EXHIBIT 1
ACQUISITION AGREEMENT
between
QUALITY AIR, INC.
and
REFRIGERATION TECHNOLOGY INC.
Dated February 24, 1997
TABLE OF CONTENTS
PAGE
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Recitals ........................................................... -1-
I. Definitions................................................ -1-
1.1 Certain Defined Terms................................ -1-
II. Assets......................................................... -3-
2.1 Assets............................................... -3-
2.2 Excluded Assets...................................... -3-
2.3 Exchange............................................. -4-
III. Assumption of Liabilities...................................... -4-
3.1 Assumption of Liabilities............................ -4-
IV. Exchange Consideration......................................... -4-
4.1 Exchange Consideration............................... -4-
4.2 RTI Shares Delivered at the Closing.................. -4-
4.3 Earn-Out Shares...................................... -4-
4.4 Allocation of the Exchange Consideration............. -5-
4.5 Sales and Transfer Taxes............................. -5-
4.6 Distributions to Principals.......................... -5-
V. Representations and Warranties of QAI and the Principals....... -5-
5.1 Corporate Matters.................................... -5-
5.2 Qualification........................................ -5-
5.3 Authorization........................................ -5-
5.4 Effect of Agreement, Etc............................. -6-
5.5 Consents............................................. -6-
5.6 Balance Sheet........................................ -6-
5.7 Subsidiaries......................................... -6-
5.8 Absence of Certain Changes or Events................. -6-
5.9 Assets............................................... -7-
5.10 Compliance........................................... -7-
5.11 Leases............................................... -8-
5.12 Insurance............................................ -8-
5.13 Taxes................................................ -9-
5.14 Employee Plans....................................... -9-
5.15 Agreements, Plans, Arrangements, Etc................. -9-
5.16 Litigation...........................................-10-
5.17 No Violation of Environmental, Health or Safety Laws.-10-
5.18 No Violation of Other Laws...........................-10-
5.19 Intellectual Property................................-10-
5.20 Permits, Licenses, Etc...............................-11-
5.21 Interest in Competitors, Etc.........................-11-
5.22 Customers............................................-11-
5.23 Books and Records....................................-11-
5.24 Labor Relations......................................-11-
5.25 Employees............................................-11-
5.26 Warranties and Returns...............................-12-
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5.27 Manufacturing by the Affiliate.......................-12-
5.28 Investment Representations...........................-12-
5.29 Disposition of Shares................................-12-
5.31 Organization and Authority of the Affiliate..........-13-
5.33 Effect of this Agreement on the Affiliate............-13-
5.34 Authorization by the Affiliate and its Shareholders..-13-
5.35 Consents required by the Affiliate...................-13-
5.36 Balance Sheet of the Affiliate.......................-13-
5.37 Assets of the Affiliate..............................-14-
5.38 Other Information....................................-14-
VI. Representations and Warranties of RefTech......................-14-
6.1 Corporate Matters....................................-14-
6.2 Information..........................................-15-
6.3 Authorization........................................-15-
6.4 Effect of Agreement, Etc.............................-15-
6.5 Government Consents..................................-15-
6.6 Litigation...........................................-15-
VII. Closing........................................................-15-
7.1 The Closing..........................................-15-
7.2 Deliveries by QAI....................................-15-
7.3 Deliveries by RefTech................................-16-
VIII.Conditions to the Closing......................................-16-
8.1 Conditions to QAI's Obligation to Close..............-16-
8.2 Conditions to RefTech's Obligation to Close..........-17-
8.3 Title Defects........................................-17-
IX. Conduct of the Parties.........................................-17-
9.1 Affirmative Pre-Closing Obligations of QAI and the
Principals ..........................................-17-
9.2 Negative Covenants Pre-Closing.......................-18-
9.3 Post Closing Management of RefTech...................-19-
X. Indemnification................................................-19-
10.1 By QAI and the Principals............................-19-
10.2 By RefTech...........................................-19-
10.3 Notices, Defense, Etc................................-19-
10.4 Recourse Against QAI and the Principals..............-20-
XI. Termination....................................................-20-
11.1 Termination..........................................-20-
XII. Miscellaneous..................................................-20-
12.1 Further Assurances..................................-20-
12.2 Finders' Fees.......................................-20-
12.3 Expenses............................................-20-
12.4 Survival of Representations and Warranties..........-20-
12.5 Arbitration.........................................-20-
12.6 Specific Performance................................-21-
12.7 Notices.............................................-21-
12.8 Entire Agreement....................................-21-
12.9 Binding Effect; Benefits............................-21-
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12.10 Amendments and Waivers..............................-21-
12.11 Assignment..........................................-21-
12.12 Section and Other Headings..........................-22-
12.13 Execution in Counterparts...........................-22-
12.14 Separability........................................-22-
12.15 Governing Law.......................................-22-
12.16 Attorneys' Fees.....................................-22-
12.17 Public Information..................................-22-
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EXHIBITS
Exhibit 2.1 January 31, 1997 Balance Sheet of QAI
Exhibit 4.2 Escrow Agreement
Exhibit 5.1A QAI Certificate of Incorporation
Exhibit 5.1B QAI By-Laws
Exhibit 5.11.2 Mexican Factory Lease
Exhibit 5.11.3 Texas Warehouse Lease
Exhibit 5.31 Articles of the Affiliate
Exhibit 5.36 January 31, 1997 Balance Sheet of the Affiliate
Exhibit 8.2A ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement
Exhibit 8.2B ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement
Exhibit 8.2C ▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement
Exhibit 8.2D Industrias QAI, S.A. de C.V. Acquisition Agreement
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SCHEDULES
Schedule 2.2 Excluded assets
Schedule 3.1.A Assumed commitments
Schedule 3.1.B Other assumed liabilities
Schedule 4.4 Allocation of purchase price
Schedule 5.2 State qualifications
Schedule 5.6 Creditors
Schedule 5.8 Post-Balance Sheet changes
Schedule 5.9.1 Exceptions to title; liens
Schedule 5.9.3 Accounts receivable
Schedule 5.11.4 Leased and other equipment and vehicles
Schedule 5.12 Insurance
Schedule 5.13 Taxes
Schedule 5.15 Material agreements
Schedule 5.16 Litigation
Schedule 5.19 Intellectual property
Schedule 5.20 Permits, licenses, etc.
Schedule 5.21 Interest in competitors, etc.
Schedule 5.25 Employees
Schedule 5.26 Warranties and returns
Schedule 5.30 Affiliate's stockholders
Schedule 12.2 Finders
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ACQUISITION AGREEMENT
AGREEMENT, dated February 24, 1997, by and among REFRIGERATION
TECHNOLOGY INC., a Delaware corporation ("RefTech"), and QUALITY AIR, INC., a
New Mexico corporation ("QAI"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ (each a "Principal"
and, collectively, the "Principals").
Recitals
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A. QAI, with its affiliated company, Industrias QAI, S.A. de C.V.
(the "Affiliate" and, together with QAI, the "Company") is engaged in
the business of manufacturing, marketing and selling high efficiency,
residential coolers and central air conditioners (the "Business").
B. The Principals own in excess of 90% of all of the issued and
outstanding capital stock of QAI and control QAI.
C. RefTech is a wholly owned subsidiary of RTI Inc., a New York
corporation ("RTI").
D. The Company desires to transfer substantially all of its
assets to RefTech in exchange for shares of common stock, par value
$.08 per share, of RTI (the "Common Stock"), and the assumption by
RefTech of certain of the Company's liabilities, upon the terms and
conditions herein set forth.
E. Simultaneously with, or within 60 days after, the exchange
referred to in Recital D, either (i) the owners of the Affiliate are
transferring all of the capital stock of the Affiliate to RefTech and
RTI, or (ii) the Affiliate is transferring the business and
substantially all of the Affiliate's assets to RefTech.
F. Upon consummation of the exchange referred to in Recital D,
QAI intends to distribute the Common Stock which it receives to the
Principals as a distribution in liquidation of QAI.
NOW, THEREFORE, in consideration of the premises and in reliance upon
the mutual representations, warranties, covenants and agreements hereinafter set
forth, the parties agree as follows:
I. DEFINITIONS
-----------
1.1 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.1 or in
other provisions of this Agreement in the singular or plural shall have the same
meanings when used in the plural or singular, respectively):
"AFFILIATE" shall have the meaning defined in Recital A.
"AFFILIATE DOCUMENTS" shall mean the Stock Purchase Agreement among the
stockholders of the Affiliate, RefTech and RTI, which provides for the sale of
all of the capital stock of the Affiliate to RefTech and RTI, including all
exhibits and schedules annexed thereto, as the same may be amended and
supplemented through the closing thereunder.
"AGREEMENT" shall mean this agreement and all Exhibits and Schedules
annexed or to be annexed hereto, as same may be amended from time to time.
"ASSUMED LIABILITIES" shall mean the liabilities referred to in Section
3.1 which are being assumed by RefTech at the Closing.
"ASSETS" shall have the meaning defined in Section 2.1.
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"BALANCE SHEET" shall have the meaning defined in Section 2.1.
"BALANCE SHEET DATE" shall have the meaning defined in Section 2.1.
"BUSINESS" shall have the meaning defined in Recital A.
"CLOSING" shall have the meaning defined in Section 7.1
"CLOSING DATE" shall have the meaning defined in Section 7.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITMENTS" shall have the meaning defined in Section 5.15.2.
"COMMON STOCK" shall have the meaning defined in Recital D.
"COMPANY" shall have the meaning defined in Recital A.
"EARN-OUT PERIOD" shall have the meaning defined in Section 4.3.
"EARN-OUT SHARES" shall mean the shares of Common Stock which are
required to be delivered pursuant to Section 4.2.
"ESCROW AGENT" shall mean the escrow agent appointed pursuant to the
Escrow Agreement.
"ESCROW AGREEMENT" shall mean the escrow agreement attached as Exhibit
4.2.
"EXCHANGE" shall have the meaning defined in Section 2.3.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"EXCHANGE CONSIDERATION" shall have the meaning defined in Section 4.1.
"EXCLUDED ASSETS" shall have the meaning defined in Section 2.2.
