SUBSCRIPTION AGREEMENT
Dated October 29, 1999
by and between
WINDSWEPT
ENVIRONMENTAL GROUP, INC.
and
SPOTLESS PLASTICS (USA) INC.
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is entered into this 29th day of October, 1999
by and between Windswept Environmental Group, Inc., a Delaware corporation (the
"Company"), and Spotless Plastics (USA) Inc., a Delaware corporation
("Spotless").
W I T N E S S E T H :
WHEREAS, the authorized share capital of the Company consists of (i)
50,000,000 shares of common stock, par value $.0001 per share (the "Common
Stock"), of which 16,158,571 shares are issued and outstanding and 11,556,746
shares are reserved for issuance upon the exercise of outstanding stock options,
warrants, convertible notes and convertible preferred stock and (ii) 10,000,000
shares of preferred stock, par value $.01 per share (the "Preferred Stock"), of
which 1,300,000 shares have been designated as Series A Redeemable Convertible
Preferred Stock, par value $.01 per share, and are issued and outstanding (the
"Series A Preferred");
WHEREAS, Spotless wishes to subscribe for and purchase from the Company,
and the Company wishes to sell to Spotless, (i) 22,284,683 shares of Common
Stock (the "Common Shares") and (ii) 9,346 shares of a new Series of Preferred
Stock which has been designated as the Series B Convertible Preferred Stock, par
value $.01 per share (the "Series B Preferred" and, together with the Common
Shares, the "Shares"); and
WHEREAS, in connection with the purchase and sale of the Shares, Spotless
has agreed to advance to the Company and certain of its Subsidiaries (as that
term is hereinafter defined) the sum of $2,000,000 (the "Loan") pursuant to the
terms of a Convertible Promissory Note substantially in the form attached hereto
as Exhibit A (the "Note"), which is convertible, subject to the terms and
conditions thereof, into either 25,304,352 shares of Common Stock or 25,305
shares of Series B Preferred;
NOW, THEREFORE, in consideration of the premises and the promises and
covenants herein contained, the parties hereto agree as follows:
1. Subscription for the Shares
Spotless hereby subscribes for and agrees to purchase, and the Company
hereby agrees to sell, convey, transfer and deliver to Spotless at the Closing
(as that term is hereinafter defined), the Shares, free and clear of all claims,
pledges, security interests, liens, rights of first refusal, options, warrants,
contractual commitments, sharing arrangements, restrictions, charges and
encumbrances of any nature whatsoever, all on the terms and conditions set forth
in this Agreement.
2. Purchase Price; Closing
a. Purchase Price. Subject to the terms and conditions of this Agreement,
the purchase price payable for the Shares (the "Purchase Price") shall be Two
Million Five Hundred Thousand Dollars ($2,500,000), or $0.07904 per Common Share
and $79.04 per share of Series B Preferred.
b. Time and Place. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Coudert Brothers at 1114 Avenue of
the Americas, New York, New York on October 29, 1999 at 10:00 A.M., or on such
other date or at such other location as the parties shall mutually agree in
writing (the "Closing Date").
c. Deliveries.
(i) Deliveries by the Company. The Company shall deliver to Spotless at the
Closing the following:
(1) certificates representing the Common Shares and the Series
B Preferred;
(2) the Note duly executed by each of the Company, Trade-Winds
Environmental Restoration, Inc. ("Trade-Winds"), North
Atlantic Laboratories, Inc. ("North Atlantic")and New York
Testing Laboratories, Inc. ("New York Testing" and, together
with the Company, Trade-Winds and North Atlantic, the
"Windswept Entities");
(3) Security Agreements (each, a "Security Agreement"),
each substantially in the form attached hereto as Exhibit B
together with UCC-1 financing statements, duly executed by
the Company, Trade-Winds, North Atlantic and New York
Testing, respectively;
(4) a certificate, dated the Closing Date and executed
by the President of the Company to the effect that (A) each
of the representations and warranties of the Company made
herein is true and correct in all material respects on the
Closing Date as though such representations and warranties
were made on such date and (B) the Company has performed and
complied in all material respects with all covenants,
conditions and obligations under this Agreement which are
required to be performed or complied with by it on or prior
to the Closing Date;
(5) a copy, certified as of the Closing Date by a proper officer
of the Company, of the resolutions of the Board of Directors
of the Company (A) authorizing Series B Preferred and
approving the Certificate of Designation of Rights,
Preferences and Privileges of the Series B Preferred in the
form attached hereto as Exhibit C (the "Certificate of
Designations"), (B) authorizing the issuance of the Common
Shares and the Series B Preferred and the Company's
execution, delivery and performance of this Agreement, (C)
authorizing the borrowing of the Loan and the execution and
delivery of the Note and the Security Agreement to which the
Company will be a party, (D) approving an amendment to the
Company's Certificate of Incorporation (the "Amendment") to
increase the number of authorized shares of Common Stock
from 50,000,000 to 100,000,000 and recommending that the
shareholders of the Company approve such amendment, (E)
subject to shareholder approval of the Amendment, reserving
34,651,000 shares of Common Stock for issuance upon
conversion of the Note and shares of Series B Preferred
(including any shares of Series B Preferred that may be
issued upon conversion of the Note), 25,305 shares of Series
B Preferred for issuance in the event that the Note is
converted into shares of Series B Preferred and 5,486,309
shares of Common Stock for issuance upon the exercise of
stock options to be granted to ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ in
connection with the execution and delivery of the Amended
Employment Agreement (as that term is hereinafter defined),
(F) effective as of the Closing, increasing the size of the
Board of Directors from five (5) to nine (9) directors,
accepting the resignation of ▇▇▇▇▇ ▇'▇▇▇▇▇▇ and appointing
as new directors each of ▇.▇. ▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, (G) effective as of the date
ten (10) days after the filing with the Securities and
Exchange Commission (the "SEC") of an Information Statement
pursuant to Section 14(f) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 14(f)
promulgated thereunder, the appointment of ▇.▇. ▇▇▇▇▇▇▇▇▇
as a director of the Company and (H) authorizing and
approving the execution and delivery by the Company of an
Amended and Restated Employment Agreement in the form
attached hereto as Exhibit D (the "Amended Employment
Agreement") by and between the Company and ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
and stock option agreements (the "Stock Option Agreements")
in the form attached hereto as Exhibit E by and between the
Company and ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇;
(6) a copy, certified as of the Closing Date by a proper
officer of Trade-Winds, of the
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resolutions of the Board of Directors of Trade-Winds
authorizing the borrowing of the Loan and the execution
and delivery of the Note and the Security Agreement to
which Trade-Winds will be a party;
(7) a copy, certified as of the Closing Date by a
proper officer of North Atlantic, of the resolutions of the
Board of Directors of North Atlantic authorizing the
borrowing of the Loan and the execution and delivery of the
Note and the Security Agreement to which North Atlantic will
be a party;
(8) a copy, certified as of the Closing Date by a
proper officer of New York Testing, of the resolutions
of the Board of Directors of New York Testing authorizing
the borrowing of the Loan and the execution and delivery
of the Note and the Security Agreement to which New York
Testing will be a party;
(9) a complete and correct copy of the Certificate of
Incorporation of the Company, as amended, certified
by the Secretary of State of the State of Delaware;
(10) a complete and correct copy of the Certificate of
Designations, certified by the Secretary of State of the
State of Delaware;
(11) certificates of good standing dated within five
business days of the Closing Date certifying the
due incorporation, good standing and continued corporate
existence of each of the Windswept Entities, issued by
their respective jurisdictions of incorporation and by
each jurisdiction where each of them is qualified to
do business as a foreign corporation;
(12) the written opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLC,
counsel for the Company, dated the Closing Date,
substantially in the form attached hereto as Exhibit F;
(13) evidence, reasonably satisfactory to Spotless,
that all indebtedness owed by the Windswept Entities to
Business Alliance Capital Corporation ("BACC") has been
duly and validly repaid and that BACC has released any and
all Encumbrances (as that term is hereinafter defined)
on their property and assets; and
(14) third party consents in form and substance
satisfactory to Spotless and its counsel with respect
to the contracts, permits, licenses and sureties specified
in Schedule 2.3(a)(xiv).
(ii) Deliveries by Spotless. Spotless shall deliver to the
Company at the Closing the following:
(1) payment of the Purchase Price by wire transfer in
immediately available funds;
(2) the advance of the Loan by wire transfer in
immediately available funds;
(3) certificates, dated as of the Closing Date and
executed by proper officers of Spotless, to the effect
that (A) each of the representations and warranties of
Spotless made herein is true and correct in all material
respects on the Closing Date as though such representations
and warranties were made on such date and (B) Spotless has
performed and complied in all material respects with all
covenants and obligations under this Agreement which are
to be performed or complied with by Spotless on or prior
to the Closing Date;
(4) a copy, certified as of the Closing Date by a
proper officer of Spotless, of the resolutions
3
of the Board of Directors of Spotless authorizing (A) the
purchase of the Shares and the execution, delivery and
performance of this Agreement and (B) the advance of the
Loan pursuant to the terms of the Note;
(5) a certificate of good standing dated within five
business days of the Closing Date certifying the due
incorporation, good standing and continued corporate
existence of Spotless issued by the Secretary of State
of the State of Delaware; and
(6) the written opinion of Coudert Brothers, counsel to
Spotless, dated the Closing Date, substantially in the
form attached hereto as Exhibit G;
3. Representations and Warranties of the Company
The Company makes the representations and warranties set forth in this
Article III, each of which is true and correct as of the date hereof and will be
true and correct as of the Closing Date.
a. Organization and Good Standing.
(i) Except as set forth in Schedule 3.1(a), the Company and each Subsidiary
(as that term is hereinafter defined) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate power and
authority to own, lease and operate the properties and assets it now owns,
leases or operates and to carry on its business as presently conducted. Except
as set forth in Schedule 3.1(a), the Company and each Subsidiary is qualified to
do business and is in good standing in each jurisdiction where the assets owned,
leased or operated by it or where ownership or operations of the conduct of its
business require such qualification, except where the lack of such qualification
would not have a material adverse effect on the business, financial condition,
results of operations or prospects of the Company and the Subsidiaries taken as
a whole (a "Material Adverse Effect"). A true and complete copy of the
Certificate of Incorporation of the Company and each Subsidiary, as amended to
date, is attached hereto as Exhibit H, and a true and complete copy of the
By-laws of the Company and each Subsidiary is attached hereto as Exhibit I.
(ii) Schedule 3.1(b) sets forth the name and jurisdiction of incorporation
or organization of each corporation, partnership or other legal entity of which
the Company, directly or indirectly, owns any shares of capital stock or other
equity interests (each a "Subsidiary"). Each Subsidiary is wholly owned by the
Company. All of the capital stock and other interests of the Subsidiaries so
held by the Company are owned by it or a Subsidiary as indicated in Schedule
3.1(b), free and clear of any Encumbrance, except for the Encumbrances listed in
Schedule 3.1(b) which are outstanding as of the date hereof, all of which shall
be released on the Closing Date. All of the outstanding shares of capital stock
in each of the Subsidiaries directly or indirectly held by the Company are duly
authorized, validly issued, fully paid and nonassessable and were issued free of
preemptive or similar rights and in compliance with applicable laws. There are
no outstanding options, warrants, rights or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any capital stock of any Subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any Subsidiary is bound
obligating it to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for such shares. The
Company does not own, of record or beneficially, directly or indirectly, any
equity or other proprietary interest, or right to acquire any such interest,
contingent or otherwise, in any other corporation, partnership, joint venture,
business enterprise or other entity of any nature whatsoever other than the
Subsidiaries.
b. Authorization; No Violations.
(i) The Company has full corporate power and authority to issue the Shares
and to execute, deliver and perform this Agreement, the Note and the Security
Agreement to which it is a party. Except as set forth in Schedule 3.2, the
issuance of the Shares by the Company and the execution and delivery of this
Agreement, the
4
Note and the Security Agreement to which it will be a party and the
consummation of the transactions contemplated hereby and thereby have been duly
approved by the Board of Directors of the Company, and no other corporate action
on the part of the Company is necessary to authorize and approve the issuance of
the Shares, the execution and delivery of this Agreement, the Note or the
Security Agreement to which it will be a party or the consummation of the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by the Company and constitutes, and upon execution and
delivery each of the Note and the Security Agreement to which the Company will
be a party will constitute, the valid and binding agreement of the Company
enforceable in accordance with its respective terms, except as such
enforceability may be limited by applicable bankruptcy laws and any other
similar laws affecting the rights and remedies of creditors generally and by
general principles of equity.
(ii) Each of Trade-Winds, North Atlantic and New York Testing has full
corporate power and authority to execute, deliver and perform the Note and the
Security Agreement to which it is a party. The execution and delivery of the
Note and the Security Agreement to which it is a party and the consummation of
the transactions contemplated hereby and thereby have been duly approved by the
Board of Directors of Trade-Winds, North Atlantic and New York Testing,
respectively, and no other corporate action on the part of any of them is
necessary to authorize and approve the execution and delivery of the Note or the
respective Security Agreement to which is a party or the consummation of the
transactions contemplated hereby and thereby. Upon execution and delivery, each
of the Note and the Security Agreement to which Trade-Winds, North Atlantic and
New York Testing, respectively, is a party will constitute the valid and binding
agreement of each of them, respectively, enforceable in accordance with its
respective terms, except as such enforceability may be limited by applicable
bankruptcy laws and any other similar laws affecting the rights and remedies of
creditors generally and by general principles of equity.
