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Exhibit 2.2
SHARE EXCHANGE AGREEMENT
THIS AGREEMENT made the 16th day of January, 1998 by and among
DURASWITCH INDUSTRIES, INC., a corporation incorporated pursuant to the laws of
the State of Nevada (the "Purchaser"); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇
▇. ▇▇▇▇▇, and ▇▇▇▇ ▇. ▇▇▇▇▇ and The ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Family Revocable Living
Trust (collectively, the "Sellers"); and Aztec Industries, Inc., an Arizona
corporation (the "Company").
WHEREAS the Sellers as a group beneficially own and control all the issued and
outstanding shares in the capital of the Company, the current shareholdings
being The ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Family Revocable Living Trust (the "Trust")
owning 6886.35 shares, and ▇▇▇▇ ▇. ▇▇▇▇▇ owning 2295.45 shares; and
WHEREAS, for convenience sake herein, the Trustee, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, is
authorized and will sign individually, however, the shares and the options will
be issued in the name of the Trust; and
WHEREAS the Sellers desire to sell and the Purchaser desires to purchase all of
the said issued and outstanding shares in the capital of the Company owned by
the Sellers, all upon and subject to the terms and conditions hereinafter set
forth; and
NOW THEREFORE, in consideration of the premises and the mutual agreements and
covenants herein contained (the adequacy of such consideration is hereby
mutually admitted by each party), the Parties hereto covenant and agree as
follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions - Whenever used in this Agreement, unless there is something in
the subject matter or context inconsistent therewith, the following words and
terms shall have the meanings as follows:
(a) "Agreement" means this Share Exchange Agreement and all
supplemental instruments and amendments;
(b) "Business" means the business presently carried on by the
Company consisting of the manufacture, sale and distribution
of screen printed membrane switch panels and graphic overlays.
(c) "Business Day" means a day other than a Saturday, Sunday or
any day on which the principal Arizona commercial banks are
open for business during normal banking hours;
(d) "Closing" means the completion of the sale to and purchase by
the Purchaser of the Purchased Shares hereunder by the
transfer and delivery of documents of title and the payment of
the purchase price as contemplated herein;
(e) "Closing Date" means January 31, 1998, or such other date as
the Parties may agree as the date upon which the Closing shall
take place;
(f) "Closing Time" means 11:59 p.m. MST, on the Closing Date or
such other time as the Parties may agree as the time at which
the Closing shall take place;
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SHARE EXCHANGE AGREEMENT
(g) "Financial Statements" means the unaudited financial
statements of the Company for the quarter ended December 31,
1997, consisting of a balance sheet and operating statement,
and the year end unaudited financial statements of the Company
dated Jan. 31, 1997, 96, 95, 94, and 93; copies of each of
which are annexed as Schedule "A" hereto;
(h) "Parties" means the Sellers, the Company and the Purchaser
collectively and "Party" means any one of them;
(i) "Person" means any individual, corporation, partnership,
trustee or trust or unincorporated association, and pronouns
have a similarly extended meaning;
(j) "Purchase Price" means the purchase price to be paid by the
Purchaser to the Sellers for the Purchased Shares as provided
in Article 2 hereof;
(k) "Purchased Shares" means all the currently issued and
outstanding common shares in the capital of the Company;
(l) "Sellers' Counsel" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(m) "To Company's knowledge" means that, to the actual knowledge
of the Sellers, such matters are as represented. Unless the
context otherwise requires, such knowledge does not require
investigation of the matters other than as normally conducted
in the ordinary course of business or in reliance on the
advice or information of professionals.
Terms defined in the preamble to this Agreement shall have the same meanings
herein as are ascribed thereto in the preamble.
1.2 Gender and Number - Words importing the singular include the plural and vice
versa; words importing gender include all genders.
1.3 Entire Agreement - This Agreement, including the Schedules hereto, together
with the agreements and other documents to be delivered pursuant hereto,
constitute the entire agreement between the Parties pertaining to the subject
matter hereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties and there are no
warranties, representations or other agreements between the Parties in
connection with the subject matter hereof except as specifically set forth
herein and therein.
1.4 Waivers, etc. - No supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the Party to be bound
thereby. No waiver of any of the provisions of this Agreement, in whole or in
part, shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
1.5 Other Words and Phrases - In this Agreement, unless otherwise expressly
provided (i) the words "hereof," "herein," "hereto" and "hereunder" and words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, Subsection, paragraph or other subdivision, and (ii) all
references to
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SHARE EXCHANGE AGREEMENT
designated "Articles," "Sections," "Subsections," "paragraphs" or other
subdivisions are to the designated Articles, Sections, Subsections, paragraphs
and other subdivisions of this Agreement.
1.6 Headings - The Article and Section headings contained herein are included
solely for convenience of reference, are not intended to be full or accurate
descriptions of the content thereof and shall not be considered part of this
Agreement.
1.7 Applicable Law - This Agreement and the rights, obligations and relations of
the Parties shall be governed by and construed in accordance with the laws of
the State of Arizona and the federal laws of the United States applicable
therein, and the courts of Arizona shall have exclusive jurisdiction to
entertain any action in connection with this Agreement
1.8 Currency - Unless otherwise specified, all references to currency herein are
deemed to mean lawful money of the United States, and all amounts to be paid or
calculated pursuant to this Agreement are to be paid or calculated in lawful
money of the United States.
1.9 Accounting Terms - All accounting terms shall have the meanings ascribed to
them in accordance with accounting principles which are generally accepted in
the United States.
1.10 Schedules - The following schedules are attached to and incorporated in
this Agreement by reference and deemed to be an integral part hereof:
Schedule "A" - Financial Statements
Schedule "B" - Undisclosed Liabilities
Schedule "C" - Liens, Charges and Encumbrances
Schedule "D" - Non-Vehicular Equipment and Personal Property Leases
Schedule "E" - List of Real Property and Real Property Leases
Schedule "F" - List of Revenue Contracts
Schedule "G" - List of Contracts to Purchase Goods/Services
Schedule "H" - List of Employment-Related Contracts, Collective
Agreements, Pension or Similar Plans, Unfair Labor
Practice Complaints
Schedule "I" - Other Material Contracts/lnsurance Policies
Schedule "J"- Litigation
Schedule "K" - Employees over $40,000 per year and Independent
Contractors
Schedule "L" - Bank Accounts
Schedule "M" - Intellectual Property
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Schedule "N" - Vehicular Equipment Owned or Leased
Schedule "O" - Environmental Matters
Schedule "P" - Forms of Non-Competition and Employment Agreements
Schedule "Q" - Additional Disclosures
Schedule "R" - Operating Licenses
Schedule "S"- Intentionally Omitted
Schedule "T" - Material Changes
Schedule "U" - Note to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ the Company
Schedule "V" - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇'▇ Patent
Schedule "W" - Purchaser's Financials
Schedule "X" - Personal Property of Sellers
ARTICLE 2
PURCHASE, SALE AND ASSUMPTION OF OBLIGATIONS
2.1 Purchase Price - At the Closing Time, the Sellers shall endorse and
surrender to Purchaser stock certificates representing all of the Purchased
Shares, in exchange for which Purchaser will issue 300,000 shares of its voting
common stock, $.001 par value, as follows: 225,000 shares to the Trust and
75,000 shares to ▇▇. ▇▇▇▇▇ (the "Exchange Shares"), subject to any adjustments
under this section.
2.2 Actions by Parties at or Prior to the Closing
(a) Delivery of Certificates, etc. - The Sellers shall transfer
and deliver to the Purchaser at the Closing stock certificates
representing all the Purchased Shares duly endorsed in blank
for transfer or accompanied by irrevocable stock transfer
powers of attorney duly executed in blank, in either case by
the holders of record thereof. The Sellers shall take such
steps as shall be necessary to cause the Company to enter the
Purchaser or its nominee upon the books of the Company as the
holder of the Purchased Shares and to issue one or more share
certificates to the Purchaser representing the Purchased
Shares;
(b) Loan to the Company - Prior to the Closing, the Purchaser
shall advance monies toward the payment of liabilities on
behalf of the Company immediately and pursuant to a mutually
agreed upon payoff schedule of payables. This payment shall
continue as a loan on the books of both Purchaser and Company
until after the Closing and then, at Purchaser's option, may
be converted to a capital contribution.
