Exhibit 2.0
BUSINESS COMBINATION AGREEMENT
This agreement is entered into the 15th day of September, 2005 between
ECOLOCLEAN INDUSTRIES, INC., a Nevada corporation (herein, "ECCI or Company")
and AQUATRONICS INDUSTRIES, INC., a Rhode Island corporation, (herein, "AQI"),
and AQI's shareholder, RUTH SCHACHTER, (herein, SELLER).
Background
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A. ECCI desires to acquire all of the issued and outstanding capital stock of
AQI from SELLER.
B. SELLER owns all of the capital stock of AQI consisting of One Hundred (100)
shares.
C. SELLER desires to sell all of her AQI capital stock in exchange for Two
Million Five Hundred Thousand (2,500,000) ECCI shares.
For good and valuable consideration, receipt of which is acknowledged the
parties agree, represent and warrant the following:
Agreement
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A. Exchange of Shares. ECCI and SELLER agree to exchange shares whereby ECCI
will acquire all of the issued and outstanding capital stock of AQI in exchange
for ECCI common stock. ECCI will issue Two Million Five Hundred Thousand
(2,500,000) shares of ECCI shares for all of SELLER'S capital stock in AQI
consisting of One Hundred (100) shares. The exchange share basis is Twenty-five
Thousand ECCI shares for One AQI share. The shares will be issued from ECCI's
authorized and unissued common stock capital pursuant to the securities
transaction exemption afforded by Section 4(2) of the Securities Act of 1933, as
amended and relevant state law securities transaction exemptions. The ECCI
common shares will be deemed restricted securities as required by federal law
under the Section 4(2) exemption and bear the Company's standard restrictive
legend. The issuance of the 2,500,000 ECCI shares is valued at Ten ($0.10) per
share or Two Hundred Fifty Thousand ($250,000) Dollars.
B. Financing Obligation. ECCI agrees to provide AQI Three Hundred Thousand
($300,000) Dollars for working capital. To date, ECCI has paid AQI $191,000
Dollars, of which One Hundred Sixty Thousand ($160,000) is working capital and
Thirty-one Thousand ($31,000) is loan repayable to ECCI. The $140,000 working
capital balance of these funds will be paid at closing of this agreement.
C. Representations, Warranties and Covenants of ECCI: The Company represents and
warrants to SELLER as of the date hereof and as of the Closing Date:
SECTION 1. Enforceability of Agreement Against the Company. ECCI has all
necessary power and authority to enter into this Agreement, perform the
obligations and to consummate the contemplated transactions. This Agreement
constitutes the legal, valid and binding obligations of ECCI enforceable against
it in accordance with the respective terms of this Agreement.
SECTION 2. Shares. The ECCI common shares, when issued, will be free and
clear of all liens, charges, demands or adverse claims or other restrictions on
the exercise of any of the attributes of ownership with the exception of
restrictions imposed by federal and state law. There are no contracts,
arrangements, commitments or restrictions relating to the issuance, sale,
transfer or purchase or obtaining of shares or other ownership interests in the
Shares, except set forth in this Agreement.
SECTION 3. Incorporation, Authority and Qualification of ECCI. ECCI is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Nevada. ECCI has all necessary corporate power and
authority to carry on the business now being conducted by it. ECCI is duly
qualified to do business, and is in good standing, in each jurisdiction where
its properties are owned, operated or leased or the nature of its activities
makes such qualification necessary. ECCI is authorized to issue 100,000,000
common shares, par value $0.0001 per share and 10,000,000 preferred shares, par
value $0.001 per share. As of June 30, 2005, the company has 46,003,605 common
shares issued and outstanding. No preferred shares have been issued. No other
classes of stock are authorized or issued.