(iii) Except as set forth in Schedule 3.2, the issuance of the Shares and
the execution, delivery and performance of this Agreement and the Note by the
Company and the consummation of the transactions contemplated hereby and thereby
will not: (i) violate or conflict with any provision of the Certificate of
Incorporation or By-laws of the Company or any Subsidiary; (ii) breach, violate
or (whether immediately or with the lapse of time or the giving of notice or
both) constitute an event of default under or an event which would give rise to
any right of termination, cancellation, modification, acceleration or
foreclosure under, or require any consent of or the giving of any notice to any
third party under, any note, bond, surety, indenture, credit facility, mortgage,
security agreement, lease, license, franchise, permit or other agreement,
instrument or obligation to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any of their respective properties or
assets may be bound, or give rise to the creation of any Encumbrance upon the
Shares or upon the properties or assets of the Company or any Subsidiary; (iii)
violate or conflict with any law, statute, rule, regulation, ordinance, code,
judgment, order, writ, injunction, decree or other requirement of any court or
of any governmental body or agency thereof applicable to the Company or any
Subsidiary or by which any of their respective properties or assets may be
bound; or (iv) require any registration or filing by the Company or any
Subsidiary with, or any permit, license, exemption, consent, authorization or
approval of, or the giving of any notice by the Company or any Subsidiary to,
any governmental or regulatory body, agency or authority.
c. Capitalization of the Company.
(i) The authorized, issued and outstanding shares of all classes of capital
stock of the Company is set forth in Schedule 3.3 hereto. Upon issuance, the
Shares will constitute 51.0% of the aggregate voting power of all the issued and
outstanding voting securities of the Company on a fully diluted basis (i.e.,
after giving effect to the exercise of all options, warrants, or similar rights
to acquire shares of Common Stock, other than the Note). The Shares have been
duly authorized for issuance and sale to Spotless pursuant to the terms of this
Agreement, and, upon payment of the Purchase Price and delivery of the
certificates representing the Shares, the Shares will be validly issued and
fully paid and nonassessable. The issuance of the Shares is not subject to any
preemptive or other similar rights. Except as set forth in Schedule 3.3, the
shares of Common Stock or Series B Preferred to be issued upon conversion of the
Note, as the case may be, and the shares of Common Stock to be issued upon
conversion of the Series B Preferred will be, upon any such conversion, duly
authorized, validly issued, fully paid
5
and nonassessable. All of the issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, full paid and
nonassessable. Except as disclosed in Schedule 3.3 hereto, there are no
agreements, arrangements or understandings (including, without limitation,
options or warrants), to which the Company is a party, or by which the Company
is bound relating to the issuance, acquisition or disposition of any shares of
capital stock of the Company or any interest therein, and there are no
agreements, arrangements or understandings to which the Company is a party or by
which it is bound relating to the repurchase or redemption of any shares of its
capital stock. Except for the options, warrants and other rights listed on
Schedule 3.3 hereto, there are no outstanding options, warrants or other rights
to subscribe for or purchase, or securities convertible into or exchangeable
for, shares of the Company's capital stock, and there are no agreements,
arrangements or understandings to which the Company is a party or by which it is
bound pursuant to which the Company is or may be required to issue or sell
additional shares of its capital stock.
d. Securities Filings; Financial Statements.
(i) Since January 1, 1997, the Company has filed all forms, reports,
statements and documents required to be filed with the SEC, and all such forms,
reports, statements and documents comply in all material respects with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, each as in effect on the date of the
respective filing thereunder. The Company has furnished or made available to
Spotless true and complete copies of (i) its Annual Reports on Form 10-KSB for
the years ended April 30, 1998 and 1999, as filed with the SEC, (ii) its proxy
statements relating to all meetings of shareholders (whether annual or special)
of the Company since January 1, 1998, as filed with the SEC and (iii) all other
reports, statements and registration statements and amendments thereto
(including, without limitation, Quarterly Reports on Form 10-QSB and Current
Reports on Form 8K, as amended) filed by the Company with the SEC since January
1, 1998 and prior to the date hereof (collectively, the "Company Filed
Documents"). As of their respective dates, or as of the date of the last
amendment thereof, if amended after filing, none of the Company Filed Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading. The
Company has heretofore furnished or made available to Spotless a complete and
correct copy of any amendments or modifications which have not yet been filed
with the SEC to executed agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the Securities
Act or the Exchange Act.
(ii) The audited consolidated financial statements and unaudited interim
financial statements of the Company included in the Company Filed Documents (the
"Company Financial Statements" (i) are accurate and complete in all material
respects, (ii) have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") consistently applied during the periods
covered thereby, except as otherwise specifically indicated therein or in the
notes thereto and (iii) fairly present the financial condition and results of
operations of the Company as at the dates and for the periods then ended
subject, in the case of the unaudited interim financial statements, to normal
year-end audit adjustments (which in the aggregate are not material in nature or
amount). The financial books and records of the Company are accurate and
complete in all material respects and are maintained in accordance with
customary business practices in the industry and all applicable legal
requirements.
(iii) Except as set forth in Schedule 3.4(c), since July 31, 1999, the
Company has not declared a dividend or set aside funds or assets for
distribution or distributed any assets of the Company, whether in connection
with any loan or other form of indebtedness, capital contribution, assignment,
dividend or distribution or otherwise, to or for the benefit of any affiliate of
the Company or any Related Party (as hereinafter defined).
e. Absence of Undisclosed Liabilities. Neither the Company nor any
Subsidiary has any material liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise, whether known or unknown, and
whether arising out of transactions entered into or any condition or state of
facts existing on or prior to the date hereof except as set forth in Schedule
3.5 and except (i) as disclosed in the Company Filed Documents, (ii) for
obligations incurred pursuant to contracts entered into in the ordinary course
of business and identified in an
6
appropriate Schedule hereto to the extent required by this Agreement to be
identified in the Schedules hereto, or (iii) for liabilities incurred in the
ordinary course of business since July 31, 1999, all of which liabilities are
properly reflected in the books and records of the Company.
f. Absence of Certain Changes or Events. Except as set forth in Schedule
3.6 hereto, since May 1, 1999, the Company and the Subsidiaries have carried on
their businesses in the ordinary course and in all material respects consistent
with past practice. Except as set forth in Schedule 3.6 hereto, since July 31,
1999, neither the Company nor any Subsidiary has:
(i) incurred any obligation or liability (whether absolute, accrued,
contingent or otherwise), except pursuant to the terms of this Agreement or
except in the ordinary course of business and consistent with past practice;
(ii) suffered any damage, destruction or loss, whether or not covered by
insurance, affecting its properties, assets or business, to the extent that the
same exceeds $5,000 individually or $25,000 in the aggregate;
(iii) mortgaged, pledged or subjected to any lien, charge or other
Encumbrance any of its assets, tangible or intangible, except in the ordinary
course of business and consistent with past practice;
(iv) sold or transferred any of its assets, except in the ordinary course
of business and consistent with past practice, or canceled or compromised any
material debts or waived any claims or rights of a material nature;
(v) leased, licensed or granted to any person or entity any rights in any
of its assets or properties outside the ordinary course of business and
inconsistent with past practice;
(vi) experienced any material adverse change in its financial condition,
results of operations, cash flows, assets, liabilities, business or operations;
(vii) made any change in any accounting principle or practice or in its
method of applying any such principle or practice;
(viii) issued any additional shares of capital stock or any options,
warrants or other rights to purchase, or any securities convertible into or
exchangeable for, shares of its capital stock;
(ix) declared or paid any dividends on or made any other distributions
(however characterized) in respect of shares of its capital stock;
(x) repurchased or redeemed any shares of its capital stock;
(xi) granted any general or specific increase in the salary, commission
rate or other compensation (including, without limitation, bonuses, profit
sharing or deferred compensation) payable or to become payable to any of its
employees or agents, except as required under existing contractual obligations
of the Company or a Subsidiary, or adopted any Benefit Plan (as that term is
hereinafter defined), or increased, augmented or improved the benefits granted
to or for the benefit of any Employee (as that term is hereinafter defined)
under any Benefit Plan; or
(xii) entered into any agreement to do any of the foregoing.
g. No Claims or Litigation. Except as set forth in Schedule 3.7 hereto,
there are no suits, actions, proceedings (including, without limitation,
arbitral and administrative proceedings), claims or governmental investigations
or audits pending or, to the best knowledge of the Company, threatened against
the Company or any Subsidiary or their respective properties, assets or business
(or, to the best knowledge of the Company, pending or
7
threatened against, relating to or involving any of the officers,
directors, Employees or agents of the Company or any Subsidiary in connection
with the business of the Company or any Subsidiary). There are no such suits,
actions, proceedings, claims or investigations pending, or, to the best
knowledge of the Company, threatened challenging the validity or propriety of,
or otherwise relating to or involving, this Agreement or the transactions
contemplated hereby. Except as set forth in Schedule 3.7, there is no judgment,
order, writ, injunction, decree or award (whether issued by a court, an
arbitrator, a governmental body or agency thereof or otherwise) for the payment
of an amount in excess of $10,000 individually or $25,000 in the aggregate to
which the Company or any Subsidiary is a party, or involving the properties,
assets or business of the Company or any Subsidiary, which is unsatisfied or
which requires continuing compliance therewith by the Company or any Subsidiary.
h. Taxes.
(i) Except as set forth in Schedule 3.8, all returns and reports relating
to Taxes (as hereinafter defined) which are required to be filed with respect to
the Company on or before the date hereof or which will be required to be filed
on or before the Closing Date have been, or will be, duly and timely filed and
all such returns and reports are, or will be, complete and correct in all
material respects. Except as set forth in Schedule 3.8, all Taxes, assessments,
fees and other governmental charges imposed on or with respect to the Company
which have become due and payable on or before the Closing Date have been, or
will be prior to the Closing Date, paid in a timely manner by the Company, or
shall be accrued for in the Company Financial Statements or in the books of the
Company. Except as set forth on Schedule 3.8 hereto, there are no actions or
proceedings currently pending or, to the best knowledge of the Company,
threatened against the Company by any governmental authority for the assessment
or collection of Taxes, no claim for the assessment or collection of Taxes has
been asserted or, to the best knowledge of the Company, threatened, against the
Company, and there are no matters under discussion by the Company with any
governmental authority regarding claims for the assessment or collection of
Taxes against the Company. Except as set forth on Schedule 3.8 hereof, there are
no agreements, waivers or applications by the Company for an extension of time
for the assessment or payment of any Taxes. There are no Tax liens on any of the
assets of the Company (other than any lien for current Taxes not yet due and
payable). No claim has ever been made by an authority in a jurisdiction where
the Company does not file Tax returns or reports that it is or may be subject to
taxation by that jurisdiction. The Company is not a party to any Tax allocation
or sharing agreement. The Company is not and has never been a member of an
affiliated group of corporations (other than the group consisting of the Company
and its Subsidiaries) filing a consolidated U.S. income Tax return and is not
liable, as a transferee or successor (by contract or otherwise), for the Taxes
of any corporation that previously was a member of such an affiliated group.
(ii) For purposes of this Agreement, the terms "Tax" and "Taxes" shall mean
and include any and all foreign, national, Federal, state, local or other
income, franchise, sales, gross receipts, use, value added, goods and services,
withholding, employment, payroll, social security, unemployment, real and
personal property, stamp duty, customs duty and intangibles tax and all other
taxes of any nature, deficiencies, fees, assessments, interest, penalties or any
other governmental charges, duties, impositions and liabilities of whatever
nature, including, without limitation, any installment payment for taxes and
contributions or other amounts determined with respect to compensation paid to
directors, officers, employees or independent contractors, from time to time
imposed by or required to be paid to any governmental authority (including
penalties and additions to taxes thereon, penalties for failure to file a return
or report and interest on any of the foregoing).
(iii) The Company has not, with regard to any assets or property held,
acquired or to be acquired by the Company, filed a consent to the application of
Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code").
(iv) The Company does not conduct any operations or sales which have been
or are required to be reported to the Internal Revenue Service (the "IRS") under
the provisions of Section 999 of the Code.
8
i. Title to Properties and Related Matters.
(i) Except as set forth on Schedule 3.9(a), the Company and the
Subsidiaries have good and marketable title to all real property and tangible
personal property and assets which they own, including, without limitation, the
properties and assets reflected in the Company Financial Statements or acquired
after the date thereof (other than properties and assets sold or otherwise
disposed of since the date thereof in the ordinary course of business and
consistent with past practice), free and clear of any mortgages, pledges,
security interests, liens, claims, charges, equities, conditional sales
contracts, restrictions, reservations, options, first refusal rights or
encumbrances of any nature whatsoever (collectively, "Encumbrances"), except for
the Encumbrances listed in Schedule 3.9(a). All of the Encumbrances listed in
Part 1 of Schedule 3.9(a) will be released on the Closing Date.