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SHARE EXCHANGE AGREEMENT
2.3 Assumption of Liabilities and Non-Competition Payments - Purchaser shall (1)
assume and pay amounts currently due to ▇▇. ▇▇▇▇▇▇▇ by the Company represented
by the promissory note in the form attached hereto as Schedule "U" (the "▇▇▇▇▇▇▇
Note") which note Purchaser shall assume and (2) enter into employment and
non-competition agreements with ▇▇. ▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ in the form attached
hereto as Schedule "H" (the "Employment Agreements").
2.4 Payments of ▇▇. ▇▇▇▇▇▇▇'▇ Personal Note by Purchaser after the Closing Time
- Payment of the ▇▇▇▇▇▇▇ Note shall be subject to set-off and reduction to the
extent of any and all reasonable costs, damages, or losses incurred by Purchaser
due to Sellers' default or breach of any of their obligations, representations,
warranties or covenants pursuant to this Agreement or any other documents
entered into hereunder. However, any such set-offs shall apply at the end of the
▇▇▇▇▇▇▇ Note term and not interrupt the monthly payment schedule. Any wrongful
set-off shall be deemed a breach of this Agreement. A breach of the terms of the
▇▇▇▇▇▇▇ Note shall invalidate the noncompetition clause of ▇▇▇▇▇▇▇'▇ Employment
Agreement under ▇▇▇▇▇▇▇'▇ Employment Agreement.
2.5 Place of Closing - The Closing shall take place at the Closing Time at the
offices of the Purchaser's Legal Counsel in Phoenix, Arizona or at such other
place as may be agreed upon by the Sellers and the Purchaser.
2.6 Tender - Any tender of documents or money hereunder may be made upon the
Parties or their respective counsel.
2.7 Tax Free Exchange - The parties intend the transactions contemplated herein
to be treated as a tax free reorganization under Section 368 and related
sections of the Internal Revenue Code of 1986, as amended.
2.8 Norwest Bank Line of Credit- After Closing, prior to any default thereunder,
purchaser will pay the balance of that certain $50,000 Norwest Bank of Arizona,
N.A. line of credit.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Sellers - The Sellers and the Company
hereby jointly and severally represent and warrant to the Purchaser as follows:
(a) Enforceability of Obligations - This Agreement constitutes a
valid and binding obligation of the Sellers enforceable
against them in accordance with its terms.
(b) Right to Sell - The Sellers:
(i) are the sole beneficial owners of the Purchased
Shares (which shares constitute all the issued and
outstanding shares in the capital of the Company);
(ii) have the exclusive right to dispose of the Purchased
Shares as herein provided and such disposition will
not violate, contravene, breach or offend against or
result in any default under any indenture, mortgage,
lease, agreement, instrument, statute,
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SHARE EXCHANGE AGREEMENT
regulation, order, judgment, decree or law to which
the Sellers are a party or subject or by which the
Sellers are bound or affected; and
(iii) are the holders of record of all the Purchased
Shares, free and clear of any liens, charges,
encumbrances or rights of others (other than the
rights of the Purchaser hereunder) and no Person
(other than the Purchaser hereunder) has any
agreement, option or any rights capable of becoming
an agreement or option for the acquisition of the
Purchased Shares.
(c) Licenses, Registrations and Compliance - The Company is
registered, licensed or otherwise qualified as a corporation
to do business in each jurisdiction in which the nature of
their businesses or the property owned or leased by them makes
such registration, licensing or other qualification necessary,
and such registrations, licenses or qualifications (as the
case may be) are in good standing. To Company's knowledge, the
Company is not in violation of any applicable laws,
regulations, orders, rules, decrees or ordinances. To
Company's knowledge, the licenses and operating authorizations
issued by federal, state or local authorities to the Company,
copies of which are attached hereto as Schedule "R" (the
"Operating Licenses") comprise all the operating authorities
held in respect of the Business. To Company's knowledge, the
Operating Licenses are all of the operating authorities
necessary or reasonably required for the carrying on of the
Business as presently conducted. The Operating Licenses are in
good standing, are in full force and effect and are being held
and operated in accordance with their terms and conditions
and, to Company's knowledge, all applicable laws, ordinances,
rules and regulations. To Company's knowledge, the Operating
Licenses are regularly subject to review or notification. To
Company's knowledge, there is no litigation, arbitration or
other proceeding pending or threatened which would adversely
affect the use of the Operating Licenses by the Business or
which may result in the revocation, cancellation, suspension
or any adverse modification of any of such Operating Licenses.
(d) Organization and Valid Existence; the Company - The Company is
a corporation duly incorporated and organized and validly
exists under the laws of its state of jurisdiction, and has
all necessary corporate power, authority and capacity to own
and lease its property and assets (including, without
limitation, the property and assets shown in the Financial
Statements) and to carry on the Business as presently
conducted.
(e) Capitalization - All issued and outstanding common shares of
the Company have been duly and validly issued and are
outstanding as fully paid and non-assessable shares in the
capital of the Company.
(f) Financial Statements - To Company's knowledge, the Financial
Statements are true and correct and have been prepared in
accordance with generally accepted accounting principles
applied on a basis consistent with that of the preceding
period. To Company's knowledge, the Financial Statements
present a true, accurate and complete statement of the
consolidated financial condition and assets and liabilities of
the Company as at October 31, 1997 and year end statements,
respectively.
(g) Absence of Undisclosed Liabilities - Except to the extent
reflected or reserved against in the Financial Statements
(including the notes thereto) or incurred subsequent to the
date thereof
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SHARE EXCHANGE AGREEMENT
and disclosed in Schedule "B" and except as incurred in the
ordinary and usual course of the Business of the Company, the
Company, to the Company's knowledge, has neither outstanding
indebtedness nor any material liabilities or obligations
(whether accrued, absolute, contingent, known, unknown, or
otherwise) of a nature customarily reflected or reserved
against in a balance sheet (including the notes thereto)
prepared in accordance with generally accepted accounting
principles.
(h) Stockholder Equity - The total stockholder equity of the
Company at the date of Closing calculated in accordance with
generally accepted accounting principles (applied on a basis
consistent with those applied in connection with the Financial
Statements) is not less than the total stockholder equity of
the Company as at the date of, and as set forth in the
Financial Statements, except for adjustments due to items
disclosed herein or through information furnished in writing
to Purchaser.
(i) Revenue Contracts - The revenue contracts of the Company
representing accounts for greater than 5% of net revenue
annually are set out at Schedule "F."
(j) Tax Matters. - To Company's knowledge, the Company has duly
and timely filed all federal, state and local income,
franchise, capital, sales or use, excise, fuel, property or
other tax returns or reports required by any law or regulation
to be filed by it and has duly paid all taxes, assessments and
reassessments and all other taxes, duties, governmental
charges, penalties, interest and fines due and payable by it
on or before the date hereof.
The last three fiscal years' federal and state income tax
returns of the Company, provided to Purchaser hereunder, to
Company's knowledge, are accurate in all respects including,
without limitation, the tax depreciation values of all capital
properties.
The Company has not received from any authority any
assessment, reassessment or notice of underpayment of any
taxes or other penalty or charges and no such notice is
reasonably to be expected.
There is no misrepresentation that is attributable to neglect,
carelessness, willful default or fraud in tax returns of the
Company previously filed or, to Company's knowledge, neglect
or carelessness in the Company's tax returns previously filed.
No consents extending or waiving the time limited for
reassessment of any taxes, duties, governmental charges,
penalties, interest or fines, or any statutes of limitations
related thereto have been filed with respect to the Company
for any fiscal year.
The Company has withheld from each payment made to any of its
officers, directors, former directors, and employees and
former employees the amount of all taxes and other deductions
(including without limitation, income taxes, unemployment,
disability, and other required taxes and contributions)
required to be withheld and has paid the same together with
the employer's share of same, if any (to the extent required
to be paid so no such amount is past due), to the proper tax
or other receiving officers within the prescribed times and
has filed, in complete and accurate form, all information and
other returns required pursuant to any applicable legislation
within the prescribed time.