"INTELLECTUAL PROPERTY" shall mean all patents and all applications
therefor, trademarks and all applications therefor, trade names, trade styles,
copyrights and all applications therefor, inventions, proprietary technology,
trade secrets and all other intellectual property and property rights.
"LAW" shall mean with respect to QAI all United States, state and local
laws, statutes, rules, ordinances and regulations and, with respect to the
Affiliate, all Mexican Federal, state and local laws, statutes, rules,
ordinances and regulations.
"LIENS" shall mean any charge, lien, mortgage, pledge, security
interest or other encumbrance of any nature whatsoever upon, of or in property
or other assets of a person or entity, whether absolute or conditional,
voluntary or involuntary, and whether created pursuant to agreement, arising by
force of statute, by judicial proceedings or otherwise.
"MEXICAN FACTORY" shall mean the premises leased and occupied by the
Affiliate, located at Carretera ▇▇▇▇▇▇- ▇▇▇▇▇ Grandes Km 1.1 in Cuidad ▇▇▇▇▇▇,
Chihuahua, Mexico.
"MEXICAN FINANCIAL STATEMENT" shall have the meaning defined in Section
5.36.
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"PRINCIPALS" shall have the meaning defined in the heading of this
Agreement.
"QAI" shall have the meaning defined in the heading of this Agreement.
"REFTECH" shall have the meaning defined in the heading of this
Agreement.
"RTI" shall have the meaning defined in Recital C.
"RTI SHARES" shall mean the shares of Common Stock which are being
delivered as part of the Exchange.
"SECURITIES ACT" shall mean the Securities Act of 1933, and the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder.
"TEXAS WAREHOUSE" shall mean the premises located at ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇.
"U.S. FACTORY" shall mean the premises leased and occupied by QAI,
located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇.
II. ASSETS
------
2.1 ASSETS. At the Closing, QAI shall assign, convey, transfer
and deliver to RefTech, free and clear of all Liens (except the liens securing
the indebtedness referred to in Section 3.1(i) and Section 3.1(ii)), all of the
assets, properties and rights, including contractual rights, of QAI of every
type and description, real, personal and mixed, tangible and intangible,
wherever located and whether or not reflected on the books and records of QAI,
as the same shall exist on the Closing (collectively, the "Assets"), excepting
only the Excluded Assets, and including, without limitation, all those assets,
properties and rights reflected on the balance sheet of QAI, as at January 31,
1997 (the "Balance Sheet Date"), a copy of which is annexed as Exhibit 2.1 (the
"Balance Sheet"), subject to such changes in the Assets through the Closing
which occur in the ordinary course of the Business without violation of the
provisions of this Agreement. Without limiting the generality of the foregoing,
the Assets include inventory (work in process, finished goods, parts and raw
materials), accounts receivable, furniture and fixtures, vehicles, machinery and
equipment, customer orders, lists and files, contractual rights (including any
rights to defenses, set-offs and counterclaims against third parties which QAI
may have with respect to any of the Assets or Assumed Liabilities), books and
records, rights in and to the name "Quality Air" (and any variants thereof) and
all other trade or product names used by QAI, Intellectual Property, franchises,
licenses, permits and authorizations, catalogs and merchandise sheets, and all
other assets, properties and rights of every kind and nature used by QAI in the
conduct of the Business, and all other assets, properties and rights of every
kind and nature owned or held by QAI, or in which QAI has an interest; and the
good will associated with each of the foregoing. To the extent that, at the
Closing, any portion of the Assets is temporarily located in Mexico, then and in
such event, and irrespective of the first sentence of this Section, such assets
shall not be assigned, conveyed, transferred and delivered to RefTech at the
Closing but shall be assigned, conveyed, transferred and delivered to RefTech,
free and clear of all Liens (except the liens securing the indebtedness referred
to in Section 3.1(i) and Section 3.1(ii)), promptly upon the export of such
assets from Mexico and the jurisdiction of Mexican Customs into the United
States.
2.2 EXCLUDED ASSETS. There shall be excluded from the Assets, the
corporate seals, minute books and capital stock records of QAI and all other
items listed on Schedule 2.2 (collectively, the "Excluded Assets").
2.3 EXCHANGE. In consideration of the assignment, conveyance,
transfer and delivery of the Assets by QAI to RefTech at the Closing, and in
exchange therefor, RefTech shall deliver to QAI the Exchange Consideration
described in Section 4.1 (the "Exchange") and shall assume the Assumed
Liabilities. Each of the parties intends that the Exchange constitute and
qualify as a tax-free reorganization pursuant to the provisions of Section
368(A)(i)(c) of the Code. No consideration of any kind, other than the Exchange
Consideration, shall be paid or transferred by RefTech to QAI, or to the
Principals, in connection with the Exchange.
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III. ASSUMPTION OF LIABILITIES
-------------------------
3.1 ASSUMPTION OF LIABILITIES. RefTech shall not assume, and
shall not become liable or responsible for, any liabilities, obligations or
commitments of QAI, all of which shall remain the responsibility of QAI, except
that RefTech at the Closing shall assume (i) QAI's indebtedness to RTI, in the
principal sum of $ 670,000, and all accrued interest thereon, as evidenced by
QAI's promissory note, dated December 2, 1996, (ii) QAI's indebtedness to ▇▇▇▇
▇. ▇▇▇▇▇▇ and his affiliates, which was in the principal sum of $ 830,000 as of
the close of business on February 14, 1997, and all accrued interest thereon,
(iii) the purchase commitments of QAI listed on Schedule 3.1.A, all of which
were incurred in the ordinary course of QAI's business and are necessary for the
Business, and (iv) other liabilities in an aggregate amount, not to exceed
$75,000, incurred by QAI in the ordinary course of business, which shall be
scheduled at the Closing, and annexed to this Agreement as Schedule 3.1.B.
IV. EXCHANGE CONSIDERATION
----------------------
4.1 EXCHANGE CONSIDERATION. "Exchange Consideration" means (i)
235,000 shares of Common Stock to be delivered to QAI at the Closing, plus (ii)
the Assumed Liabilities, plus (iii) any of the 225,000 additional shares of
Common Stock constituting the Earn-Out Shares which may be required to be
delivered by RefTech based on the earnings of RTI, as provided in Section 4.2.
The Common Stock is publicly traded, and the market price therefor may increase
or decrease between the date of this Agreement and the Closing; notwithstanding
any such increase or decrease in the market price of the Common Stock, the
number of shares of Common Stock constituting the RTI Shares shall not be
increased or decreased. The RTI Shares, when issued, shall be fully paid and
non-assessable shares of Common Stock. None of the RTI Shares have been or shall
be registered under the Securities Act, and the certificates therefor shall
contain a legend restricting their transfer, substantially as follows:
"The securities represented by this certificate have not been
registered or qualified under the Securities Act of 1933, or the
securities law of any state, and may be offered and sold only if
registered and qualified pursuant to the relevant provisions of
the Federal and applicable State securities laws, or if RTI Inc.
is provided with an opinion of counsel, which counsel and opinion
shall be satisfactory to RTI Inc., that registration and
qualification under the Federal and applicable State securities
laws is not required."
4.2 RTI SHARES DELIVERED AT THE CLOSING. Certificates evidencing
235,000 shares of Common Stock, registered in the name of QAI, shall be
delivered at the Closing as follows: (i) a certificate for 185,000 shares of
Common Stock shall be delivered to QAI, and (ii) a certificate for the remaining
50,000 shares of Common Stock (with a stock power duly executed by QAI) shall be
delivered to the escrow agent, identified in and pursuant to the terms of an
Escrow Agreement to be entered into at the Closing, in the form annexed as
Exhibit 4.2.
4.3 EARN-OUT SHARES. The Exchange Consideration shall be
increased by (i) 100,000 Earn-Out Shares, if and when the pre-tax earnings of
RTI for any fiscal year through RTI's fiscal year ending December 31, 2001 (the
"Earn-Out Period") exceed $800,000, and (ii) an additional 125,000 Earn-Out
Shares, if and when the pre-tax earnings of RTI for any subsequent fiscal year
during the Earn-Out Period exceed $1,200,000. For the purposes hereof, pre-tax
earnings (i) shall be exclusive of any items of revenue or expense relating to
RTI's Rockaway, New Jersey property, and (ii) shall be determined from RTI's
audited annual consolidated financial statements prepared in accordance with
generally accepted accounting principles, promptly after the release of such
audited financial statements, by RTI's then regularly engaged independent
accountants, whose determination (a) shall be evidenced by a certificate of such
accountants delivered to RefTech, RTI and the Principals, and (b) shall be final
and binding on all parties. Certificates evidencing any Earn-Out Shares to be
delivered shall be delivered by RefTech within thirty days after RefTech's
receipt of the accountants' determination that Earn-Out Shares have been earned.
Such certificates shall be delivered to the Escrow Agent, unless the Escrow
Agreement has been terminated.
4.4 ALLOCATION OF THE EXCHANGE CONSIDERATION. RefTech and QAI
agree that the Exchange Consideration shall be allocated as set forth on
SCHEDULE 4.4. Reftech and QAI further agree that each of them shall (i) execute
such elections and/or agreements as may be required pursuant to the applicable
provisions of the Code,
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and the applicable regulations thereunder, and any other statute or regulation
which may require the same, and (ii) prepare and file their respective tax
returns in a manner consistent with Schedule 4.4.
4.5 SALES AND TRANSFER TAXES. Any and all sales and use or
transfer taxes, or the like, arising out of the Exchange shall be borne by, and
be paid by, RefTech.
4.6 DISTRIBUTIONS TO PRINCIPALS. Following the Closing, in
complete liquidation of QAI, QAI shall distribute to the Principals the RTI
Shares (including all rights to the RTI Shares held by the Escrow Agent and all
rights to the Earn-Out Shares) in exchange for the surrender and cancellation of
all QAI capital stock; and, in connection therewith and in accordance with the
provisions of Section 368(A)(i)(g) of the Code, QAI (i) shall distribute all of
its remaining assets and provide for the payment of any remaining liabilities as
required by law, and (ii) shall thereupon dissolve. Upon effecting the
dissolution of QAI, the Principals shall deliver a notice, signed by each of
them, to RefTech and to the Escrow Agent (if the Escrow Agreement is then still
in effect), instructing RefTech and the Escrow Agent as to how any RTI Shares
which may thereafter be distributed are to be allocated as among the Principals.
