EXHIBIT 2
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:
ARTICLE I
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.
ARTICLE II
Purchase Price; Closing
2.1 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.
2.2 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").
2.3 Deliveries.
(a) Deliveries by the Company. The Company shall deliver to Spotless
at the Closing the following:
(i) certificates representing the Common Shares and the Series
B Preferred;
(ii) 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");
(iii) 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;
(iv) 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;
(v) 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
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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 ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇;
(vi) a copy, certified as of the Closing Date by a proper
officer of Trade-Winds, of the 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;
(vii) 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;
(viii) 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;
(ix) 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;
(x) a complete and correct copy of the Certificate of
Designations, certified by the Secretary of State of the State of Delaware;
(xi) 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;
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(xii) the written opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLC, counsel
for the Company, dated the Closing Date, substantially in the form attached
hereto as Exhibit F;
(xiii) 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
(xiv) 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).
(b) Deliveries by Spotless. Spotless shall deliver to the Company at
the Closing the following:
(i) payment of the Purchase Price by wire transfer in
immediately available funds;
(ii) the advance of the Loan by wire transfer in immediately
available funds;
(iii) 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;
(iv) a copy, certified as of the Closing Date by a proper
officer of Spotless, of the resolutions 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;
(v) 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
(vi) the written opinion of Coudert Brothers, counsel to
Spotless, dated the Closing Date, substantially in the form attached hereto as
Exhibit G;
ARTICLE III
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.
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3.1 Organization and Good Standing.
(a) 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.
(b) 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 non-assessable 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.
3.2 Authorization; No Violations.
(a) 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 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
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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.
(b) 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.
(c) 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.
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3.3 Capitalization of the Company.
(a) 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 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.
3.4 Securities Filings; Financial Statements.
(a) 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 8-K, 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
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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.
(b) 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.
(c) 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).
3.5 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 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.
3.6 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:
(a) 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;
(b) 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;
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(c) 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;
(d) 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;
(e) 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;
(f) experienced any material adverse change in its financial
condition, results of operations, cash flows, assets, liabilities, business or
operations;
(g) made any change in any accounting principle or practice or in
its method of applying any such principle or practice;
(h) 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;
(i) declared or paid any dividends on or made any other
distributions (however characterized) in respect of shares of its capital stock;
(j) repurchased or redeemed any shares of its capital stock;
(k) 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
(l) entered into any agreement to do any of the foregoing.
3.7 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 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
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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.
3.8 Taxes.
(a) 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.
(b) 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).
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(c) 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").
(d) 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.
3.9 Title to Properties and Related Matters.
(a) 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.
(b) 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
- 11 -
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 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.
(c) 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
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brief description of the property in question and the amount and repayment terms
of the underlying obligation.
(d) 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.
3.10 Computer Software.
(a) 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.
(b) 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 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.
3.11 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.
- 13 -
3.12 Contracts.
(a) Except as set forth in Schedule 3.12(a), neither the Company nor
any Subsidiary is a party to, or subject to:
(i) 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);
(ii) any Material Personal Property Lease;
(iii) any lease of real property;
(iv) any license agreement involving an amount in excess of
$25,000;
(v) any contract, arrangement or understanding not made in the
ordinary course of business and consistent with past practice;
(vi) 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;
(vii) any warranty, indemnity or guaranty issued by the
Company or any Subsidiary;
(viii) 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;
(ix) 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
(x) 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).
(b) 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 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
- 14 -
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.
3.13 Employees; Employee Benefits.
(a) 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.
(b) 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
- 15 -
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 ("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.
(c) 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
- 16 -
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.
(d) 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.
(e) Except as set forth on Schedule 3.13(e) hereto, neither the
Company, any Subsidiary nor any 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 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.
- 17 -
(f) 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.
3.14 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 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.
3.15 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
- 18 -
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.
3.16 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.
3.17 Material Suppliers; Inventories.
(a) 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.
(b) 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.
3.18 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.
3.19 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
- 19 -
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 within three
hundred sixty-five (365) days of the Closing Date.
3.20 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.
3.21 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.
3.22 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.
3.23 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.
3.24 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
- 20 -
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.
3.25 Environmental Matters.
(a) 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, 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.
(b) 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
- 21 -
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.
(c) 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 "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.
- 22 -
(d) 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).
3.26 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.
3.27 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.
3.28 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.
3.29 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.
3.30 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
- 23 -
contemplation of this Agreement or otherwise, or by reason of the fact that
Spotless or any of such advisors, consultants or representatives 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.
ARTICLE IV
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:
4.1 Corporate Organization. Spotless is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
4.2 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.
4.3 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,
- 24 -
consent, authorization or approval of, or the giving of any notice by Spotless
to, any governmental or regulatory body, agency or authority.
4.4 Securities Act Matters. Spotless hereby represents and warrants as
follows:
(a) 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;
(b) 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;
(c) It is an "accredited investor" pursuant to Rule 501 under the
Securities Act by reason of the fact 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
(d) 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.";
(e) 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;
(f) 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");
- 25 -
(g) 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
(h) 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.
4.5 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.
4.6 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.
4.7 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.
4.8 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 respective assets are bound
involving the Company or any Subsidiary.
4.9 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.