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SHARE EXCHANGE AGREEMENT
The provisions made for current and deferred taxes included in
the Financial Statements are sufficient for the payment of all
accrued and unpaid federal, state and local income, franchise,
capital, sales or use, excise, fuel, property or other taxes,
assessments and reassessments, duties, governmental charges,
penalties, interest and fines of, and payable by, the Company
whether or not disputed, for the period ended the date thereof
and for all periods prior thereto. The reserve for taxes on
the financial statements does not take into account the affect
that the acquisition and post-acquisition activities may have
on taxes for the Company.
The Sellers represent that their Social Security or Federal
I.D. Numbers are as follows:
Aztec Industries, Inc. ▇▇-▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ###-##-#### ▇▇▇▇ ▇. ▇▇▇▇▇▇▇: ###-##-####
▇▇▇▇ ▇. ▇▇▇▇▇ ###-##-#### ▇▇▇▇ ▇. ▇▇▇▇▇: ###-##-####
The Purchaser represents that its federal employer
identification number is set out below:
DuraSwitch Industries, Inc.: ▇▇-▇▇▇▇▇▇▇
(k) Absence of Changes - Other than as disclosed on Schedule "T"
hereto since the date of the Financial Statements there has
not been:
(i) any material decrease in the condition or operations
of the Business, assets or financial condition of the
Company other than changes in the ordinary and normal
course of business, none of which has been materially
adverse; or
(ii) any damage, destruction or loss, labor trouble or
other event, development or condition of any
character (whether or not covered by insurance)
materially and adversely affecting the Business,
assets, properties or future prospects of the
Company.
(l) Absence of Unusual Transactions - Except as otherwise
disclosed on Schedule "T" attached hereto, since the date of
the Financial Statements the Company has not:
(i) transferred, assigned, sold or otherwise disposed of
any of the assets shown in the Financial Statements
or cancelled any debts or claims except in each case
in the ordinary and usual course of business;
(ii) incurred or assumed any obligation or liability
(fixed or contingent), except those listed in
Schedule "B" hereto and except unsecured current
obligations and liabilities incurred in the ordinary
and normal course of business;
(iii) issued or sold any shares in its capital or any
warrants, bonds, debentures or other securities of
the Company or issued, granted or delivered any
right, option or other commitment for the insurance
of any such or other securities, except as described
in Schedule "Q";
(iv) discharged or satisfied any lien or encumbrance, or
paid any obligation or liability (fixed or
contingent) other than liabilities included in the
Financial Statements and
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SHARE EXCHANGE AGREEMENT
liabilities incurred since the date thereof in the
ordinary and normal course of business;
(v) undertaken any action or transaction, or suffered any
circumstance or situation, having an adverse effect
on stockholders equity other than in the ordinary
course of business;
(vi) declared or made any payment of any dividend or other
distribution in respect of any shares in its capital
or purchased or redeemed any such shares thereof or
effected any subdivision, consolidation or
reclassification of any such shares, except as
described in Schedule "Q";
(vii) except as disclosed in its current Financial
Statement or on any Schedule attached hereto,
suffered any operating loss or any extraordinary
loss, or waived any rights of substantial value, or
entered into any commitment or transaction not in the
ordinary and usual course of business where such
loss, rights, commitment or transaction is or would
be material in relation to the Company;
(viii) amended or changed or taken any action to amend or
change its articles or bylaws, provided, however, the
articles were amended to conform to requirements of
Arizona law regarding the provisions that are no
longer applicable or required of corporations in the
State of Arizona;
(ix) made any general wage or salary increases in respect
of personnel which it employs, other than increases
in the ordinary and normal course of business;
(x) except as disclosed in Schedule "C," mortgaged,
pledged, subjected to lien, granted a security
interest in or otherwise encumbered any of its assets
or property, whether tangible or intangible;
(xi) except with Purchaser's prior written consent, or
described in Schedule "Q," made any single capital
expenditure in excess of $1,000; or
(xii) authorized or agreed or otherwise become committed to
do any of the foregoing.
(m) Title to Properties - Except as disclosed in the Financial
Statements or in Schedule "C" hereto, the Company has good and
marketable title to all its properties, interests in personal
properties and assets, including without limitation those
reflected in the Financial Statements or acquired since the
date of the Financial Statements free and clear of all
pledges, liens, encumbrances or charges of any kind or
character.
(n) Leased Equipment - Schedule "D" contains a true and complete
list of all non-vehicular equipment of the Company. Also
attached at Schedule "D" is a complete list of all material
personal property and fixtures in the possession or custody of
the Company which, as of the date hereof, is leased or held
under license or similar arrangement and details of the
leases, licenses, agreements and other documentation relating
thereto.
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(o) Collectibility of Accounts Receivable - The net accounts
receivable (i.e. after discounts, reserves for uncollectibles
or other contractual allowances) shown in the Financial
Statements or acquired subsequent to the date thereof and
prior to the date of this Agreement, and subject to normal
uncollectible rates and write-offs, per industry standards, to
Company's knowledge, either have been collected or are good
and collectible at the aggregate recorded amounts thereof
(subject to no defense, counterclaim or set off), provided,
however, Schedule "Q" contains a list of accounts which may be
problematical. This representation shall be read in
conjunction with Section 5.08 hereof.
(p) Leases of Real Property - The Company is not a party to or
bound by any leases of real property other than those referred
to in Schedule "E" hereto, and all interests held by the
Company as lessee under such leases are free and clear of any
and all liens, charges and encumbrances of any nature and kind
whatsoever. All rental and other payments required to be paid
by the Company as lessee, pursuant to such leases have been
duly paid except for accrued payments for ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇,
which are not to be paid by the Purchaser, but are the
responsibility of the Sellers. Such leases are in full force
and effect without amendment thereto and the Company is not in
default in meeting its obligations contained in any such
lease.
(q) Real Property - Except as set out at Schedule "E" hereto, the
Company does not own any real property in fee simple.
(r) Vehicular Equipment - Schedule "N" contains a list of all
vehicular equipment owned or leased by the Company. Such
vehicular equipment is in a good state of repair, reasonable
wear and tear excepted, and, to Company's knowledge, each
vehicle complies with all laws and regulations affecting its
operation and each vehicle bears a current safety standards
certificate. By signing hereunder, Purchaser acknowledges it
has examined and accepts the condition of the assets.
(s) Condition of Assets - All material non-vehicular tangible
assets of the Company set out at Schedule "D" used in or in
connection with the Business are in good condition, repair and
proper working order, reasonable wear and tear excepted. By
signing hereunder, Purchaser acknowledges it has examined and
accepts the condition of such assets.
(t) Revenue Contracts - Except as set out in Schedule "F," the
Company is not, at the date of the execution of this
Agreement, a party to any contract garnering net revenues in
excess of 5% of total net revenues of the Company pursuant to
which it is to provide manufacturing or other services.
(u) Contracts to Purchase - Except as set out in Schedule "G," the
Company is not a party to any contract to purchase any goods
and/or services with a value in excess of $10,000/year.
(v) Employment-Related Contracts - Except as set out in Schedule
"H" or elsewhere in this Agreement, the Company does not have
any union or collective labor, pension, deferred profit
sharing, retirement, employee benefit, stock option or other
similar agreements or plans nor has it had any such plan or
agreement in the past and a qualified profit sharing plan.
Except as set out in Schedule "H," the Company has not, in the
last four (4) years, experienced any labor disputes which were
of a material nature, work stoppages or strikes
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(legal or otherwise). To Company's knowledge, there is not now
any circumstance or conduct which could result in the filing
of an unfair labor practice complaint against the Company; any
such complaints previously raised and currently ongoing and
the current status thereof are particularized in Schedule "H."
To Company's knowledge, no attempts have (within the last 60
days) been made by any trade union or employee association to
organize or represent any employees of the Company. Except as
set out on Schedule "H," to Company's knowledge, the Company
has complied at all times with minimum wage, overtime and
benefit rules and regulations under all applicable state and
federal laws.