(ii) Schedule 3.9(b) contains a complete and correct list and description
of all real property leased by the Company or any Subsidiary (the "Leased Real
Property"), in each case indicating the persons or entities from whom such
property is being leased. The Company or one or more of its Subsidiaries has
good and marketable title to all structures, plants, leasehold improvements,
systems, fixtures and other property located on or about any of the Leased Real
Property which are owned by any of them, as reflected in the Company Financial
Statements, free of any Encumbrances, except for the Encumbrances listed in
Schedule 3.9(a) which are outstanding as of the date hereof, all of which shall
be released on the Closing Date (but subject to the interests of landlords under
any applicable leases), and none of such material assets is subject to any
agreement, arrangement or understanding for their use by any person other than
the Company or one or more of its Subsidiaries. Except as set forth on Schedule
3.9(b), no work has been performed on or with respect to or in connection with
any of the Leased Real Property that would cause such Leased Real Property to
become subject to any mechanics', materialmen's, workmen's, repairmen's,
carriers' or similar liens in excess of $5,000 individually or $25,000 in the
aggregate. The structures, plants, improvements, systems and fixtures
(including, without limitation, storage tanks or other impoundment vessels,
whether above or below ground) located on each such parcel of Leased Real
Property conform in all material respects with all Federal, state and local
statutes and laws and, to the best knowledge of the Company, all ordinances,
rules, regulations and similar governmental and regulatory requirements (except
as set forth on Schedule 3.9(b) hereto) and are in reasonable operating
condition and repair, ordinary wear and tear excepted, taking into consideration
their respective ages and periods of use. Each such parcel of Leased Real
Property, in view of the purposes for which it is currently used or for which it
is proposed to be used pursuant to existing plans, conforms in all material
respects with all covenants or restrictions of record and conforms in all
material respects with all applicable building codes and zoning requirements,
and current, valid certificates of occupancy (or equivalent governmental
approvals) have been issued for each item of Leased Real Property; provided
that, for purposes of this sentence, a "material" non-conformity shall be deemed
to include, without limitation, any condition giving rise to liabilities, costs
or expenses of $5,000 or more individually or $25,000 in the aggregate; and the
Company is not aware of any proposed material change in any such governmental or
regulatory requirements or in any such zoning requirements. All existing
electrical, plumbing, fire sprinkler, lighting, air conditioning, heating,
ventilation, elevator and other mechanical systems located in or about the
Leased Real Property are in reasonable operating condition and repair, ordinary
wear and tear excepted, taking into consideration their respective ages and
periods of use. The maintenance and operation of such items located in or about
Leased Real Property is and has been conducted in compliance in all material
respects with the terms and conditions of all leases to which the Company or any
of its Subsidiaries is a party and all material maintenance or repair projects
(which, for purposes hereof, shall be deemed to include any one or more items
requiring expenditures by the Company or a Subsidiary in excess of $5,000 for
each item of Leased Real Property) required to be undertaken by the Company or a
Subsidiary under the terms of such leases within the first year following the
Closing Date have been disclosed in Schedule 3.9(b) hereto. To the knowledge of
the Company, the Company and its Subsidiaries have the benefit of all material
easements, rights-of-way and similar rights necessary to conduct their
businesses as presently conducted and to use the items of Leased Real Property
as currently used, including, without limitation, easements and licenses for
pipelines, power lines, water lines, roadways and other access. All such
easements and rights are valid, binding and in full force and effect, any
amounts due and payable thereon to date have been paid or have been fully
accrued for in the books and records of the Company, as applicable, neither the
Company or any of its Subsidiaries nor, to the best knowledge of the Company,
any other party thereto is in default thereunder, and there exists no event or
9
condition affecting the Company or any of its Subsidiaries or, to the best
knowledge of the Company, any other party thereto, which, with the passage of
time or the giving of notice or both, would constitute a material default
thereunder, which, for purposes hereof, shall be deemed to include, without
limitation, any individual or series of defaults resulting in liabilities, costs
or expenses of $5,000 or more individually or $25,000 in the aggregate. No such
easement or right will be breached by, nor will any party thereto be given a
right of termination as a result of, the transactions contemplated by this
Agreement. Neither the Company nor any of its Subsidiaries currently owns any
real property.
(iii) All items of equipment, machinery, vehicles, furniture, fixtures and
other tangible personal property currently owned or used by the Company or any
Subsidiary as of the date hereof are in reasonable operating condition and
repair, ordinary wear and tear excepted, taking into consideration its age and
period of use, are physically located at or about the Company's place of
business or where it otherwise conducts its business and are owned outright by
the Company or its Subsidiaries or validly leased under one of the leases set
forth in Schedule 3.9(d). No material items of such personal property are
subject to any agreement, arrangement or understanding for its use by any person
other than the Company and its Subsidiaries. To the best knowledge of the
Company, the maintenance and operation thereof has complied in all material
respects with all applicable laws, regulations, ordinances, contractual
commitments and obligations. Except as set forth in Schedule 3.9(a) referred to
above or as disclosed in the Company Financial Statements, no item of tangible
personal property owned or used by the Company or any Subsidiary is subject to
any conditional sale agreement, installment sale agreement or title retention
agreement or arrangement of any kind; as to each material item of personal
property subject to any such agreement or arrangement, Schedule 3.9(c) sets
forth a brief description of the property in question and the amount and
repayment terms of the underlying obligation.
(iv) Schedule 3.9(d) sets forth a complete and correct list and summary
description of all tangible personal property leases to which the Company or any
Subsidiary is a party (either as landlord or tenant), together with a brief
description of the property leased and identifying the date and term of the
lease, the amount and timing of lease payments and any renewal or purchase
options, provided that, with respect to personal property leases, only those
leases wherein the property leased has a fair market value exceeding $1,000 or
the total annual rental payments exceed $5,000 ("Material Personal Property
Leases") shall be required to be disclosed. The Company has made available to
Spotless complete and correct copies of each lease (and any amendments thereto)
listed in Schedule 3.9(d). Except as set forth in Schedule 3.9(d), (i) each such
lease is in full force and effect; (ii) all lease payments due to date on any
such lease have been paid, and neither the Company, any Subsidiary nor (to the
best knowledge of the Company) any other party is in default under any such
lease, and no event has occurred which constitutes, or with the lapse of time or
the giving of notice or both would constitute, a default by the Company, any
Subsidiary or (to the best knowledge of the Company) any other party under such
lease; (iii) there are no disputes or disagreements between the Company and any
Subsidiary, on the one hand, and any other party, on the other hand, with
respect to any such lease; and (iv) the lessor under each such lease has
consented or been given notice (where such consent or the giving of such notice
is necessary) sufficient that such lease shall remain in full force and effect
following the consummation of the transactions contemplated by this Agreement
without any modification in the rights or obligations of the lessee under any
such lease.
j. Computer Software.
(i) Schedule 3.10 hereto sets forth a complete and correct list of all
computer systems and software which are used by the Company and its Subsidiaries
in the administration and/or financial accounting of their businesses (the
"Proprietary Software"). Except as set forth in Schedule 3.10, the Company or a
Subsidiary is the owner of the Proprietary Software, and, to the best knowledge
of the Company, the Proprietary Software does not infringe any patent,
copyright, trade secret or trademark of any other person.
(ii) The Company warrants that (i) all non-Proprietary Software material to
the conduct of its business and its Subsidiaries' businesses was commercially
available at the time of its acquisition by the Company or the relevant
Subsidiary and was acquired by the Company or a Subsidiary though normal
business channels and (ii) to
10
the knowledge of the Company, neither the Company, nor its Subsidiaries,
affiliates, agents or third-party consultants (but only with respect to services
rendered to the Company or any Subsidiary) are in breach of any licensing
arrangements (including, without limitation, payment of applicable user fees)
with respect to any non-Proprietary Software.
k. Patents, Trademarks, Etc. Neither the Company nor any of its
Subsidiaries owns, licenses or uses any patents or registered trademarks,
service marks or trade names in the conduct of its respective business. Neither
the Company nor any Subsidiary has received any notice or claim that it is
infringing upon or the intellectual property rights of any other person.
l. Contracts.
(i) Except as set forth in Schedule 3.12(a), neither the Company nor any
Subsidiary is a party to, or subject to:
(1) any contract, arrangement or understanding, or Series
of related contracts, arrangements or understandings,
which involves annual expenditures or receipts by the
Company or any Subsidiary of more than $25,000 or which
provides for performance, regardless of amounts, over a
period in excess of six months after the date of such
contract, arrangement or commitment (unless such contract
is cancelable by the Company or the relevant Subsidiary,
as the case may be, on less than six months' notice);
(2) any Material Personal Property Lease;
(3) any lease of real property;
(4) any license agreement involving an amount in excess of
$25,000;
(5) any contract, arrangement or understanding not made
in the ordinary course of business and consistent with
past practice;
(6) any note, bond, indenture, credit facility,
mortgage, security agreement or other instrument or
document relating to or evidencing indebtedness for money
borrowed (all of which indebtedness is prepayable at any
time at the option of the Company or the relevant
Subsidiary, as the case may be, without premium or penalty)
or a security interest or mortgage in the assets of the
Company or any Subsidiary or any reimbursement
obligation in respect of any letter of credit, guaranty,
bond or surety issued by a third party for the benefit of
the Company;
(7) any warranty, indemnity or guaranty issued by the
Company or any Subsidiary;
(8) any contract, arrangement or understanding granting
to any person the right to use any material item of
property or property right of the Company or any Subsidiary;
(9) any contract, arrangement or understanding
restricting the right of the Company or any Subsidiary to
engage in any business activity or compete with any
business; or
(10) any outstanding offer or commitment to enter into
any contract or arrangement of the nature described in
subsections (i) through (ix) of this Section 3.12(a).
(ii) The Company has delivered to Spotless complete and correct copies of
each contract (and any amendments thereto) listed on Schedule 3.12(a), except to
the extent that Schedule 3.12(a) contains a complete and
11
correct description of the material terms of all oral contracts. Except as
set forth in Schedule 3.12(b), (i) each contract listed in Schedule 3.12(a) is
in full force and effect; (ii) neither the Company, any Subsidiary nor (to the
best knowledge of the Company) any other party is in material default under any
such contract, and no event has occurred which constitutes, or with the lapse of
time or the giving of notice or both would constitute, a default by the Company,
any Subsidiary or (to the best knowledge of the Company) by any other party
under such contract; (iii) there are no material disputes or disagreements
between the Company or any Subsidiary, on the one hand, and any other party, on
the other hand, with respect to any such contract; and (iv) each other party to
each such contract has consented or been given notice (where such consent or the
giving of such notice is necessary) sufficient that such contract shall remain
in full force and effect following the consummation of the transactions
contemplated by this Agreement without any modification in the rights or
obligations of the Company or any Subsidiary thereunder.
m. Employees; Employee Benefits.
(i) Schedule 3.13(a) sets forth the names of all employees of the Company
and the Subsidiaries, other than temporary employees, as of October 15, 1999
(the "Employees") and, with respect to each Employee, such Employee's job title
and the date of employment of such Employee. The Company has accrued on its
books and records all obligations for salaries, vacations, benefits and other
compensation with respect to its Employees and any of its Former Employees (as
that term is hereinafter defined), to the extent required by GAAP, including,
but not limited to, severance, bonuses, incentive and deferred compensation, and
all commissions and other fees payable to salespeople, sales representatives and
other agents. The Company accrues for vacation benefits, but does not accrue for
sick pay benefits. The Company and its Subsidiaries do not currently offer, and
have never offered, retiree health and insurance benefits to Employees and
Former Employees, and neither the Company nor any of its Subsidiaries has any
liabilities (contingent or otherwise) with respect thereto. Except as set forth
on Schedule 3.13(a), there are no outstanding loans from the Company or any
Subsidiary to any Related Party. Complete and correct copies of all material
written agreements with or concerning Employees, including, without limitation,
union and collective bargaining agreements, and all employment policies, and all
amendments and supplements thereto, have been delivered to Spotless, and a list
of all such agreements and policies is set forth on Schedule 3.13(a). None of
the Employees has, to the best knowledge of the Company, indicated a desire to
terminate his or her employment other than at normal retirement age, or any
intention to terminate his or her employment in connection with the transactions
contemplated by this Agreement. Except as set forth on Schedule 3.13(a), since
May 1, 1999, neither the Company nor any Subsidiary has (i) except in the
ordinary course of business and consistent with past practice, increased the
salary or other compensation payable or to become payable to or for the benefit
of any of the Employees, (ii) provided any of the Employees with any increased
security or tenure of employment, (iii) increased the amounts payable to any of
the Employees upon the termination of any such person's employment or (iv)
adopted, increased, augmented or improved benefits granted to or for the benefit
of any of the Employees under any Benefit Plan.
(ii) To the best knowledge of the Company, the Company and its Subsidiaries
have complied at all times and in all material respects with all laws, statutes,
rules and regulations applicable with respect to employees in each of the
jurisdictions in which it operates and/or does business. Except as disclosed on
Schedule 3.13(b), the Company and each Subsidiary has complied in all material
respects with Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act, as amended, the Americans with Disabilities
Act, the Family Medical Leave Act, the Fair Labor Standards Act, as amended, and
all applicable laws, statutes and regulations governing payment of minimum wages
and overtime rates, labor standards, working conditions, the withholding and
payment of Taxes or any other kind of governmental charge from compensation,
terms and conditions of employment, workplace safety, workers' compensation,
disability pay, social benefits whether or not imposed by a governmental
program, discriminatory practices, including, without limitation, with respect
to employment and discharge, or otherwise relating to the conduct of employers
with respect to employees or potential employees (collectively, the "Employee
Laws"), and there have been no claims made or, to the knowledge of the Company,
threatened thereunder against the Company or any Subsidiary arising out of or
relating to or alleging any violation of any of the foregoing. The Company and
its Subsidiaries have complied in all material respects with the employment
eligibility verification form requirements under the Immigration and
Naturalization Act, as amended
12
("INA"), with respect to Employees, and the Company and its Subsidiaries
have complied with the paperwork provisions and anti-discrimination provisions
of the INA and the Company has obtained and maintained the employee records and
I-9 forms with respect to the Employees in proper order as required by law.
Neither the Company nor any Subsidiary is currently employing any Employees who
are not citizens of the United States and who are not authorized to work in the
United States. To the best knowledge of the Company, there are no controversies,
strikes, work stoppages, picketing, filed grievances, job actions, unfair labor
practice charges, investigations, complaints, disputes or other proceedings
pending or threatened between the Company or any Subsidiary and any of the
Employees or Former Employees; no labor union or other collective bargaining
unit represents or has ever represented any of the Employees in connection with
their employment with the Company and its Subsidiaries; the Company has no
knowledge of any organizational effort by any labor union or other collective
bargaining unit currently under way or threatened with respect to any Employees;
no consent of any labor union or other collective bargaining unit representing
Employees is required to consummate the transactions contemplated by this
Agreement; and neither the Company nor any Subsidiary has incurred any liability
under the Worker Adjustment Retraining Notification Act ("WARN") or similar
state and local laws.
(iii) Except for temporary clerical personnel, none of the Employees are
"leased employees" within the meaning of Section 414(h) of the Code. Schedule
3.13(c) sets forth a list of each defined benefit and defined contribution plan,
stock ownership plan, executive compensation program or arrangement, bonus plan,
incentive compensation plan or arrangement, deferred compensation agreement or
arrangement, supplemental retirement plan or arrangement, vacation pay,
sickness, disability or death benefit plan (whether provided through insurance,
on a funded or unfunded basis or otherwise), medical or life insurance plan,
providing benefits to any Employee, retiree or Former Employee or any of their
dependents, survivors or beneficiaries, employee stock option or stock purchase
plan, severance pay, termination or salary continuation plan, and each other
employee benefit plan, program or arrangement, including, without limitation,
each "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which is
maintained by the Company or any Subsidiary for the benefit of or relating to
any of the Employees or to any former employees of the Company or any Subsidiary
(the "Former Employees") or their dependents, survivors or beneficiaries,
whether or not legally binding, and for which the Company or any Subsidiary
could reasonably have any liabilities, all of which are hereinafter referred to
as the "Benefit Plans." Neither Spotless, the Company nor any Subsidiary will
incur any liability under any severance agreement, deferred compensation
agreement, employment agreement, similar agreement or Benefit Plan solely as a
result of the consummation of the transactions contemplated by this Agreement.