- 26 -
ARTICLE V
Conduct of the Company Pending Closing
5.1 Conduct of the Company. The Company hereby makes the following
covenants and agreements with Spotless:
(a) Affirmative Covenants. Between the date hereof and the Closing
Date, the Company shall, and shall cause each Subsidiary to:
(i) conduct its respective business diligently and only in the
ordinary course consistent with past practice;
(ii) 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;
(iii) 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;
(iv) 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;
(v) 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
(vi) 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.
(b) Negative Covenants. Between the date hereof and the Closing
Date, neither the Company nor any Subsidiary shall, without the prior written
consent of Spotless:
(i) 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;
(ii) make any change in its Certificate of Incorporation or
By-Laws or other constituent documents, except as contemplated hereby;
- 27 -
(iii) enter into any contract or commitment, or series of
related contracts or commitments (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;
(iv) create or permit to become effective any Encumbrances on
its respective property or assets;
(v) 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;
(vi) declare or pay any dividends on or make any other
distributions (however characterized) in respect of shares of its capital stock;
(vii) repurchase or redeem any shares of its capital stock
except pursuant to the transactions contemplated hereby;
(viii) 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;
(ix) 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;
(x) seek to acquire any business or to start-up any new
business;
(xi) merge or consolidate or agree to merge or consolidate
with any other person or entity;
(xii) waive any material rights;
(xiii) commit a material breach of or amend in any material
respect any agreement, permit, license or other right;
(xiv) enter into any other transaction outside the ordinary
course of business or prohibited hereunder; or
(xv) enter into any agreement or commitment to do any of the
foregoing.
5.2 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.
- 28 -
ARTICLE VI
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:
6.1 Representations and Warranties True. All of the representations and
warranties of the Company 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.
6.2 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.
6.3 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.
6.4 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.
6.5 Amended Employment Agreement. The Company and ▇▇. ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
shall have duly executed and delivered the Amended Employment Agreement and
Stock Options Agreements.
6.6 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.
6.7 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
- 29 -
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.
6.8 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.
ARTICLE VII
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:
7.1 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.
7.2 Performance. Spotless 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 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.
7.3 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.
7.4 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.
7.5 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.
7.6 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
- 30 -
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.
ARTICLE VIII
Indemnification; Survival
of Representations and Warranties
8.1 Indemnity Obligations of the Company.
(a) 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
after-Tax 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".
(b) 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.
8.2 Indemnity Obligations of Spotless.
(a) 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
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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.
(b) 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.
8.3 Notification of Claims; Procedures.
(a) 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.
(b) 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
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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 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 cross-complaint 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.
(c) 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.
(d) 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
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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.
(e) 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.
8.4 Duration.
(a) Notwithstanding anything to the contrary in this Agreement, all
representations, warranties, 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:
(i) 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;
(ii) in the case of all other claims for indemnification
arising under this Agreement, on the second anniversary of the Closing Date.
(b) 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
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expiration of such claim on the relevant Indemnity Termination Date shall be
deemed to have been waived.
8.5 Certain Limitations and Remedies.
(a) 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.
(b) 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.
8.6 Non-Exclusive Remedy. Indemnification pursuant to this Article VIII
shall not preclude Spotless or the Company from exercising any other remedies it
may have.
8.7 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.
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ARTICLE IX
Termination
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(i) by the mutual written consent of Spotless and the Company;
(ii) by either Spotless or the Company:
(A) 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;
(B) if the Closing shall not have occurred on or prior to
[October 30,] 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;
(iii) 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
(iv) 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.
9.2 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.
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9.3 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).
ARTICLE X
Registration Rights
10.1 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 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.
10.2 Requested Registration.
(a) 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:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) 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
- 37 -
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:
(A) 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;
(B) 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);
(C) 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
(D) If the Company shall furnish to such Holders a
certificate, signed by the 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.
(b) 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).
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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.
10.3 Company Registration.
(a) 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:
(i) promptly give to each Holder written notice thereof; and
(ii) 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 by any Holder.
(b) 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
- 39 -
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.
10.4 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:
(a) 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;
(b) 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;
(c) 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;
- 40 -
(d) 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;
(e) 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;
(f) 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;
(g) 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
(h) 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).
10.5 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
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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.
10.6 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 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).
10.7 Indemnification.
(a) 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.
(b) 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
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"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.
(c) 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 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
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subject to any liability for any settlement made by the indemnified party
without its or their consent (such consent not to be unreasonably withheld).
(d) 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.
10.8 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.
10.9 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 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
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(as appropriately adjusted for stock splits and the like) or (B) all of the
Registrable Securities then owned by Spotless
10.10 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.
ARTICLE XI
Miscellaneous Provisions
11.1 Amendment. This Agreement may not be amended except by a written
instrument signed by each of the parties hereto.
11.2 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.
11.3 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: ▇▇. ▇▇▇▇▇▇▇ ▇' ▇▇▇▇▇▇
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With copies to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLC
50 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Boulevard - Suite ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
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.
11.4 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.
11.5 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.
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11.6 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.
11.7 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.
11.8 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.
11.9 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.
11.10 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.
11.11 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.
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11.12 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.
11.13 Spotless Vote. Spotless hereby agrees to vote all Shares in favor of
the Amendment.
11.14 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 of
Finance and
Secretary
WINDSWEPT ENVIRONMENTAL
GROUP, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
Title: President and Chief
Executive Officer
48