CONSENTS. Selling Parties have the right, power,
legal capacity, and authority to enter into and perform their respective
obligations under this Agreement; and no approvals or consents of any persons
other than Selling Parties are necessary in connection with it. The execution
and delivery of this Agreement by Corporation have been duly authorized by all
necessary corporate action.
2.19 CORPORATE DOCUMENTS. Selling Parties have furnished to Buyer for
its examination (1) copies of the articles of incorporation and bylaws of
Corporation; (2) the minute books of Corporation containing all records required
to be set forth of all proceedings, consents, actions, and meetings of the
shareholders and board of directors of Corporation; (3) all permits, orders, and
consents issued by the California Commissioner of Corporations with respect to
Corporation, or any of its securities, and all applications for such permits,
orders, and consents; and (4) the stock transfer books of Corporation setting
forth all transfers of any capital stock.
2.20 SELLER'S FULL DISCLOSURE. None of the warranties made by
Shareholders or Corporation or made in any certificate or memorandum furnished
or to be furnished by any of them or on their behalf, taken as a whole contains
or will contain any untrue statement of a material fact, or omits to state any
material fact necessary to make the statements made true.
ARTICLE III
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants that:
3.1 ORGANIZATION. Buyer is a corporation duly organized, existing, and
in good standing under the laws of Nevada. The execution and delivery of this
Agreement and the consummation of this transaction by Buyer have been duly
authorized, and no further corporate authorization is necessary on the part of
Buyer.
3.2 AUTHORITY AND CONSENTS. Buyer need make or obtain no consent,
approval, or authorization of, or declaration, filing, or registration with, any
federal or state governmental or regulatory authority in connection with the
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated by this Agreement.
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ARTICLE IV
PRE-CLOSING OBLIGATIONS OF SELLING PARTIES
Selling Parties covenant that from the date of this Agreement until the
closing:
4.1 BUYER'S ACCESS TO PREMISES AND INFORMATION. Buyer and its counsel,
accountants, and other representatives will have full access during normal
business hours to all properties, books, accounts, records, contracts, and
documents of or relating to Corporation. Selling Parties will furnish or cause
to be furnished to Buyer and its representatives all data and information
concerning the business, finances, and properties of Corporation that may
reasonably be requested. Buyer agrees to give Selling Parties 48 hours' notice
before visiting Buyer's place of business. Buyer shall not contact Selling
Parties' employees, customers, or suppliers without Selling Parties' prior
written approval.
4.2 CONDUCT OF BUSINESS IN NORMAL COURSE. Corporation will carry on
its business and activities diligently and in substantially the same manner as
they previously have been carried out and will not institute any unusual or
novel methods of manufacture, purchase, sale, lease, management, accounting, or
operation that vary materially from those methods used by Corporation as of the
date of this Agreement.
4.3 PRESERVATION OF BUSINESS AND RELATIONSHIPS. Corporation will use
reasonable efforts to preserve its respective business organizations intact; to
keep available to Corporation its present officers and employees; and to
preserve its present relationships with suppliers, customers, and others having
business relationships with it.
4.4 NO CHANGE IN CORPORATE STRUCTURE. Corporation will not (1) amend
its articles of incorporation or bylaws; (2) issue any shares of its capital
stock; (3) issue or create any warrants, obligations, subscriptions, options,
convertible securities, or other commitments under which any additional shares
of its capital stock of any class might be directly or indirectly authorized,
issued, or transferred from treasury; or (4) agree to do any of the acts listed
above.
4.5 MAINTENANCE OF INSURANCE. Corporation will continue to carry its
existing insurance, subject to variations in amounts required by the ordinary
operations of their businesses.
4.6 EMPLOYEES AND COMPENSATION. Corporation will not: (1) make any
change in compensation payable or to become payable to any officer, employee,
sales agent, or representative; (2) make any change in benefits payable to any
officer, employee, sales agent, or representative under any bonus or pension
plan or other contract or commitment; or (3) modify any collective bargaining
agreement to which it is a party or by which it may be bound; provided, however,
that the Corporation will implement the previously arranged salary increases and
employee loyalty bonus agreements set forth on the disclosure schedule.