(w) Material Contracts - To Company's knowledge, except for the
liens, charges and encumbrances listed in Schedule "C," the
equipment and other personal property leases and agreements
referred to in Schedule "D," the revenue contracts listed in
Schedule "F," the purchase contracts listed in Schedule "G,"
the employment contracts and pension plans listed in Schedule
"K," the leases set out in Schedule "E," other items disclosed
herein and the insurance policies and agreements listed in
Schedule "I," the Company is not a party to or bound by any
material contract or commitment whether oral or written. To
Company's knowledge, the contracts and agreements listed in
Schedule "I" are all in full force and effect unamended and no
material default exists in respect thereof on the part of any
of the Parties thereto. To Company's knowledge, such contracts
and agreements include all the presently outstanding material
contracts entered into by the Company in the course of
carrying on its respective business and all quotations, orders
proposals or tenders for such contracts which remain open for
acceptance. Subject to unforeseen happenings in the future,
the Company has the capacity, including the necessary
personnel, equipment and supplies, to perform all their
obligations thereunder.
(x) Employee Benefit Plans - The Company has a so-called 401(k)
plan with a January year end which was previously a profit
sharing plan that was converted into the 401(k) plan (the
"Plan"). The Company has delivered to Purchaser a correct and
complete copy of the Plan's documents and summary Plan
description, and all related IRS determination letters, Form
5500 Annual Reports, trust agreements, funding agreements and
insurance contracts. The Plan is the only employee benefit
plan ever maintained or contributed to by the Company. To
Company's knowledge, with respect to the Plan: (i) it has
never been completely or partially terminated or been the
subject of a "reportable event" which would require a notice
to the PBGC; (ii) there have been no "prohibited
transactions"; (iii) the Company or its officers have no
reason to believe that they have incurred or that they will
incur any liability to the PBGC or otherwise under Title IV of
ERISA or under the Internal Revenue Code of 1997; and (iv) the
Company has never contributed to, had liability to or
maintained any multi-employer plan. The Company does not have
any obligation to provide material post-retirement benefits of
any nature to its employees, former employees or their
survivors, dependents or beneficiaries, except as may be
required by the Consolidated Omnibus Budget Reconciliation Act
of 1986 ("COBRA") or any other applicable state medical
benefits continuation laws, nor will any such obligation to
provide such post-retirement benefits be incurred solely as a
result of the consummation of the within transactions. The
Company has not caused there to occur a "mass lay-off," as
defined in section 693.3 of the regulations issued under the
Worker Adjustment and Retention Notification Act (20 CFR 639)
at any time in the past.
(y) Absence of Guarantees - To the Company's knowledge, the
Company has not given or agreed to give, or is a party or
bound by, any guaranty of indebtedness or other obligations
11
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SHARE EXCHANGE AGREEMENT
of third Parties or any other commitment by which the Company
is, or is contingently, responsible for such indebtedness or
other obligation.
(z) Absence of Conflicting Agreements - To Company's knowledge,
the Company is not a party to, bound or affected by or subject
to any indenture, mortgage, lease, agreement, instrument,
charter or bylaw provision, statute, regulation, order,
judgment, decree or law which would be violated, contravened,
breached by or under which default would occur, as a result of
the execution and delivery of this Agreement or the
consummation of any of the transactions provided for herein.
(aa) Litigation - Except for the items disclosed in Schedule "J"
hereto, all of which are fully insured against, to Company's
knowledge, there is no suit, action, litigation, arbitration
proceeding or governmental proceeding, hearing before an
administrative tribunal, including appeals and applications
for review, in progress, pending or threatened against or
relating to the Company or its properties or Business. Except
as shown in Schedule "J," to Company's knowledge, there is not
presently outstanding against the Company any adverse
judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality
or arbitrator.
(bb) Employees, etc. - Schedule "K" contains the names and titles
of all personnel employed or engaged by the Company whose
annual rate of remuneration exceeds $40,000, including rates
of remuneration, positions held and date of commencement of
employment. To Company's knowledge, the employment records of
the Company are true, complete and correct. Also set forth in
Schedule "K" hereto is a complete list of all independent
contractors, subcontractors, and agents which are presently
engaged by the Company on a basis which involves a commitment
which cannot be cancelled by the Company on 30 days notice or
less.
(cc) Bank Accounts, etc. - There is set forth in Schedule "L"
hereto the name of each bank or other depository in which the
Company maintains any bank account, trust account or safety
deposit box, the account numbers for each, and the names of
all persons authorized to draw thereon or who have access
thereto.
(dd) Insurance - The Company currently has in force the policies of
insurance set out in Schedule "I" hereto. Such policies are
issued by responsible insurers, and are appropriate to the
Business, property and assets, and are in such amounts and
against such risks as are customarily carried and insured
against by owners of comparable businesses, properties and
assets; all such policies of insurance are in full force and
effect and the Company is not in default, whether as to the
payment of premium or otherwise, under the terms of any such
policy. To Company's knowledge, the Company has no liability
for retrospective insurance premiums or costs. The Company
will provide Purchaser with all insurance policies which they
have had in effect for the last seven (7) years.
Notwithstanding the foregoing, there exists insurance policies
on the life of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ that will be distributed to
him prior to the Closing.
(ee) Absence of Uninsured Liabilities - To Company's knowledge, the
Company does not have any outstanding liabilities nor is it
the subject of any outstanding claims which liabilities or
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SHARE EXCHANGE AGREEMENT
claims are normally covered by insurance policies but which
liabilities or claims are not covered by its insurance.
(ff) Intellectual Property - Attached as Schedule "M" is a true and
correct schedule (including the appropriate registration
numbers and expiration dates, if applicable) identifying all
patents, patent rights or licenses, patent applications,
trademarks, trademark registrations and applications,
trademark rights, trade names, trade secrets, service marks
and applications therefore, copyrights and copyright
registrations and copyright applications used in whole or in
part or required for the proper carrying on of the Business of
the Company.
(gg) Copies of Agreements, etc. - True, correct and complete copies
of all mortgages, leases, agreements, instruments and other
documents listed on the Schedules to this Agreement, and of
the policies of insurance referred to herein, either have been
delivered to the Purchaser or will be delivered prior to
Closing.
(hh) Corporate Records - The corporate records and minute books of
the Company contain true and accurate copies of the bylaws,
material minutes of the meetings and resolutions of the
directors and shareholders of the Company; that such meetings
were duly called and held, that such bylaws and resolutions
were duly passed and the share certificate books, registers of
shareholders, registers of transfers and registers of
directors of the Company are true and accurate in all material
respects.
(ii) Books of Account - The books and records of account of the
Company fairly set out and disclose in all material respects,
and in accordance with GAAP, applied consistently, the
financial position of the Company as of the date hereof and
are true and correct regarding the financial transactions of
the Company and, to Company's knowledge, have been accurately
recorded in such books and records.
(jj) Third-Party Approvals - Except as listed on Schedule "Q,"
there are no approvals, consents or waivers required to be
obtained or applications required to be filed from or with
governmental authorities or from any other Person whatsoever,
including pursuant to any leases or contracts containing
prohibitions or pre-consent provisions to the within
transactions in order to permit the transactions contemplated
herein or to preserve the Business and/or assets of the
Company.