V. REPRESENTATIONS AND WARRANTIES OF QAI AND THE PRINCIPALS
--------------------------------------------------------
QAI and the Principals, jointly and severally, make the following
representations and warranties to Reftech, in order to induce RefTech to enter
into and perform this Agreement:
5.1 CORPORATE MATTERS. QAI is a corporation duly and validly
organized and validly existing in good standing under the laws of the State of
New Mexico and has all requisite corporate power, authority, licenses, permits
and franchises to own or lease and operate its properties and carry on its
business as currently being conducted. QAI has heretofore furnished RefTech with
a copy of its Certificate of Incorporation as amended to date, certified by the
Secretary of State of the State of New Mexico, a copy of which is annexed as
Exhibit 5.1.A and its By-Laws, as amended to date, certified by the Secretary of
QAI, a copy of which is annexed as Exhibit 5.1.B, and QAI is not in violation of
any of the provisions thereof. All of the issued and outstanding shares of
capital stock of QAI are owned by one or more of the Principals, and there is no
agreement or understanding with any third party to issue or transfer any QAI
capital stock.
5.2 QUALIFICATION. The Company does business in the States listed
on Schedule 5.2. Except as set forth on Schedule 5.2, the Company is duly
licensed or qualified and in good standing as a foreign corporation authorized
to do business in each jurisdiction in which the nature of the business
transacted by it, or the character of its properties owned or leased by it,
makes such qualification or licensing necessary.
5.3 AUTHORIZATION. The Company has the unqualified right and full
power and authority (when authorized by requisite corporate actions) to sell,
transfer, assign, convey and liquidate all of its assets and properties, without
the consent of any person. The Board of Directors of QAI has duly adopted
resolutions (i) authorizing the execution of this Agreement by QAI and the
consummation by QAI of the transactions contemplated herein, and (ii)
recommending such transactions to the shareholders of QAI and directing the
submission thereof to a vote of such shareholders; thereafter, (i) notice
thereof was given to each shareholder of record of QAI, (ii) such transactions
were duly authorized by the shareholders of QAI, and (iii) neither at nor prior
to the time of such due authorization did any shareholder of QAI file with QAI a
written objection to the proposed corporate action. In addition to the
foregoing, QAI has taken all other necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby. Each of the Principals is legally
competent to enter into this Agreement. This Agreement has been duly and validly
executed and delivered by QAI and each of the Principals, and constitutes the
valid and binding obligation of each of them, enforceable in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
moratorium, fraudulent conveyance or other similar laws currently or hereafter
in effect affecting the enforcement of creditors rights generally.
5.4 EFFECT OF AGREEMENT, ETC. The execution, delivery and
performance of this Agreement by QAI and the Principals, and the consummation of
the transactions contemplated hereby shall not, with or without the giving
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of notice or the lapse of time, or both (i) violate any provision of Law, (ii)
violate any judgment, order, writ or decree of any court applicable to the
Company or any of the Principals, or (iii) result in the breach of or conflict
with any term, covenant, condition or provision of, result in the modification
or termination of, constitute a default under, or result in the creation or
imposition of any Lien upon any of the properties or assets of the Company
pursuant to any corporate charter or by-law, or any commitment, contract or
other agreement or instrument to which the Company or any of the Principals is a
party or by which any of the Company's assets or properties is or may be bound.
5.5 CONSENTS. No consent, authorization or approval of, or
exemption by, any governmental or public body or authority, nor any consent of
any third party, is required to be obtained by the Company in connection with
the execution, delivery and performance by QAI and the Principals of this
Agreement, or any of the instruments or agreements herein referred to or the
taking of any action herein contemplated.
5.6 BALANCE SHEET. The Balance Sheet makes full and adequate
provision for all obligations and liabilities (fixed and contingent) of QAI, as
of the Balance Sheet Date, and QAI had, as of the Balance Sheet Date, no
obligations, liabilities or commitments (fixed or contingent) required to be
reserved against on the Balance Sheet or to be disclosed in any notes thereto,
in accordance with generally accepted accounting principles, which are not so
reserved against or disclosed, except for any such obligations or liabilities
which are not material to the financial condition of QAI, the Business, the
Assets or the Assumed Liabilities. The list of QAI's creditors and the amounts
owed to each, as of the Balance Sheet Date, are as set forth on Schedule 5.6,
and since the Balance Sheet Date, except as set forth on Schedule 5.6, QAI has
had no additional creditors and the amounts set forth on Schedule 5.6 have not
materially increased.
5.7 SUBSIDIARIES. QAI owns no capital stock or other equity
participation in any entity, either directly or indirectly, and is not a partner
in, nor a member of, any other entity.
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date, and except as set forth on Schedule 5.8, the Company has not (i) incurred
any obligation or liability (fixed or contingent) except (A) trade or business
obligations incurred in the ordinary course of business consistent with normal
and usual past practices, none of which are materially adverse to the financial
condition of the Company or the continuity of the Business, or (B) under this
Agreement, (ii) subjected any of its assets to a Lien, (iii) sold, transferred
or leased any of its assets, except in the ordinary course of the Business, (iv)
entered into any transaction other than in the ordinary course of the Business,
(v) canceled or compromised any claim or debt, (vi) waived or released any
rights of any material value, (vii) transferred or granted any rights under any
lease, license, agreement, patent, invention, proprietary right, trademark,
trade name, copyright, or with respect to know-how, (viii) declared any
dividend, made any distribution to its shareholders or purchased or redeemed any
of its capital stock, (ix) created or assumed any obligation for borrowed money,
or (x) suffered any change in its financial condition, results of operations,
properties, operations or business which, individually or in the aggregate, has
had or reasonably may be expected to have a material adverse effect on its
assets, the financial condition of the Company, the continuity of the Business
or the prospects of the Business.
5.9 ASSETS.
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5.9.1 OWNERSHIP AND LIENS. The Company has the ownership in
fee and good and marketable title to the Assets which are reflected in the
Balance Sheet (except to the extent that, subsequent to the Balance Sheet Date,
such Assets have been sold or otherwise disposed of in the ordinary course of
the Business) and all other Assets acquired by the Company since the Balance
Sheet Date, free and clear of all Liens, other than (i) the Liens relating to
the indebtedness referred to in Section 3.1(i) and Section 3.1(ii), (ii) Liens
for taxes not yet due and payable, and (iii) Liens for taxes being contested in
good faith by appropriate proceedings, details with respect to which are set
forth on Schedule 5.9.1.
5.9.2 MACHINERY AND IMPROVEMENTS. The machinery and
equipment included in the Assets is in good operating condition, and such
machinery and equipment, as well as all of the Company's inventory, is located
at (i) the U.S. Factory, (ii) the Mexican Factory, or (iii) month-to month
leased premises located in ▇▇▇▇▇▇▇,
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New Mexico (which will terminate February 28, 1997), or (iv) the Texas
Warehouse. The fixed assets of the Company, including those referred to in the
Balance Sheet, are all located on or at the U.S. Factory or the Mexican Factory,
which are leased by the Company. The U.S. Factory and Mexican Factory
improvements (including the roof and roof membrane, exterior and structural
walls, foundations, floor slabs, and other load-bearing components) as well as
all heating, ventilation and air conditioning systems, plumbing, electrical,
wiring, life safety, and other equipment, appurtenances and systems are in
operable condition and repair, which means that there are no material defects or
state of disrepair that have a material adverse effect on the operations of the
Business. The leases and other agreements or instruments under which the Company
holds, leases or is entitled to the use of any real or personal property are in
full force and effect and all rentals, royalties or other payments accruing
thereunder prior to the date hereof have been duly paid or payment has been duly
waived or forgiven. No default or event of default exists (which has not been
waived) and no event which with notice or lapse of time, or both, would
constitute a default, has occurred and is continuing under the terms or
provisions, express or implied, of any of such leases, agreements or other
instruments or under the terms or provisions of any agreement to which any of
such properties are subject.
5.9.3 RECEIVABLES AND INVENTORY. Except as set forth on
Schedule 5.9.3, all accounts receivable, whether included on the Balance Sheet
or arising after the Balance Sheet Date, are collectable in the amounts thereof,
net of any allowance for doubtful accounts specified in the Balance Sheet; and
there are no defenses, offsets or counterclaims threatened or pending with
respect to any of the accounts receivable. The inventory of QAI included on the
Balance Sheet, or purchased after the Balance Sheet Date, and on hand at the
Closing is and shall be of a quality, quantity and mix consistent with QAI's
past business practices, and is usable and saleable at a price at least equal to
its book value in the ordinary course of QAI's business within six months after
the Closing.
5.10 COMPLIANCE. The Assets, and the operation of the Business,
are in conformance in all material respects with all Federal, state and local
environmental protection, labor, safety and other Laws, orders and requirements,
including without limitation the regulations and requirements of the Federal
Occupational Safety and Health Act of 1970. The Company has not received notice
of violation of any applicable Law, order or requirement relating to its Assets
or operations. The Company has obtained all permits, certificates, licenses,
authorizations, consents, instructions, registrations, directions or approvals,
issued or required by any applicable governmental authorities pursuant to any
applicable statutes, rules, regulations, ordinances, orders, decrees, judgments,
permits, licenses, consents, approvals, authorizations, and governmental
requirements or directives or other obligations lawfully imposed by governmental
authority under federal, state, foreign or local law pertaining to the
protection of the environment, protection of public health, protection of worker
health and safety, the treatment, emission and/or discharge of gaseous,
particulate and/or effluent pollutants, and/or the handling of hazardous
materials with respect to the operations of the Company in connection with the
Business, and all such environmental approvals are current, valid and in good
standing in all respects, and there are no proceedings commenced or, to the
knowledge of the Company or the Principals, threatened to revoke or amend any
such environmental approvals. All operations of the Business have been and are
now in compliance with all applicable environmental Laws. There has not been any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of any hazardous materials which is now
present in, on or under the U.S. Factory or the Mexican Factory (including
underlying soils and substrata, surface water and groundwater) at levels which
exceed any action levels or remediation standards under any applicable
environmental Laws or standards published or administered by any applicable
governmental authorities responsible for establishing or applying such
standards.