(iv) Each Benefit Plan which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) meets the requirements of Section 401(a) of
the Code; the trust, if any, forming part of such plan is exempt from U.S.
Federal income Tax under Section 501(a) of the Code; a favorable determination
letter has been issued by the IRS after January 1, 1994 with respect to each
plan and trust and each amendment thereto; and since the date of such
determination letter there are no circumstances which are likely to adversely
affect the qualification of such plan. No Benefit Plan is a "voluntary employees
beneficiary association" (within the meaning of Section 501(c)(9) of the Code)
and there have been no other "welfare benefit funds" relating to Employees or
Former Employees within the meaning of Section 419 of the Code. No event or
condition exists with respect to any Benefit Plan that could subject the Company
or any Subsidiary to any material Tax under Section 4980B of the Code or, for
plan years beginning before January 1, 1989, Section 162(k) of the Code. With
respect to each Benefit Plan, the Company has heretofore delivered to Spotless
complete and correct copies of the following documents, where applicable: (i)
the most recent annual report (Form 5500 series), together with schedules, as
required, filed with the IRS, and any financial statements and opinions required
by Section 103(a)(3) of ERISA, (ii) the most recent determination letter issued
by the IRS, (iii) the most recent summary plan description and all
modifications, (iv) the text of the Benefit Plan and of any trust, insurance or
annuity contracts maintained in connection therewith, (v) the most recent
actuarial report, if any, relating to the Benefit Plan and (vi) the most recent
actuarial valuation, study or estimate of any retiree medical and life insurance
benefits plan or supplemental retirement benefit plan.
(v) Except as set forth on Schedule 3.13(e) hereto, neither the Company,
any Subsidiary nor any
13
corporation or other trade or business under common control with the
Company (as determined pursuant to Section 414(b) or (c) of the Code) (a "Common
Control Entity") maintains or contributes to or, to the knowledge of the 15
Company, in any way directly or indirectly has any liability (whether contingent
or otherwise) with respect to, any "multiemployer plan," within the meaning of
Section 3(37) or 4001(a)(3) of ERISA, or any other employee pension benefit plan
subject to Title IV of ERISA or Section 412 of the Code; no Benefit Plan of the
Company, any Subsidiary or of any Common Control Entity is subject to Title IV
of ERISA. No contingent or other liability with respect to which the Company or
any Subsidiary has or could have any liability exists under Title IV of ERISA to
the Pension Benefit Guaranty Corporation (the "PBGC") or to any Benefit Plan;
and no assets of the Company or any Subsidiary are subject to a lien under
Sections 4064 or 4068 of ERISA. Except as set forth on Schedule 3.13(e) hereto,
all contributions required to be made to or with respect to each Benefit Plan
with respect to the service of Employees or Former Employees prior to the date
hereof have been made or have been accrued for in the books and records of the
Company for all periods through the date hereof. Neither the Company nor any
Subsidiary has any obligation to provide post-retirement medical or other
benefits to Employees or Former Employees or their survivors, dependents and
beneficiaries, except as may be required by Section 4980B of the Code or Part 6
of Title I of ERISA or applicable state medical benefits continuation law and
the Company or the relevant Subsidiary may terminate any such post-retirement
medical or other benefits upon thirty (30) days' notice or less without any
liability therefor.
(vi) None of the Benefit Plans has been subject to a "reportable event,"
within the meaning of Section 4043 of ERISA (whether or not waived), within the
24-month period ended on the date hereof; there have been no "prohibited
transactions" within the meaning of Section 4975 of the Code or Part 4 of
Subtitle B of Title I of ERISA in connection with any of the Benefit Plans that,
assuming the taxable period of such transaction expired as of the date hereof,
could subject the Company or any Subsidiary to a Tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA in an amount which
would have a Material Adverse Effect; none of the Benefit Plans which are
subject to Section 412 of the Code has incurred any "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code and neither the Company nor any Subsidiary is subject to a lien under
Section 412(n) of the Code; each Benefit Plan has, in all material respects,
been administered to date in accordance with the applicable provisions of ERISA,
the Code and applicable law and with the terms and provisions of all documents,
contracts or agreements pursuant to which such Benefit Plan is maintained; all
reports and information required to be filed with the Department of Labor, the
IRS or the PBGC with respect to any Benefit Plan have been timely filed or
delivered; there is no arbitration, claim or suit pending or, to the best
knowledge of the Company, threatened, involving a Benefit Plan (other than
routine claims for benefits), and, to the best knowledge of the Company, there
is no basis for such a claim; none of the Benefit Plans nor any fiduciary
thereof has been, to the best knowledge of the Company, the direct or indirect
subject of an order or investigation or examination by a governmental or
quasi-governmental agency and there are no matters pending before the IRS, the
Department of Labor, or any other governmental agency with respect to a Benefit
Plan; and there has not been and will be no "parachute payment" (as defined in
Section 280G(b)(2) of the Code) to any of the Employees prior to the Closing or
as a result of the transactions contemplated by this Agreement.
n. Ability to Conduct the Business. Except as may be disclosed in Schedule
3.14 hereto, there is no agreement, arrangement or understanding, nor any
judgment, order, writ, injunction or decree of any court or any governmental
body or agency thereof that could prevent the use by the Company or any
Subsidiary of their properties and assets or the conduct by them of their
businesses as of the Closing Date. Schedule 3.14 sets forth a list of all
permits, licenses, certificates, approvals and other authorizations required by
the Company and its Subsidiaries in connection with the operation of their
respective businesses as presently conducted, all such permits, licenses,
certificates, approvals and other authorizations are in force and the Company or
the relevant Subsidiary, as the case may be, has complied with all of the
conditions and requirements imposed by the terms thereof. Neither the Company
nor any Subsidiary has received any notice of, and neither the Company nor any
Subsidiary has any knowledge of, any intention on the part of any appropriate
authority to cancel, revoke or modify, or any inquiries, proceedings or
investigations the purpose or possible outcome of which is the cancellation,
revocation or modification of any such material permit, license, certificate,
authorization or approval, except as set forth on Schedule 3.14. Except as set
forth in Schedule 3.14, all such permits, licenses, certificates, authorizations
and
14
approvals shall remain in full force and effect, without the requirement of
any filing or the giving of any notice, and without any modification thereof,
upon the consummation of the transactions contemplated by this Agreement.
o. Major Customers. Neither the Company nor any Subsidiary has received any
notice or other written communication from any customer of the Company
terminating or reducing, or setting forth an intention to terminate or reduce in
the future, or otherwise reflecting a material adverse change in, the business
relationship between such customer and the Company or any Subsidiary and, to the
knowledge of the Company, there has not been any material adverse change in the
business relationship of the Company with any such customer since May 1, 1999.
p. Sales Representatives and Other Agents. Neither the Company nor any
Subsidiary is currently a party to any agreement with any consultant or sales
representative, and no individual or entity is entitled to any further
compensation, commissions or fees with respect to services rendered to the
Company or any Subsidiary prior to the date hereof.
q. Material Suppliers; Inventories.
(i) The Company and its Subsidiaries purchase their supplies and materials
from a number of suppliers, none of which represented in the fiscal year ended
April 30, 1999 more than five percent (5%) of aggregate purchases of the Company
and the Subsidiaries. None of such suppliers has given the Company or any
Subsidiary any notice or other written communication terminating, suspending or
materially reducing, or setting forth an intention to terminate, suspend or
materially reduce in the future, or otherwise reflecting any change, occurrence
or other event that has resulted in or is reasonably likely to result in,
individually or in the aggregate, a Material Adverse Effect in, the business
relationship between such supplier and the Company or any Subsidiary, as the
case may be, and, to the knowledge of the Company, there has not been any
adverse change in the business relationship of the Company or any Subsidiary
with any such supplier since May 1, 1999.
(ii) The inventory of materials used by the Company and its Subsidiaries in
the conduct of their businesses (the "Inventory") is owned by them free and
clear of any Encumbrances, except for the Encumbrances listed in Schedule 3.9(a)
which are outstanding as of the date hereof, all of which shall be released on
the Closing Date, and all of the Inventory is serviceable and in good condition,
reasonable wear and tear excepted.
r. Compliance with Applicable Law. Neither the Company nor any Subsidiary
is in violation of any applicable foreign or domestic laws, rules, regulations,
ordinances, codes, judgments, orders, injunctions, writs or decrees of any
Federal, state, local or foreign court or governmental body or agency thereof to
which it may be subject which are applicable to or which could reasonably be
expected to affect the respective businesses or operations of the Company and
its Subsidiaries, except for any violations which would not have, individually
or in the aggregate, a Material Adverse Effect. No claims have been filed
against the Company or any Subsidiary, and neither the Company nor any of the
Subsidiaries has received any notice, alleging any such violation, nor, to the
best knowledge of the Company, is there any inquiry, investigation or proceeding
relating thereto.
s. Accounts Receivable. All accounts receivable of the Company and its
Subsidiaries (i) arose from bona fide sales of goods or services in the ordinary
course of business and consistent with past practice; (ii) are owned by the
Company or the relevant Subsidiary and as of the Closing Date shall be free and
clear of any Encumbrances, except for the Encumbrances listed in Schedule 3.9(a)
which are outstanding as of the date hereof, all of which shall be released on
the Closing Date; (iii) are accurately and fairly reflected on the Company
Financial Statements or, with respect to accounts receivable of the Company
created after the date thereof and through the Closing Date, are and will be
accurately and fairly reflected in the books and records of the Company; and
(iv) will be collected, without offset (other than in the ordinary course of
business consistent with past practice, but not to exceed an amount equal to two
percent (2%) of the aggregate amount of the accounts receivable outstanding on
the date hereof) or counterclaim (net of any accounts receivable insurance,
subject, however, to any allowance for doubtful accounts shown in the Company
Financial Statements or the books and records of the Company), in full
15
within three hundred sixty-five (365) days of the Closing Date.
t. Insurance. Schedule 3.20 hereto is a complete and correct list of all
insurance policies carried by, or covering, the Company and its Subsidiaries
with respect to their businesses, together with, in respect of each such policy,
the name of the insurance carrier, the policy number, the risk insured against,
the limits of coverage, the policy term, and the expiration date thereof. All
such policies are in full force and effect, and no notice of cancellation has
been given with respect to any such policy. All premiums due thereon have been
paid in a timely manner. The Company believes that the policies of insurance
identified in Schedule 3.20 hereof adequately insure the Company and its
Subsidiaries.
u. Bank Accounts; Powers of Attorney. Schedule 3.21 sets forth a complete
and correct list showing: (a) all banks in which the Company or any Subsidiary
maintains a bank account or safe deposit box (collectively, "Bank Accounts"),
together with, as to each such Bank Account, the account number, the names of
all signatories thereof and the authorized powers of each such signatory and,
with respect to each such safe deposit box, the number thereof and the names of
all persons having access thereto; and (b) the names of all persons holding
powers of attorney from the Company or any Subsidiary and a summary statement of
the terms thereof.
v. Books and Records. All of the records, data, information, databases,
systems and controls maintained, operated or used by the Company and its
Subsidiaries in connection with the conduct or administration of their
businesses (including all means of access thereto and therefrom) are located on
the premises of the Company and are under the exclusive ownership and direct
control of the Company.
w. Transactions with Related Parties. Schedule 3.23 contains an accurate
and complete list and description of all agreements, arrangements and
understandings (including outstanding indebtedness) which are currently in
effect or which occurred at any time after January 1, 1998 between the Company
or any Subsidiary and any of the following (each, a "Related Party"): (i) each
director and officer of the Company or any Subsidiary; (ii) the spouses,
children, grandchildren, siblings, parents, grandparents, uncles, aunts, nieces,
nephews or first cousins of any such director or officer or their spouses
(collectively, "near relatives"); (iii) any trust for the benefit of any such
director or officer of the Company or any of their respective near relatives;
and (iv) any corporation, partnership, joint venture or other entity owned or
controlled by any such director or officer or any of their respective near
relatives.
x. Warranties. The Company has previously delivered to Spotless copies of
all past and present standard and other express warranties extended by the
Company and its Subsidiaries with respect to the services now or in the past six
years sold by the Company. Neither the Company nor any Subsidiary has, and the
Company know of no basis for, any material liability as a result of claims
against the Company or any Subsidiary based on services rendered by the Company
or any of its Subsidiaries on or prior to the date hereof, nor have the Company
or any Subsidiary received any notices from any person threatening any such
claim.
y. Environmental Matters.
(i) Except as set forth in Schedule 3.25, and except for Hazardous
Substances (as hereinafter defined) generated, stored, treated, manufactured,
refined, handled, produced, disposed of or used by the Company or any Subsidiary
in the ordinary course of their respective businesses, in compliance with the
requirements of currently applicable laws, rules and regulations, (i) there are
no Hazardous Substances in, on, under or around any of the Real Property (as
hereinafter defined) at which the operations of the Company or any Subsidiary
are, or have been in the past, conducted; (ii) there are no tanks, impoundments,
vessels or other containers used for the storage of Hazardous Substances on or
below the surface of such Real Property; (iii) none of such Real Property has
been designated, restricted or investigated by any governmental authority as a
result of the actual or suspected presence, spillage, leakage, discharge or
other emission of Hazardous Substances, whether or not such designation,
restriction or investigation of Real Property resulted in a designation of no
further action, de-listing, or clean closure or any such other related
designation by any governmental agency; (iv) no Hazardous Substances have been
generated,
16
used, stored, treated, manufactured, refined, handled, produced or
disposed of in, on or under, and no Hazardous Substances have been transported,
released or disposed of at, from or to, any of such Real Property by the Company
or any Subsidiary or by any persons or agents operating under the control,
direction and supervision of the Company or any Subsidiary, including, without
limitation, all Employees, agents and contractors of the Company and its
Subsidiaries; (v) neither the Company nor its Subsidiaries have caused any
release of Hazardous Substances at any Real Property and no Hazardous Substance
originating or emanating from any other property is present in, on, under or
above any Real Property; (vi) neither the Company nor its Subsidiaries have sent
any Hazardous Substances to any sites that (A) have been placed on the "National
Priorities List" of hazardous waste sites or any similar state list or (B) is
otherwise designated or identified as a potential site for remediation, cleanup,
closure or other environmental remedial activity; and (vii) neither the Company
nor any Subsidiary has received any written or oral governmental notice, order,
inquiry, investigation, environmental audit or assessment or any lien,
Encumbrance, decree, easement, covenant, restriction, servitude or proceeding
concerning, or arising by reason of, the actual or suspected presence, spillage,
leakage, discharge or other emission of any Hazardous Substance in, on, under,
around, about or in the vicinity of, or the transportation of any Hazardous
Substance at, from or to, any of such Real Property, and to the best knowledge
of the Company there is no basis for any such notice, order, inquiry,
investigation, environmental audit or assessment or any such lien, Encumbrance,
decree, easement, covenant, restriction, servitude or proceeding.