4.7 DIVIDENDS, DISTRIBUTIONS, AND STOCK ACQUISITIONS. Corporation will
not:
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(1) Declare, set aside, or pay any dividend or make any distribution in
respect of its capital stock;
(2) Directly or indirectly purchase, redeem, or otherwise acquire any
shares of its capital stock; or
(3) Enter into any agreement obligating it to do any of the foregoing
prohibited acts.
4.8 PAYMENT OF LIABILITIES AND WAIVER OF CLAIMS. Corporation will not:
(1) pay any obligation or liability, fixed or contingent, other than current
liabilities; (2) waive or compromise any right or claim; or (3) cancel, without
full payment, any note, loan, or other obligation owed to Corporation.
4.9 MODIFICATION OF EXISTING AGREEMENTS PROHIBITED. Corporation will
not modify, amend, cancel, or terminate any of its existing contracts or
agreements.
4.10 TRUE WARRANTIES AS OF CLOSING. All warranties of Selling Parties
set forth in this Agreement will also be true on the closing date as if made on
that date, except to the extent that any of them may become untrue because of
events beyond the control of Selling Parties, who are unable to make them true
as of the closing date despite their best efforts to do so.
4.11 INFORMATION CONFIDENTIAL. Buyer agrees that Buyer and its
officers, directors, and other representatives will hold in strict confidence,
and will not use to the detriment of Shareholders or Corporation, any data and
information about the business of Corporation obtained in connection with this
transaction or agreement, except as far as the data and information may be
required by law. If the transactions contemplated by this Agreement are not
consummated, Buyer will return to Selling Parties all that data and information
that Selling Parties may reasonably request, including worksheets, test reports,
manuals, lists, memoranda, and other documents prepared by or made available to
Buyer in connection with this transaction.
ARTICLE V
CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
The obligations of Buyer to purchase the Shares under this Agreement are
subject to the satisfaction, at or before the closing, of all the conditions set
out below in this paragraph. Buyer may waive any or all of these conditions in
whole or in part without prior notice; provided, however, that no such waiver of
a condition will constitute a waiver by Buyer of any of its other rights or
remedies, at law or in equity, if Shareholders or Corporation are in default of
any of their representations, warranties, or covenants under this Agreement.
5.1 ACCURACY OF SELLING PARTIES' WARRANTIES. Except as otherwise
permitted by this Agreement, all warranties by each of the Selling Parties in
this Agreement, or in any written statement that will be delivered to Buyer by
any of them under this Agreement, must be true in all material respects on the
closing date as though made at that time
5.2 PERFORMANCE BY SELLING PARTIES. Selling Parties must have
performed, satisfied,
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and complied in all material respects with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by them,
or any of them, by the closing date.
5.3 NO MATERIAL ADVERSE CHANGE. During the period from June 30, 2004
to the closing date, there will not have been any material adverse change in the
financial condition or the results of operations of Corporation, and Corporation
will not have sustained any insured or uninsured loss or damage to its assets
that materially and adversely affects its ability to conduct a material part of
its business; provided, however, that material adverse changes arising from acts
of terrorism or an industry- or economy-wide recession shall be excepted from
this representation and shall not form the basis for averting the closing.
5.4 CERTIFICATION BY SELLING PARTIES. Buyer will have received a
certificate, dated the closing date, signed and verified by Shareholder and by
Corporation's president or vice president and treasurer, certifying, in such
detail as Buyer and its counsel may reasonably request, that to the best of
their knowledge, the conditions specified in this Agreement have been fulfilled.
5.5 CORPORATE APPROVAL. The execution and delivery of this Agreement
by Corporation, and the performance of its covenants and obligations under it,
will have been duly authorized by all necessary corporate action, and Buyer will
have received copies of all resolutions pertaining to that authorization,
certified by the secretary of Corporation.