5.11 LEASES.
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5.11.1 U.S. FACTORY. The lease for the U.S. Factory is in
full force and effect, and can be terminated by QAI at the Closing with no
penalty or obligation being imposed on RefTech. The owner of the U.S. Factory is
a company affiliated with the Principals, and such owner has agreed to the
re-lease of the U.S. Factory to RefTech at the Closing in accordance with
Section 7.2(vi) of this Agreement. The Company has not received any notice of
violation of any applicable Law or of any requirement relating to its use or
occupancy of the U.S. Factory or the operations conducted thereat.
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5.11.2 MEXICAN FACTORY. The lease for the Mexican Factory (a
complete copy of which has been delivered to RefTech and is annexed to this
Agreement as Exhibit 5.11.2) (i) is in full force and effect, (ii) no event of
default, or event which with or without the giving of notice or the lapse of
time, or both, will constitute an event of default, has occurred and is
continuing under such lease, and (iii) the transactions contemplated by this
Agreement will not cause or give rise to a default under such lease. The Company
has not received any notice of violation of any applicable Law or of any
requirement relating to its use or occupancy of the Mexican Factory or the
operations conducted thereat.
5.11.3 TEXAS WAREHOUSE. The lease for the Texas Warehouse (a
complete copy of which has been delivered to RefTech and is annexed to this
Agreement as Exhibit 5.11.3) (i) is in full force and effect, (ii) no event of
default, or event which with or without the giving of notice or the lapse of
time, or both, will constitute an event of default, has occurred and is
continuing under such lease, (iii) such lease can be assigned to RefTech at the
Closing, if RefTech so desires, without any consideration to the landlord
thereof, and (iv) the transactions contemplated by this Agreement will not cause
or give rise to a default under such lease. The Company has not received any
notice of violation of any applicable Law or of any requirement relating to its
use or occupancy of the Texas Warehouse.
5.11.4 EQUIPMENT AND VEHICLES. The equipment and vehicles
owned, operated, or leased by the Company are in good condition and repair
(ordinary wear and tear which are not such as to affect adversely the operation
of the Business excepted) and suitable for the uses for which intended. Schedule
5.11.4 contains a complete and correct listing, by location, of all (i) leased
equipment and vehicles, indicating each lessor thereof, (ii) other equipment and
vehicles which are used by the Company but which are not owned by the Company,
and (iii) equipment, vehicles and other items owned by the Company (having a
value in excess of $5,000) which are necessary or in use in the operations of
the Company. The leases with respect to any of the leased equipment and vehicles
which will not be sold to RefTech at the Closing can be assigned to RefTech at
the Closing if RefTech so desires, without any consideration to the lessors
thereof. Except as set forth on Schedule 5.11.4, all of the Company's equipment
and vehicles are in conformity with all foreign, Federal, state and local
environmental protection, labor, safety and other applicable laws, ordinances,
regulations, orders, and other requirements relating thereto currently in effect
or currently scheduled to come into effect.
5.12 INSURANCE. Schedule 5.12 sets forth a description of all
insurance policies carried by the Company and the coverages thereunder. The
Company has carried since its inception, and continues to carry (i) workers
compensation insurance for all employees to the full extent as required by Law,
and (ii) reasonable amounts of public liability insurance. There are no
outstanding requirements or recommendations by any insurance company, agent or
broker, or by any Board of Fire Underwriters, or other body exercising similar
functions or by any governmental authority requiring or recommending any repairs
or other work to be done on or with respect to the Company's properties or
Assets, or requiring or recommending that any equipment or facilities be
installed on or in connection with such properties or Assets.
5.13 TAXES. Each of QAI and the Affiliate has (i) properly
prepared and filed all federal, state, local and foreign tax returns which are
required to have been filed by it, and (ii) paid all taxes indicated on such
returns, except taxes being contested in good faith and by appropriate
proceedings, and for which QAI has set up reserves on the Balance Sheet and the
Affiliate has set up reserves on the Mexican Financial Statement; and no claims
have been assessed and remain unpaid with respect to such taxes.
5.14 EMPLOYEE PLANS. QAI has never had an "Employee Pension
Benefits Plan", as defined in Section 3 of the Employee Retirement Income
Security Act of 1974 ("ERISA"), and has never been a party to or incurred any
liability (actual or contingent) under a "Multi-Employer Plan", as defined in
the Multi-Employer Pension Plan Amendments Act of 1980. The Affiliate (i) is
registered with the Mexican Institute of Social Security and with the Workers
Housing Fund Institute and is current with all dues, assessments and other
payments required to be made by it, and (ii) has made all contributions for
retirement insurance on behalf of its employees as required by Mexican Law.
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5.15 AGREEMENTS, PLANS, ARRANGEMENTS, ETC.
------------------------------------
5.15.1 Except as set forth in SCHEDULE 5.15, or on any other
Schedule hereto, neither QAI nor the Affiliate is a party to, nor are QAI or the
Affiliate or any of their respective properties or assets bound or affected by,
any (i) lease agreement (whether as lessor or lessee) relating to real or
personal property; (ii) license agreement, assignment or contract (whether as
licensor or licensee, assignor or assignee) relating to trademarks, patents or
copyrights (or applications therefor), unpatented designs or styles, know-how or
technical assistance; (iii) employment agreement not terminable without
liability to the employer upon notice to the employee of not more than 30 days,
or employment agreement providing compensation of more than $25,000 per year
(including all salary, bonuses and commissions) to any employee; (iv) agreement
for the purchase or sale of goods, materials, supplies, machinery or capital
assets in excess of $10,000 in any one case; (v) agreement with any labor union;
(vi) policy of insurance (including surety bonds) in force with respect to such
corporation or any of its properties, assets, executive officers, agents or
employees; (vii) agreement with any distributor, dealer, sales agent or
representative; (viii) agreement with any manufacturer or supplier with respect
to discounts or allowances not generally made by such manufacturer or supplier
in the ordinary course of its business; (ix) agreement guaranteeing,
indemnifying or otherwise becoming liable for the obligations or liabilities of
another; (x) agreement for the borrowing or lending of money; (xi) agreement
with any bank, finance company or similar organization which acquires from such
corporation consumer paper or contracts for the sale of merchandise on credit;
(xii) agreement granting any person a lien, security interest or mortgage on any
property or asset of such corporation, including, without limitation, any
factoring agreement or agreement for the assignment of accounts receivable or
inventory; (xiii) agreement for the construction or modification of any building
or structure or for the incurrence of any other capital expenditures; (xiv)
bonus, deferred compensation, profit sharing, pension, retirement, stock option,
stock purchase, hospitalization, insurance or other plan, arrangement or
practice providing employee or executive benefits; (xv) advertising agreement
with any newspaper, magazine or radio or television station; (xvi) agreement
which restricts it from doing business anywhere in the world; (xvii) agreement,
statute or regulation giving any party the right to renegotiate or require a
reduction in prices or the repayment of any amount previously paid; (xviii)
agreement with any consultant; or (xix) other agreement affecting such
corporation or its assets or business, except written contracts for the purchase
or sale of goods made in the usual and ordinary course of business terminable
without liability to such corporation upon notice to the other party thereto of
not more than 30 days and not otherwise referred to above.
5.15.2 Correct and complete copies of all of the agreements,
plans, policies and arrangements referred to in Section 5.15.1 ,and such other
instruments as are material to QAI or the Affiliate (or, where they are oral,
true and complete written summaries thereof)(collectively referred to herein as
the "Commitments"), have been delivered to the RefTech. Each of the Commitments
is now valid, in full force and effect and enforceable in accordance with its
terms, and QAI and the Affiliate each have fulfilled, or taken all action
reasonably necessary to enable it to fulfill when due, all of its obligations
under the Commitments. There has not occurred any default by QAI or the
Affiliate, or any event which with or without the giving of notice or the lapse
of time, or both, will become a default, nor to the knowledge of QAI or the
Principals has there occurred any default by others, except defaults, if any,
which will not result in any material loss to or liability of the Company.
Neither the Company, nor, to the knowledge of QAI or the Principals, any other
party, is in arrears in respect of the performance or satisfaction of the terms
or conditions on its part to be performed or satisfied under any of the
Commitments and no waiver or indulgence has been granted by any of the parties
thereto. There are no existing laws, regulations or decrees nor, to the
knowledge of the Company or the Principals, any proposed laws, regulations or
decrees which adversely affect or might adversely affect the rights of the
Company under any of the Commitments by reason of the present ownership by the
Company of its assets and properties or by reason of the proposed transfer of
ownership of such assets and properties as contemplated by this Agreement. Each
of the Commitments is assignable by the Company to RefTech without the consent
of the other parties thereto or, with respect to any of the Commitments which
may not be so assigned without such consent, the Company has obtained all such
consents to such assignment.
5.16 LITIGATION. There is no claim, action, suit, proceeding,
arbitration, investigation or inquiry pending before any Federal, state,
municipal, foreign or other court or governmental or administrative body or
agency, or any private arbitration tribunal, or, to the knowledge of QAI or the
Principals, relating to or affecting QAI or the Affiliate or any of their
respective assets, properties or businesses, or the transactions contemplated by
this
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Agreement; nor to the knowledge of QAI or the Principals is there any basis for
any such claim, action, suit, proceeding, arbitration, investigation or inquiry
which may have any adverse effect upon the assets or properties of the Company,
or upon the Business, or upon the transactions contemplated by this Agreement.
Neither QAI nor the Affiliate, nor any officer, director or employee of either
of them, has been permanently or temporarily enjoined by order, judgment or
decree of any court or other tribunal or any agency from engaging in or
continuing any conduct or practice in connection with the businesses engaged in
the Company. There is not in existence any order, judgment or decree of any
court or other tribunal or any agency enjoining or requiring QAI or the
Affiliate to take any action of any kind or to which QAI or the Affiliate or
their respective businesses, properties or assets are subject or bound. Neither
QAI nor the Affiliate is in default under any order, license, regulation or
demand of any federal, state or municipal or other governmental agency or with
respect to any order, writ, injunction or decree of any court. Schedule 5.16
summarizes each suit, action, investigation or proceeding pending at any time
against QAI or the Affiliate.