(ii) Except as disclosed in Schedule 3.25, the Company, its Subsidiaries,
and the Real Property comply in all material respects with, and are not subject
to any liabilities as a result of any past or current violations of all existing
or then existing Federal, state and local laws (including common law), statutes,
ordinances, rules and regulations (and any proposed laws, statutes, ordinances,
rules and regulations), relating to occupational health and safety, or relating
to packaging or transporting Hazardous Substances, or relating to pollution or
protection of the environment, including, without limitation, statutes, laws,
ordinances, rules and regulations relating to the emission, discharge, spillage,
leakage, storage, off-site dumping, release or threatened release of Hazardous
Substances into ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances, and no material
expenditures are required in connection with the operation of the businesses of
the Company and its Subsidiaries as presently conducted (or as proposed to be
conducted pursuant to existing plans of the Company) in order to comply with any
such existing statutes, laws, ordinances, rules or regulations. Except as
disclosed in Schedule 3.25, the Company, each Subsidiary and the Real Property
have in all material respects passed all inspections conducted by applicable
regulatory bodies in connection with the matters described in the preceding
sentence. All cleanup, removal and other remediation activities carried out by
the Company or any Subsidiary or by any of their respective agents at the Real
Property have been conducted in material compliance with all applicable laws,
statutes, ordinances, rules and regulations of any Federal, state or local
governmental authority, and there is no basis for liability on the part of the
Company or any Subsidiary as a result of such activities. Except as disclosed in
Schedule 3.25, to the best knowledge of the Company, there are no soil or
geological conditions which might impair or adversely affect the current use of
any of the Real Property (or any proposed future use thereof pursuant to
existing plans of the Company) and none of such Real Property is located in an
area identified by an agency or department of Federal, state or local
governments, or identified by the Company as having special flood or mudslide
hazards or wetlands. Except as disclosed in Schedule 3.25, the production and
other facilities at the Real Property have waste treatment and disposal
facilities that are adequate to render any waste, vapors or effluents safe for
discharge in the manner in which they are being discharged and, except as
disclosed in Schedule 3.25, do not discharge, and have not in the past
discharged, into the environment any Hazardous Substances.
(iii) For purposes of this Agreement, the term "Hazardous Substance" shall
mean any product, substance, chemical, contaminant, pollutant, effluent, waste
or other material whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, emission, discharge,
spill, release or effect, either by itself or in combination with other
materials located on any of the Real Properties, is either: (i) injurious to the
public health, safety or welfare, the environment or any of the Real Properties,
(ii) regulated or monitored by any governmental authority, or (iii) defined or
listed in, or otherwise classified pursuant to, any statute, law, ordinance,
rule or regulation applicable to the Real Property (or any proposed statute,
law, ordinance, rule or regulation) as
17
"hazardous substances," "hazardous materials," "hazardous wastes,"
"infectious wastes" or "toxic substances". Hazardous Substances shall include,
but not be limited to, (i)(A) any "hazardous substance" as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, (B) any
"hazardous waste" as defined in the Solid Waste Disposal Act or (C) any
substance subject to regulation pursuant to the Toxic Substances Control Act, as
such laws are now in effect or may be amended through the Closing Date and any
rule, regulation or administrative or judicial policy statement, guideline,
order or decision under such laws, (ii) petroleum and refined petroleum
products, (iii) asbestos and asbestos-containing products, (iv) flammable
explosives, (v) radioactive materials, (vi) radon, (vii) polychlorinated
biphenyls, (viii) exposed lead-based paint, (ix) urea formaldehyde foam and (x)
any other substance that is regulated or classified as hazardous or toxic under
any Federal, state or local law, statute, ordinance, rule or regulation.
(iv) For purposes of this Section 3.25, the term "Real Property" shall be
deemed to include all Leased Real Property, together with all other locations
(whether leased or owned or previously owned or leased by the Company or any
Subsidiary) at which the operations of the Company or any Subsidiary are, or
have previously been, conducted (to the extent that any prior activities of the
Company, any Subsidiary or any of their respective predecessors-in-interest give
rise to any liabilities, claims or obligations (including, without limitation,
any obligations to investigate, respond, clean up or remediate) with respect to
the matters described in this Section 3.25).
z. Absence of Other Agreements for Sale of Subject Shares or Assets of the
Company. There are no agreements, arrangements or understandings to which the
Company is a party or by which any of the Company's assets are bound involving
the purchase, sale or other disposition of any substantial portion of the assets
or the Shares, whether through a sale of assets or otherwise, other than this
Agreement.
aa. Brokers and Finders. No broker, finder or investment banker has been
retained by the Company or is entitled to any brokerage, finder's or other fee
or commission, in connection with the transactions contemplated hereby, other
than OEM Capital Corp.
bb. Year 2000 Compliance. All functions, including, without limitation,
date-reliant (which includes year-reliant) functions, of the Proprietary
Software are capable of continuing to operate up to, during and after the year
2000. Neither the performance nor functionality of the Proprietary Software will
be affected by any changes to the field configuration which contains the date
information within any part of the Proprietary Software caused by the advent of
the year 2000. The Proprietary Software will perform consistent with past
performance and there shall be no faults in the processing of dates and
date-dependent information or data including, without limitation, in
calculations, comparisons and sequencing of information or data. For the
purposes of this Section 3.28, the term "Proprietary Software" shall not be
deemed to include automated components, automated devices, embedded equipment
and other date sensitive equipment such as security systems, alarms, elevators,
HVAC systems and monitoring equipment used by the Company or the Subsidiaries.
cc. Disclosure. No representation or warranty by the Company contained in
this Agreement (including, without limitation, the Schedules hereto), nor any
other statement, schedule, certificate or other document delivered or to be
delivered by the Company to Spotless pursuant hereto or in connection with the
transactions contemplated by this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances in which they were made, not misleading.
dd. Reliance. The representations and warranties of the Company contained
in this Agreement are made by the Company with the knowledge and expectation
that Spotless is placing complete reliance thereon in entering into, and
performing its obligations under, this Agreement and the Note, and, subject to
Section 4.6, the same shall not be affected or deemed waived in any respect
whatsoever by reason of any investigation heretofore or hereafter conducted or
knowledge gained by or on behalf of Spotless (including, without limitation, by
any of its advisors, consultants or representatives or otherwise) prior to the
Closing, whether in contemplation of this Agreement or otherwise, or by reason
of the fact that Spotless or any of such advisors, consultants or
representatives
18
knew or should have known that any such representation or warranty is or
might be inaccurate, or that any covenant or undertaking has been or might have
been breached, at or prior to the Closing, and no claims by Spotless with
respect thereto shall be waived or otherwise affected as a result of such
knowledge on the part of Spotless (or any of its advisors, consultants or
representatives) and the Company shall not raise any such matter as a defense to
any claim by Spotless for indemnification pursuant to Article VIII hereof.
4. Representations and Warranties of Spotless
Spotless makes the representations and warranties set forth in this Article
IV, each of which is true and correct as of the date hereof and will be true and
correct as of the Closing Date:
a. Corporate Organization. Spotless is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
b. Authorization. Spotless has full corporate power and authority to
execute, deliver and perform this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly approved by the Board of Directors of Spotless, and no other corporate
action on the part of Spotless is necessary to approve and authorize the
execution and delivery of this Agreement by it or the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Spotless, and constitutes the valid and binding agreement of
Spotless enforceable in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy laws and any other similar laws
affecting the rights and remedies of creditors generally and by general
principles of equity.
c. Consents and Approvals; No Violations. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not: (i) violate or conflict with any provision of the certificate of
incorporation or by-laws of Spotless, (ii) breach, violate or (whether
immediately or with the lapse of time or the giving of notice or both)
constitute an event of default (or an event which with the lapse of time or the
giving of notice or both would constitute an event of default) under or an event
which would give rise to any right of termination, cancellation, modification,
acceleration or foreclosure under, or require any consent of or the giving of
any notice to any third party under, any note, bond, surety, indenture, credit
facility, mortgage, security agreement, lease, license, franchise, permit or
other agreement, instrument or obligation to which Spotless is a party, or by
which Spotless or any of its properties or assets may be bound, (iii) violate or
conflict with any law, statute, ordinance, code, rule, regulation, judgment,
order, writ, injunction, decree or other instrument of any court or governmental
or regulatory body, administration, agency or authority applicable to Spotless
(or any affiliate of Spotless) or by which any of their respective properties
may be bound or (iv) require any registration or filing by Spotless with, or any
permit, license, exemption, consent, authorization or approval of, or the giving
of any notice by Spotless to, any governmental or regulatory body, agency or
authority.
d. Securities Act Matters. Spotless hereby represents and warrants as
follows:
(i) It understands that (i) the Shares have not been registered under the
Securities Act or any state securities laws by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws (ii) that the Company's reliance on the
availability of such exemption is, in part, based on the accuracy and
truthfulness of the representations and warranties of Spotless set forth in this
Section 4.4 and (iii) the Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and applicable state
securities laws or is exempt from such registration;
(ii) It is acquiring the Shares for its own account and not with a view to,
or for sale in connection with, directly or indirectly, any distribution thereof
that would require registration under the Securities Act or applicable state
securities laws or would otherwise violate the Securities Act or such state
securities laws;
(iii) It is an "accredited investor" pursuant to Rule 501 under the
Securities Act by reason of the fact
19
that it is a corporation not formed for the specific purpose of acquiring the
Shares with total assets in excess of $5,000,000; and
(iv) It understands that the Shares will bear the following legend (or a
substantially similar legend):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
WITHOUT SUCH REGISTRATION OR THE DELIVERY TO THE COMPANY
OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH DISPOSITION WILL NOT REQUIRE
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED.";
(v) Spotless is not a party or subject to or bound by any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
pledge the Shares or the Note or any part thereof to any person, and has no
present intention to enter into such a contract, undertaking, agreement or
arrangement;
(vi) Spotless has received and reviewed copies of the Company's Annual
Report on Form 10-KSB for the fiscal year ended April 30, 1999 and its Quarterly
Report on Form 10-QSB/A for the fiscal quarter ended July 31, 1999
(collectively, the "SEC Reports");
(vii) Spotless has been provided the opportunity to discuss with the
Company's management, and has had access to information concerning, the
business, affairs and financial condition of the Company in order to verify the
accuracy of the SEC Reports; and
(viii) Spotless has evaluated the merits and risks of purchasing the Shares
and the Note and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of such purchase,
is aware of and has considered the financial risks and financial hazards of
purchasing the Shares and the Note, and is able to bear the economic risk of
purchasing the Shares and the Note, including the possibility of a complete loss
with respect thereto.
e. No Other Representations, Warranties, Covenants or Agreements of the
Company. Except as set forth in this Agreement, or the documents referred to
herein, the Company has not made any representation, warranty, covenant or
agreement with respect to the matters contained herein, and Spotless has not and
will not rely on any representation, warranty, covenant or agreement other than
those expressly set forth herein or any information or document other than the
SEC Reports.
f. Spotless' Investigation. To the knowledge of Spotless, Spotless' due
diligence investigation of the Company and its Subsidiaries has not revealed any
facts which would make any representations or warranties of the Company
contained herein inaccurate or untrue in any material respect or which would
result in a breach or violation of this Agreement by the Company.
g. Financial Statements. The audited consolidated financial statements of
Spotless for the fiscal year ended June 30, 1999 which Spotless has provided to
the Company (i) have been prepared in accordance with GAAP consistently applied
during the periods covered thereby, except as otherwise specifically indicated
therein or in the notes thereto and (ii) fairly present the financial condition
and results of operations of Spotless as at the dates and for the periods then
ended.
h. Absence of Agreements Relating to the Company or any Subsidiary. There
are no agreements, arrangements or understandings to which Spotless or any of
its affiliates is a party or by which any of their
20
respective assets are bound involving the Company or any Subsidiary.
i. Brokers and Finders. No broker, finder or investment banker has been
retained by Spotless or is entitled to any brokerage, finder's or other fee or
commission, in connection with the transactions contemplated hereby.
5. Conduct of the Company Pending Closing
a. Conduct of the Company. The Company hereby makes the following covenants
and agreements with Spotless:
(i) Affirmative Covenants. Between the date hereof and the Closing Date,
the Company shall, and shall cause each Subsidiary to:
(1) conduct its respective business diligently and only
in the ordinary course consistent with past practice;
(2) use its best efforts to (a) preserve its respective
assets, business and goodwill, (b) keep available the
services of the Employees, (c) preserve the goodwill
of its respective customers, suppliers and others having
business relationships with it, and (d) maintain levels
and quality of Inventory consistent with past practice;
(3) remain in full compliance with all material
permits, laws, rules and regulations, consent orders
and all other orders of applicable courts, regulatory
agencies and similar governmental authorities applicable to
it;
(4) promptly after becoming aware thereof, advise
Spotless in writing of the commencement or threat of any
suit, proceeding or investigation against, relating to or
involving it or which could otherwise have a material
adverse effect on it, whether or not covered by insurance;
(5) promptly advise Spotless in writing of the
existence or occurrence of (i) any Material Adverse Effect
which occurs or is likely to occur and (ii) any event,
condition or state of facts which will or may result in the
failure to satisfy any of the conditions in Article VI
hereof; and
(6) maintain the policies of insurance on the property
and assets of the Company and its Subsidiaries in effect
as of the date hereof in full force and effect without
reduction in coverage.