5.6 EMPLOYMENT AGREEMENT. An employment agreement in the form set
forth in Exhibit I dated the closing date, will have been executed and delivered
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by XXXXXXXXX XXXXXX to Buyer.
5.7 LEASE. Buyer and Shareholders will have entered into a lease for
the premises located at 00000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx for a term of
ten (10) years in the form attached as Exhibit J, subject to an option in favor
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of Buyer to acquire that leased property pursuant to an agreement attached as
Exhibit K.
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5.8 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, and other documents delivered to Buyer under this
Agreement will be satisfactory in all reasonable respects to Buyer and its
counsel.
5.9 RESIGNATIONS. Selling Parties will have delivered to Buyer, except
as otherwise requested by Buyer, the written resignations of all the officers
and directors of Corporation, and will cause any other action to be taken with
respect to these resignations that Buyer may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The obligations of Shareholder to sell and transfer the Shares under this
Agreement are subject to the satisfaction, at or before the closing, of all the
following conditions. Shareholders may waive any or all of these conditions in
whole or in part without prior notice, provided, however, that no such waiver of
a condition will constitute a waiver by Shareholders of any of
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their other rights or remedies, at law or in equity, if Buyer should be in
default of any of its representations, warranties, or covenants under this
Agreement.
6.1 ACCURACY OF BUYER'S REPRESENTATIONS AND WARRANTIES. All warranties
by Buyer contained in this Agreement or in any written statement delivered by
Buyer under this Agreement must be true on and as of the closing date as though
such representations and warranties were made on and as of that date.
6.2 BUYER'S PERFORMANCE. Buyer must have performed and complied with
all covenants and agreements and satisfied all conditions that it is required by
this Agreement to perform, comply with, or satisfy before or at the closing.
6.3 BUYER'S CORPORATE APPROVAL. The board of directors and holders of
a majority of the outstanding stock of Buyer will have duly authorized and
approved the execution and delivery of this Agreement and all corporate action
necessary or proper to fulfill Buyer's obligations to be performed under this
Agreement on or before the closing date.
6.4 EMPLOYMENT AGREEMENTS. An employment agreement in the form set
forth in Exhibit I dated the closing date, will have been executed and delivered
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by Buyer to XXXXXXXXX XXXXXX.
6.5 ABSENCE OF LITIGATION. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, will have been instituted
or threatened on or before the closing date.
ARTICLE VII
TIME AND PLACE OF CLOSING
The transfer of the Shares by Shareholders to Buyer (the "closing") will
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take place at the offices of Xxxx & Xxxxxxxxx, 00000 Xxxx Xxxxx Xxxxx, Xxxxxx
Xxxxx, Xxxxxxxxxx 00000 at 10:00 a.m. local time, on October 15, 2004, or at
such other time and place as the parties may agree to in writing (the "closing
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date").
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ARTICLE VIII
OBLIGATIONS AT CLOSING
8.1 SELLING PARTIES' OBLIGATIONS AT CLOSING. At the closing,
Shareholders must deliver to Buyer the following instruments, in form and
substance satisfactory to Buyer and its counsel:
(a) A certificate or certificates representing the Shares,
registered in the name of Shareholders, duly endorsed by Shareholders
for transfer or accompanied by an assignment of the Shares duly
executed by Shareholders, with all required documentary stock transfer
stamps affixed or accompanied by Shareholders' personal check for the
amount of these stamps. On submission of
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that certificate or certificates to Corporation for transfer,
Corporation will issue to Buyer a certificate representing the Shares,
registered in the Buyer's name.
(b) The stock books, stock ledgers, minute books, and
corporate seals of Corporation.
(c) Except with respect to XXXXXXXXX XXXXXX, who is being
hired as the Corporation's President pursuant to the employment
agreement attached as Exhibit I or as otherwise specified by Buyer,
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the written resignations of all the officers and directors of
Corporation.