5.17 NO VIOLATION OF ENVIRONMENTAL, HEALTH OR SAFETY LAWS.
Neither QAI nor the Affiliate has received any notice, or petition or similar
document, in connection with or arising out of any violation or possible
violation of any environmental, health or safety Law, and neither QAI nor the
Principals knows of any condition or facts which would constitute any such
violation.
5.18 NO VIOLATION OF OTHER LAWS. Neither QAI nor the Affiliate is
in violation of any Law or order which would have an adverse effect on the
Company or which would affect RefTech after the Closing.
5.19 INTELLECTUAL PROPERTY. SCHEDULE 5.19 sets forth a correct
and complete list of all Intellectual Property, now or heretofore used or which
is presently contemplated will be used in the conduct of the Business, including
all Intellectual Property which may be the property of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
Except as disclosed in such Schedule, (i) QAI and the Affiliate own or possess
adequate perpetual licenses or other valid perpetual rights to use (without the
making of any payment to others or the obligation to grant rights to others in
exchange) all Intellectual Property, know-how and other proprietary information
necessary to or used in the conduct of the Business as presently being
conducted, all of which may be fully and validly transferred to RefTech at the
Closing without the payment of any additional consideration by RefTech; (ii) the
validity of the Intellectual Property and of QAI's or the Affiliate's title
thereto has not been questioned in any litigation, nor is any such litigation
threatened; and (iii) to the knowledge of QAI and the Principals, the conduct of
the Business, as now operated, does not conflict with any Intellectual Property
or licenses of third parties. No infringement of any Intellectual Property right
owned by QAI or the Affiliate is known to QAI or the Principals. There is no
Intellectual Property, or rights to inventions, owned or held by any Principal
or by any employee or officer of QAI or the Affiliate relating to the Business
which has not been duly and effectively transferred to the Company.
5.20 PERMITS, LICENSES, ETC. QAI and the Affiliate have all
permits, licenses, orders and approvals of Federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit QAI to
carry on the Business as presently conducted. SCHEDULE 5.20 sets forth a correct
and complete list of all such permits, licenses, orders and approvals, all of
which are in full force and effect, and neither QAI nor the Principals has any
knowledge or reason to know that any suspension or cancellation of any of them
is threatened.
5.21 INTEREST IN COMPETITORS, ETC. Except as set forth on
SCHEDULE 5.21, neither QAI, the Affiliate, the Principals nor any officers or
directors of QAI or the Affiliate, directly or indirectly, owns any interest in
or controls or is an employee, officer, director or partner of, or participant
in, or consultant to, any corporation, partnership, limited partnership, joint
venture, association, or other entity which is a competitor, supplier, customer
or landlord of the Company.
5.22 CUSTOMERS. Neither QAI nor the Principals has any knowledge
of any termination, cancellation or limitation of, or any modification or change
in, the business relationship of the Company with any customer or group of
customers whose purchases, individually or in the aggregate, provide more than
5% of the gross revenues or net income of the Business.
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5.23 BOOKS AND RECORDS. The financial and corporate records,
sales registers and ledgers, payroll registers, cost accounting records,
customer and vendor lists and files, inspection reports and product liability
records of QAI and the Affiliate have been kept in the normal course of
business, and to the extent maintained are in all material respects correct.
5.24 LABOR RELATIONS. Each of QAI and the Affiliate is in
compliance with all applicable Law respecting employment and employment
practices, terms and conditions of employment, and wages and hours and is not
engaged in any unfair labor practice. There is no unfair labor practice
complaint against QAI pending before the National Labor Relations Board or any
State or local agency. There is no labor strike, dispute, grievance, controversy
or other labor trouble pending or, to the knowledge of QAI, the Affiliate or the
Principals threatened, affecting QAI or the Affiliate, nor does any basis
therefore exist. No representation question exists respecting the employees of
QAI or the Affiliate. There are no collective bargaining agreements binding upon
QAI or the Affiliate or which restrict QAI or the Affiliate.
5.25 EMPLOYEES. Neither QAI nor the Principals know, or have
reason to know, that any employee of the Company is a party to any confidential
information or other agreement that in any way adversely affects the performance
of his or her duties as such an employee, or is a party to or threatened by any
litigation which could affect the Company or the Business. Neither QAI nor the
Affiliate has received notice of its violation of any of the civil rights of its
employees, and QAI and the Affiliate are each in compliance with the regulations
and guidelines of the Federal Equal Opportunity Employment Commission and
comparable Mexican, State and local authorities. All accrued obligations of QAI
and the Affiliate, as of the Closing, whether arising by operation of Law, by
contract or by past custom, for payments by it to trusts or other funds or to
any governmental agency, with respect to unemployment compensation, social
security, pension, welfare benefits, dues or any other benefits for its
employees, and all reasonably anticipated obligations of QAI and the Affiliate,
whether arising by operation of Law, by contract or by past custom, for
salaries, vacation and holiday pay, bonuses, welfare benefits and other forms of
compensation or benefit accrued or payable to any employee of the Company as at
the Closing will be timely paid before or at the Closing; and the Balance Sheet
makes adequate provision for such obligations of QAI as of the Balance Sheet
Date. Schedule 5.25 sets forth a correct and complete list of the names of all
persons whose aggregate annual compensation (including bonuses) from QAI and/or
the Affiliate will equal or exceed $25,000 per annum at the present base salary
rate for such person, together with a statement as to the full amount paid or
payable to each such person (including the approximate bonus payments paid or to
be paid to such person) for services rendered during the past year.
5.26 WARRANTIES AND RETURNS. Schedule 5.26 sets forth a summary
of all previous and present practices followed by the Company with respect to
guarantees, warranties, servicing or repairs of any products manufactured or
sold by it, whether or not such practices are verbal or in writing, or are
deemed to be guarantees, or are deemed to be legally enforceable. Except as set
forth in Schedule 5.26, there is not presently, nor has there been, any failure
of any product or component part thereof sold by the Company or any of its
predecessors such as to require, or which may require, a general replacement
campaign with respect to such product or component part thereof, nor has there
been any acceptance of returns of defective goods in excess of one percent of
any product sold by the Company or any of its predecessors during either of the
last two years. 5.27 Manufacturing by the Affiliate. All manufacturing done by
the Affiliate is performed in a free trade zone. There are no duties, levies,
taxes or other charges due and payable, or assessable, by reason of the
exportation by QAI, on a temporary basis, to the Affiliate of parts and
materials for assembly and manufacture, or by reason of the delivery by the
Affiliate to QAI of finished products and/or sub-assemblies.
5.28 INVESTMENT REPRESENTATIONS. Neither QAI, nor the Principals
or any of their affiliates (as such term is defined in the Securities Act),
directly or indirectly, have engaged, or shall engage, in any transaction with
respect to the Common Stock prior to the Closing. Neither QAI nor the Principals
have agreed to, or shall agree prior to the Closing to, sell, assign, transfer
or otherwise dispose of any of the RTI Shares, including any of the Earn-Out
Shares, or any interest therein, to any person except that QAI will transfer the
RTI Shares to the Principals in connection with the liquidation of QAI. The RTI
Shares shall be acquired by the Principals for investment for such Principals'
own accounts, and not as a nominee or agent and not with a view to resale or
distribution of any part thereof, and neither QAI nor the Principals have any
present intention of selling, granting any participation in or
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otherwise distributing the RTI Shares or any interest therein, except as
aforesaid. QAI and the Principals understand that none of the RTI Shares have
been, or are intended to be, registered under the Securities Act, and that the
Exchange provided for in this Agreement, and the issuance of the RTI Shares,
will be exempt from registration under the Securities Act, pursuant to Section
4(2) thereof, and that RefTech's reliance on such exemption is based upon the
representations of QAI and the Principals set forth herein. QAI and the
Principals have reviewed RTI's recent periodic filings with the Securities and
Exchange Commission and each of them has received all additional information
that it considers necessary or appropriate for deciding whether to effect the
Exchange.
5.29 DISPOSITION OF SHARES. QAI and the Principals understand
that the RTI Shares may not be sold, transferred or otherwise disposed of
without registration under the Securities Act and that, absent an effective
registration covering the RTI Shares, the RTI Shares may be disposed of only
pursuant to an applicable exemption from registration under the Securities Act.
QAI and the Principals acknowledge that, pursuant to Rule 144 promulgated under
the Securities Act, unless all the conditions of that rule are met (including
among other requirements, the requirement that a minimum of two years elapse
between the date of the acquisition of the RTI Shares and any resale of the RTI
Shares), any resale of the RTI Shares in reliance on Rule 144 cannot be
effected.
5.30 OWNERSHIP OF THE AFFILIATE. The owners of all of the issued
capital stock of the Affiliate are listed, with the amount of such ownership, on
Schedule 5.30. All of such capital stock has been validly issued, is fully paid
and non-assessable, has no personal liability attaching to the ownership
thereof, and is owned free and clear of all Liens. There are no outstanding
warrants, options or other rights to acquire any capital stock of the Affiliate,
and no such rights will be granted prior to the Closing. The owners of the
capital stock of the Affiliate have the free and unencumbered right to liquidate
the Affiliate, as well as the free and unencumbered right to transfer all legal,
record and beneficial interest in and to all of the issued capital stock of the
Affiliate.
5.31 ORGANIZATION AND AUTHORITY OF THE AFFILIATE. The Affiliate
is a corporation validly existing and in good standing under the laws of the
Republic of Mexico, and has all requisite corporate power, authority, licenses,
permits and franchises to own or lease and operate its properties and carry on
its business as currently being conducted. The Affiliate operates as an in-bond
manufacturing corporation, and the Affiliates's inventory and other tangible
moveable assets have been temporarily imported into Mexico under the In-Bond
Manufacturing Program of Mexico (commonly known as the "Maquiladora Program").
QAI has heretofore furnished RefTech with a copy of the Affiliate's Articles, as
amended to date, a copy of which is annexed as Exhibit 5.31. The capitalization
of the Affiliate consists of fifty ordinary shares, with a nominal value of one
thousand pesos each, all of which have been duly issued and are outstanding, and
all of which are permitted to be held by non-Mexican nationals.