(kk) Compliance with Environmental Laws - Except as disclosed in
Schedule "O" hereto, to Company's knowledge, the Company and
the Business are in compliance with and have always been in
compliance with all, and do not violate, and have not violated
in any material respect any applicable federal, state,
municipal or local laws, regulations, orders, certificates of
approval, licenses, permits, governmental decrees, ordinances
or any and all other legislation or regulatory instruments
with respect to environmental, health or safety matters
(collectively, "Environmental Laws") and, for greater
certainty, and without limiting the generality of the
foregoing:
(i) to Company's knowledge, the Company has operated at
all times and has received, handled, used, stored,
treated, shipped and disposed at all times all
contaminants in strict compliance with all
Environmental Laws and has removed all contaminants
in compliance with all Environmental Laws from, out
of and off the real property
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14
SHARE EXCHANGE AGREEMENT
owned or leased or under its control or the control
of its respective agents or employees;
(ii) to Company's knowledge, there have been no spills,
releases, deposits, emissions or discharges of
hazardous or toxic substances, materials, pollutants,
contaminants or wastes on or near any of the real
property owned or leased by the Company, or under the
control of the Company, its agents or employees, nor
has any of such real property been used at any time
by any Person as a landfill or waste disposal site;
the adverse effects of any spills, releases,
deposits, emissions or discharges as disclosed in
Schedule "O" have been eliminated or ameliorated and
the natural environment has been restored to the
state it was in prior to such spill, release,
deposit, emission or discharge;
(iii) to Company's knowledge, there have been no spills,
releases, deposits, emissions or discharges, in
violation of Environmental Laws. of any hazardous or
toxic substances, materials, pollutants, contaminants
or wastes into the earth, air or into any river,
stream, lake, reservoir or other body of water
(including groundwater) or into any municipal or
other sewer or drain water systems except as
disclosed in Schedule "O" hereto; the adverse effects
of any and all spills, releases, deposits, emissions
or discharges so disclosed have been eliminated or
ameliorated and the natural environment has been
restored to the state it was in prior to such spill,
release, deposit, emission or discharge;
(iv) to Company's knowledge, there are not now nor have
there ever been underground storage vessels,
associated piping or appurtenances thereto located on
any of the real property owned or leased by the
Company except as disclosed in Schedule "O" hereto;
Schedule "O" sets forth the date any such underground
storage vessels, associated piping or appurtenances
thereto were installed, as well as the composition of
same; all underground storage vessels, associated
piping and appurtenances thereto have been installed
in compliance with Environmental Laws, and all the
foregoing required to be removed, replaced or
upgraded pursuant to Environmental Laws have been
removed, replaced or upgraded in compliance
therewith: all reports, correspondence, invoices,
receipts and other records associated with the
installation, removal, replacement or upgrading of
any underground storage vessels, associated piping
and appurtenances thereto dating back a period of 10
years have been or will, prior to Closing, be
delivered Purchaser;
(v) to Company's knowledge, no orders, directions or
notices have been issued pursuant to any
Environmental Laws to the Company except as disclosed
in Schedule "O" hereto, copies of which shall be
delivered to the Purchaser prior to Closing;
(vi) to Company's knowledge, the Company has maintained
all environmental operating documents, manifests and
other records in the manner and for the time periods
required by Environmental Laws;
(vii) to Company's knowledge, the Company has not conducted
any environmental audits except as disclosed in
Schedule "O" (for the purposes hereof "environmental
audits"
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15
SHARE EXCHANGE AGREEMENT
means any evaluations, assessments, studies or tests
performed relating to environmental matters,
including without limitation any results of soil,
groundwater, air or water quality samples and any
associated reports, whether prepared by the Company,
the Sellers, their agents or employees or any other
Person whomsoever); correct and complete copies of
said environmental audits shall be delivered to the
Purchaser prior to Closing;
(viii) to Company's knowledge, the Company is in compliance
with all orders, directions, notices, certificates of
approval, certificates, licenses and permits which
have been issued to them and hold all certificates of
approval, certificates, licenses and permits or other
approvals which they are required to hold pursuant to
Environmental Laws; correct and complete copies of
all said orders, directions, notices, certificates of
approval, certificates, licenses and permits shall be
delivered to the Purchaser prior to Closing;
(ix) to Company's knowledge, the Company has never been
charged with or convicted of any offence under
Environmental Law;
(x) to Company's knowledge, the Company has not received
any written notice nor does it have any knowledge
after due investigation and inquiry of any facts
which could give rise to any notice that it is a
Potentially Responsible Party for a waste disposal
site pursuant to the Comprehensive Environmental
Response Compensation and Liability Act of the United
States of America or any other similar federal, state
or local laws, as same may be amended or supplemented
from time to time;
(xi) to Company's knowledge, no poly-chlorinated biphenyl
wastes are stored on or in any of the real property
leased by the Company; and
(xii) to Company's knowledge, the Company has not failed to
report to the proper governmental authority the
occurrence of each event which is required to be so
reported by any Environmental Laws and the Sellers
have provided or shall prior to Closing provide the
Purchaser with correct complete copies of all such
reports and all correspondence relating thereto.
The Company is not required to hold any license, permit or
approval under any Environmental Laws for any reason
whatsoever (including in connection with the operation of the
Business) except as disclosed in Schedule "O" hereto, the
Company has not received any notification pursuant to any
Environmental Laws that any work, repairs, construction or
capital expenditures are required to be made in respect of any
of the assets owned or used by them or any of them as a
condition of continued compliance with any Environmental Laws.
(ll) Compliance with Laws - To Company's knowledge, the Company is
not in violation of any laws, regulations, decrees or
ordinances applicable to the type of Business operated.
(mm) Full Disclosure - To Company's knowledge, none of the
foregoing representations, warranties and statements of fact
contains any untrue statement of material fact or omits to
state any material fact necessary to make any such statement
or representation not misleading to a
15
16
SHARE EXCHANGE AGREEMENT
prospective purchaser of the Purchased Shares seeking full
information as to the Company and its respective properties,
businesses and affairs.
(nn) Seller acknowledges that the offering and sale of the Exchange
Shares are being made by the Purchaser in reliance upon an
exemption from registration under the provisions of Section
4(2) of the Securities Act of 1933, as amended. Without
limiting the generality of the foregoing and subject to the
other provisions of this letter, Sellers agree not to sell or
otherwise dispose of the Shares of Purchaser unless a
registration statement covering such Shares has been filed and
has become effective under the Securities Act of 1933 or
Sellers provide Purchaser an opinion of legal counsel
satisfactory to Purchaser that an exemption from such
registration is available.
Sellers acknowledge that the company is not presently subject
to the provisions of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, and that Seller may not be
permitted to rely on the provisions of Rule 144, promulgated
by the Securities and Exchange Commission, for authority to
sell or otherwise dispose of the Shares after a fixed period
of time.
Sellers further agree that they will not sell, transfer,
assign or encumber the Exchange Shares until after January 31,
2000.
Sellers agree that the certificates representing the
above-described Shares may bear the following restrictive
legends:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, but
are issued in reliance on the representation that
they are taken for investment and not for
redistribution. As a condition to any transfer
hereof, the Corporation may require an opinion of
counsel satisfactory to it that all statutory
registration provisions have been met or do not
apply."
and
"The sale, transfer, assignment or encumbrance of
the shares represented by this certificate is
restricted by the provisions of a Share Exchange
Agreement dated January 14, 1998 by and among ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and their respective
Spouses, and the ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Family
Revocable Living Trust. The Company will mail to any
shareholder a copy of such agreement within five days
after receipt of a written request therefor."
Sellers understand the nature of the investment being made and
the financial risks thereof, and are able to bear the economic
risks of Sellers' investment. Sellers have been afforded
access to information regarding the business operations and
financial condition of the Purchaser and has been furnished
with financial and other information regarding the Purchaser
which they have requested and deem necessary; Sellers have
examined the same or caused the same to be examined by
Sellers' investment representatives; and Sellers do not desire
any further information or data concerning Purchaser. Sellers
have
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SHARE EXCHANGE AGREEMENT
been represented by legal counsel of its choice in connection
with the investment in the Shares.
Sellers further agree that the Purchaser may permit the
transfer of the Shares out of Sellers' name only if Sellers'
request for transfer is accompanied by evidence satisfactory
to the Purchaser that neither the sale nor the proposed
transfer of the Shares will result in a violation of any
applicable law, rule or regulation, federal or state.
3.2 Representations and Warranties of the Purchaser - The Purchaser hereby
represents and warrants to the Seller as follows:
(a) Organization and Valid Existence - The Purchaser is a
corporation duly incorporated and organized and is validly
existing under the laws of the State of Nevada and has all
necessary corporate power, authority and capacity to enter
into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereunder
shall be duly authorized or ratified by any necessary
corporate action on the part of the Purchaser on or prior to
Closing.
(b) Enforceability of Obligations - This Agreement will, on
Closing, constitute a valid and binding obligation of the
Purchaser enforceable against it in accordance with its terms.