(d) An option agreement in the form attached as Exhibit K,
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signed on behalf of Aldar, LLC;
(e) A certificate executed by Selling Parties, dated the
closing date, certifying that all their representations and warranties
in this Agreement are true on the closing date, as though each of
those representations and warranties had been made on that date,
except to the extent that any of them may have become untrue after the
date of this Agreement because of events outside Selling Parties'
control that they are unable to make true on the closing date despite
their best efforts to do so.
8.2 BUYER'S OBLIGATIONS AT CLOSING. At the closing, Buyer must deliver
to Shareholders the following instruments and documents, in form and substance
satisfactory to Shareholders and their counsel:
(a) Buyer's promissory note dated the closing date, in the
principal amount of Three Million Dollars ($3,000,000) in the form of
Exhibit A;
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(b) Twenty (20) checks made payable to Shareholders, each
corresponding in date and amount to payments due under the Promissory
Note;
(c) Certified resolutions of Buyer's board of directors, in
form satisfactory to counsel for Selling Parties, authorizing the
execution and performance of this Agreement and all actions to be
taken by Buyer under this Agreement; and
(d) A certificate executed by the president or vice president
and the secretary or treasurer of Buyer certifying that all Buyer's
representations and warranties under this Agreement are true as of the
closing date, as though each of those representations and warranties
had been made on that date.
ARTICLE IX
INDEMNITY AND GUARANTY PROVISIONS
9.1 SHAREHOLDERS' INDEMNITY. Shareholders will indemnify, defend, and
hold
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harmless Buyer and Corporation against and in respect of claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries, and
deficiencies, including interest, penalties, and reasonable attorney fees that
they may incur or suffer that arise, result from, or relate to any breach of, or
failure by Selling Parties to perform, any of their representations, warranties,
covenants, or agreements in this Agreement or in any schedule, certificate,
exhibit, or other instrument furnished or to be furnished by Selling Parties
under this Agreement. Shareholders' liability under this paragraph will not,
however, exceed the aggregate amount of Three Million Two Hundred Fifty Thousand
Dollars ($3,250,000). Despite any other provision of this Agreement,
Shareholders will not be liable to Buyer on any warranty, representation, or
covenant made by Selling Parties in this Agreement, or under any of their
indemnities in this Agreement, regarding any single claim, loss, expense,
obligation, or other liability that does not exceed Ten Thousand Dollars
($10,000); provided, however, that when the aggregate amount of all such claims,
losses, expenses, obligations, and liabilities not exceeding Ten Thousand
Dollars ($10,000) each reaches One Hundred Thousand Dollars ($100,000),
Shareholders will, subject to the above limitation on its maximum aggregate
liability, thereafter be liable in full for all breaches and indemnities and all
those claims, losses, expenses, obligations, and liabilities.
9.2 DEDUCTION FOR BUYER'S TAX BENEFITS. In computing the amount to be
paid by Shareholder under its indemnity obligations, there will be deducted an
amount equal to any tax benefits actually received by Buyer and Corporation,
taking into account the income tax treatment of the receipt of these payments.
9.3 SELLERS' RIGHT TO DEFEND. Buyer will promptly notify Shareholders
of the existence of any claim, demand, or other matter to which Shareholders'
indemnification obligations would apply and will give Shareholders a reasonable
opportunity to defend the same at Shareholders' own expense and with counsel of
Shareholders' own selection; provided that Buyer will at all times also have the
right to participate fully in the defense at its own expense. If Shareholders,
within a reasonable time after this notice, fails to defend, Buyer will have the
right, but not the obligation, to undertake the defense of, and to compromise or
settle (exercising reasonable business judgment), the claim or other matter on
behalf, for the account, and at the risk, of Shareholders. If the claim is one
that cannot by its nature be defended solely by Shareholders (including any
federal or state tax proceeding), Buyer will make available and cause
Corporation to make available, all information and assistance that Shareholders
may reasonably request.