5.32 QUALIFICATION OF THE AFFILIATE TO DO BUSINESS, ETC. The
Affiliate is duly licensed or qualified and in good standing as a corporation
authorized to do business in each jurisdiction in which the nature of the
business transacted by it or the character of its properties owned or leased
makes such qualification or licensing necessary. The Affiliate and its
operations are not in violation of any Law or of any judgment, order, writ or
decree. The Affiliate is not in breach or default of its Articles or any
commitment, contract or other agreement or instrument to which the Affiliate is
a party or by which any of the Affiliate's assets or properties is or may be
bound.
5.33 EFFECT OF THIS AGREEMENT ON THE AFFILIATE. The consummation
of the transactions contemplated hereby and by the Affiliate Documents will not,
with or without the giving of notice or the lapse of time, or both (i) violate
any provision of Law, (ii) violate any judgment, order, writ or decree of any
court applicable to the Affiliate, or (iii) result in the breach of or conflict
with any term, covenant, condition or provision of, result in the modification
or termination of, constitute a default under, or result in the creation or
imposition of any Lien upon any of the properties or assets of the Affiliate
pursuant to any corporate charter or by-law, or any commitment, contract or
other agreement or instrument to which the Affiliate is a party or by which any
of the Affiliate's assets or properties is or may be bound.
5.34 AUTHORIZATION BY THE AFFILIATE AND ITS SHAREHOLDERS. The
Affiliate and its shareholders have taken all necessary corporate action to
authorize the execution, delivery and performance of the Affiliate Documents and
the consummation of the transactions contemplated thereby. Each of the
shareholders of the Affiliate is legally
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competent to enter into the Affiliate Documents. The Affiliate Documents have
been duly and validly executed and delivered by the Affiliate and each of its
shareholders, and constitutes the valid and binding obligation of each of them,
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other
similar laws currently or hereafter in effect affecting the enforcement of
creditors rights generally.
5.35 CONSENTS REQUIRED BY THE AFFILIATE. No consent,
authorization or approval of, or exemption by, any governmental or public body
or authority, nor any consent of any third party, is required to be obtained by
the Affiliate in connection with the performance of any of the transactions
contemplated by this Agreement or the Affiliate Documents, or any of the
instruments or agreements herein or therein referred to.
5.36 BALANCE SHEET OF THE AFFILIATE. The balance sheet of the
Affiliate, as of the Balance Sheet Date (the "Mexican Financial Statement"), a
copy of which is annexed as Exhibit 5.36, makes full and adequate provision for
all obligations and liabilities (fixed and contingent) of the Affiliate, as of
the Balance Sheet Date, and the Affiliate had, as of the Balance Sheet Date, no
obligations, liabilities or commitments (fixed or contingent) required to be
reserved against on the Mexican Financial Statement or to be disclosed in any
notes thereto, in accordance with United States generally accepted accounting
principles, which are not so reserved against or disclosed, except for any such
obligations or liabilities which are not material to the financial condition of
the Affiliate, the Business, the assets of the Affiliate or any liabilities of
the Affiliate which may be assumed by RefTech under the Affiliate Documents. The
liabilities of the Affiliate as of the Balance Sheet Date, are as set forth on
the Mexican Financial Statement and, since the Balance Sheet Date, the Affiliate
has had no additional creditors and the amount of each of its liabilities has
not materially increased.
5.37 ASSETS OF THE AFFILIATE.
-----------------------
5.37.1 OWNERSHIP AND LIENS. The Affiliate has the ownership
in fee and good and marketable title to the assets which are reflected on the
Mexican Financial Statement (except to the extent that, subsequent to the
Balance Sheet Date, such assets have been sold or otherwise disposed of in the
ordinary course of the Business) and all other assets acquired by the Affiliate
since the Balance Sheet Date, free and clear of all Liens, other than Liens for
taxes not yet due and payable.
5.37.2 MACHINERY AND IMPROVEMENTS. The machinery and
equipment included in the assets is in good operating condition, and such
machinery and equipment, as well as all of the Affiliate's inventory, is located
at the Mexican Factory. The fixed assets of the Affiliate, including those
referred to in the Mexican Financial Statement, are all located on or at the
Mexican Factory, which is leased by the Affiliate. The leases and other
agreements or instruments under which the Affiliate holds, leases or is entitled
to the use of any real or personal property are in full force and effect and all
rentals, royalties or other payments accruing thereunder prior to the date
hereof have been duly paid or payment has been duly waived or forgiven. No
default or event of default exists (which has not been waived) and no event
which with notice or lapse of time, or both, would constitute a default, has
occurred and is continuing under the terms or provisions, express or implied, of
any of such leases, agreements or other instruments or under the terms or
provisions of any agreement to which any of such properties are subject.
5.37.3 RECEIVABLES AND INVENTORY. All accounts receivable of
the Affiliate, whether included on the Mexican Financial Statement or arising
after the Balance Sheet Date, are collectable in the amounts thereof, net of any
allowance for doubtful accounts specified in the Mexican Financial Statement;
and there are no defenses, offsets or counterclaims threatened or pending with
respect to any of the accounts receivable. The inventory of the Affiliate
included on the Mexican Financial Statement, or purchased after the Balance
Sheet Date, and on hand at the Closing is and shall be of a quality, quantity
and mix consistent with the Affiliate's past business practices, and is usable
and saleable at a price at least equal to its book value in the ordinary course
of the Affiliate's business within six months after the Closing.
5.38 OTHER INFORMATION. None of the information and
documents which have been or may be furnished by the Company or the Principals
or any of their respective representatives to RTI or RefTech, or any of
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their representatives, in connection with the transactions contemplated by this
Agreement is or will be materially false or misleading or contains or will
contain any material misstatement of fact or omits or will omit any material
fact necessary to be stated in order to make the statements therein not
misleading.
VI. REPRESENTATIONS AND WARRANTIES OF REFTECH
-----------------------------------------
RefTech makes the following representations and warranties to QAI
and the Principals in order to induce QAI and the Principals to enter into and
perform this Agreement:
6.1 CORPORATE MATTERS. RefTech is a corporation validly existing
in good standing under the laws of the State of Delaware, and has all requisite
power, authority, licenses, permits and franchises to own or lease and operate
its properties and carry on its business as currently being conducted. All of
the issued and outstanding shares of capital stock of RefTech are owned by RTI.
6.2 INFORMATION. RTI is a public company and the Common Stock is
registered under the Exchange Act and traded on the Nasdaq SmallCap Market. RTI
has filed all reports required to be filed by Section 13 of the Exchange Act
during the past twelve months, and the information contained therein is correct
and complete in all material respects.
6.3 AUTHORIZATION. RTI and RefTech have taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by RefTech and constitutes the
valid and binding obligation of RefTech, enforceable in accordance with its
terms, except as such enforcement may be limited by bank ruptcy, insolvency,
moratorium or other similar laws currently or hereafter in effect affecting the
enforcement of creditors rights generally.
6.4 EFFECT OF AGREEMENT, ETC. The execution, delivery and
performance of this Agreement by RefTech and the consummation of the
transactions contemplated hereby will not, with or without the giving of notice
or the lapse of time, or both (i) violate any provision of Law to which RefTech
or RTI is subject, (ii) violate any judgment, order, writ or decree of any court
applicable to RefTech or RTI, or (iii) result in the breach of or conflict with
any term, covenant, condition or provision of, result in the modification or
termination of, constitute a default under, any commitment, contract or other
agreement or instrument to which RefTech or RTI is a party or by which any of
their respective assets or properties is or may be bound.
6.5 GOVERNMENT CONSENTS. No consent, authorization or approval
of, or exemption by, any governmental or public body or authority, is required
to be obtained by Reftech or RTI in connection with the execution, delivery and
performance by RefTech of this Agreement or any of the instruments or agreements
(other than the Affiliate Documents) herein referred to or the taking by RefTech
or RTI of any action (other than in connection with the Affiliate Documents)
herein contemplated.
6.6 LITIGATION. There is no claim, action, suit, proceeding,
arbitration, investigation or inquiry, pending before any Federal, state, local,
foreign or other court or governmental or administrative body or agency, or any
private arbitration tribunal, or, to the knowledge of RefTech threatened against
RefTech or RTI, relating to or affecting the transactions contemplated by this
Agreement.
VII. CLOSING
-------
7.1 THE CLOSING. The Closing of the transactions contemplated by
this Agreement (the "Closing") is scheduled to take place at the offices of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ & Kuh, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ at 10:00 a.m. local time on February __, 1997, or at such other place or on
such other date and time (i) as to which RefTech and QAI may agree, or (ii)
three business days after the respective conditions to Closing have been or
scheduled to be satisfied (the "Closing Date"). For accounting, tax and other
purposes not inconsistent herewith, the Exchange shall be deemed effective as of
the opening of business on the Closing Date.