(c) Absence of Conflicting Arguments - To Purchaser's knowledge,
the Purchaser is not a party to, bound or affected by or
subject of any indenture, mortgage, lease, agreement,
instrument, charter or bylaw provision, statute, regulation,
order, judgment, decree or law which would be violated,
contravened or breached by, or under which any default would
occur, as a result of the execution and delivery of this
Agreement or the consummation of any of the transactions
provided for herein.
(d) Litigation - To Purchaser's knowledge, there is no suit,
action, litigation, arbitration proceeding or governmental
proceeding, including appeals and applications for review, in
progress, pending or, to the best of the knowledge,
information and belief (after due enquiry) of the senior
officers of the Purchaser, threatened against or involving the
Purchaser or any judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency,
instrumentality or arbitrator which, in any such case, might
adversely affect the ability of the Purchaser to enter into
this Agreement or to consummate the transactions contemplated
hereby.
(e) Tax - The Purchaser represents that its federal employer
identification number is 88- 0308867.
(f) Due Diligence - Purchaser acknowledges being provided access
to Company's facilities and records for due diligence and,
based on the materials and access disclosed, is satisfied with
its due diligence.
(g) Patents - The Purchaser owns those patents outright (or such
rights as described) on Schedule "V."
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SHARE EXCHANGE AGREEMENT
(h) Financial Statements - Purchaser's current financial
statements are attached hereto as Schedule "W," and Purchaser
hereby represents that they are accurate and correct and
prepared in accordance with GAAP, and that from the date of
the financial statements to the Closing, there has been no
material changes, except as set forth on an attachment to
Schedule "W."
(i) Laws - To Purchaser's knowledge, the consummation of this
transaction will not violate any laws or regulations of the
United States, state or local governmental authority.
3.3 No Broker - Each of the Parties represents and warrants to the others that
all negotiations relating to this Agreement and the transactions contemplated
hereby have been carried on between them directly and without the intervention
of any other party in such manner as to give rise to any valid claims against
any of the Parties for a brokerage commission, finder's fee or other like
payment.
3.4 Non-Waiver - No investigations made by or on behalf of the Purchaser or
Sellers at any time shall have the effect of waiving, diminishing the scope of
or otherwise affecting any representation or warranty made by the Sellers or
Purchaser, as the case may be, herein or pursuant hereto, unless through such
investigations a party discovers a misrepresentation or incorrectness of a
warranty or is given information which contradicts such representation or
warranty, in which case, such discovering Party shall inform the other Parties
in writing of such misrepresentation or incorrectness. If the closing takes
place after such written notice of a discovered misrepresentation or
incorrectness, the representation or warranty shall be deemed to have been
modified to the facts as they actually exist.
3.5 Nature and Survival of Representations, Warranties and Covenants - All
statements contained in any certificate or other instrument delivered by or on
behalf of a Party pursuant to or in connection with the transactions
contemplated by this Agreement shall be deemed to be made by such Party
hereunder. Subject to section 3.4 above, all representations, warranties,
covenants and agreements herein contained on the part of each of the Parties
shall survive the Closing, the execution and delivery hereunder of share or
security transfer instruments and other documents of title to the Purchased
Shares for a period of five years except for representations, warranties,
covenants and agreements relating to taxation matters, ERISA matters or
environmental matters, each of which shall survive until the applicable statute
of limitations in respect of same; and except for matters of fraud, which shall
survive forever.
ARTICLE 4
CONDITIONS PRECEDENT TO THE PERFORMANCE
BY THE PURCHASER AND THE SELLER OF
THEIR OBLIGATIONS UNDER THIS AGREEMENT
4.1 Purchaser's Conditions - The obligation of the Purchaser to complete the
exchange of the Shares hereunder shall be subject to the satisfaction of, or
compliance with, in all material respects, at or before the Closing Time, each
of the following conditions precedent (each of which is hereby acknowledged to
be inserted for the exclusive benefit of the Purchaser and may be waived by it
in whole or in part):
(a) Truth and Accuracy of Representations of Seller at the Closing
Time - Subject to section 3.4 herein, all of the
representations and warranties of the Seller made in or
pursuant to this Agreement, including, without limitation, the
representations and warranties made by the Sellers and set
forth in Sections 3.1 and 3.3 hereof, shall be true and
correct as at the
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19
SHARE EXCHANGE AGREEMENT
Closing Time and with the same effect as if made at and as of
the Closing Time (except as such representations and
warranties may be affected by the occurrence of events or
transactions expressly contemplated and permitted hereby or by
transactions in the ordinary and normal course of business),
and the Purchaser shall have received a certificate from each
of the Sellers confirming, to the best of their knowledge,
information and belief (after due inquiry), the truth and
correctness of the representations and warranties of the
Sellers contained herein;
(b) Performance of Obligations - The Sellers shall have performed
or complied with, in all respects, all of their obligations,
covenants and agreements hereunder;
(c) Receipt of Closing Documentation - All documentation relating
to the due authorization and completion of the sale and
purchase hereunder of the Purchased Shares and all actions and
proceedings taken on or prior to the Closing in connection
with the performance by the Sellers of their obligations under
this Agreement shall be satisfactory to the Purchaser and the
Purchaser shall have received copies of all such documentation
or other evidence as it may reasonably request in order to
establish the consummation of the transactions contemplated
hereby and the taking of all corporate proceedings in
connection therewith in compliance with these conditions, in
form (as to certification and otherwise) and substance
satisfactory to the Purchaser;
(d) Consents, Authorizations and Registrations - All consents,
approvals, orders and authorizations of any Persons or
governmental authorities (or registrations, declarations,
filings or recordings with any such authorities) required in
connection with the completion of any of the transactions
contemplated by this Agreement, the execution of this
Agreement, the Closing or the performance of any of the terms
and conditions hereof (collectively the "Approvals"), shall
have been obtained on or before the Closing Time; the Sellers
shall have obtained and delivered by Closing to the Purchaser
written consents, in form and substance satisfactory to the
Purchaser, to the transaction contemplated herein which are
required pursuant to the real property leases referred to in
Schedule "E" (and any customer contracts where approval or
consent is required). Including, without limiting the
generality of the foregoing, such acknowledgments and
confirmations of good standing from the lessors in respect of
the real property leases referred to in Schedule "E" hereto as
may be reasonably requested by the Purchaser;
(e) Directors and Officers of the Company - There shall have been
delivered to the Purchaser on or before the Closing Time the
resignations of such persons as the Purchaser shall direct who
are presently directors and/or officers of the Company from
such positions and duly executed comprehensive releases from
each such person and from the Sellers of all their claims
respectively, against the Company, except for any claims for
current or future unpaid transaction consideration or
remuneration; provided, however, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇
▇. ▇▇▇▇▇, under an employment agreement, will be elected
President and Vice President of the Company and one of them,
per agreement between the two, will also be given a seat on
the Board of Directors of Purchaser for a minimum of one (1)
year from the date of Closing.
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20
SHARE EXCHANGE AGREEMENT
(f) Non-Competition - There shall have been delivered to the
Purchaser from ▇▇. ▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ executed employment
and non-competition Agreements which agreements shall be in
the form set out at Schedule "P" hereto.
(g) Limit on Capital Expenditures - The Purchaser shall be
satisfied that the Company shall not have, since the date
hereof, incurred any capital expenditures in excess of $1,000
in the aggregate without the prior approval of the Purchaser;
(h) No Fire Damage - No substantial damage by fire or other hazard
to the assets of the Company shall have occurred from the date
hereof to the Closing Date which is not adequately insured
against;
(i) Litigation - On the Closing Date. there shall be no
litigation, governmental investigation or proceeding pending
or threatened for the purpose of enjoining or preventing the
consummation of any of the transactions contemplated by this
Agreement or otherwise claiming that such consummation is
improper;
(j) Tax Returns - Purchaser shall have received the 1997, 1996,
1995, 1994 and 1993 fiscal years' tax returns of the Company;
(k) Financial - The Purchaser shall be satisfied with the accuracy
and sufficiency of the Financial Statements and all other
financial records of the Company;
(l) Labor - The Closing of this transaction is conditional upon
Purchaser being satisfied with the Company's labor situation;
(m) Board Approval - Purchaser shall have received the approval
and authorization of its Board of Directors prior to the
entering into this Agreement;
(n) Due Diligence - Purchaser shall have satisfactorily completed
its due diligence investigations.