9.4 BUYER'S INDEMNITY. Buyer will indemnify and hold harmless the
Selling Parties against, and in respect of, claims, losses, expenses, costs,
obligations, and liabilities it may incur by reason of Buyer's breach of or
failure to perform any of its warranties, guaranties, commitments, or covenants
in this Agreement, or by reason of any act or omission of Buyer, or any of its
successors or assigns, after the closing date, that constitutes a breach or
default under, or a failure to perform, any obligation, duty, or liability of
any of the Selling Parties under any loan agreement, lease, contract, order, or
other agreement to which it is a party or by which it is bound at the closing
date, but only to the extent to which Buyer expressly assumes these obligations,
duties, and liabilities under this Agreement.
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ARTICLE X
COVENANT NOT TO COMPETE
10.1 COVENANT. XXXXXX X. XXXXX acknowledges that, as a former key
management employee of the Corporation, he has had access to the development,
implementation, and management of the Corporation's business strategies. By
virtue of his unique and sensitive position and special background, employment
of XXXXXX X. XXXXX by a competitor of the Corporation represents a serious
competitive danger to the Corporation and the use of the XXXXXX X. XXXXX'x
talent and knowledge and information about the Corporation's business and
strategies would constitute a valuable competitive advantage over the
Corporation. Consequently:
(a) XXXXXX X. XXXXX covenants and agrees that, during and
for a period of two (2) years after the closing date, he will not
engage or be engaged in any capacity, directly or indirectly,
including but not limited as employee, agent, consultant, manager,
executive, owner or stockholder (except as a passive investor holding
less than a 1% equity interest in any enterprise the securities of
which are publicly traded) in any business entity engaged in
competition with any business conducted by the Corporation in any
county in which the Corporation is conducting business as of the
closing date.
(b) If any court determines that the covenant and agreement
described above is unenforceable because of the duration or geographic
scope of the covenant, that court shall have the power to reduce the
duration or scope of the provision, as the case may be, and the
provision shall be enforceable in its reduced form.
(c) This parties acknowledge that this covenant is being
given as additional consideration for the repurchase of XXXXXX X.
XXXXX'x stock in the Corporation.
10.2 INJUNCTIVE RELIEF. XXXXXX X. XXXXX acknowledges that the
violation of the covenants contained in this Agreement would be detrimental and
cause irreparable injury to the Corporation that could not be compensated by
money damages. XXXXXX X. XXXXX agrees that an injunction from a court of
competent jurisdiction is the appropriate remedy for these provisions, and
consents to the entry of an appropriate judgment enjoining XXXXXX X. XXXXX from
violating these provisions in the event there is a finding of their breach.
ARTICLE XI
TAXES
Corporation and Shareholders have elected to be taxed in accordance with
the S Corporation rules promulgated by the Internal Revenue Service.
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Shareholders shall be responsible for filing the Corporation's final income
tax returns for the year ending with the closing date and paying any income
taxes attributable to the Corporation's income for that year as well as any
income taxes attributable to their sale of the Shares.
As additional consideration for the purchase of the Shares, the Corporation
and the Buyer, jointly and severally, agree to pay to the Shareholders their
distributable share of the taxable income of the Company with respect to the
calendar year 2004, as reflected on Schedule K-1 for 2004, which payment shall
be made no later than the filing of the Corporation's tax return for calendar
year 2004 (but no later than September 15, 2005).
Buyer will promptly notify Shareholders if any tax audit is commenced by
any taxing authority with respect to a year preceding the closing date for which
Shareholders could have liability. Shareholders shall have a reasonable
opportunity to participate in, defend, settle or compromise any such audit at
Shareholders' own expense and with counsel of Shareholders' own selection. If
Shareholders, within a reasonable time after this notice, fail to participate or
defend the audit, Buyer will have the right, but not the obligation, to
undertake the defense of, and to compromise or settle (exercising reasonable
business judgment), the issues raised at audit for the account, and at the risk,
of Shareholders.
ARTICLE XII
MISCELLANEOUS
12.1 PUBLICITY. All notices to third parties and all other publicity
concerning the transactions contemplated by this Agreement will be jointly
planned and coordinated by and between Buyer and Selling Parties. No party will
act unilaterally in this regard without the prior written approval of the
others; however, this approval will not be unreasonably withheld.