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7.2 DELIVERIES BY QAI. At the Closing, QAI shall deliver the
following to RefTech: (i) evidence, satisfactory to RefTech, that all corporate
or other actions necessary to be taken by the Company and the Principals to
authorize and approve the transactions contemplated herein have been duly taken;
(ii) all necessary deeds, conveyances, assurances, transfers, assignments and
consents and any other documents, necessary or reasonably required to transfer
effectively to RefTech good and marketable title to the Assets, free and clear
of all Liens, including a duly executed ▇▇▇▇ of Sale; (iii) a duly authorized
and executed Certificate of Amendment to its Certificate of Incorporation, in
form acceptable for filing with the Secretary of State of New Mexico, to change
QAI's name to a name not similar to its present name nor incorporating either of
the words "Quality" or "Air", and such other documents as may be appropriate to
discontinue doing business under any assumed name used by the Company, as well
as all other trade names utilized by the Company in the conduct of the Business;
(iv) an assignment of the Texas Warehouse lease, or a new lease for the Texas
Warehouse, in form and substance satisfactory to RefTech; (v) either (A) a
three-year triple net lease for the U.S. Factory at a rental equal to the lesser
of (1) $6,500 per month, or (2) the payments due under the U.S. Small Business
Administration Authorization and Loan Agreement, Loan No. GP- 453125 2005-EP, in
form and substance satisfactory to RefTech, or (B) a one-year lease, terminable
by RefTech on one month's notice, which provides that it is to be replaced by a
triple-net lease as aforesaid, except that the term will be decreased by the
period from the Closing Date until the date the replacement lease commences, and
which further provides that, until such time, if any, as the replacement lease
is entered into, the rental thereon will be equal to the cost of taxes and
insurance thereon incurred by the lessor; (vi) an aged accounts receivable
schedule (on a 30, 60 and 90 day basis) with respect to all accounts receivable
in existence on the business day immediately preceding the Closing; (vii) a
schedule of inventory (by location), separately identifying raw materials, work
in process and finished goods, prepared as of the last calendar day of the month
immediately preceding the month in which the Closing occurs; (viii) a schedule
of open purchase orders and of open customer orders, prepared as of a date
within three business days of the Closing; (ix) a schedule, satisfactory to
RefTech, of the liabilities to be assumed by RefTech as provided for in Section
3.1; (x) a Certificate of Good Standing for QAI, dated no earlier than ten days
prior to the Closing, issued by the Secretary of State of New Mexico, which also
contains a listing of all charter documents on file with the Secretary of State;
and (xi) such other and further documents and instruments as may reasonably
requested by RefTech to effectuate the transactions contemplated hereby,
including but not limited to duly executed stock powers sufficient in form to
allow the transfer of the RTI Shares deposited pursuant to the Escrow Agreement,
and the Certificate of the President of QAI as provided for in Section 8.1(iv).
7.3 DELIVERIES BY REFTECH. At the Closing, RefTech shall deliver
the following: (i) to QAI and the escrow agent identified in the Escrow
Agreement, the Escrow Agreement and the RTI Shares required to be delivered at
the Closing; and (ii) to QAI (a) appropriate evidence that all corporate or
other actions necessary to be taken by RefTech and RTI to authorize and approve
the transactions contemplated herein have been duly taken; (b) an appropriate
instrument of assumption pursuant to which RefTech assumes certain QAI
liabilities to the extent provided for in Section 3.1; (c) Certificates of Good
Standing for each of RefTech and RTI, dated no earlier than ten days prior to
the Closing, issued by the respective Secretaries of State in the states of
their incorporation; and (d) such other and further documents and instruments as
may be reasonably requested by QAI to effectuate the transactions contemplated
herein, including but not limited to the Certificate of the President of RefTech
as provided for in Section 8.2(vi).
VIII. CONDITIONS TO THE CLOSING
-------------------------
8.1 CONDITIONS TO QAI'S OBLIGATION TO CLOSE. The obligation of
QAI to close the transactions contemplated by this Agreement shall be subject to
the following conditions, any one or more of which may be waived by QAI: (i)
RefTech shall have delivered at the Closing all items provided in Section 7.3;
(ii) RefTech shall have entered into a lease for the Texas Warehouse and a lease
for the U.S. Facility; (iii) RefTech shall have entered into a Credit Agreement
with certain of the Principals whereby such Principals may borrow from RefTech,
on a full- recourse basis, the sum of $240,000, (a) the principal amount of
which shall be repayable over the Earn-Out Period in equal monthly installments,
with interest payable monthly at one percent (1%) in excess of the prime rate as
published in The Wall Street Journal, Eastern Edition, from time to time, except
that upon the sale of the residence located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ the full amount of any net proceeds of sale received
therefrom, directly or indirectly, by any of the Principals shall be immediately
applied in reduction of such loan, and
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(b) repayment of such loan shall be secured by a pledge of all of the QAI
capital stock and all of the RTI Shares owned by such Principals; (iv) a
Certificate of RefTech's President that all representations and warranties of
RefTech contained in this Agreement are true and correct on the Closing as
though made on the Closing, except as affected by the transactions contemplated
by this Agreement and except to the extent that such representations and
warranties were made as of a specified date and as to such representations and
warranties the same shall have been true as of the specified date, and that
RefTech has complied with all agreements and conditions contained in this
Agreement to be complied with or observed by RefTech.
8.2 CONDITIONS TO REFTECH'S OBLIGATION TO CLOSE. The obligation
of RefTech to close the transactions subject to this Agreement shall be subject
to the following conditions, any one or more of which may be waived by RefTech:
(i) QAI shall have delivered at the Closing all items provided in Section 7.2;
(ii) each of the ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ shall have
duly executed and delivered an employment agreement with RefTech, in the form of
EXHIBIT 8.2A, EXHIBIT 8.2B and EXHIBIT 8.2C, respectively; (iii) QAI and the
Principals shall have entered into the Escrow Agreement, and the stock powers
required to be delivered by them pursuant thereto shall have been duly executed
and delivered to the Escrow Agent; (iv) RefTech shall have entered into an
agreement with Bacchus Industries, Inc. to purchase from Bacchus Industries,
Inc. the rolling stock and other equipment listed on Schedule 5.11.3 and used by
the Company in the Business at its then fair market value, all such rolling
stock and other equipment to be delivered free and clear of all Liens and in
good working condition and repair; (v) between the date of this Agreement and
the Closing, there shall not have occurred (A) any casualty to any facility,
property, equipment or inventory owned by the Company as a result of which
either: (1) the monetary amount of damage or destruction aggregates ten percent
or more of the aggregate book value shown on the Company's books of the entire
facilities, property, equipment and inventory of the Company; or (2) the total
monetary amount of damage or destruction is less than ten percent of such
aggregate book value and such loss shall not be substantially covered by valid
and existing insurance underwritten by responsible insurers; or (B) any
condemnation, seizure, expropriation or liquidation by any governmental
authority or any officer or instrumentality thereof of facilities, property,
equipment or inventory owned by the Company; (vi) the closing shall have
occurred under the Affiliate Documents, a copy of which is annexed as EXHIBIT
8.2D; and (vii) QAI shall have delivered a Certificate of QAI's President and of
each of the Principals that all of their respective representations and
warranties contained in this Agreement are true and correct on the Closing as
though made on the Closing, except as affected by the transactions contemplated
by this Agreement and except to the extent that such representations and
warranties were made as of a specified date and as to such representations and
warranties the same shall have been true as of the specified date, and that QAI
has complied with all agreements and conditions contained in this Agreement to
be complied with or observed by QAI. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
or incidental thereto and all other related legal matters shall have been
satisfactory to and approved by counsel for RefTech and RTI, and such counsel
shall have been furnished with such certified copies of actions and proceedings
and such other instruments and documents as they shall have reasonably
requested.
8.3 TITLE DEFECTS. In the event that there are any Liens on or
defects in QAI's title to any of the Assets which are not expressly contemplated
under this Agreement then RefTech may elect to either (i) cancel and terminate
this Agreement, without liability hereunder to RefTech, or (ii) proceed with the
Closing without waiving any of its rights to recover its actual damages as a
result thereof.
IX. CONDUCT OF THE PARTIES.
----------------------
9.1 AFFIRMATIVE PRE-CLOSING OBLIGATIONS OF QAI AND THE
PRINCIPALS. Between the date of this Agreement and the Closing, QAI and the
Principals shall:
9.1.1 INFORMATION. Give RefTech, RTI and their counsel,
accountants, consultants and other representatives, full access, during normal
business hours, to all of the Company's management and administrative personnel,
properties, books, accounts, tax returns, contracts, commitments and records;
and furnish to RefTech and RTI all such information concerning the Business as
RefTech or RTI reasonably may request; PROVIDED, HOWEVER, that RefTech and RTI
shall, and shall use their best efforts to cause their representatives to (i)
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hold in strict confidence all data and information so obtained, and (ii) if the
Closing does not occur, return to QAI, or destroy, all of such data as QAI may
reasonably request.
9.1.2 CONDUCT OF BUSINESS. Operate the Business only in the
usual, regular and ordinary manner and, to the extent consistent with such
operation and the provisions of this Agreement, use their best efforts to (i)
preserve and keep intact the Company's present business organizations, (ii) keep
available the services of its present employees, (iii) preserve the Company's
present relationships with customers, suppliers and others having business
dealings with them, and (iv) timely pay and discharge all of the Company's bills
and monetary obligations and otherwise timely and properly perform all of the
Company's obligations and commitments.
9.1.3 MAINTENANCE. Maintain all of the Company's (i)
properties necessary for the conduct of the Business, whether owned or leased,
in good repair, order and condition, reasonable wear and use excepted, (ii)
books, accounts and records in the usual, regular and ordinary manner, at least
on a basis consistent with prior periods, and (iii) insurance.
9.1.4 COMPLIANCE WITH LAW. Comply with all Law applicable to
the Company and to the conduct of the Business.
9.1.5 MATERIAL CHANGES. Promptly notify RefTech upon the
occurrence of any event which would make any of their representations and
warranties herein contained incorrect, incomplete or misleading in any material
respect (as if such representations and warranties were being remade as at such
time).
9.1.6 APPROVALS, CONSENTS, ETC. Use its best efforts to
obtain in writing as promptly as possible all approvals and consents required to
be obtained by any of them in order to effectuate the transactions contemplated
hereby and deliver to RefTech copies of such approvals and consents in form and
substance satisfactory to RefTech's counsel.
9.2 NEGATIVE COVENANTS PRE-CLOSING. Between the date of this
Agreement and the Closing and except as contemplated by this Agreement, the
Company shall not:
9.2.1 CORPORATE. Amend QAI's Certificate of Incorporation or
By-Laws or the Affiliate's Articles, or merge or consolidate with, or sell all
or any portion of its Assets or change the character of the Business, or take
any action not in the ordinary course of the Business.
9.2.2 CHANGE IN COMPENSATION OR BENEFITS. Increase the
compensation payable or to become payable to any employee or agent; pay or make
any bonus, stock option, profit sharing, pension, retirement or other similar
payment or arrangement except in the ordinary course of the administration of
existing welfare, pension or retirement plans or arrangements; or enter into any
employment agreement (except that the Affiliate may enter into such employment
agreement, upon prior notice to RefTech, to the extent required by Mexican Law),
sales agency or other contract or arrangement with respect to the performance of
personal services.
9.2.3 COMMITMENTS. Make any commitments to employees or any
other third party which will or may become effective upon or after consummation
of the transactions contemplated by this Agreement.