SECTION 4. No Conflict. To the best knowledge and belief, the execution and
delivery by ECCI of this Agreement and each Related Document to which it is a
party have been obtained and all filings and notifications required by law,
agreement or otherwise have been made, the performance by ECCI of this Agreement
and each Related Document to which they it is a party will not:
a. Violate or conflict with any term or provision of the articles or
certificate of incorporation or organization (or other charter
documents) of each company;
b. Conflict with or violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable
to either company;
c. Conflict with, result in any breach of, constitute a default (or
event which with the giving of notice or lapse of time, or both,
would become a default) under, give to others any rights of
termination, amendment, acceleration or cancellation of, or
result in the creation of any lien on any of the assets pursuant
to, any assigned contract or any licenses;
d. Without limiting the generality of the foregoing, result in the
termination, denial or impairment of any material contract,
arrangement or benefit granted with respect to ECCI business
operations, or require the payment of any fees, taxes or
assessments, pursuant to any federal, state or local law.
SECTION 5. Consents, Approvals and Notifications. The execution and
delivery by ECCI of this Agreement and each Related Document to which it is a
party does not, and the performance by them of this Agreement and such Related
Documents will not, require any consent, approval, authorization or other action
by, or filing with or notification to, any Governmental Authority or any other
Person, with the exception of the disclosure requirements imposed by federal law
on ECCI.
SECTION 6. Financial Statements.
6.1 ECCI has furnished SELLER copies of its Annual Report on Form
10-KSB for the year ending December 31, 2004 which includes (a) audited balance
sheets of the Company and audited statements of income, changes in shareholders'
equity and statements of cash flow for the period ending December 31, 2004,
together with the reports and notes thereon, independent certified public
accountants (collectively, the "Audited Financial Statements").
6.2 ECCI has furnished SELLER copies of its Quarterly Reports on Forms
10-QSB and 8-K for the relevant interim periods.
SECTION 7. Litigation. The Company and its subsidiaries are parties to
various legal proceedings and claims incidental to its normal business
operations. While the ultimate resolution of the various legal proceedings is
not known, presently, management does not expect that the resolution of these
matters will have a material adverse effect on the Company's financial
statements and results of operation. There is no material claim, action,
investigation, arbitration or proceeding pending or, threatened against ECCI or
against or relating to any of the assets or the ability of either company to
perform its obligations hereunder, before any arbitrator, judge, court or
governmental authority. ECCI is not subject to any order, writ judgment,
injunction, decree, determination or award of any arbitrator, judge, court or
governmental authority.
D. Representations, Warranties Covenants of AQI and SELLER: AQI and SELLER
represent and warrant to ECCI as of the date hereof and as of the Closing Date:
SECTION 1. Enforceability of Agreement Against the AQI and SELLER. AQI and
SELLER have all necessary power and authority to enter into this Agreement to
which each is a party, to carry out the obligations and to consummate the
contemplated transactions. This Agreement constitutes the legal, valid and
binding obligations of the AQI and SELLER enforceable against each in accordance
with the respective terms of this Agreement.
SECTION 2. SELLER'S AQI Capital Stock. SELLER'S AQI capital stock has been
validly issued and is free and clear of all liens, charges, encumbrances,
community property claims, demands or adverse claims or other restrictions on
the exercise of any of the attributes of ownership. There are no contracts,
arrangements, commitments or restrictions relating to the issuance, sale,
transfer or purchase of SELLER'S AQI capital stock.
SECTION 3. Organization, Authority and Qualification of AQI. AQI is duly
organized, validly existing and in good standing under the laws of the State of
Rhode Island. AQI has all necessary power and authority to carry on the business
now being conducted by it. AQI is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary. AQI is authorized to issue 4,000 shares of capital stock, no par
value. The company has 100 shares issued and outstanding. No other classes of
ownership are authorized or issued. There are no outstanding options, warrants,
rights or otherwise, other than those disclosed in the financial statements.