12.2 NO FINDER'S OR BROKER'S FEES. Except as provided in this section,
each party represents and warrants that it has dealt with no broker or finder in
connection with any transaction contemplated by this Agreement, and, as far as
it knows, no broker or other person is entitled to any commission or finder's
fee in connection with any of these transactions. Shareholders will be
responsible for any fees or commissions owed to Xxxxx Xxx or Xxxxx and Xxxxx in
connection with the transactions described in this Agreement.
12.3 EXPENSES. Each party will pay all costs and expenses incurred or
to be incurred by it in negotiating and preparing this Agreement and in closing
and carrying out the transactions contemplated by this Agreement.
12.4 EFFECT OF HEADINGS. The subject headings of the paragraphs and
subparagraphs of this Agreement are included for convenience only and will not
affect the construction or interpretation of any of its provisions.
12.5 WORD USAGE. Unless the context clearly requires otherwise: (i)
plural and singular numbers will each be considered to include the other; (ii)
the masculine, feminine, and neuter genders will each be considered to include
the others; (iii) "shall," "will," "must,"
12
"agree," and "covenants" are each mandatory; (iv) "may" is permissive; (v) "Or"
is not exclusive; and (vi) "includes" and "including" are not limiting.
12.6 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties. No supplement, modification,
or amendment of this Agreement will be binding unless executed in writing by all
the parties. No waiver of any of the provisions of this Agreement will
constitute a waiver of any other provision, whether or not similar, nor will any
waiver constitute a continuing waiver. No waiver will be binding unless executed
in writing by the party making the waiver.
12.7 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be considered an original, but all
of which together will constitute one and the same instrument.
12.8 PARTIES IN INTEREST. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their respective
successors and assigns. Nothing in this Agreement is intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement. No provision gives any third persons any right of subrogation or
action against any party to this Agreement.
12.9 ASSIGNMENT. This Agreement will be binding on, and will inure to
the benefit of, the parties to it and their respective heirs, legal
representatives, successors, and assigns; provided, however, that Buyer may not
assign any of its rights under this Agreement, except to a wholly owned
subsidiary corporation of Buyer. No such assignment by Buyer to its wholly owned
subsidiary will relieve Buyer of any of its obligations or duties under this
Agreement.
12.10 ARBITRATION. Any controversy or claim arising out of, or
relating to, this Agreement, or the making, performance, or interpretation of
it, will be settled by arbitration in San Bernardino County, California, under
the commercial arbitration rules of the American Arbitration Association then
existing, and judgment on the arbitration award may be entered in any court
having jurisdiction over the subject matter of the controversy.
12.11 SPECIFIC PERFORMANCE AND WAIVER OF RESCISSION RIGHTS. Each
party's obligation under this Agreement is unique. If any party should default
in its obligations under this Agreement, both parties acknowledge that it would
be extremely impracticable to measure the resulting damages; accordingly, the
non-defaulting party or parties, in addition to any other available rights or
remedies, may xxx in equity for specific performance, and the parties each
expressly waive the defense that a remedy in damages will be adequate. Despite
any breach or default by any of the parties of any of their respective
representations, warranties, covenants, or agreements under this Agreement, if
the purchase and sale contemplated by it will be consummated at the closing,
each of the parties waives any rights that it may have to rescind this Agreement
or the transaction consummated by it; provided, however, that this waiver will
not affect any other rights or remedies available to the parties under this
Agreement or under the law.
13
12.12 RECOVERY OF LITIGATION COSTS. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties will be entitled to recover
reasonable attorney fees and other costs incurred in that action or proceeding,
in addition to any other relief to which it or they may be entitled.
12.13 CONDITIONS PERMITTING TERMINATION. Any party may on the closing
date terminate this Agreement, without liability to any other: (1) if any bona
fide action or proceeding will be pending against any party on the closing date
that could result in an unfavorable judgment, decree, or order that would
prevent or make unlawful the performance of this Agreement; or (2) if the
legality and sufficiency of all steps taken and to be taken by the parties and
their shareholders in carrying out this Agreement has not been approved by
counsel as required by this Agreement.