(ii) Negative Covenants. Between the date hereof and the Closing
Date, neither the Company nor any Subsidiary shall, without the prior
written consent of Spotless:
(1) announce or institute any increase in the salary,
commission or other compensation (including bonuses)
rates payable or to become payable to any Employee or
agent of the Company or any Subsidiary, or approve, adopt,
amend or modify any Benefit Plan or similar plan, agreement
or arrangement, except as required by currently existing
agreements;
(2) make any change in its Certificate of Incorporation
or By-Laws or other constituent documents, except as
contemplated hereby;
(3) enter into any contract or commitment, or series of
related contracts or commitments
21
(except for acceptances of purchase orders), unless such
contract or commitment, or Series of related contracts or
commitments, (i) arises in the ordinary course of business,
(ii) involves expenditures or revenues of less than $5,000
in the aggregate or (iii) does not involve a Related Party;
(4) create or permit to become effective any
Encumbrances on its respective property or assets;
(5) issue any additional shares of capital stock or any
options, warrants or other rights to purchase, or
securities convertible into or exchangeable for, shares
of capital stock, other than dividends required to be
declared or paid with respect to the Company's Series A
Preferred Stock;
(6) declare or pay any dividends on or make any other
distributions (however characterized) in respect of shares
of its capital stock;
(7) repurchase or redeem any shares of its capital
stock except pursuant to the transactions contemplated
hereby;
(8) make any change in the accounting principles or
practices reflected in the Company Financial Statements or
in the Company's methods of applying such principles or
practices, or in the credit criteria utilized by it in
connection with the businesses of the Company and its
Subsidiaries;
(9) sell, assign, lease or otherwise transfer or
dispose of any property, equipment or other assets, except
in the ordinary course of business consistent with past
practice;
(10) seek to acquire any business or to start-up any
new business;
(11) merge or consolidate or agree to merge or
consolidate with any other person or entity;
(12) waive any material rights;
(13) commit a material breach of or amend in any
material respect any agreement, permit, license or other
right;
(14) enter into any other transaction outside the
ordinary course of business or prohibited hereunder; or
(15) enter into any agreement or commitment to do any
of the foregoing.
b. Best Efforts. Subject to the terms and conditions of this Agreement,
each of the parties agrees that it shall use its best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement.
6. Conditions to the Obligations of Spotless
The obligations of Spotless to consummate the transactions contemplated
hereunder shall be subject to the satisfaction of each of the following
conditions at or prior to the Closing, unless waived by Spotless in writing:
a. Representations and Warranties True. All of the representations and
warranties of the Company
22
contained in this Agreement (including, without limitation, the Schedules
hereto) shall be true and correct in all material respects on the Closing Date
as though such representations and warranties were made on such date, and the
Company shall have delivered the certificate to that effect which is described
in Section 2.3(a)(iv) above.
b. Performance. The Company shall have performed and complied in all
material respects with all covenants and obligations under this Agreement which
are required to be performed or complied with by the Company on or prior to the
Closing Date, and the Company shall have delivered the certificate to that
effect which is described in Section 2.3(a)(iv) above.
c. Approvals, Permits, Consents. All consents, authorizations, approvals,
exemptions, licenses or permits of, or registrations, qualifications,
declarations or filings with, any governmental body or agency thereof that are
required in connection with the sale of the Shares to Spotless pursuant to this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly obtained or made in form and substance reasonably satisfactory to
Spotless and its counsel and shall be effective at and as of the Closing Date.
The Company shall have delivered to Spotless duly executed written consents of
third parties to the sale of the Shares to Spotless required pursuant to any
agreement to which the Company is a party or by which it is bound.
d. Delivery of Closing Documents. The Company shall have delivered to
Spotless the documents referred to in Section 2.3(a) hereof, in form and
substance reasonably satisfactory to Spotless and its counsel.
e. Amended Employment Agreement. The Company and ▇▇. ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ shall
have duly executed and delivered the Amended Employment Agreement and Stock
Options Agreements.
f. Directors and Officers Insurance. Spotless shall have received evidence
satisfactory to it and its counsel that the Company has obtained a Directors and
Officers Liability Insurance Policy on terms and conditions reasonably
satisfactory to Spotless and its counsel.
g. Absence of Certain Events. No statute, rule or regulation shall have
been enacted or promulgated which would make any of the transactions
contemplated by this Agreement illegal or would otherwise prevent the
consummation thereof. No order, decree, writ or injunction shall have been
issued and shall remain in effect, by any court or governmental body or agency
thereof which restrains, enjoins or otherwise prohibits the consummation of the
transactions contemplated hereby, and no action, suit or proceeding before any
court or governmental body or agency thereof shall have been instituted by any
person (or instituted or threatened by any governmental body or agency thereof),
and no investigation by any governmental body or agency thereof shall have been
commenced, with respect to the transactions contemplated hereby.
h. No Material Adverse Effect. Since July 31, 1999, the Company shall not
have experienced any change, occurrence or event that has resulted in a Material
Adverse Effect and no event shall have occurred that in the reasonable judgment
of Spotless would be likely to result in a Material Adverse Effect.
7. Conditions to the Obligations of the Company
The obligations of the Company to consummate the transactions contemplated
hereunder shall be subject to the satisfaction of each of the following
conditions on or prior to the Closing, unless waived by the Company in writing:
a. Representations and Warranties True. All of the representations and
warranties of Spotless contained in this Agreement (including, without
limitation, the Schedules hereto) shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made on such date, and Spotless shall have delivered the certificate to that
effect which is described in Section 2.3(b)(iii) above.
b. Performance. Spotless shall have performed and complied in all material
respects with all
23
covenants and obligations under this Agreement which are required to be
performed or complied with by it on or prior to the Closing Date, and Spotless
shall have delivered the certificate to that effect at the Closing which is
described in Section 2.3(b)(iii) above.
c. Approvals, Permits, Etc. All consents, authorizations, approvals,
exemptions, licenses or permits of, or registrations, qualifications,
declarations or filings with, any governmental body or agency thereof that are
required in connection with the sale of the Shares to Spotless pursuant to this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly obtained or made in form and substance reasonably satisfactory to
the Company and its counsel and shall be effective at and as of the Closing
Date.
d. Delivery of Closing Documents. The Company shall have received the
documents referred to in Section 2.3(b) hereof in form and substance reasonably
satisfactory to the Company and its counsel.
e. Fairness Opinion. The Company have received an opinion from ▇▇▇▇▇▇ &
Co., or such other advisor as the Company may select, that the transactions
contemplated by this Agreement and the consideration to be received by the
Company are fair to the shareholders of the Company from a financial standpoint.
f. Absence of Certain Events. No statute, rule or regulation shall have
been enacted or promulgated which would make any of the transactions
contemplated by this Agreement illegal or would otherwise prevent the
consummation thereof. No order, decree, writ or injunction shall have been
issued and shall remain in effect, by any court or governmental body or agency
thereof which restrains, enjoins or otherwise prohibits the consummation of the
transactions contemplated hereby, and no action, suit or proceeding before any
court or governmental body or agency thereof shall have been instituted by any
person (or instituted or threatened by any governmental body or agency thereof),
and no investigation by any governmental body or agency thereof shall have been
commenced, with respect to.
8. Indemnification; Survival of Representations and Warranties.
a. Indemnity Obligations of the Company.
(i) Subject to the conditions and limitations set forth in this Article X,
the Company hereby agrees to indemnify and hold Spotless and its stockholders,
affiliates, directors, officers, employees and agents (such parties being
collectively referred to herein as the "Spotless Indemnitees") harmless from,
and to reimburse each such Spotless Indemnitee for, on an afterTax basis, any
loss, damage, deficiency, diminution in value, claim, liability, obligation,
suit, proceeding, action, demand, fee, penalty, fine, interest, surcharge, cost
or expense of any nature whatsoever, including, without limitation,
out-of-pocket expenses, investigation costs and fees and disbursements of
counsel (collectively, "Damages") suffered or incurred by a Spotless Indemnitee
arising out of, based upon or resulting from (i) any inaccuracy in or any breach
of any representation and warranty of the Company contained in this Agreement or
any Schedule, certificate or other written instrument or document delivered by
the Company pursuant hereto or (ii) any breach or nonfulfillment of, or any
failure to perform, any of the covenants, agreements or undertakings of the
Company contained in or made pursuant to this Agreement. Indemnification claims
made by any Spotless Indemnitee based upon the matters described in this Section
8.1 are separately referred to herein as "Spotless Indemnity Claims".
(ii) The indemnification obligations of the Company under this Article VIII
shall apply with respect to, without limitation, Damages arising out of any and
all actions, claims, suits, proceedings, demands, assessments, judgments,
recoveries, damages, costs and expenses or deficiencies incident to the disposal
of any Spotless Indemnity Claim under this Section 8.1, together with any
interest, penalties, costs and expenses of any Spotless Indemnitee (including,
without limitation, reasonable out-of-pocket expenses, reasonable investigation
expenses and reasonable fees and disbursements of accountants and counsel)
arising out of or related to any such Spotless Indemnity Claims.
24
b. Indemnity Obligations of Spotless.
(i) Spotless hereby agrees to indemnify and hold the Company harmless from,
and to reimburse the Company and its stockholders, affiliates, directors,
officers, employees and agents (such parties being collectively referred to
herein as the "Company Indemnitees") for, on an after-Tax basis, any Company
Indemnity Claims (as that term is hereinafter defined) arising under the terms
and conditions of this Agreement. For purposes of this Agreement, the term
"Company Indemnity Claim" shall mean any Damages arising out of, based upon or
resulting from (i) any inaccuracy in or any breach of any representation and
warranty of Spotless contained in this Agreement or any Schedule, certificate or
other written instrument or document delivered by Spotless pursuant hereto, or
(ii) any breach or nonfulfillment of, or failure to perform, any of the
covenants, agreements or undertakings of Spotless contained in or made pursuant
to the terms and conditions of this Agreement.
(ii) The indemnification obligations of Spotless under this Article VIII
shall apply with respect to, without limitation, Damages arising out of any and
all actions, claims, suits, proceedings, demands, assessments, judgments,
recoveries, damages, costs and expenses or deficiencies incident to the disposal
of any Company Indemnity Claim under this Section 8.2, together with any
interest, penalties, costs and expenses of any Company Indemnitee (including,
without limitation, reasonable out-of-pocket expenses, reasonable investigation
expenses and reasonable fees and disbursements of accountants and counsel)
arising out of or related to any such Company Indemnity Claims.
c. Notification of Claims; Procedures.
(i) Subject to the remaining provisions of this Article VIII, a party
wishing to seek indemnification hereunder (the "Indemnified Party") shall
provide the indemnifying party (the "Indemnifying Party") with notice (a "Claim
Notice") of the event or matter giving rise to such claim and its good faith
estimate of the amount of Damages relating to such claim, and shall otherwise
make available to the Indemnifying Party all relevant information which is
material to the claim and which is in the possession of the Indemnified Party.
In the event any claim or demand in respect of which an Indemnified Party might
seek recovery of Damages under this Article VIII is asserted against or sought
to be collected from such Indemnified Party by any third party (a "Third Party
Claim"), the Indemnified Party shall deliver the relevant Claim Notice with
reasonable promptness to the Indemnifying Party. The Indemnifying Party will
notify the Indemnified Party in writing as soon as practicable but in any event
within forty-five (45) days following receipt of such Claim Notice (the "Dispute
Period") whether the Indemnifying Party disputes the claim of the Indemnified
Party in whole or in part and whether the Indemnifying Party desires, without
cost or expense to the Indemnified Party, to assume the defense of such Third
Party Claim. If, following the delivery of a Claim Notice but prior to the
Indemnity Termination Date (as hereinafter defined) for the claim covered by
such Claim Notice, the Indemnified Party determines, in good faith, that the
amount of potential Damages relating to such claim exceeds the estimated Damages
initially set forth in the Claim Notice, then the Indemnified Party shall have
the right to submit an amended Claim Notice to the Indemnifying Party setting
forth such additional amount of estimated Damages. Notwithstanding the
foregoing, if such amended Claim Notice shall be delivered within the Dispute
Period for the initial claim relating to such Claim Notice, the Dispute Period
shall automatically be extended for a further forty-five (45) days following the
Indemnifying Party's receipt of such amended Claim Notice.
(ii) Except as is hereinafter provided in this Section 8.3(b), if the
Indemnifying Party notifies the Indemnified Party within the Dispute Period that
the Indemnifying Party desires to assume the defense of the Third Party Claim,
then the Indemnifying Party will have the right to defend such Third Party Claim
by all appropriate proceedings, which proceedings will be diligently prosecuted
by the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of (i) any settlement that provides for any relief
other than the payment of monetary damages, or (ii) the payment of monetary
damages in an amount in excess of the Indemnity Cap Amount (as defined below)
for such party, which consent will not be unreasonably withheld or delayed). The
Indemnifying Party will have full control of such defense and proceedings,
including (except as provided in the immediately preceding sentence) any
settlement
25
thereof; provided, however, that if requested by the Indemnifying Party,
the Indemnified Party will, at no cost to the Indemnified Party, cooperate with
the Indemnifying Party and its counsel in contesting any Third Party Claim that
the Indemnifying Party elects to contest, or, if appropriate and related to the
Third Party Claim in question, in making any counterclaim against the person
asserting the Third Party Claim, or any crosscomplaint against any person (other
than the Indemnified Party or any of its affiliates). Notwithstanding the
foregoing, (i) the Indemnified Party may, at its sole cost and expense, retain
or take over the control of the defense or settlement of any Third Party Claim,
the defense of which the Indemnifying Party has elected to control, if the
Indemnified Party irrevocably waives in writing its right to recover from the
Indemnifying Party any Damages hereunder with respect to such Third Party Claim;
(ii) if the amount of such claim exceeds the Indemnity Cap Amount for the
Indemnifying Party, then the Indemnified Party may, at the sole cost and expense
of the Indemnifying Party, retain or take control over the defense or settlement
of such claim; (iii) the Indemnified Party may, at the sole cost and expense of
the Indemnifying Party, retain separate counsel to represent it in, but not
control, any defense or settlement undertaken by the Indemnifying Party pursuant
to this Section 8.3(b) if outside counsel to the Indemnified Party reasonably
advises the Indemnified Party and the Indemnifying Party in a written opinion
that joint representation of such parties by a single counsel raises a potential
conflict of interest; and (iv) if the proceeding involves a matter solely of
concern to the Indemnified Party, which matter is in addition to the claim for
which indemnification under this Article VIII is being sought, such Indemnified
Party shall have the right to control the defense and settlement of such
additional claim at its own cost and expense and with its own counsel.