SECTION 4. No Conflict. The execution and delivery by AQI and SELLER of
this Agreement and each Related Document to which the each is a party has been
obtained and all filings and notifications required by law, agreement or
otherwise have been made, the performance by AQI and SELLER of this Agreement
and each Related Document to which each is a party will not:
i. Violate or conflict with any term or provision of the articles or
certificate of incorporation (or other charter documents) of AQI;
ii. Conflict with or violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to AQI and
SELLER ;
iii. Conflict with, result in any breach of, constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any lien on any of
the assets pursuant to, any assigned contract or any licenses;
iv. Without limiting the generality of the foregoing, result in the
termination, denial or impairment of any material contract, arrangement or
benefit granted with respect to AQI'S business, or require the payment of any
fees, taxes or assessments, pursuant to any federal, state or local law.
SECTION 5. Consents, Approvals and Notifications. The execution and
delivery by the AQI and SELLER of this Agreement and each Related Document to
which each is a party does not, and the performance by it of this Agreement and
such Related Documents will not, require any consent, approval, authorization or
other action by, or filing with or notification to, any Governmental Authority
or any other Person.
SECTION 6. Financial Statements.
6.1 AQI has furnished to the Company copies of (a) unaudited balance
sheets of the Company and unaudited statements of income, changes in
shareholders' equity and statements of cash flow for the fiscal years ending May
31, 2004 and 2005, and interim two month report June 1 until July 31, 2005,
together with the reports and notes thereon, independent certified public
accountants (collectively, the "Unaudited Financial Statements").
6.2 The Unaudited Financial Statements (a) have been prepared in
conformity with GAAP applied on a consistent basis from year to year (except as
noted otherwise therein); and are true and correct and present fairly in all
material respects the financial condition of AQI and the results of operations
and changes in cash flow of AQI for the periods to which each relates.
6.3 To the knowledge of the AQI and SELLER, the Interim Financial
Statements, if prepared, (a) have been prepared in conformity with GAAP applied
on a consistent basis from year to year (except as noted otherwise therein),
subject to normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be material) and the absence of notes (which,
if presented, would not differ materially from those included in the Unaudited
Financial Statements), and are true and correct and present fairly in all
material respects the financial condition of each company and the results of
operations and changes in cash flow of AQI for the periods to which it relates.
SECTION 7. Litigation. There is no claim, action, investigation,
arbitration or proceeding pending or, threatened against AQI and SELLER, or
against or relating to any of the assets or the ability of AQI and SELLER to
perform their respective obligations hereunder, before any arbitrator, judge,
court or governmental authority. AQI and SELLER are not subject to any order,
writ judgment, injunction, decree, determination or award of any arbitrator,
judge, court or governmental authority.
SECTION 8. Contracts. To the extent applicable, Exhibit "A" contains an
accurate and complete list of all written and oral agreements and contracts in
effect on the date of this Agreement to which AQI is a party in connection with
their respective business operations or by which any of their properties or
assets relating to their respective business operations are bound. There are no
contracts in formation or which are capable of subsequent formation as a result
of future satisfied conditions. AQI has made available to ECCI true and complete
copies of the contracts (including any amendments or modifications thereto).
i. Key Man Insurance. AQI will transfer all obligations and ownership of
the Howard Schachter life insurance policy to Ruth Schachter, or her nominees at
closing.
SECTION 9. Environmental Matters. AQI has not used any property, real or
personal to generate, manufacture, refine, transport, treat, store, handle, or
dispose of any hazardous substances except in accordance with all applicable
federal and state environmental laws.
SECTION 10. Taxes. AQI has filed all federal income tax returns and all
other federal, state, county, local or city tax returns which are required to be
filed, including, but not limited to, income and employee withholding taxes, and
each company has paid or caused to be paid all taxes shown on said returns or on
any tax assessment received by it to the extent that such taxes have become due,
or has set aside on its books reserves (segregated to the extent required by
sound accounting practice) reasonably deemed by it to be adequate with respect
thereto. Schedule 10 sets for the details of all unpaid AQI taxes.