9.2.4 AMENDMENT OF CONTRACTUAL ARRANGEMENTS. Modify or
change any existing right, concession, license, lease, contract, commitment or
agreement affecting any asset to be sold hereunder, or sell or otherwise dispose
of any right or privilege relating to any such asset except in the ordinary
course of business and except as and to the extent contemplated herein.
9.2.5 COMPLIANCE WITH CLOSING CONDITIONS. Enter into any
transaction, take any action or by inaction permit any event to occur, which
would result in any of the representations and warranties of the Company and the
Principals herein contained not being true and correct at and as of the time
immediately after the occurrence of such transaction or event.
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9.3 POST CLOSING MANAGEMENT OF REFTECH. During the Earn-Out
Period, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇, as a group, shall
have the non-assignable right to nominate three of the seven directors
constituting RTI's Board of Directors. RTI covenants and agrees that, subject to
its fiduciary duties, as the sole stockholder of RefTech, it will encourage the
directors of RefTech to elect ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as its President, and to elect a
chief financial officer who shall be recommended by ▇▇▇▇ ▇. ▇▇▇▇▇▇ as long as he
is the chief executive officer of RTI.
9.4 REORGANIZATION TREATMENT. RefTech and QAI shall take all
actions necessary to cause the Exchange and the other transactions contemplated
by this Agreement to be treated for tax purposes as a reorganization under Code
Section 368(a)(1)(C), including all actions necessary to comply with the
"continuity of business enterprise" and "continuity of interest" requirements
with respect thereto.
X. INDEMNIFICATION
---------------
10.1 BY QAI AND THE PRINCIPALS. After the Closing, QAI and the
Principals agree to jointly and severally indemnify and hold RefTech and RTI
harmless against and in respect of any and all loss, liability or damage
incurred or sustained by RefTech or RTI in connection with any breach by (i) the
Company or the Principals of any provision of this Agreement, including, without
limitation, any breach of any representations, warranties and covenants made by
any of them herein, and (ii) by the Affiliate or any of its stockholders of any
provision of the Affiliate Documents, including, without limitation, any breach
of any representations, warranties and covenants made by any of them therein, in
each case including, subject to the provisions of Section 10.3, all reasonable
costs and expenses (including reasonable attorneys' fees) incurred by RefTech
and RTI in connection with any action, suit, proceeding, demand, assessment or
judgment incident to any such matter.
10.2 BY REFTECH. After the Closing, RefTech agrees to indemnify
and hold QAI and the Principals harmless against and in respect of any and all
loss, liability or damage incurred or sustained by QAI in connection with any
breach by RefTech of any provision of this Agreement, including, without
limitation, any breach of any representations, warranties and covenants made by
RefTech herein, including, subject to the provisions of Section 10.3, all
reasonable costs and expenses (including reasonable attorneys' fees) incurred by
QAI or the Principals in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any such matter.
10.3 NOTICES, DEFENSE, ETC. Promptly upon receipt by an
indemnified party of notice of any claim or the commencement of any action for
which indemnity may be sought hereunder, the indemnified party (i) if RefTech or
RTI, shall notify ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or his nominee, and (ii) if QAI or the
Principals, shall notify RTI, in writing of the claim or the commencement of
such action, attaching to such notice a copy of the claim or judicial pleading
received. The indemnifying party shall be entitled to participate in the defense
of any such claim or action that may be brought against an indemnified party,
and may elect, by notice to the indemnified party within a reasonable time
following notification by the indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party, and to settle and
compromise any such claim or action; provided, however, that if the indemnified
party has elected to be represented by separate counsel pursuant to the proviso
to the following sentence, such settlement or compromise shall be effected only
with the consent of the indemnified party, which consent shall not be
unreasonably withheld, delayed or conditioned. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that the indemnified party
shall have the right to employ counsel to represent it if, in the indemnified
party's sole reasonable judgment, it is advisable for the indemnified party to
be represented by separate counsel due to a conflict of interest and, in that
event, the reasonable fees and expenses of such separate counsel shall
thereafter be paid by the indemnifying party. The parties agree to render to
each other such assistance as may reasonably be requested in order to insure the
proper and adequate defense of any such claim or action.
10.4 RECOURSE AGAINST QAI AND THE PRINCIPALS. In the event that
RefTech or RTI shall be entitled to indemnification as provided in this Article,
upon the determination thereof it shall give ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or his
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nominee notice thereof. Unless RefTech shall have received payment in the full
amount of the indemnified claim within thirty days of its giving such notice, it
shall give notice to the Escrow Agent that it is entitled to indemnification, in
which event the Escrow Agent shall cause to be redelivered to RefTech or to RTI,
out of the RTI Shares held in escrow pursuant to the Escrow Agreement, such
number of RTI shares as when multiplied by their market value per share, as
herein determined, equals the amount of the unreimbursed indemnified claim. For
the purposes of this Section, "market value" means the average closing price of
the Common Stock as quoted on NASDAQ or any national securities exchange on
which the Common Stock may then be traded during the thirty day period
immediately prior to delivery of such notice to the Escrow Agent, and if at such
time the Common Stock is not so traded then at the most recent ask price as
quoted by the National Quotation Bureau, Inc. (or any successor organization
performing a similar reporting function). If the RTI Shares held by the Escrow
Agent shall be insufficient to reimburse RefTech in full, QAI and the Principals
shall be jointly and severally responsible for the balance.
XI. TERMINATION
-----------
11.1 TERMINATION. This Agreement and the transactions
contemplated herein may be terminated at or prior to the Closing (i) by mutual
consent of RefTech and QAI, or (ii) by RefTech pursuant to notice delivered at
or prior to the Closing if the Company or the Principals fail in any material
respect to satisfy all of the conditions to the Closing to be satisfied by them.
XII. Miscellaneous
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12.1 FURTHER ASSURANCES. The parties shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
12.2 FINDERS' FEES. Each of the parties (i) represents and
warrants that, except as set forth on Schedule 12.2, it has not taken and shall
not take any action which would cause the other parties to have any obligation
or liability to any person for finders' fees, brokerage fees, agents'
commissions or like payments in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby, and
(ii) agrees to indemnify and hold the other parties harmless for any loss,
liability, cost or expense (including, without limitation, legal expenses)
arising out of the breach or inaccuracy of the foregoing representation and
warranty.
12.3 EXPENSES. Whether or not the transactions contemplated by
this Agreement are consummated, the parties shall pay the fees and expenses of
their respective counsel, accountants and other experts, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement and the transactions contemplated
hereby; provided, however, that if this Agreement is terminated because of any
party's breach of this Agreement, such party shall remain liable in damages to
the other party to this Agreement.
12.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreements contained in this
Agreement or in any instrument or document delivered or to be delivered pursuant
to this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby, notwithstanding any investigation at any time
made by or on behalf of any party or parties hereto.
12.5 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement or the breach of any term or provision thereof shall
be settled by arbitration in accordance with the Rules of the American
Arbitration Association and judgment upon the award rendered by the Arbitrator
or Arbitrators may be entered in any Court having jurisdiction. In the event
that the parties to the controversy or claim can not agree on the location of
the arbitration, the arbitration shall be conducted in New York City, New York.
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12.6 SPECIFIC PERFORMANCE. QAI and the Principals acknowledge
that (i) the Assets and Business to be transferred to RefTech pursuant to this
Agreement are unique, (ii) RefTech will not have any adequate remedy at law if
QAI and the Principals fail to perform any of their respective obligations
hereunder, and (iii) RefTech shall have the right, in addition to any other
rights it may have, to specific enforcement of this Agreement if QAI and the
Principals fail to perform any of their respective obligations hereunder.
12.7 NOTICES. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given on the earlier of (i) when actually
received or when receipt is refused, or (ii) five days after being mailed by
United States first class, registered or certified mail, return receipt
requested, postage prepaid, addressed to the party at the following addresses or
to such other address as any party shall hereafter specify by notice to the
other parties:
a. If to RefTech, to: RTI Inc.
c/o ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ & Kuh, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
b. If to QAI or the
Principals, to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Quality Air, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Notice of change of address shall be effective only upon actual receipt.
12.8 ENTIRE AGREEMENT. This Agreement, together with the Exhibits
and Schedules annexed hereto, constitutes the entire agreement among the parties
and supersedes all prior agreements, understandings and arrangements, oral or
written, among the parties with respect to the subject matter hereof.
12.9 BINDING EFFECT; Benefits. This Agreement shall inure to the
benefit of and shall be binding upon the parties and their respective successors
and permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to or shall (i) confer on any person other than the parties, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, or (ii) constitute the
parties partners or participants in a joint venture.
12.10 AMENDMENTS AND WAIVERS. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party may, by an instrument in writing, waive performance or compliance by any
other party with respect to any term or provision of this Agreement on the part
of such other party to be performed or complied with. The waiver by any party of
a breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach.
12.11 ASSIGNMENT. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by any party without the prior written consent of all of the other
parties.
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12.12 SECTION AND OTHER HEADINGS. The Article, section and other
headings contained in this Agreement are for reference purposes only and shall
not be deemed to be a part of this Agreement or to affect the meaning or
interpretation of this Agreement.
12.13 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
12.14 SEPARABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
12.15 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and to be performed wholly therein.
12.16 ATTORNEYS' FEES. In any proceedings relating to this
Agreement, including a proceeding with respect to any instrument, document or
agreement made under or in connection with this Agreement, the prevailing party
shall be entitled to recover its costs and reasonable attorneys' fees and
expenses.
12.17 PUBLIC INFORMATION. Neither the Company nor the Principals
shall issue any press release or other public document or make any public
statement relating to, connected with or arising out of this Agreement or the
transactions contemplated hereunder without first obtaining the prior written
approval of RTI.
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IN WITNESS WHEREOF, QAI and RefTech have caused this Agreement to
be signed in their respective names by an officer thereunto duly authorized and
each of the Principals have executed this Agreement as of the date first above
written.
QUALITY AIR, INC. REFRIGERATION TECHNOLOGY INC.
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇
President Sole Director
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Agreed to with respect to Section 9.3 only.
RTI INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇,
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▇▇▇▇ ▇. ▇▇▇▇▇▇, President
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