4.2 Seller's Conditions - The obligations of the Sellers to complete the
exchange of the Shares hereunder shall be subject to the satisfaction of or
compliance with, at or before the Closing Time, each of the following conditions
precedent (each of which is hereby acknowledged to be inserted for the exclusive
benefit of the Sellers and may be waived by them in whole or in part):
(a) Truth and Accuracy of Representations of Purchaser at Closing
Time - All of the representations and warranties of the
Purchaser made in or pursuant to this Agreement, including
without limitation the representations and warranties made by
the Purchaser and set forth in Sections 3.2 and 3.3 hereof,
shall be true and correct at the Closing Time and with the
same effect as if made at and as of the Closing Time and the
Sellers shall have received a certificate from a duly
authorized senior officer of the Purchaser confirming, to the
best of his knowledge, information and belief (after due
inquiry), the truth and correctness of the representations and
warranties of the Purchaser contained herein;
(b) Performance of Obligations - The Purchaser shall have
performed or complied with, in all respects, all of its
obligations, covenants and agreements hereunder;
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21
SHARE EXCHANGE AGREEMENT
(c) Receipt of Closing Documentation - All documentation relating
to the due authorization and completion of the sale and
purchase hereunder of the Purchased Shares and all actions and
proceedings taken on or prior to the Closing in connection
with the performance by the Purchaser of its obligations under
this Agreement shall be satisfactory to the Seller and the
Sellers shall have received copies of all such documentation
or other evidence as it may reasonably request in order to
establish the consummation of the transactions contemplated
hereby and the taking of all corporate proceedings in
connection therewith in compliance with these conditions, in
form (as to certification and otherwise) and substance
satisfactory to the Seller;
(d) Litigation - On the Closing Date. there shall be no
litigation, governmental investigation or proceeding pending
or threatened for the purpose of enjoining or preventing the
consummation of any of the transactions contemplated by this
Agreement or otherwise claiming that such consummation is
improper.
(e) Employment Agreements - Purchaser shall execute with ▇▇.
▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ employment agreements substantially in
conformance with those attached as Schedule "P" to this
Agreement.
(f) Due Diligence - Seller (and Company) shall have satisfactorily
completed their due diligence investigations.
(g) Financial - Sellers shall be satisfied with the accuracy and
sufficiency of the Financial Statements and all other
financial records of the Purchaser;
(h) Board Approval - Sellers shall have received a copy of the
approval and authorization of Purchaser's Board of Directors
approving this transaction.
(i) Sellers shall be satisfied that the exchange contemplated
herein will qualify as a tax-free exchange under Section 368
of the Internal Revenue Code of 1986, as amended.
4.3 Effect of Waiver - With regard to the conditions described in Sections
4.2(f), (g) and (i), unless Sellers give notice to Purchaser before January 21,
1998 at 5 p.m. to the contrary, such conditions shall be waived by Sellers. If
any party hereby waives in writing any of the conditions precedent in this
Article 4, said waiver shall be deemed in acceptance and approval of the
condition as waived. In any event, Closing shall be deemed in satisfaction of
all conditions described in this Section 4.
ARTICLE 5
OTHER COVENANTS OF THE PARTIES
5.1 Conduct of Business Prior to Closing - During the period from the date of
this Agreement to the Closing Time, the Sellers will cause the Company to do the
following:
(a) Conduct Business in Ordinary Course - Except as otherwise
contemplated or permitted by this Agreement, to preserve all
its goodwill and customer relations and conduct the Business
in the ordinary and normal course thereof and not, without the
prior written consent of the
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SHARE EXCHANGE AGREEMENT
Purchaser, to enter into any transaction which if effected
before the date of this Agreement would constitute a material
breach of the representations, warranties or agreements
contained herein;
(b) Continued Insurance - To continue in force existing policies
of insurance presently maintained by the Company;
(c) Perform Obligations - To comply with all laws affecting the
operation of the Business and to pay all required taxes and
tax installments; and
(d) Prevent Certain Changes - Not, without prior written consent
of the Purchaser, to take any of the actions, do any of the
things or perform any of the acts described in paragraphs (i)
to (xii) inclusive of Subsection 3.1(l).
5.2 Access for Investigation - The Seller has caused and shall continue to cause
the Company to permit the Purchaser and its employees, agents, counsels and
accountants or other representatives, between the date hereof and the Closing
Time, without interference to the ordinary conduct of the Business of the
Company and at the Purchaser's sole cost and expense, to have free and
unrestricted access during normal business hours to the premises and to all the
books, accounts, records, and other data of the Company (including, without
limitation, all corporate, accounting and tax records of the Company) and to the
properties and assets of the Company and to furnish with respect to the
Business, properties and assets of the Company as the Purchaser shall from time
to time reasonably request to enable confirmation of the matters warranted in
Section 3.1 hereof. Without limiting the generality of the foregoing, it is
agreed that the accounting representatives of the Purchaser shall be afforded
ample opportunity to make a full investigation of all aspects of financial
affairs of the Company. It is also agreed that an environmental representative
of the Purchaser shall be afforded ample opportunity to conduct an environmental
facility audit for the purpose of confirming the matters warranted in Section
3.1 (kk). Until the Closing Time, and in the event of the termination of this
Agreement without consummation of the transactions contemplated hereby, the
Purchaser will keep confidential any information (unless readily available from
public or published information or sources) obtained from the Company or the
Seller. If this Agreement is so terminated, promptly after such termination, all
documents, work papers and other written material obtained from any Person in
connection with this Agreement and not theretofore made public (including all
copies thereof), shall be returned to the Person who provided such material.
5.3 Actions to Satisfy Closing Conditions - Each of the Parties hereby agrees to
take all such reasonable actions as are within its power to control, and to use
its best efforts to cause other actions to be taken which are not within its
power to control, so as to ensure compliance with any conditions set forth in
Article 4 hereof which are for the benefit of any other Party.
5.4 Tax Indemnity - The Sellers will be responsible for the payment of, and will
indemnify the Company for, all unpaid or reassessed income taxes, if any, not
recorded as liabilities on the financial Statements but which are applicable to
any period prior to Closing.
5.5 Customer Consents - Sellers represent that none of the contracts or leases
to which the Company is a party contain provisions requiring approval prior to
any transfer of the Purchased Shares, nor do the contracts contain provisions
which bring into effect amendment or cancellation terms under a sale as
described in this Agreement.
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SHARE EXCHANGE AGREEMENT
5.6 Discussions, etc. - From the date hereof until this transaction terminates,
Sellers will not engage in any discussions or negotiations with any third party
regarding the sale of the Purchased Shares or all or substantially all of the
Company's assets.
5.7 Employment Agreements - ▇▇. ▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ will be offered employment
with the Purchaser at Closing all in accordance with Employment Agreements in
the format attached at Schedule "P" hereto.
5.8 Receivables - Sellers represent and warrant that all of the Company's net
receivables (i.e. after discounts and other contractual allowances) as at
Closing shall be fully collectible, except as reserved in the Financial
Statements and subject to normal industry standards of non-collection.
5.9 Quit Claim - At Closing, Purchaser shall cause and permit Company to quit
claim to the individual Sellers the items described in Schedule "X."
5.11 Schedules Refinement - The Parties acknowledge that the Schedules attached
hereto are formative, and that further alterations, additions or deletions
thereto shall be made before Closing after execution hereof provided that on or
prior to the 45th day after execution hereof, the Purchaser and Seller shall
endeavor to formally confirm in writing to each other their agreement as to the
final version of the Schedules, and same shall be attached to each original
Agreement in existence, if agreed. If no such agreement can be arrived at prior
to the Closing Time, either party may terminate this Agreement with no further
liability.
5.12 Curative Period - Prior to Purchaser exercising its set-off rights under
Section 2.4 hereof, it shall give 30 days prior written notice to Sellers,
describing with reasonable specificity the basis of the set-off. If curable,
Sellers shall have such 30 day notice period to demonstrate to Purchaser that
the matter has been cured or that it will be cured in a reasonable period of
time or to dispute the same. If not cured, disputed or demonstrated that it will
be cured in a reasonable period of time, the set-off shall proceed.