SECTION 11. Absence of Changes. Since the date of the Unaudited Financial
Statements, AQI has operated its business in the ordinary course consistent with
past practices and there have not been, except as disclosed in this Agreement or
the Exhibits attached hereto:
i. any Material Adverse Effect;
ii. any damage, destruction or loss (whether or not covered by insurance)
affecting any tangible asset or property used or useful in the business
operations, normal wear and tear excepted;
iii. any payments, discharges or satisfactions by it of any liens, claims,
charges or liabilities (whether absolute, accrued, contingent or otherwise and
whether due or to become due) relating to the business operations, other than in
the ordinary course of the business and consistent with past practice;
iv. any licenses, sales, transfers, pledges, mortgages or other
dispositions of any tangible or intangible assets having a value over $1,000 (in
the aggregate) used or held for use in connection with the operation of the
business, other than in the ordinary course of business and consistent with past
practice;
v. any write-offs as uncollectible of any accounts receivable or notes
receivable of the operations, or any portion thereof, not provided for in the
allowance for uncollectible accounts in the Interim Financial Statements;
vi. any cancellations of any material debts or claims of, or any
amendments, terminations or waivers of any rights of material value to, the
business operations;
vii. any general uniform increase in or change in the method of computing
the compensation of employees of it who perform services for the benefit of
their respective business operations;
viii. any material changes in the manner in which either company extends
discount or credits to customers or otherwise deals with customers of its
business;
ix. any material changes in the accounting methods or practices followed by
either company and or any changes in depreciation or amortization policies or
rates theretofore adopted;
x. any capital commitments by either company and for additions to property,
plant or equipment of their respective business operations;
xi. any agreements or commitments to merge or consolidate with or otherwise
acquire any other corporation, association, firm or other business organization
or division thereof;
xii. any declarations of dividend, payment of any dividend, issuance of any
securities, purchase or redemption of any securities, commitments or
authorizations for any changes to its Articles of Incorporation or amendments to
any by-laws, conversions of any options, warrants or otherwise into common
shares, and except as disclosed in paragraph B.1. relating to the total
membership units issued and outstanding which resulted from a corporate
reorganization?
xiii. any other material transaction relating to either company other than
in the ordinary course of the business and consistent with past practices; or
xiv. any agreements or understandings, whether in writing or otherwise, for
either company to take any of the actions specified in items i. through xiii.
above.
SECTION 12. Undisclosed Liabilities. AQI does not have any liabilities or
obligations of any nature that would be required by GAAP to be reflected in the
Financial Statements (subject, in the case of unaudited statements, to normal
year-end audit adjustments), except: (a) such liabilities and obligations which
are reflected in the Financial Statements, or (b) such liabilities or
obligations which were incurred in the ordinary course of business for normal
trade or business obligations and are not individually or in the aggregate in
excess of $1,000.
SECTION 13. Compliance with Laws. Except as individually or in the
aggregate would not have a Material Adverse Effect, AQI has complied in all
respects with all laws of all Governmental Authorities (including all tariff and
reporting requirements) with respect to its business operations.
SECTION 14. Consents, Approvals and Notifications. The execution and
delivery by AQI and SELLER of this Agreement to which each is a party does not,
and the performance by each of this Agreement will not, require any consent,
approval, authorization or other action by, or filing with or notification to,
any Governmental Authority or any other Person.