(iii) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to assume the
defense of the Third Party Claim, or if the Indemnifying Party shall not have
the right to assume control of the dispute of such claim pursuant to Section
8.3(b) above, then the Indemnified Party will have the right and the obligation
(at the sole cost of the Indemnifying Party) to defend the Third Party Claim by
all appropriate proceedings, which proceedings will be diligently prosecuted by
the Indemnified Party to a final conclusion or will be settled at the discretion
of the Indemnified Party. The Indemnified Party will have full control of such
defense and proceedings, including any settlement thereof. Subject to the
foregoing, the Indemnifying Party may, at is sole cost and expense, retain
separate counsel to represent it in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this clause.
(iv) If the Indemnifying Party notifies the Indemnified Party in writing
that it does not dispute the recoverability of any Damages by the Indemnified
Party with respect to the Third Party Claim or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
recoverability of any Damages with respect to such Third Party Claim, the
applicable portion of the Damages arising from such Third Party Claim will be
conclusively deemed recoverable under this Article VIII. If the Indemnifying
Party has timely disputed the recoverability of any Damages with respect to such
claim (a "Dispute Notice"), the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within the thirty (30) day period following
receipt by the Indemnified Party of the Dispute Notice (the "Resolution
Period"), such dispute shall be resolved by litigation.
(v) In the event any Indemnified Party seeks to recover any Damages under
this Article VIII that do not involve a Third Party Claim, the Indemnified Party
shall deliver a Claim Notice with reasonable promptness to the Indemnifying
Party. If the Indemnifying Party notifies the Indemnified Party that it does not
dispute the recoverability of such Damages or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
recoverability of such Damages, the Damages arising from the claim specified in
such Claim Notice will be conclusively deemed recoverable under this Article
VIII. If the Indemnifying Party has timely disputed the recoverability of any
Damages with respect to such claim, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of such dispute, and
if not resolved through negotiations within the Resolution Period, such dispute
shall be resolved by litigation.
d. Duration.
(i) Notwithstanding anything to the contrary in this Agreement, all
representations, warranties,
26
covenants, undertakings and agreements of the parties contained in or made
pursuant to this Agreement, and the rights of the parties to seek
indemnification with respect thereto, shall survive the Closing; provided,
however, that, except in respect of any claims for indemnification as to which
written notice shall have been duly given to the Indemnifying Party prior to the
relevant expiration date set forth below in accordance with the terms of this
Agreement, and subject to the remaining provisions of this Section 8.4, such
representations, warranties, covenants, undertakings and agreements, and the
rights of the parties to seek indemnification with respect thereto, shall expire
on the following dates (the "Indemnity Termination Dates"), other than the
representation and warranties set forth in Section 3.3, which shall survive
indefinitely:
(1) in the case of Spotless Indemnity Claims arising
out of or related to any breach of the representations
and warranties contained in Section 3.8, the date of
expiration of the relevant statute of limitations for
any such claims, including any extensions thereof;
(2) in the case of all other claims for indemnification
arising under this Agreement, on the second anniversary
of the Closing Date.
(ii) Any claim for indemnification under this Article VIII which is made in
good faith and in writing prior to the expiration of such claim on the Indemnity
Termination Date shall survive such expiration until mutually resolved or
otherwise determined hereunder, as applicable, and the Indemnity Termination
Date for all purposes hereunder shall automatically be extended with respect to
such claim (but not any other claims) until such claim is so mutually resolved
or otherwise determined hereunder. Any such claim not so made in writing prior
to the expiration of such claim on the relevant Indemnity Termination Date shall
be deemed to have been waived.
e. Certain Limitations and Remedies.
(i) In no event shall the maximum aggregate liability for each of the
Company, on the one hand, and Spotless, on the other hand, for indemnity claims
under this Article VIII exceed the amount of the Purchase Price.
(ii) In addition to a claim for indemnification under this Article VIII and
any other remedies that Spotless may have, the Company hereby agrees that, in
the event that at any time following the Closing the Company becomes aware that
the representation and warranty set forth in Section 3.3 to the effect that the
Shares, upon issuance, will constitute as of the Closing Date 51.0% of the
aggregate voting power of all issued and outstanding voting securities of the
Company on a fully diluted basis (i.e., after giving effect to the exercise of
all options, warrants, or similar rights to acquire shares of Common Stock,
other than the Note) was inaccurate as of the Closing Date, the Company shall
issue to Spotless, for no additional consideration, such number of shares of
Common Stock as shall be required so that such representation and warranty shall
have been true and accurate as of the Closing Date. Such additional shares of
Common Stock shall be issued to Spotless immediately following receipt by the
Company from Spotless of a written notice indicating that such representation
and warranty was inaccurate as of the Closing Date. Notwithstanding the
foregoing, if the breach of such representation and warranty is the result of
the disclosure following the Closing Date of any agreements, understandings,
arrangements, options, warrants or other rights to subscribe for or purchase, or
securities convertible into or exchangeable for, any voting security of the
Company which were in effect on the Closing Date but not set forth in Schedule
3.3, then, in the event the Company disputes the claim by Spotless that such
representation and warranty, has been breached or was inaccurate as of the
Closing Date, the Company may defer the issuance of such additional shares of
Common Stock until the earliest of (i) the date on which such dispute is
resolved, (ii) the next succeeding record date established by the Board of
Directors for determining shareholders entitled to vote on any matter submitted
to the shareholders or shareholders entitled to a dividend or distribution on
the shares of Common Stock and (iii) the date on which the Company issues to any
third party shares of any voting security pursuant to any such agreement,
understanding, arrangement, option, warrant or other right to subscribe for or
purchase, or securities convertible into or exchangeable for, any voting
security of the Company.
f. NonExclusive Remedy. Indemnification pursuant to this Article VIII shall
not preclude Spotless
27
or the Company from exercising any other remedies it may have.
g. Treatment of Indemnity Payments. Any indemnity payments made pursuant to
this Article VIII shall, to the extent permitted by applicable law, be treated
as an adjustment to the Purchase Price.
9. Termination
a. Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(1) by the mutual written consent of Spotless and the Company;
(2) by either Spotless or the Company:
(i) if any statute, rule or regulation has been enacted
which would make any of the transactions
contemplated by this Agreement illegal or would
otherwise prevent the consummation thereof or if
any court or governmental body or agency thereof
shall have issued any writ or injunction, or taken any
other action, restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby
and all appeals and means of appeal therefrom have
been exhausted;
(ii) if the Closing shall not have occurred on or prior to
[October30,] 1999; provided, however, that the
right to terminate this Agreement pursuant to this
Section 9.1(b)(ii) shall not be available to any party
whose breach of any representation or warranty or
failure to perform or comply with any covenant or
obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing to occur on
or before such date;
(3) by the Company, if any of the conditions specified
in Article VII have not been met or waived prior to such
time as such condition can no longer be satisfied; or
(4) by Spotless, if any of the conditions specified in
Article VI shall not have been met or waived prior to such
time as such condition can no longer be satisfied.
b. Effect of Termination. In the event of termination of this Agreement,
this Agreement shall forthwith become null and void and there shall be no
liability on the part of any party hereto or their respective officers or
directors, except as provided in Sections 9.3, 11.6 and 11.7 hereof, which shall
remain in full force and effect, and except that nothing herein shall relieve
any party hereto from liability for a breach of this Agreement prior to the
termination hereof.
c. Payment of Expenses. The Company hereby agrees that it will promptly pay
to Spotless the reasonable fees and disbursements of its counsel incurred by
Spotless in connection with the negotiation, execution and delivery of this
Agreement, the Amended Employment Agreement, the Note and the Certificate of
Designations (including, without limitation, the due diligence exercise
conducted by such counsel on behalf of Spotless), up to a maximum of $100,000 in
the event that the Company terminates this Agreement pursuant to Section
9.1(iii).
10. Registration Rights
a. Registrable Securities. For purposes of this Agreement, "Registrable
Securities" shall mean (i) the Common Shares and the additional shares of Common
Stock issued to Spotless upon conversion of shares of Series B Preferred or the
Note, as the case may be, and (ii) any equity securities issued in exchange or
substitution for, or in payment of dividends on, any such Common Shares and
additional shares of Common Stock. Registrable
28
Securities shall cease to be Registrable Securities when either (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of under such registration statement, (ii) such securities shall have
become eligible for sale and distribution, or be sold, pursuant to Rule 144 (as
currently in effect or as subsequently amended), (iii) such securities shall
have been otherwise lawfully transferred or disposed of, and new certificates
therefor not bearing a legend restricting further transfer thereof under the
Securities Act shall have been delivered by the Company and subsequent transfer
or disposition thereof shall not require their registration or qualification
under the Securities Act or any similar state law then in force, or (iv) such
securities shall have ceased to be outstanding. A "Holder" shall mean Spotless
or any other party to whom Spotless may have transferred or assigned the
registration rights provided for in this Article X in accordance with the
provisions of Section 10.9.
b. Requested Registration.
(i) In case the Company shall receive from a Holder or Holders which hold
in the aggregate not less than fifty percent (50%) of the Registrable Securities
("Initiating Holders") a written request that the Company effect the
registration of at least 20% of the outstanding Registrable Securities then held
by it or them, the Company shall:
(1) promptly give written notice of the proposed registration to
all other Holders; and
(2) use its best efforts to effect such registration
(including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any
other applicable governmental requirements or
regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in
such request, together with all or such portion of the
Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written
request received by the Company within twenty (20) days
after receipt of such written notice from the Company;
provided, however, that the Company shall not be
obligated to take any action to effect any such
registration, qualification or compliance pursuant to this
Section 10.2:
(i) In any particular jurisdiction in which the Company
would be required to execute a general consent
to service of process in effecting such
registration, qualification or compliance unless
the Company is already subject to service in such
jurisdiction and except as may be required by the
Securities Act;
(ii) During the period ending on the date three (3)
months immediately following the effective date of
any registration statement pertaining to securities
of the Company (other than a registration of
securities in a transaction covered by Rule 145
under the Securities Act (a "Rule 145 Transaction")
or a registration of securities on Form S-8 (or any
successor form) relating solely to an employee
benefit plan);
(iii) If the Company shall furnish to such Holders,
within thirty (30) days of any written request made
pursuant to this Section 10.2(a), a certificate,
signed by the President of the Company, stating that
the Company intends to file, within ninety (90) days
of the date of such certificate, a registration
statement for the Company's securities; or
(iv) If the Company shall furnish to such Holders a
certificate, signed by the
29
President of the Company, stating that in the good
faith judgment of the Board of Directors the filing
of a registration statement would require the
disclosure of material information regarding a
possible financing, business combination or other
material transaction, which disclosure the Board has
determined in its good faith judgment would be
detrimental to the Company, then the Company's
obligation to use its best efforts to register,
qualify or comply under this Section 10.2 shall be
deferred for a single period not to exceed one
hundred twenty (120) days from the date of its
receipt of a written request from the Initiating
Holders.
Subject to the foregoing clauses (A) through (D), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders, and in no event, later than ninety (90) days thereafter.
(ii) In the event that a registration pursuant to this Section 10.2 is for
a registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the notice given pursuant to Section 10.2(a)(i).
In such event, the right of any Holder to registration pursuant to this Section
10.2 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 10.2 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent provided in this
Article X.
The Company (together with all Holders proposing to distribute their
securities through such underwriting) shall enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders (which managing underwriter
shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 10.2, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, the Company shall so advise all Holders of
Registrable Securities and the number of shares of Registrable Securities that
may be included in the registration and underwriting shall be allocated among
all Holders in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities held by all Holders who have requested that
Registrable Securities be included in such registration at the time of filing
the registration statement; provided, however, that shares sought to be included
by the Company or any other stockholder in such underwritten offering shall be
excluded from such registration statement before any Registrable Securities held
by the Initiating Holders shall be excluded. No Registrable Securities excluded
from the underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders.
c. Company Registration.
(i) If at any time or from time to time, the Company shall determine to
register any of its securities, either for its own account or for the account of
a security holder or holders, other than (i) a registration of securities on
Form S-8 (or any successor form) relating solely to employee benefit plans, or
(ii) a registration of securities in a Rule 145 Transaction, the Company will:
(1) promptly give to each Holder written notice thereof; and
(2) subject to Section 10.3(b), include in such
registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting
involved in such registration, all the Registrable
Securities specified in a written request or requests
received within twenty (20) days after receipt of such
written notice from the Company
30
by any Holder.