12.14 DEFAULTS PERMITTING TERMINATION. If either Buyer or Selling
Parties materially default in the due and timely performance of any of their
warranties or agreements under this Agreement, the non-defaulting party or
parties may on the closing date give notice of termination of this Agreement.
The notice will specify with particularity the default or defaults on which the
notice is based. The termination will be effective five (5) days after the
closing date, unless the specified default or defaults have been cured on or
before this effective date for termination.
12.15 REPRESENTATIONS AND OBLIGATIONS EXPIRE AT CLOSING. The
representations and warranties made by the parties to this Agreement, and their
respective obligations to be performed under its terms on or before the closing
date, will expire with, and be terminated and extinguished by, the closing, and
consummation of the closing will be conclusive evidence that each party is fully
satisfied with the facts constituting the basis of the representations and
warranties of the other parties and with the performance of their obligations.
This paragraph will not affect any obligation of any party under this Agreement
that is permitted to be performed, in whole or in part, after the closing. This
paragraph will not affect any obligation under section 4.11 in the event the
transactions contemplated by this Agreement are for any reason not consummated,
and the obligations under that section shall not expire.
12.16 NOTICES. All notices, requests, demands, and other
communications under this Agreement must be in writing and will be considered to
have been duly given on the date of service if served personally on the party to
whom notice is to be given, or on the second day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows:
Shareholders: Xxxxxx X. and Xxxxxxx Xxxxx
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
With a copy to: Xxxxxxx X. Xxxx, Esq. And
Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxx & Christian
00000 Xxxx Xxxxx Xx.
Xxxxxx Xxxxx, XX 00000
14
Buyer: American Fire Retardant Corp.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxx, CFO
With a copy to: ______________________
______________________
______________________
Any party may change its address for purposes of this paragraph by giving the
other parties written notice of the new address in the manner set forth above.
12.17 GOVERNING LAW. This Agreement will be construed in accordance
with, and governed by, the laws of the State of California as applied to
contracts that are executed and performed entirely in California.
12.18 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of final jurisdiction, it is the intent of the
parties that all other provisions of this Agreement be construed to remain fully
valid, enforceable, and binding on the parties.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on
the day and year first above written.
SELLING PARTIES:
________________________________
XXXXXX X. XXXXX
________________________________
XXXXXXX XXXXX
ALCHEMCO, INC., A California
Corporation
By: ___________________________
XXXXXX X. XXXXX, President
BUYER:
AMERICAN FIRE RETARDANT CORP.,
A Nevada Corporation
By: ______________________________
XXXXX X. XXXXX, CFO
15
EXHIBIT A
---------
PROMISSORY NOTE
1
EXHIBIT B
---------
PLEDGE AGREEMENT
1
EXHIBIT C
---------
FINANCIAL STATEMENTS
2
EXHIBIT D
---------
REAL PROPERTY INTERESTS
Corporation leases the property at 00000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx
from Aldar, LLC. Copy of lease attached as Exhibit J.
---------
1
EXHIBIT E
---------
PATENT RIGHTS
None.
1
EXHIBIT F
---------
INSURANCE
1
EXHIBIT G
---------
COMPLIANCE WITH LAWS
Corporation has not yet filed a risk management program with the hazardous
materials division of the fire department with respect to its tanks.
1
EXHIBIT H
---------
LITIGATION
Corporation is a defendant in a small claims action (Case No. RIS167312) pending
in Riverside County. The case involves the Corporation's purchase of equipment
from American Danatron Corporation, which equipment failed to function properly
and was rejected by the Corporation. The equipment has been tendered back to
American Danatron Corporation.
2
EXHIBIT I
---------
EMPLOYMENT AGREEMENT
3
EXHIBIT J
---------
LEASE
4
EXHIBIT K
---------
OPTION AGREEMENT
5