E. Miscellaneous Provisions.
SECTION 1. Conditions to Closing
1.1 Conditions to Obligations of AQI and SELLER. The obligations of AQI
and SELLER to consummate this Agreement and deliver the shares of capital stock
will be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions, any one of which may be waived by ECCI without waiver of
any other rights or remedies which the either company may have under this
Agreement:
i. No Order, Decree, Injunction or Adverse Enactments. The ECCI
will not be subject on the Closing Date to any order, decree or injunction of a
Governmental Authority and no law will have been enacted, promulgated or issued,
which enjoins or prohibits the consummation of the transactions contemplated by
this Agreement.
ii. No Litigation. There will not be pending on the Closing Date
any material lawsuit, claim or legal action involving either the ECCI which
might materially and adversely affect the transactions contemplated by this
Agreement.
iii. The ECCI Closing Documents. At the Closing, ECCI will have
executed and/or delivered the following Related Documents to which it is a party
or for which it is responsible: (1) this Agreement with attached Schedules and
Exhibits signed by each company's authorized representative, (2) Copies of the
Unanimous Consent of the Board of Directors of ECCI authorizing sale and
issuance of the ECCI exchange shares, (3) the delivery of the ECCI shares to the
SELLER.
1.2 Conditions to Obligations of ECCI. The obligations of ECCI to
consummate this Agreement and deliver the ECCI exchange shares will be subject
to the fulfillment, at or prior to the Closing, of each of the following
conditions, any one of which may be waived by the Company without waiver of any
other rights or remedies which the Company may have under this Agreement.
i. The AQI and SELLER'S Closing Documents. At the Closing, the AQI
and SELLER will have executed and/or delivered the following Related Documents
to which each is a party, or for which each is responsible: (1) this Agreement
with attached Schedules and Exhibits signed by the authorized representative of
AQI and SELLER, (2) SELLER will deliver and transfer her countersigned shares of
AQI along with AQI'S authorized representative attesting to the authenticity of
SELLER'S signature and (3) executed copy of the Howard Schachter employment
agreement.
ii. Other Actions. All other documents required to have been
delivered by AQI and SELLER, and all actions required to have been taken by each
of them, at or prior to the Closing, will have been delivered or taken in all
material respects.
1.3 Closing Date. The date of closing will be retroactively construed
as August 1, 2005.
SECTION 2. Indemnification.
2.1 Survival. All representations and warranties and covenants and
agreements contained herein shall survive the execution of hereof and the
Closing Date. Any investigations by or on behalf of any party shall not
constitute a waiver as to enforcement of any representation, warranty or
covenant contained in this Agreement. No notice or information delivered by one
party shall affect the other party's right to rely on any representation or
warranty made by the party delivering the notice or information or relieve that
party of any obligations under this Agreement as the result of a breach of any
of its representations and warranties.
SECTION 3. General Provisions.
3.1 Headings and Interpretation. The headings used in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of any term or provision of this Agreement.
3.2 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party.
3.3 Entire Agreement. This Agreement represents the entire
understanding of the parties with reference to the matters set forth herein.
This Agreement supersedes all prior negotiations, discussions, correspondence,
communications and prior agreements among the parties relating to the subject
matter herein.
3.4 Amendment. This Agreement may not be amended or modified except by
an instrument in writing signed by the parties hereto.
3.5 Applicable Law. This Agreement shall be governed by the substantive
laws of the State of Texas, without regard to its conflict of laws provisions.
3.6 Counterparts and Facsimile Transmission Copies of Originals. This
Agreement may be executed in several original or facsimile copy counterparts and
all so executed and transmitted shall constitute one Agreement, binding on all
the parties hereto even though all the parties are not signatories to the
original or the same counterpart. Facsimile transmitted signatures shall be
deemed valid as though they were originals and the parties may perform any and
all obligations and duties in reliance on the facsimile copies.
3.7 Further Assurances, Additional Documents, Etc. The parties will
cooperate with each other to accommodate the intent of this agreement.
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representatives to execute, this Business Combination Agreement as of
the date first written above.
AQUATRONICS INDUSTRIES, INC. ECOLOCLEAN INDUSTRIES, INC.
/s/ Howard Schachter /s/ Royis Ward
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By: Howard Schachter By: Royis Ward
Title: President Title: President
SELLER:
/s/ Ruth Schachter
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Ruth Schachter