(ii) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
10.3(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 10.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company (or by the holders who have
demanded such registration). Notwithstanding any other provision of this Section
10.3, if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit or eliminate entirely the Registrable Securities to be included in
such registration. The Company shall advise all Holders who have requested that
Registrable Securities be included in such registration of any limitations
imposed pursuant to this Section 10.3(b). The number of shares of Registrable
Securities that may be included in such registration and underwriting for each
Holder who has requested that Registrable Securities be included in such
registration shall be determined in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by all Holders who have
requested that Registrable Securities be included in such registration at the
time of filing the registration statement. To facilitate the allocation of
shares in accordance with the above provisions, the Company or the underwriters
may round the number of shares allocated to any Holder to the nearest 100
shares. If any Holder disapproves of the terms of any such underwriting, he or
she may elect to withdraw therefrom by written notice to the Company and the
managing underwriter.
d. Registration Procedures. If and whenever the Company is required to use
its best efforts to effect the registration of any Registrable Securities as
provided in Section 10.2, the Company will, as expeditiously as possible:
(i) Prepare and, in any event within ninety (90) calendar days after the
end of the period within which requests for registration may be given to the
Company, file with the SEC a registration statement (for the purposes of this
Article X, a "Registration Statement") with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become and remain effective: provided, that (i) the obligation of the Company to
effect such registration and/or cause such registration statement to become
effective, may be postponed for such period of time when the financial
statements of the Company required to be included in such registration statement
are not available (due solely to the fact that such financial statements have
not been prepared in the regular course of business of the Company) and (ii) the
obligation of the Company to effect such registration and/or cause such
registration statement to become effective, may be deferred for a single period
not to exceed ninety (90) days if the filing of a registration statement would
require the disclosure of material information concerning a possible financing,
business combination or other material transaction which disclosure the Board of
Directors has determined in good faith would be detrimental to the Company;
(ii) After a Registration Statement is filed with the SEC, prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
a period not in excess of ninety (90) days (or such earlier date by which all
securities that have been requested to be registered are sold) and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the participating Holders
set forth in such Registration Statement;
(iii) Furnish to the participating Holders and to each underwriter, if any,
of such Registrable Securities, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements of the
Securities Act, and such other documents, as such person may reasonably request,
in order to facilitate the public sale or other disposition of the Registrable
Securities;
31
(iv) Use its best efforts to cause such Registrable Securities covered by
such Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the participating Holders to consummate the disposition of such Registrable
Securities in accordance with any plan of distribution described in such
Registration Statement;
(v) Immediately notify the participating Holders, at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 10.4(a), if the Company
becomes aware that the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and at the request of the participating Holders, deliver a
reasonable number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the Company of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading;
(vi) Otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC and make generally available to the participating
Holders, in each case as soon as practicable, but not later than forty-five (45)
calendar days after the close of the period covered thereby (ninety (90)
calendar days in case the period covered corresponds to a fiscal year of the
Company), an earnings statement of the Company which will satisfy the provisions
of Section 11(a) of the Securities Act;
(vii) In the event the offering is an underwritten offering, use its best
efforts to obtain a "cold comfort" letter from the independent public
accountants for the Company in customary form and covering such matters as are
customarily covered by such letters; and
(viii) Execute and deliver all instruments and documents (including in an
underwritten offering an underwriting agreement in customary form) and take such
other actions and obtain such certificates and opinions as are customary in
underwritten public offerings.
Any participating Holder will, upon the receipt of any notice from the
Company of the occurrence of an event of the kind described in Section 10.4(e),
immediately discontinue disposition of the Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities until the Holder
receives copies of the supplemented or amended prospectus contemplated by
Section 10.4(e).
e. Holdback Agreement. If the Company at any time shall register any shares
of Common Stock under the Securities Act (including any registration of
Registrable Securities pursuant to Section 10.2) for sale to the public, the
Holders shall not sell publicly (including any sale pursuant to Rule 144), make
any short sale of, grant any options for the purchase of, or otherwise dispose
publicly of any shares of Registrable Securities, or of any security convertible
into or exchangeable or exercisable for any Registrable Securities (other than
those Registrable Securities included in the registration being effected
pursuant to Section 10.2) without the prior written consent of the Company and
the managing underwriter during a period commencing on the effective date of
such registration and ending a number of calendar days thereafter not exceeding
one hundred eighty (180) as the Company and the managing underwriter shall
reasonably determine is required to effect a successful offering.
f. Expenses. All Registration Expenses (as that term is hereinafter
defined) incurred in connection with the first registration effected under
Section 10.2 and the first registration effected under Section 10.3 shall be
borne by the Company. The participating Holders shall pay the Registration
Expenses incurred in connection with any subsequent registration effected under
Section 10.2 and the incremental expenses resulting from the inclusion of their
Registrable Securities in any subsequent registrations effected under Section
10.3. For the purposes of this Agreement, the term "Registration Expenses" shall
mean all registration, filing and qualification fees, printing expenses, escrow
fees, fees and disbursements of counsel to the Company, blue sky fees and
expenses and the
32
expense of any special audits incident to or required by any such
registration (but excluding underwriting commissions and discounts on the sale
of the Registrable Securities).
g. Indemnification.
(i) The Company hereby agrees to indemnify and hold each participating
Holder, each person who controls such participating Holder (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) and their
respective agents and representatives (each, a "Holder Indemnitee"), and to
reimburse any Holder Indemnitee for, on an after-Tax basis and to the extent
permitted by applicable law, all Damages (as defined herein) caused by any
untrue or alleged untrue statement of material fact contained in any
Registration Statement, prospectus or preliminary prospectus relating to the
Registrable Securities or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by such
participating Holder expressly for use therein or by such participating Holder's
failure to deliver a copy of the Registration Statement or prospectus or any
amendments or supplements thereto after the Company has furnished such
participating Holder with a sufficient number of copies of the same and except
insofar as the same are caused by or contained in any prospectus if such
participating Holder failed to send or deliver a copy of any subsequent
prospectus or prospectus supplement which would have corrected such untrue or
alleged untrue statement of material fact or such omission or alleged omission
of a material fact with or prior to the delivery of written confirmation of the
sale by such participating Holder after the Company has furnished such
participating Holder with a sufficient number of copies of the same.
(ii) In connection with any Registration Statement, each such participating
Holder will furnish to the Company in writing such information as the Company
reasonably requests for use in connection with any such Registration Statement
or prospectus and, to the extent permitted by law, will severally and not
jointly indemnify and hold the Company, each person who controls the Company
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and their respective shareholders, officers, directors,
affiliates, employees, agents and representatives (collectively, for purposes of
this Article X, the "Company Indemnitees") harmless from, and reimburse such
Company Indemnitees for, on after-Tax basis and to the extent permitted by
applicable law, any Damages arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in any Registration Statement,
prospectus, or form of prospectus relating to Registrable Securities, or arising
out of or based upon any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, to the
extent, but only to the extent, that such untrue or alleged untrue statement is
contained in, or such omission or alleged omission is required to be contained
in, any information so furnished in writing by such participating Holder to the
Company expressly for use in such Registration Statement or prospectus and that
such statement or omission was relied upon by the Company in preparation of such
Registration Statement, prospectus or form of prospectus; provided, however,
that such participating Holder of Registrable Securities shall not be liable in
any such case to the extent that the participating Holder has furnished in
writing to the Company prior to the filing of any such Registration Statement or
prospectus or amendment or supplement thereto information expressly for use in
such Registration Statement or prospectus or any amendment or supplement thereto
which corrected or made not misleading, information previously furnished to the
Company, and the Company failed to include such information therein. In no event
shall the liability of any participating Holder hereunder be greater in amount
than the dollar amount of the proceeds (net of payment of all expenses borne by
such participating Holder) received by such participating Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such indemnified party.
(iii) If any person shall be entitled to indemnity hereunder such
indemnified party shall give prompt notice to the party or parties from which
such indemnity is sought of the commencement of any action, suit, proceeding,
investigation or written threat thereof (a "Proceeding") with respect to which
such indemnified party seeks indemnification or contribution pursuant hereto;
provided, however, that the failure to so notify the
33
indemnifying parties shall not relieve the indemnifying parties from any
obligation or liability except to the extent that the indemnifying parties have
been prejudiced by such failure. The indemnifying parties shall have the right,
exercisable by giving written notice to an indemnified party promptly after the
receipt of written notice from such indemnified party of such Proceeding, to
assume, at the indemnifying parties' expense, the defense of any such
Proceeding, with counsel reasonably satisfactory to such indemnified party;
provided, however, that an indemnified party or parties (if more than one such
indemnified party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless the parties to such Proceeding include
both the indemnified party or parties and the indemnifying party or parties, and
there exists, in the opinion of the parties' counsel, a conflict between one or
more indemnifying parties and one or more indemnified parties, in which case the
indemnifying parties shall, in connection with any one such Proceeding or
separate but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of not more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. If an indemnifying party assumes the defense of such Proceeding, the
indemnifying parties will not be subject to any liability for any settlement
made by the indemnified party without its or their consent (such consent not to
be unreasonably withheld).
(iv) If the indemnification provided for in this Section 10.7 is
unavailable to an indemnified party or is insufficient to hold such indemnified
party harmless for Damages in respect of which this Section 10.7 would otherwise
apply by its terms, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have an obligation to contribute to
the amount paid or payable by such indemnified party as a result of such
Damages, in such proportion as is appropriate to reflect the relative fault of
the indemnifying party, on the one hand, and such indemnified party, on the
other hand, in connection with the actions, statements or omissions that
resulted in such Damages as well as any other relevant equitable considerations.
The relative fault of such indemnifying party, on the one hand, and indemnified
party, on the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been taken by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a result
of any Damages shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the extent such
party would have been indemnified for such expenses under Section 10.7(c), if
the indemnification provided for in Section 10.7(a) or Section 10.7(b) was
available to such party. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 10.7(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 10.7(d), an
indemnifying party that is a Holder of Registrable Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such indemnifying party exceeds the amount of any damages
that such indemnifying party has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person adjudged guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
h. Information by Holders. The Holders shall furnish to the Company such
written information regarding the Holders and the distribution proposed by the
Holders as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Article X.
i. Transfer of Registration Rights. Except as provided below, the rights to
cause the Company to register Registrable Securities under Sections 10.2 and
10.3 hereof may be assigned to a transferee or assignee of Spotless in
connection with any transfer or assignment of Registrable Securities by it;
provided that (a) such transfer or assignment may otherwise be effected in
accordance with applicable securities laws, (b) notice of such transfer or
assignment is given to the Company, and (c) such transferee or assignee (i) is
an entity controlled by, controlling or
34
under common control with Spotless, (ii) is a successor in interest of
Spotless or (iii) acquires from Spotless the lesser of (A) 1,000,000 or more
shares of Registrable Securities (as appropriately adjusted for stock splits and
the like) or (B) all of the Registrable Securities then owned by Spotless
j. Rule 144. The Company covenants that it will file the reports required
to filed by it under the Securities Act and the Exchange Act and the rules and
regulations thereunder and it will take such further action as Spotless may
reasonably request, all to the extent required from time to time to enable the
Holders to sell shares of Registrable Securities, subject to the applicable
restrictions on transfer contained herein, without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the SEC.
11. Miscellaneous Provisions
a. Amendment. This Agreement may not be amended except by a written
instrument signed by each of the parties hereto.
b. Waiver of Compliance. Except as otherwise provided in this Agreement,
any failure of any of the parties to comply with any obligation, covenant or
agreement contained herein may be waived only by a written notice from the party
entitled to the benefits thereof. No failure by any party hereto to exercise,
and no delay in exercising, any right hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of either right hereunder
preclude any other or future exercise of that right by that party.
c. Notices. All notices and other communications hereunder shall be deemed
given if given in writing and delivered personally, by courier or by facsimile
transmission, telexed or mailed by registered or certified mail (return receipt
requested), facsimile, telex or postage fees prepaid, to the party to receive
the same at its respective address set forth below (or at such other address as
may from time to time be designated by such party to the others in accordance
with this Section 11.3):
If to the Company:
Windswept Environmental Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇' ▇▇▇▇▇▇
With copies to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLC
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
35
If to Spotless, to:
Spotless Enterprises Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
With copies to:
Coudert Brothers
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
All such notices and communications hereunder shall be deemed given when
received, as evidenced by the signed acknowledgment of receipt of the person to
whom such notice or communication shall have been personally delivered,
confirmed answerback or other evidence of transmission or the acknowledgment of
receipt returned to the sender by the applicable postal authorities.
d. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any rights, duties
or obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties and any attempted assignment or transfer
without such prior written consent shall be null and void; provided that,
Spotless shall have the right, without the prior written consent of any other
party hereto, to assign its rights and to delegate its duties under this
Agreement to any affiliate of Spotless.
e. No Third Party Beneficiaries. Neither this Agreement or any provision
hereof, nor any Schedule, certificate or other instrument delivered pursuant
hereto, nor any agreement to be entered into pursuant hereto or any provision
hereof, is intended to create any right, claim or remedy in favor of any person
or entity, other than the parties hereto and their respective successors and
permitted assigns.
f. Expenses. Each party shall pay its own expenses in connection with this
Agreement, the agreements to be entered into pursuant hereto and the
transactions contemplated hereby.
g. Public Announcements. Unless required by law, regulatory authority or
the rules of any applicable securities exchange or automated quotation system,
the parties hereto will not issue any press release or make any other public
announcement with respect to this Agreement or the transactions contemplated
hereby without the prior consent of the other parties, which consent shall not
be unreasonably withheld. The parties will reasonably cooperate with each other
in the development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other parties with drafts of any such releases and
announcements as far in advance as practicable.
h. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
i. Headings. The article and section headings contained in this Agreement
are solely for convenience of reference, are not part of the agreement of the
parties and shall not be used in construing this Agreement or in any way affect
the meaning or interpretation of this Agreement.
36
j. Entire Agreement; Severability. This Agreement, and the Schedules,
certificates and other instruments and documents delivered pursuant hereto,
together with the other agreements referred to herein and to be entered into
pursuant hereto, embody the entire agreement of the parties hereto in respect
of, and there are no other agreements or understandings, written or oral, among
the parties relating to, the subject matter hereof. This Agreement supersedes
all prior agreements and understandings, written or oral, between the parties
with respect to the subject matter hereof. The invalidity, illegality or
unenforceability for any reason of any one or more provisions of this Agreement
shall not affect the validity, legality or enforceability of the remainder of
this Agreement.
k. Governing Law. This Agreement, and the respective rights, duties and
obligations of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflicts of law thereunder.
l. Schedules. All matters disclosed on any schedule hereto shall be deemed
to be disclosed on any other schedule hereto to which such matters may be
relevant or applicable.
m. Spotless Vote. Spotless hereby agrees to vote all Shares in favor of the
Amendment.
n. Director Information. Spotless will provide the Company on a timely
basis with all information respecting the director nominees of Spotless
contemplated by Section 2.3(a)(iv) (F) as may be required by Section 14(f) of
the Exchange Act and the rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
SPOTLESS PLASTICS (USA) INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Vice President - Finance and Secretary
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
Title: President and Chief Executive Officer