ARTICLE 6
INDEMNIFICATION AND DISPUTE RESOLUTION
6.1 Mutual Indemnifications for Breaches of Warranty, etc. - The Sellers hereby
covenant and agree with the Purchaser, and the Purchaser hereby covenants and
agrees with the Sellers (the Party or Parties so covenanting and agreeing to
indemnify another Party referred to in this paragraph as the "Indemnifying
Party" and the Party so to be indemnified being hereinafter called the
"Indemnified Party") to indemnify and save harmless the Indemnified Party,
effective as and from the Closing Time, from and against any claims, demands,
actions, causes of action, damage, loss, costs, liability or expense
(hereinafter in this Article 6 called "Claims") which may be brought against the
Indemnified Party and/or which it may suffer or incur as a result of, in respect
of, or arising out of any material non-fulfillment of any covenant or agreement
on the part of the Indemnifying Party under this Agreement or any incorrectness
in or breach of any representation or warranty of the Indemnifying Party
contained herein or in any certificate or other document furnished by the
Indemnifying Party pursuant hereto. The foregoing obligation of indemnification
in respect of such Claims shall be subject to the requirement that the
Indemnifying Party shall, in respect of any Claim made by any third party, be
notified forthwith by the Indemnified Party of all material particulars thereof
and be afforded at least 30 days, at its sole cost and expense, to resist,
defend and compromise the same. Notwithstanding the foregoing, the liability of
the Sellers shall be limited to the value paid for the shares pursuant to this
Agreement and may be satisfied by tender of shares which, for purposes of this
indemnity, shall be the greater of the
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SHARE EXCHANGE AGREEMENT
sales value accorded hereunder or the fair market value at the time the
indemnity is satisfied. If the shares tendered by the Sellers do not satisfy the
liability, such event will constitute an Employee Initiated Separation (as
defined in the Employment Agreements attached hereto of Schedule "P").
6.2 Carriage of Action
(a) If, within ten days after receipt of the notice referred to in
Section 6.1 hereof, the Indemnifying Party gives notice to the
Indemnified Party that the Indemnifying Party wishes to
dispute the matter in question, the Indemnifying Party shall
have the right to litigate such matter in the name of the
Indemnified Party using counsel chosen by the Indemnifying
Party and the Indemnifying Party shall also have the right to
settle or compromise such matter in the name of the
Indemnified Party; provided, however, that contemporaneously
with such compromise or settlement the Indemnifying Party
shall pay or cause to be paid to the Indemnified Party, as
either may direct, the amount owing under this indemnity with
respect to such matter and provided further that:
(i) the Indemnifying Party shall furnish security to the
Indemnified Party in respect of any costs or damages
arising in connection with any litigation;
(ii) the Indemnifying Party shall agree to reimburse the
Indemnified Party promptly in respect of all
out-of-pocket expenses of the Indemnified Party in
connection with such litigation or pending
litigation; and
(iii) the Indemnifying Party shall not be entitled to take
any steps which would have the effect of forfeiting
or otherwise terminating any contract, lease or other
agreement, the benefit of which the Indemnified Party
would otherwise be entitled to enjoy.
(b) If the Indemnifying Party does not provide the notice referred
to in Subsection 6.2(a) assuming the defense of the Claim, the
Indemnified Party may defend against such Claim in such manner
as it deems appropriate and may take such action as may be
reasonably prudent in the circumstances to settle any such
Claim.
6.3 Arbitration. Any disputes of less than $100,000 arising from this Agreement
shall be resolved by binding arbitration. The parties shall select a
mutually-agreeable arbitrator(s), and such arbitration shall be governed by the
rules of the American Arbitration Association. The prevailing party shall be
entitled to Attorneys' Fees and costs, as determined as reasonable by the
arbitrator(s).
ARTICLE 7
GENERAL
7.1 Public Notices - All public notices to third Parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by the Sellers and the Purchaser and no Party shall act
unilaterally in this regard without the prior approval of the Sellers and the
Purchaser or any of them.
7.2 Expenses - Purchaser shall pay directly to Company's attorney ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ $17,939 of the Company's legal fees incurred prior to Closing, as follows:
$10,000 upon closing for fees incurred regarding
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SHARE EXCHANGE AGREEMENT
the share exchange transaction and the remainder payable 90 days after Closing
for fees incurred prior to December 31, 1997. The Sellers shall be solely
responsible for all other fees and expenses incurred prior to Closing.
7.3 Time - Time shall be of the essence hereof.
7.4 Notices - Any notice, direction or other document required or permitted to
be given hereunder or for the purposes hereof (hereinafter in this Section 7.4
called a "notice") to any Party shall be in writing and shall be sufficiently
given if delivered personally, or if sent by prepaid registered mail or if
transmitted by telex, facsimile or other form of recorded communication tested
prior to transmission to such Party:
(a) in the case of a notice to the Seller, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, at his business address:
c/o Aztec Industries, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇.
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a facsimile number of: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to the Seller's Counsel at:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Attorney
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a facsimile number of: (▇▇▇) ▇▇▇-▇▇▇▇
(b) in the case of a notice to the Purchaser, to:
▇▇▇▇▇▇ ▇▇▇▇▇▇, at his business address:
DuraSwitch Industries, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a facsimile number of (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to Purchaser's Counsel at:
P. ▇▇▇▇▇▇ ▇▇▇▇, Esq.
▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a facsimile number of (▇▇▇) ▇▇▇-▇▇▇▇
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SHARE EXCHANGE AGREEMENT
or at such other address as the Party to whom such writing is to be given shall
have last notified the Party giving the same in the manner provided in this
section. Any notice delivered in person as provided herein shall be deemed to
have been given and received on the day it is so delivered at such address,
provided that if such day is not a Business Day then the notice shall be deemed
to have been given and received on the first Business Day next following such
day. Any notice mailed as aforesaid shall be deemed to have been given and
received on the seventh Business Day following the date of its mailing. Any
noticed transmitted by telex, facsimile or other form of recorded communication
shall be deemed given and received on the Business Day of its transmission.
7.5 Assignment - Neither this Agreement nor any rights or obligations hereunder
shall be assignable by any Party without the prior written consent of the other
Party hereto; provided, however, this Agreement shall inure to the benefit of
and be binding upon the Parties and their respective heirs, executors,
administrators and successors (including any successor by reason of amalgamation
of the Purchaser) and permitted assigns.
7.6 Further Assurances - The Parties hereto shall with reasonable diligence do
all such things and provide all such reasonable assurances as may be required to
consummate the transactions contemplated hereby, and each Party shall provide
such further documents or instruments required by any other Party as may be
reasonably necessary or desirable to effect the purpose of this Agreement and
carry out its provisions, whether before or after the Closing.
7.7 Severability - If any covenant or provision of this Agreement is prohibited
in whole or in part in any jurisdiction, such covenant or provision shall, as to
such jurisdiction, be ineffective to the extent of such prohibition without
invalidating the remaining covenants and provisions hereof and shall, as to such
jurisdiction, be deemed to be severed from this Agreement to the extent of such
prohibition.
7.8 Counterparts - This Agreement may be executed by the Parties in separate
counterparts (and by facsimile transmission) each of which when so executed and
transmitted or delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument.
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
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SHARE EXCHANGE AGREEMENT
IN WITNESS WHEREOF the Parties have hereunto duly executed this Agreement.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------- --------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Seller By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Seller
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------- --------------------------
By: ▇▇▇▇ ▇. ▇▇▇▇▇, Seller By: ▇▇▇▇ ▇. ▇▇▇▇▇, Seller
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Trustee for the
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Family Revocable
Living Trust
AZTEC INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
DURASWITCH INDUSTRIES, INC.
By: /s/ R. ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
R. ▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO/President
/s/ ▇▇▇▇▇▇▇ Van Zeeland
--------------------------------------------
Witness: ▇▇▇▇▇▇▇ Van Zeeland
COO/Exec. Vice President
DuraSwitch Industries, Inc.
27
